Reviewing Crypto Quarterly – Vol. 2

Today’s edition is a review of Crypto from early April 2022. TGIF 2 Minutes will return with new content in early July! Read on for:

  • A high-level update & follow-up on cryptocurrencies
  • Brief comments on Inflation & 1st quarter 2022

Crypto Update

Continuing with the whirlwind of interest generated by “To Crypto Or Not To Crypto” and “Crypto Superbowl” there is more to say including highlighting the recent 36% decline in Bitcoin since November 2021. There is broad evidence that high-profile, fiduciary financial advisers are hesitant – for good reason – to include cryptocurrency across the board in client portfolios. At the same time, a good number of high-profile, responsible, fiduciary financial advisers are including cryptocurrency in some – emphasis, “some” – client portfolios, depending on the client’s goals and risk tolerance.**

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Looking Back On… The Luck Factor

Despite all of the calculations involved in investing, there is still an element of luck involved. A specific term for this luck is, “Sequence of Returns.” What on earth is that? Answer: it is a risk and may be the most important concept in the world if a saver or investor ever wishes to spend their savings – and have those savings last.

The topic became relevant recently when a client asked me for assistance in defining what their “concerns” should be for the long-term now that they had accumulated a decent amount of savings and investments. The desire was to continue to accumulate savings and, more important, have the monies last at least long enough to see their plan to fruition for themselves and their kids.

There are ways to plan around both good and bad luck! 

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Looking Back On Behavior & Investing

From the “Best of TGIF 2 Minutes” 2017 Archives….

Under the heading of ICYMI and how meaningful this man’s work is to every human being:

The Nobel Prize in Economics may be a real yawn for most people. But this year [2017], the winner is a rock star. He made a cameo appearance in a hit movie with Selena Gomez and has written multiple best-sellers. His name is Richard Thaler and he’s an economist by trade but over the years chose to combine his studies of economics with psychology – and is widely known as “The Father of Behavioral Economics.” Are you still yawning? Read on.

Richard Thaler
Richard Thaler: The Father of Behavioral Economics
Source: Personal Financial News

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Looking Back On… Money & Therapy

Money and Therapy: two things that people may love or hate thinking about. However, among other things in life, money and therapy help. 

About five years ago I read a must-read book for young and old, wealthy, or building wealth, married or single. Anyone who wants to have a “life” someday… or even have a life NOW. The book is called The Number* and was written by Lee Eisenberg nearly 15 years ago but reads like he wrote it yesterday.

Here are several of the chapters:

  • “Welcome To Numberland”
  • “Debt Warp”
  • “Alone At Sea”
  • “Covering Your Assets” (nice play on words)
  • “Night Sweats”
  • “Deep Breathing”
  • “Bottom Lines”

All of these topics could be covered in conversations with friends, or by reading The Number, explored in a therapy session… or all 3! I recommend all three (and the therapy session could be with your financial adviser – because a real financial adviser makes this conversation mandatory.)

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Looking Back On…

TGIF 2 Minutes will be taking a small break over the next five or so weeks. While looking back on several topics from the past 5 to 7 years – consider these editions a sort of ICYMI (“In Case You Missed It”). In times such as the current market weakness, it helps to understand that each economic cycle has its unique qualities, and there are certain factors that repeat themselves. There are also super-smart and talented people – see the upcoming edition about Richard Thaler – who educate and remind us about human nature and the factors within and not within our control.

Enjoy these upcoming “Best of TGIF editions starting next week for Memorial Day.

Series I Savings Bonds, Yes 9.62%

“What are I Bonds?” Thank you to a growing number of curious and smart clients, friends and colleagues for hammering this question enough over the past several months to warrant a TGIF 2 Minutes dedicated to I-Bonds. The “I” in I Bonds stands for inflation, which is why these bonds are so HOT at the moment. (Note: inflation overall is clearly not a good thing; I Bond interest rates may be one of the only things that benefit from skyrocketing inflation.)

Inflation is higher in 2022 than it has been in over 40 years – longer than lots of TGIF 2 Minutes readers may have been alive, and certainly longer than lots of readers have been working for, earning, and spending “real money”.

The “I” in I Bonds stands for inflation, which is why these bonds are so HOT at the moment.

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Slaying Inflation & Stagflation

Stagflation. An economic condition not experienced since the 1970’s – which was also the last time that inflation was as high as it is today.

Stagflation is an understandable word: stagnated growth coupled with persistent, high inflation. Often high unemployment is also part of the picture but presently is not the case. The reason stagflation is currently in the conversation is that in addition to current high levels of inflation, there are potential factors that could weigh even further on the US economy: tax increases and greater government spending. Stagflation could result – or could be inevitable no matter what.

Higher interest rates and focused policy today could be a small price to pay for a more balanced future with modest growth and less inflation.

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Murphy’s Law & YOLO Can Be Expensive

One of the most critical factors of long-term personal financial success is… guess:

  • The markets
  • Spending
  • Interest rates
  • Stock selection
  • Income level

And the answer is…. SPENDING. This fact is why a truly competent financial planner will spend the most time on discussing spending, both today and future projected, along with GOALS. (Goals are what people spend money on.)

Holding an amount of cash – un-invested cash savings – is key to surviving Murphy’s Law events.

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Taxes Make Ya Wanna Go #$%&!

Yup, it is tax season. This year as clients and friends were completing their 2021 tax returns* the cries of, “Are you kidding me?” and “This is by far the most taxes I have ever paid in my life!” were louder than ever. There were valid reasons for wealthier taxpayers paying more taxes for tax year 2021 – far more than for tax year 2020. A few reasons were somewhat UN-related to the coronavirus pandemic, and a number of reasons were directly pandemic-related.

The majority of my clients and friends simply made more money in 2021 than 2020. (Is that a bad thing? Most likely not.) The pandemic, in a delayed fashion, led to promotions and opportunities in 2021 for lots of individuals in corporate America and at companies that “dug in” amidst epic challenges in 2020. Retention and performance bonuses wound up being paid in 2021 (continuing in 2022), following a time in late 2020 when it seemed basic compensation and jobs were at serious risk. This turnaround was a huge irony and welcome relief to a number of people – and the “flip side” became higher taxes for tax year 2021.

Pandemic-related factors were to blame for higher 2021 taxes in several “hidden” ways.

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Financial Satisfaction in Crazy Times

These are crazy times, almost chaotic. Chaos is defined as complete disorder and confusion – and parts of the world and our lives may be nearing that point, or at least feel that way. How does an investor get financial satisfaction in times like these? Carefully and patiently.

“Carefully” can equate to:

  • having a plan that addresses saving, spending, taxes, & investments
  • being able to monitor and adjust the plan, perhaps with an adviser
  • then continually executing the plan.

The “patiently” part can be more difficult and is just as critical.

Storms are temporary and the worst of chaos and volatility will pass – be prepared for an unknown timeframe.

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