20240115

After a weekend only using two computers, it seems like this will be a viable option. I have no rush to upgrade to Windows 11 because Windows 10 doesn’t reach end of support until October 2025. That gives me the opportunity to wait until after the 2024 season ends.

I began work on the 2023 tax forms this weekend. As part of the account simplification, I expect the filing to be simpler. It has certainly started out that way. I only have one form so far and don’t expect the final form until the middle of March.

We received three Christmas cards this weekend all with December 8th postmarks. Amazing. I have two bills that do not have an electronic option. One sent a letter stating electronic delivery is coming. Small steps to gaining full confidence that missed payments is not possible.

I have been reluctant to sign up for auto-pay. I don’t like the lack of control and I don’t expect customer service can perform an immediate refund for an incorrect payment. Two bills have switched to requiring auto-pay. I’ll be watching those close now through my daily reconciliation.

20240111

We have been renovating the kitchen in our home and it is about to spill into another room. Soon, I will be moving out of a bedroom and into this room. It is designed to be a den with our original idea of making it a bar. We have dropped that idea with the plan of moving myself there.

Because it is on the ground floor and the door has glass panels, I will need to be highly organized. I have recently been contemplating what it will look like with three 24” monitors. Two days ago I came to the conclusion that one would have to go. The Ubuntu computer is the newest and has the highest performance specs yet is used the least. I am considering changing the OS to Windows 11 which will be necessary by October 2025 when Windows 10 reaches end of life.

This will free up a monitor that will be used for my Tempo when it gets moved upstairs. I think this plan will look better and be cheaper than the original plan which involved new hardware.

2023 the Year of Consolidation

The last I wrote was in February. It was a long post about reducing the number of accounts I have as well as reducing the number of positions in those accounts. As we reach the end of the year, I want to document an account of what I have achieved and what I want to focus on next year.

End of Year Status

The emergency savings funds are 68% of my target. That is a good improvement from the beginning of the year. The retirement funds are 8.4 years behind and I am 17.0 years away from my number. Personal debt is down almost 50% on the year.

2023 Recap

I am down to three checking and three savings accounts. I had a goal of being down to two each. My primary, and local, account has a well below market interest rate associated with it. I’ll need it in the rare occasions I need an ATM. The other two accounts are online only. They both offer checking and savings accounts that bear interest. One is handling monthly payments and stores funds for quarterly estimated taxes. The other handles debit transactions and stores emergency savings funds. I don’t have a judgment on the number of accounts and feel okay with these three for now.

The two retirement accounts are still in place. There isn’t much to recap here as there have been no changes and none are planned.

The two brokerage accounts have expanded to three. One was added this year because a stock bonus is going to be distributed this week. Because of the tax liability created, I have decided to hold the shares. In addition, my employer opened an Employee Stock Purchase Plan. The amount I am deducting each pay cycle goes into the same account and purchases are made quarterly.

Savings Directive Change

I want to give an aside at this point that will explain why I subscribed to the ESPP. It has become clear that I am unable to save enough to reach my retirement number. The ESPP provides a way to purchase an asset at a discount. Every little bit helps and I’m hoping this does as well. It also deducts from my pay check forcing me to alter my monthly budget. I thought about going into that but will save it for later.

Major Expense

During 2023, my wife and I have added an expense to our HELOC. Unfortunately, the amount will take several years to be fully paid down. Total debt in the household is now above my comfort level. My plan is to be aggressive in paying down this amount even to the point of compromising my retirement plan.

2024 Plans

For next year, I want to focus on personal debt reduction. I have a small amount of revolving credit debt that I should eliminate in the first quarter. I have a personal loan that should be paid off in the second quarter. One car loan will be paid off the third quarter. One DeFi loan should be removed in the fourth quarter.

Writing that list out helps me realize the length of the list. There is one other car loan and one other DeFi loan that will likely not be gone until 2025.

The funding of the 401(k) and the ESPP will continue but there will be nothing else. While those constitute a good percentage of income being saved, the amount saved will be down about five percentage points compared to 2023.

I should create a goal of doing this again during the first quarter when the revolving credit debt is eliminated.

20230207

Simplifying my finances has been working well. It is a journey, and I don’t expect to reach a big milestone until the middle of March. For now, I am working on my taxes and have discovered that I may be subject to the whims of our federal government. My wife retired during 2022 and her employer will only make her W-2 available through the mail. They promised it would be here before February 2nd, but that deadline has passed. There are actually a few financial forms that won’t be available until February 15th and March 15th, but I like to plan. Knowing a potential range of outcomes for our estimated quarterly taxes sure would be nice in advance of that first payment that is due April 18th.

As far as stumbling blocks go, this is really minor. It is useful to know that most pathways are not linear, and the journey may not match our expectations. That doesn’t mean we can’t learn something along the way.

I’m not sure what I am learning yet, but there will be something.

For now, I am learning the WordPress editor really likes commas between phrases even though an “and” is present and the thoughts are logically connected. Well, grammar changes and the computer is probably better equipped to stay informed and use those methods.

20230115

Five weeks since I wrote. In that time, I have had no free time. Actually, that is kind of what I do want to write about today.

