Bank of Mozilla-can Valley.

Bank of Mozilla-can Valley.

So I was looking over Mozilla’s recently released financial statement for the 2021 fiscal year.

The good news is that letting office leases expired saved them some money. You don’t really need offices anyway between remote work and firing 300 employees.

The bad news is that most of their rainy day fund/cash equivalents is tied up in the bond markets.

Specifically low interest government paper like the kind that brought down Silicon Valley Bank before the recent rout in the bond market which is the worst in American history, and even worse than 1981.

A lot of the rest of it is in corporate debt obligations. Want to take a guess at what kind of corporate debt they have as a chaser to almost-zero interest government bonds that have years and years left until maturity? Might it have been invested in tech crap that is paying junk bond returns because there’s no product? I don’t know. It wouldn’t surprise me.

The problem with snatching up low interest bonds of 10+ year durations is, you’re stuck with them if interest rates rise which means you can hold them and lose money to inflation and the interest income you would have made with a better bond, which they issue now, or you can raise cash by selling it at a “book loss”.

That is, the loss goes on the book immediately, and someone else is only going to buy this thing if they can get a more attractive deal than going to the Treasury and telling them “I would like a bond.”

One would hope that at Mozilla, some of these college-educated professionals could find a Web browser laying around somewhere and take “interest rate risk 101“, also default risk. That one’s even easier. The junk bonds market pays a lot because there’s a higher risk that you might get stiffed by someone who walks away.

The irony is that this woke mob probably voted for this President of ours (and the ones who didn’t will probably say they did, because that’s what is required in order to not face harassment when you’re surrounded by leftists) who has been running around flushing taxpayer money down the toilet, causing the hyperinflation, which led to the high interest rates in the first place. Then the high interest rates laid waste to the bonds market because it had to adjust too much in such a short period of time.

Bonds are typically issued decades at a time. But conditions under which they’re written can change really fast.

It should be interesting to see how Mozilla’s finances look in the coming statements, especially if they need cash real quick and have to put those losses from losses in theory to losses in fact.

Corporations can buy Certificates of Deposit in amounts that individuals can and still get the same Deposit Insurance, with much shorter rates of “exposure” without ability to easily change lanes.

It was all of these “brilliant tech company CEOs” that decided to put hundreds of millions of dollars in places like Bank of Silicon Valley, and all in one account.

I guess they should find a Web browser laying around and go search how the Deposit Insurance Fund works.

S&P 500 “Earnings Season” Off to Weak Start as Bonds Reverse Losses

The S&P 500 is off to a relatively tepid start for “Earnings Season” while the Bloomberg Barclays US Aggregated Bond Index continues to reverse last year’s losses.

While it is perhaps too soon to take a victory lap, the first two days of the week didn’t go over so well for the stock market.

In my last post I pointed out the bloated valuation of Microsoft and “tech”.

Today we have to turn our attention over to companies like UPS and First Republic Bank.

The Wall Street Journal and Insider report that the loss of deposits at FRB were $72 billion dollars since SVB collapsed, but were really over $100 billion dollars if you don’t count the $30 billion that Chase and other large banks deposited to try to keep it from flopping. The WSJ reports that things got so bad today with FRB that it triggered a circuit breaker several times, halting trading, and still ended the day down another 49%. It’s a disaster. Meanwhile, Yahoo Finance is running articles saying there’s no problem with the liquidity. LOL (I won’t even link to that. They’re full of shit.)

The main source of First Republic’s problem turns out to be the fact that they wrote sweetheart mortgage deals at low rates to people in finance and tech (both of which are experiencing layoffs and deposit outflows now) and even threw in terms like “interest-only mortgage payments for the first ten years”.

In other words, what we have is almost a return of the 5/1 ARM crisis, only this time they wrote mortgages with sweet intro rates to a bunch of (now) unemployed tech workers and those who continue to face the prospects of losing their jobs. And the trap was set to spring on them ten years in.

They found out a way around the safeguards by finding people who could pay the mortgage, at the time they wrote it, and then got around the regulations that way.

Unfortunately for the bank, you can’t pay the mortgage forever on no job and they vastly under-rated the risk to write the damned things, and continue to under-state risk to try to find someone dumb enough to buy them as an “asset”.

Some of the people who signed these face deportation from America if they can’t find a job within three months of being fired, and then who do you even sue?

I can’t imagine someone in India caring that a bank in the US that can’t even garnish them because they got fired from Microsoft and aren’t ever coming back here will care what the bank does with the house when they get it back.

The people who can still pay their mortgage have no reason to change terms or refi, but they are taking their deposits out of the bank.

Personally, I would not be surprised if the FDIC is having meetings NOW about seizing First Republic at the end of the week. Since they’re in deeper shit every time they have to come clean about something and Chase Bank isn’t going to keep depositing unlimited money there, there’s going to be some sort of takeover and bailout of First Republic and probably soon.

UPS says shipping volumes are down and their stock fell 10% today.

