The Renegade's Guide to Building Wealth (Why It’s Time To Go Rogue)
Escape Velocity Issue 3 18th July 2025
When it comes to wealth, there’s a painful lesson that you need to take on board as early as possible on your journey.
The vast majority of people never make it. Including most of your friends and family.
You must be prepared to be different. A maverick. A renegade.
That might mean losing some existing friends and replacing them with others who are on your wavelength. My hope is that the Escape Velocity community might be a part of that.
I’ve been banging the drum about the lack of financial education for decades now. The response from governments, regulators and academia? Silence.
It’s clear that politicians do not want financially literate citizens. In fact, they don’t want citizens at all. They want dependent subjects, a throwback to the feudal system where the Lord of the Manor gives us a patch of ground and takes 20% of our produce as rent.
Except our 21st century landlords are far more greedy. They want 50% of our income, 20% of everything we spend, 24% of every capital gain and 40% of what’s left when we die.
And still, public services are useless and every year brings demands for more money to feed the state machine. If you’ve read Orwell’s 1984, you’ll know about Newspeak and the Memory Hole. A few examples from recent events:
- Joe Biden pumps trillions of taxpayer money into green projects and calls it the Inflation Reduction Act
- Ask Elon Musk what he thinks of Trump’s Big, Beautiful Bill that will add $2 trillion a year to the US national debt
- The ludicrous restrictions on freedom and the forced use of untested vaccines during the pandemic are now in the Memory Hole so that the Mediocre Majority forget how they were mistreated by those elected to be our servants
The only way we can escape exploitation by increasingly dictatorial governments in the West is through financial independence.
I’m often accused of being obsessed with money because I spend so much time talking about it. The accusation is half right. I am obsessed. Not with money, but with freedom.
Money is simply a tool with which we can buy freedom for ourselves and those we care about. And the price of freedom is rising.
In this issue of Escape Velocity I want to give some guidance on how to build wealth and how to protect it. We’ll come back to these topics again and again because it’s never too early or too late to get started.
The key point is to start.
Most people don’t.
You are not most people.
What’s Wrong With Traditional Investing?
Before I answer that question, to reinforce why we need to go it alone in our thinking about saving and investing, check out these statistics:
- In America, 20% of Baby Boomers, 27% of Gen X and 31% of Millennials have less than $1000 in savings
- In the UK, 21% of working age people have less than £1,000 in savings
- In Australia, 45% have less than $1,000 in savings
The youngest boomers are now in their 60s, so they’ve failed to put away $25 for every year of their adult life.
Pathetic.
The first skill to master is the discipline of saving. Open a Wealth Account and put as big a percentage of your net income in there as you can without starving or living on the street.
As you accumulate some capital, traditional High Street financial advisers will talk about a 60/40 portfolio which means:
- 60% in stocks and shares like the S&P500 or the FTSE
- 40% in bonds, usually government treasuries
This approach has worked (more or less) between the 1980s and the early 2020s, but is unlikely to work so well in the coming decades.
American shares in particular have seen a long bull market since the Global Financial Crisis of 2008, helped by central banks keeping interest rates close to zero for a decade and a half. That kind of market manipulation always comes at a price, usually after the culprits like Ben Bernanke and Mark Carney have left office.
With government bonds, they pay a fixed coupon which is a percentage of the bond’s price when it is issued. So, in 2018 you might have bought a UK 10 year government bond paying 1% interest. Then, when interest rates rose during the pandemic, the government had to offer say 3% to get people to buy their 10 year bonds. So, if £100 now buys £3 a year of income, what would someone pay for your 2018 bond that only pays £1 a year? A lot less than you paid for it! Maybe only £33 as they would need to buy three of those old bonds to match the income from one new bond.
So the 40% you’d been holding in the bonds recommended by your High Street adviser would have lost a huge chunk of value. You would not be alone – central banks like the Federal Reserve and the Bank Of England are sitting on billions of these bonds. Enough to make them insolvent if they had to play by the same real world rules by which you and I run our businesses...
In summary, the public equity markets are fragile after a long bull run, made worse by geo-political risks, the impact of Trump tariffs and interest rates that may stay higher for longer as inflation rears its ugly head once more.
And government bonds are a no-go area for anyone looking to either beat inflation (they don’t pay enough) or preserve their capital (they are volatile as interest rates move.)
The Flight To Passive Investing
It’s long been known that most fund managers fail to achieve better returns than the overall market.
This drove the launch of tracker funds and Exchange Traded Funds (ETFs) that offer low charges and automatic trading in line with the market they are following. Hence they reinforce what is already happening in the market – if Apple shares represent 5% of the value of the S&P then the ETF allocates 5% of its capital to Apple.