I have started simplifying my personal financial life. I think I have reached my first level towards something resembling a goal. By the end of March, I will have closed three accounts that no longer fit any objective that I have. This will result in the following:

• Two retirement accounts
• Two brokerage accounts
• Two savings accounts
• Two checking accounts
• Two debit cards

The reason I created two of everything is to avoid situations that I experienced during the Great Financial Crisis. During the 2008 and 2009 years, one checking account was suspended, two credit cards were closed, and one brokerage was in jeopardy of closing. Not all of those happened at once, but the repetition emphasized that having one location for anything can create an issue in extreme circumstances.

The two retirement accounts are one 401 (k) plan from my current employer plus an IRA holding retirement assets from a previous employer. Simple. When I do retire, this will necessarily be simplified to one account.

The two brokerage accounts have different funding sources. One is a collection of inheritances and bonuses. These bonuses arise from cash back from cards or other similar activities. The second is for excess savings. This doesn’t happen every month, but there are times when life goes smoothly, and I have a few dollars left over at the end of the month. The 401(k) sucks up most of my savings because I definitely want to capture the match from my employer. Given my age and my participation in the catch-up plan, it stresses my monthly budget enough that I cannot guarantee there are any other funds available for additional savings.

The two savings accounts are for emergency needs. For now, my largest requirement for these funds is loss of employment. Because of the Federal Reserve raising rates, I have been increasing the targeted amount in these two accounts. In November 2021, I was at six months of expenses. As the Fed has been raising rates, I have been increasing the targeted amount to twelve months. That has always felt excessive, but I am constantly reminding myself that I am not young enough to not experience age discrimination. One of these accounts is at my local credit union and the other is in a DeFi protocol on the Ethereum blockchain. This is the one pair of accounts that is the most radically different and separated.

There are two checking accounts — one is for monthly payments on a car and the other is for paying down credit cards. I am currently only using two credit cards — one for everyday expenses like groceries and fuel. This is the one that generates cash back rewards. The other is for anything online and generates miles for travel. These two checking accounts are at different institutions — one is my local credit union, and the other is an online bank.

The two debit cards also have different purposes. The first and most used is for dining out while the second is for gifts and upgrading computers. The first is a treat us type of expense while the second is a type of targeted savings account where gifts for birthdays and holidays are saved for throughout the year.

I balance all of these accounts weekly, and it has recently taken less than one hour to accomplish. This is remarkable because it used to be four hours. As Spring approaches, I expect to find ample things to fill those open hours.

As I sit in a coffee shop waiting, I had planned to write a separate post about the two-fund strategy. I have enough time that I’ll write about it now.

I have been following Financial Tortoise on YouTube. Tae has a video where he talks about multi-fund strategies from the two-fund to the six-fund. It seems to me the two-fund strategy fits our situation because of the Fed’s plan for interest rates. Fed Funds are set to be in a range of 4.25% to 4.50%. The Fed board has announced they do not expect this rate to rise above 5.00%. Given we are near the terminal rate, I am targeting the two funds of VTI and BND. VTI is the Vanguard Total Equity Market ETF and BND is the Vanguard Total Bond Market ETF. My 401(k) has a total bond fund but only an S&P 500 Index fund. This will have to do. Because of my age, I have an allocation target of 75% equity and 25% fixed income.

This fits in with the simplification actions of the accounts. Every account is aspiring to a dollar cost average (DCA) funding mechanism. This is built into the 401(k), but it requires personal discipline for the two brokerage accounts. By using DCA, timing is taken out of the investment process. There is a side benefit of purchasing a larger number of shares when prices are relatively low and fewer shares when prices are relatively high. This forces a lower cost basis and can amplify the account value when prices rise. Re-balancing takes place with each purchase as the required proportion into each fund is easily calculated.

I really hope this leads to a simplification of my annual taxes. The size of the return has been growing over the past decade causing the annual process to expand in time required to complete. I won’t notice this year of course, but I do expect an improvement for next year. I expect at some time to become resentful of the necessity of filing my own taxes. All of my income and withholding is already reported to the IRS. I do not understand the need to generate another version of the same data. Is this their version of redundancy? I don’t think they consider the amount of time and money is expended to complete the return each year.

What’s next? I’m not sure. I covered most of the ideas I had for the next two posts. Maybe the next one will be the first weekend in February. I should have the majority of tax statements and will have time to start the tax return. Maybe I will update my rant on the time it took to get that far.

20221207

I have been spending some time this morning learning about Reflexer and the pegged-asset RAI. I am going to create bullet list of decisions her because the RAI explainer is not designed to create a list of trading decisions.

• When the redemption rate is negative, there is an incentive for people to create more indexes
• A positive redemption rate causes a reduction in the collateralization ratio encouraging users to repay debt or add more collateral

It seems to be that simple. The redemption rate this morning is -5.706% providing a strong incentive for people to create more reflex-indexes. The minimum borrow is almost 3,000 RAI and it appears to be outside of my ability to afford. I need to work on creating a template for the borrow and maintenance of the collateralization ratio.

