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The Mexican Fisherman
Learn the four pillars of wealth and why each is important to the generation and enjoyment of that wealth over time.
Daniel Lancaster
January 20, 2025
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“It is not the man who has too little, but the man who craves more, that is poor.”
– Seneca (4 BC - AD 65)
NEWS
What Happened Last Week
China’s economy grew 5% over 2024, beating expectations for the year and significantly beating expectations for the fourth quarter.
US consumer prices rose by 0.4% in December, led largely by an increase in energy costs. This is an annualized rate of 4.8%, well above the Fed’s target of 2% average.
Core CPI, however, rose only 0.2%, which is a slowdown from the previous four months.
The Producer Price Index registered 0.2% for December, beating expectations of 0.4%.
Recent inflation data is overall encouraging, though still persisting above the 2% average target. Analysts continue to expect the next Fed rate cut to be pushed to May or June, with a very small chance of a March cut.
Expectations for economic health in the Eurozone continues to be pessimistic.
US President Donald Trump was sworn into office today.
Investor sentiment is fearful at the moment, and has trended in the direction of fear for the last two months, according to the AAII Investor Sentiment Survey and Fear and Greed Index.
Both the S&P 500 and the MSCI World are both above their 50-day moving averages, indicating an upward trend continues.
How I See It
While it’s no secret that the Eurozone has encountered signs of a slowing economy, broad expectations still remain that GDP growth ends up around 1%.
China’s estimated GDP remains well positive, in line with the natural slowdown that has been occurring fairly consistently since about 2007 due mainly to its ever-larger economy. Higher growth as a percentage is more difficult to sustain at larger absolute levels.
And as for the US, healthy growth ahead appears very likely.
The main thing markets dislike are recessions, which often result from a massive negative overhaul in forecasted GDP to the tune of trillions of dollars worldwide, due to new information or events.
While no one can foretell sudden changes in news or events, we can look at developing fundamentals that underlie the global economy. This analysis of reality versus expectations can assist us in identifying a mismatch between the two.
Even with inflation continuing to be a battle, it doesn’t pack enough punch to cause the whole economy to tank. It can cause short-term price volatility in the markets, but unless the Fed makes an extremely bad mistake, we’re likely to see continued improvement in market values over the course of this year.
Several uncertainties still persist as the government changes leadership, and these uncertainties are likely to fade as things become clearer over the course of this year.
But expectations were set very high last year, which means I don’t believe the market has much room for growth this year as compared to the last two.
Markets love to surprise, so I could be wrong.
But I expect this year will have higher volatility, maybe even a market correction, because so much depends on last year’s expectations being met.
Nevertheless, market corrections are impossible to time consistently. Because they happen rather quickly, and recover often just as fast, it’s better to ride through them in order to make sure you capture the full year’s upside potential.
PARADIGM SHIFT
Lesson of the Mexican Fisherman
A story is told of an American investment banker who stood upon a pier of a coastal Mexican village when a fisherman docked his boat with a beautiful catch of a few large yellowfin tuna fish.
The investment banker complimented him on the catch and asked how long he’d been out fishing.
“Only a little while,” the man replied.
“But what do you do with the rest of your time?” the banker asked.
“I sleep late, fish a little, play with my children, take siestas with my wife, Maria, stroll into the village each evening where I sip wine, and play guitar with my amigos. I have a full and busy life.”
The investment banker proceeds to offer some unsolicited advice.
He proposes that the fisherman should spend more time fishing in order to pay for a larger boat, hire a few others, and buy a fleet of fishing boats with those proceeds. By scaling his business, he could eventually negotiate better contracts and eventually control the whole process from product to distribution, from start to finish.
And the best part is that, after 15-20 years, he could sell shares of the company in an IPO, become a multi-millionaire, and retire to a small coastal fishing village where he could sleep late, fish a little, play with his kids and grandkids, take siestas, stroll the village in the evenings, sip wine and play his guitar.
Of course, this proposal sounds preposterous when we see it in the form of a short story.