A lot of UPS business is handling people’s Amazon returns so they can end up on a pallet of merchandise heading to a dump. Or some “mystery pallet”.

Amazon is doing badly. I gambled on ordering some HEPA filters for one of my air purifiers through Warehouse Deals last week. The first two packages came in and the filters were clean and factory sealed. The third package came and one of them was factory sealed, but the other was someone’s dirty air filter they threw in the box and Amazon said “Used-Like New”. It had dirt and crap all over it. I chucked it and they gave me a refund.

You never know what you’ll get. I ordered coffee from them last year, they ended up refunding a third of the bags because they burst at the warehouse and Amazon workers just literally put them in plastic bags with coffee dumped out everywhere and shipped them to me. Used-Like New

They sent mother a portable washing machine that got hit by a forklift. Someone had gone through the trouble of replacing the box where one of the forks had hit the washer, impaling it and denting the drum. They refunded that. Used-Like New

Amazon is trying to discourage people from using UPS for returns by imposing fees now. If they’re going to charge me fees to send back trash that they didn’t even inspect before saying it was fine, I’m not going to shop Warehouse Deals and take the risk.

My sell order for the S&P 500 and buy order for the Bond Fund for my spouse’s 401(k) went through Friday evening.

In the past two days, it has made hundreds of dollars in appreciation (recovery in the Bond Fund) while the stock market is slumping.

Earnings season is about what is unsaid or what is buried in opaque language (Microsoft loves doing this) in forms the SEC requires be made public as much as it is about what makes it into the news.

And there’s a difference between the news investors pay for and what they let out “for free” to the public. So I’m probably better informed than the average person right now as to what is really going on.

I had no confidence in this stock market on Friday and I’m even more skeptical of it now.

Walmart is best positioned to take advantage of dying retail sector.

Walmart is absolutely the best positioned company to take advantage of the chaos in retail right now. Even though total sales are way down and some stores are filing bankruptcy, Walmart’s Gross Earnings and Net Profits have been on a tear in the last several weeks.

Look for them to pick up business in everything that Bed, Bath, & Beyond sold immediately. In the next quarter or two.

In the longer run, Amazon. But Amazon is dying a protracted death. So BB&B will benefit Walmart faster.

P&G reported the other day that sales of their baby products and Gillette division are down due to “weak demand for diapers and shaving razors.

Less people having kids because of lack of resources. Less people with jobs means fewer people need to shave.

Alan Greenspan looked at men’s underwear sales to figure out what the state of the economy was. I look at P&G.

If P&G can’t sell diapers and razors, the diapers are both a short and long term problem, and the razors indicate to me what the unemployment trends really are.

Shaving supplies are expensive, or at least an expense. Most men sort of let it go while they’re on unemployment.

But the US unemployment figures are a total scam. They count you until you didn’t find work for so long that your benefits end, whether you have a job or not.

We need to be looking at things like the long term trend in sales on personal grooming products. In a strong economy, you don’t cut prices on Tide.

Most of P&G’s higher profits were due to “greedflation”, and it seems they don’t think that strategy is going to continue to work.

Up until now they could sort of get away with it because with consumer staples, they tend to have the better quality stuff, but there is only so much that people are going to take.

Finally, GM’s profit was down 18.5% in the first quarter vs. last year.

I see that big bet on $70,000 electric SUVs is going well.

As big as a house and about as aerodynamic, and with a battery the size of my gasoline Buick.

It’s back. Big is back. The 6000 SUX EV. (Hummer EV)

It seems like the Democrats will call anything green and throw a tax credit at it as long as it’s “electric” no matter how bad it is for the planet.

We’re in the “cigarettes with health claims” era of vehicles.

What Frightens Me the Most About Stock Investing? “AI” (Microsoft, Google, Coca-Cola…..) Bonus: Crypto and Samsung

“AI” frightens me.

No, not the thought of living in the Future War of The Terminator. Skynet said that it “evolves in seconds”. ChatGPT, Dall-E, and Bard still get simple interest wrong and can’t tell me what things will cost when I ask them to factor in coupons or rebates.

NPR’s article about “AI” building rockets that would explode if anyone tried building them was just amusing. We’re a long way off from rockets when GPT and Bard can’t tell me how much interest $1,000 will make in 5 years if I put it in a CD that compounds daily at a given APY.

The entire point of “generative AI” is to create a seductive mirage for stock investors.

Google and Microsoft are examples of giant tech companies whose established products are still fairly widely used despite having degenerated quite a bit.

Google and Microsoft Bing search are an arm of the state propaganda mills, and Windows 11 is noticeably slower than Windows 10 even on faster hardware, carrying on Microsoft’s usual tradition there, and even Windows XP was more reliable in terms of uptime and hotfixes and service packs installing and rebooting successfully.