The appearance of being outside my ability to afford the minimum has been confirmed. It will take almost 29,000 USD to create the minimum position of 3,000 RAI.

Liquity has a borrow rate of 0.5% and Reflexer has a borrow rate of 2.0%. Liquity has a powerful saving incentive while Reflexer has a powerful borrow incentive. If I can figure out a way to achieve the minimum, that 2.0% rate is much more favorable than other rates I am paying for personal loans.

The Convex RAI3CRV pool is currently generating a 2.47% APY. Combine that with the 2.0% borrow rate and the net of 47 bps is not much of an incentive. Well, this was a good exercise.

20221202

On December 1st, Michael Barr, Vice President of Supervision of the Federal Reserve, gave a speech titled “Why Bank Capital Matters”. In his speech, he lays out all the regulatory methods that have been put in place to protect the fractional financial system.

I state it that way because he doesn’t directly mention the inherent risks posed by the current banking system. He does start with FDIC insurance which successfully stopped bank runs.

When he moves forward to the Great Financial Crisis, he blames the banking sector for inadequate risk management controls. He does skip over the linkage from the creation of moral hazard by the FDIC backstop to the expansion of leverage to increase profits from the creation and trading of mortgage-backed securities.

To resolve this situation through regulation, the banking sector was subjected to stress tests. These fictional scenarios were designed to see how adequate the capital held by individual banks would be in periods of market disruption. The last two-thirds of the speech was an admission regarding the stress tests being based on potential scenarios and may not be adequate for the next crisis.

It seems remarkable to me that VP Barr skips over the layers of regulations that now must support the fractional reserve system. He also skips over the cost of the regulations to consumers as the expense of compliance will be passed on by the banks.

It seems to me that we can do better. How do we change the fractional reserve system to prevent excessive risk taking arising from greed? Maybe a peer-to-peer system that is algorithm based and doesn’t allow for undercollateralized borrowing? One of those already exists and encourages saving first with responsible levels of borrowing second. There isn’t a need for determining capital ratios under stress. There also isn’t a need for depositors insurance.

Decentralized Finance encourages participants to generate more participants. Learn more about it.

20221129

I have been spending some time reading about the Liquity protocol. This aims to be a governance free stable coin that is on Ethereum. It is similar to Maker where I deposit ETH and create LUSD as a loan. There is risk because the price of ETH is unstable and could cause the loan to be liquidated.

Now they have released a bonding protocol where I can deposit LUSD and interest is paid. The mechanism to pay the interest gathers fees from multiple other protocols. That is an interesting way to pay interest since it is based on others using LUSD.

I think Liquity is undergoing a mild test right now. Aave just froze its lending pool that used LUSD as an asset. That would explain why my bond added a few days to reach its estimated break-even date. This will be interesting to watch.

This seems to be related to the movement away from risk or at least towards more healthy risk management practices. I have to agree with The Defiant as they think this will cause DeFi to grow slower with more stability. I agree this would be good for the industry as hot money creates some disincentives for good behavior.

20221125

I spent some time today learning about why yields are down in crypto. It appears that leverage is dropping significantly as more participants become convinced the bottom in the market has yet to be reached. This is good because ETH prices are holding and there is potential for opportunity.

I also learned that Infura is going to start collecting IP addresses and wallet addresses. Time to get that VPN installed. This is a very centralized service in crypto that has plans to become decentralized, but until then, they have changed their privacy policy to collect information. This might not be a big deal because all of my transactions are on-chain and publicly viewable. However, I do not want to have my location determined. That seems creepy and unnecessary. The only purpose I can think of involves the government abusing its authority.

20221111

While it is Veteran’s Day, it is an ordinary work day for me. As an investor, it has been anything but an ordinary week.

I only have three on-ramps from fiat into crypto and the implosion of FTX US has really shaken me up. I would consider myself as a passive investor — I prefer to provide liquidity and get something close to a stable return. I have been somewhat indifferent to whether I had funds on a centralized or a decentralized exchange.

I used FTX US as a true exchange — never holding assets there. Instead, I brought fiat to the platform and traded for the token I wanted and moved it to a wallet or DeFi protocol. The assets I had there were quite small. I have an open request to move those fiats funds to a bank account. They are still in transit.

I had a large amount of assets on another centralized exchange. While I had a great deal of confidence in the integrity of the exchange operator, I began to become overly concerned about contagion. I do not know how centralized entities are intermingled. I dropped that risk and moved the assets to a personal wallet.

Uncontent to leave the assets uninvested, I swapped them for a stable coin and moved into a specialized pool through DeFi Saver. I am waiting for a substantial drop in the price of ETH with the intent of moving from the stable coins to that token.

Well, that’s my plan today. We will see what next week brings.

Meanwhile, I am watching the ARKK – SARK pair. I have a balanced investment for now but I expect to begin moving aggressively toward the SARK side.I am pleased to have read about the SARK asset. It is the equivalent of the UBT – TBT pair.

ARKK is moving higher yesterday and today because of the expectation of the Federal Reserve slowing the pace of interest rate increases. I would be surprised if the Fed does anything less than 50 bps at their December meeting. That should still put pressure on the assets in the ARKK fund.