The extra funds from the ETF increase demand for Apple shares, sending them even higher so they become worth 6% of the S&P. The ETF now needs to buy more Apple shares to bring its allocation up to 6%, reinforcing the virtuous circle and the status quo.
This drift to passive investing is one of the main drivers of the Magnificent Seven, where growth is concentrated in a few superstar companies while many of the remaining 493 are languishing in mediocrity.
Passive funds were brought into the mainstream by Vanguard founder John Bogle. He thought they would play a great role for perhaps 20% of market capital. As of May 2024, they had reached 59% of all invested funds in America. In his later years, Bogle realized that he had unleashed a monster which could kill the normal functioning of the stock market:
“If current trends continue, a handful of giant institutional investors will one day hold voting control of virtually every large U.S. corporation.”
— John Bogle, Wall Street Journal, November 2018
Why is this a problem? Because we can only determine the fair value of a company if its shares trade on an active market where some are willing buyers and some are willing sellers.
Passive funds are dumb. They don’t have an opinion. They don’t invest in research or due diligence. They don’t pick stocks.
Even more sinister, the managers of these funds assume massive power in the boardrooms of major corporations. This became clearly visible as Blackrock boss and WEF director Larry Fink pushed his ESG and U.N. SDG (sustainable development goals) agenda onto companies with the threat of withholding investment if they failed to comply.
Bogle’s fears have come true. The performance of the shares of companies listed on public stock markets is now under the influence of unelected fund managers who may have an agenda which is not in the shareholders’ interests.
If the majority of the market is made up of passive investors, the traditional process of ‘price discovery’ is broken. To borrow a line from that well known fund manager Oscar Wilde, this means that we as private investors ‘know the price of everything and the value of nothing’.
The Wealth Effect Caused By Inflation and Fiat Currency Debasement
In my recent white paper, I’m A Millionaire – Why Do I Feel Poor? I explained how we fool ourselves into thinking that we’ve grown rich when we look at the nominal value of our homes and our investment portfolios.
The reality is that houses and shares have simply risen in lockstep with the increase in global money supply. Try valuing your house in ounces of gold when you bought it and ounces of gold today and you’ll see what I mean.
There’s been a lot of noise about the all time highs in the gold price recently. As ever, the mainstream media has things back to front. Gold hasn’t changed one iota. What’s happened is that the perceived value of fiat currencies like the dollar, the pound and the euro has fallen to record lows.
It therefore needs more of this green toilet paper to buy a given amount of gold. Or bricks and mortar. Or Amazon/Tesla/Microsoft etc.
There are just three assets that have beaten the combination of money supply growth and price inflation in recent years:
The best performing tech stocks in the NASDAQ
Bitcoin
Direct private equity investing
How many High Street financial advisers are pushing their clients into that combination?
There are lots of reasons to believe that the American stock market will struggle to continue its record bull run for much longer:
The disruption to world trade caused by stop/start tariffs
The rich valuations of a concentrated few companies
The decline in the $ and threats to US hegemony
Private equity funds have long out-performed the pubic markets, but have recently struggled to find new deals or to exit existing investments. Much of this is down to their modus operandi. Especially in the field of leveraged buy-outs.
They’ve made great money by buying a profitable operating company with a thin sliver of equity and masses of debt acquired during the ‘emergency’ interest rate period from 2008 to the early 2020s. Without making any improvements to the way the company works they can 5X their capital like this:
Purchase price of company $500 million, $100m of equity and $400m of debt
The company makes $50m a year profit which is used to pay down the debt
After 8 years the debt is paid off and, even if the company is still only judged to be worth $500m, it is now all equity and the PE fund have a 5X return.
As interest rates have normalized, it’s been much harder to make this model work as more of the profit is soaked up in interest on the debt. This also impacts the viability of an exit because the buyer has to either have access to much more equity or find a way of funding the higher debt servicing costs by making real operational improvements.
These big private equity companies and funds operate in the glare of the public markets. What goes largely unreported is the activity in smaller private equity and venture capital deals.
To access these you need to be connected. You won’t find the best opportunities on crowdfunding sites or from your mate down the pub.
It takes years of nurturing your network and building trust and confidence with founders or the people in their inner circle. More on that next week.
I’ve spent a lot of time talking about the challenges of traditional investing.
Next week I’ll take you through my approach to prospering in the 2020s, which I call Barbell Investing TM.
Meanwhile, your homework for this week is to start a spreadsheet, call it your Asset Allocation Report and complete an inventory of everything you own. Property. Stocks and shares. Bonds. Bitcoin. Gold. Cash.
Doesn’t matter how much or how little is in there.
What matters is understanding where you are today.
Only then can we start building the future.
See you next Friday.
Graham