But it illustrates vividly the exact truth which Henry David Thoreau presented when he said:
“There is no more fatal blunderer than he who consumes the greater part of his life getting his living.” -Life Without Principle (1863)
Stories like these remind us that true and comprehensive wealth is a combination of time, flexibility, purpose and money.
Seasons of life come and go, wherein one or more of these four wealth pillars necessarily fall out of balance temporarily. But accumulation of money alone is not worth the ultimate sacrifice of the other three elements as a perpetual habit. It’s like having one part of wealth, but with the limited ability to actually enjoy it.
When one of these four elements is thrown off balance, it behooves someone to put down in writing the precise date and plan by which they will return to balance. This might be only months, or it may be three to five years. But in the end, this imbalance should not be perpetual with no end in sight.
The sacrifice of life upon the altar of getting a living is not true wealth.
This is why I propose setting major life milestones that can be achieved in three years or less. This not only offers the real experience of progress, but it also maintains motivation to conquer the next and higher mountain.
Setting yourself free into a life of balance, of synergy among all aspects of your life, is a process. But it’s one that can be accomplished by anyone at any stage of their career.
These are the principles and strategies which I share in detail through the online courses so that those who want to create radical change in their near future can learn a step-by-step process to achieve that lifestyle in which they can grow wealth and enjoy it all along the way.
FINANCIAL TOOL
Bonds and Risk Management
Bonds are often touted as lower risk than stocks.
When markets get a bit choppy, bonds often outperform stocks during these shorter periods of time. Not always, but in most circumstances.
But what isn’t often discussed are the types of risks that are inherent in bonds as compared with stocks.
Bond exposure as part of a total portfolio is meant as a way of achieving slightly better returns than cash while reducing the magnitude of downward (and upward) swings in the portfolio’s value.
Bonds are not meant as a way to achieve meaningful long-term returns. Historically, they have surpassed the rate of inflation on average by only about 1.5%.
So the risk of these “safe havens” is this: an investor may end up with fewer assets in retirement than they need, simply because they wanted the comfort of seeing a less volatile portfolio from week to week and month to month.
The risk of not having enough, or of running a retirement account dry, is a real risk!
And unless someone is already a multimillionaire and can live off the interest alone, then they probably are going to need at least some market-like growth in order to achieve their long-term goals.
Interestingly, it doesn’t take long to see stocks start outperforming bonds on average.
Historically, stocks on average have been negative for shorter periods of time than bonds. And when returns are positive, stocks on average have dramatically outperformed bonds.
Now, bonds have their place. If someone is saving for a large purchase or otherwise near-term need, bonds are going to offer predictable returns assuming two things:
The company or government doesn’t default, call or restructure the loan.
The bond matures prior to when the investor needs the money.
And, as mentioned earlier, it can be used as part of a larger strategy that reduces average standard deviation (volatility) of a portfolio, if that portfolio requires reduced volatility due to investor preferences or needs.
In summary, bonds are more predictable than stocks in the very short-term, and over the life of the bond. But they are not “safe” in the sense that they can offer meaningful growth to someone who needs close to market-like returns over longer periods of time.
The risk of failing to achieve the needed long-term portfolio return must be balanced with the risk of downside that could happen over a 1-3 year period.
HERE’S HOW I CAN HELP
COURSE 2 OF 3 IS AVAILABLE!
I am in the process of creating the third and final in-depth digital course that, together with the other two, will comprehensively make you a master of your financial destiny.
The second of three courses is now available:
This course will lead you step-by-step toward developing your escape plan into a life of comprehensive wealth: time, flexibility, purpose and money.
Walk through the lessons and accompanying action steps to create an extraordinary life change today which culminates in a bridge to financial independence in the near future.
Each lesson builds upon the last, covering these main topics:
Master high-impact budgeting techniques to create a surplus today
Develop a plan to become debt-free in record time
Raise your salary this year
Use tax strategy to fast-track your goals
Bridge your way to entrepreneurship
This is a learn-at-your-own-pace course with 7+ hours of content that will set you on course to achieve your dream life well in advance of retirement age using simple but powerful habits of finance.
I’d love to hear from you. Let me know what you’d like to see in upcoming newsletters, articles, or a digital course at Contact Us - The Wealth Expedition.