According to Gartner (which itself is Microsoft-affiliated), PC shipments have fallen more than 30% in the first quarter of 2023 vs. the comparable period last year, and so new PCs sales are not happening. Are people switching to Macs? Apple had the worst decline of a single OEM. Even worst than Lenovo.

Microsoft has basically given up on demanding “TPM 2.0” or new PCs, and has unofficially started trying to cannibalize all the Windows 10 systems it can by waving them through. Figuring that they’ll at least make some extra money with all of the additional adware and spyware if they can’t sell you on a new PC?

No, Microsoft said that they would make money with “Cloud”, but even Yahoo Finance articles admit that “Cloud” revenue growth is slowing and will be a disappointing miss.

There’s simply nothing here to justify MSFT stock nearly doubling in the last few years and it’s time to dump it if you have it.

Every major company, even Coca-Cola (we don’t want your White money), has “plans” to “Chaff Bot” now. This has jumped the shark already and they’ve been at it for less than 60 days. Amazing!

Consider the amount of money and potential being wasted to juice the stocks while the important people dump shares and, hey it’s not insider trading if it’s scheduled, right? 😉

Bill Gates himself has to know full well that GPT is a great big fat nothingburger, but the speculation makes him other people’s money, so he’s buying columns talking it up about how it will teach your kids to read. (Don’t teachers already do this?)

The “AI” bullshit was a major factor in my decision to exit stocks in the retirement portfolio recently. I expect the bond fund to right-size because those are binding obligations to pay and with a very low default rate, and prioritized during bankruptcy proceedings.

(Like Bed, Bath, and Beyond…. Now if only they had put out a press release about using AI to sell people coffee makers and pillows, and sold shares are horrifically inflated costs with no promise to pay anyone back.)

Walmart recently fired their global chief of marketing. This is the guy that said they were going to start selling NFTs and taking Cryptocurrency.

I read a news article today about the US Government’s war on crypto. At first it was just the IRS, then it was the New York “Department of Financial Services”, and now it’s the SEC.

The SEC just issued a notice to Coinbase that is the final step, usually, before criminal charges. Coinbase is threatening to exit the United States.

There are no Crypto exchanges you can trust. Ask FTX and Celsius customers.

Ask people who used Uphold and have Uphold freezing their account or money disappearing, and nobody from Uphold will talk to them.

Crypto had its day. Now these companies are saying there’s “AI”.

The reason why Microsoft can burn so much time in Azure to run GPT is because they weren’t doing anything with it. It was sitting there as dead, unsold, capacity.

They’ve cooked up this thing, and it’s an utter scam, and people will lose their life savings if they don’t get out quickly.

Investors should take serious note of the fact that while Microsoft is trumpeting an AI that returns false information, and can’t be fixed, they fire thousands of people in Bing, Edge, and other divisions that are responsible, theoretically, for fixing it.

It shows that their plans are, in fact, to deceive investors about what the potential future applications for generative AI really are, and not to fix it, and to dump inflated shares before the little people using Robinhood and their 401(k) to invest in Microsoft lose their asses on it.

This is a picture of the history of Microsoft stock.

When a stock moves like this, tread very lightly.

You see that little bump way back between 1986 and 2004?

That was around 1998-2001. The DotCom Bubble.

Hardly a blip compared to what’s been building up recently.

Microsoft isn’t alone at severely overvalued “tech” companies.

There is a wipeout coming.

And it’s not only fraudulent accounting, “AI” hype, and such. It’s not just “irrational exuberance” as Alan Greenspan might say.

A lot of it is also legal embezzlement, known as “share buybacks”, which are done to increase executive pay. Share buybacks should be illegal. They don’t add value. They destroy value.

Democrats in Congress put a 1% tax on share buybacks into law.

That’s better than nothing (which is what the Republicans want), but it doesn’t do very much to discourage them.

It’s saying “We’re going to let you do something incredibly wrong and fraudulent, but we want some money first.”

Captured government.

Don’t look for the government to help you. They’re figuring out how to shut down your retirement money and take it all back so they can bail banks out again; so they can run Super-TARPs.

As an investor in a retirement plan, there’s just not many safe options, but given that last year was already the worst year in 250 years for Bonds, I think that other people have taken the hit and fixed income will be the name of the game for a while.

I think that Gold and Silver could do well too. At some point, the large market caps are going to have to be companies that really make things and mine things and build things again. This tech surge is a seductive mirage.

“Intellectual Property” is just a fancy way of saying “slavery with extra steps”. It’s a way to extract rents from the productive sectors using nothing but the threat of law.

That being said, while some companies do make money like this, it’s normally a form of economic parasitism. “Non-Practicing Entities” and “Patent Trolls” come to mind, but Microsoft operates like this too, and it ruins companies that made stuff.

I was reading my email today, and Samsung emailed me about having until July to remove everything from “Samsung Cloud” before it got deleted.

I don’t even have a Samsung phone anymore. They turned a loyal customer into “Eww, Samsung.” with the increasingly buggy firmwares, and shoveling Microsoft crap into the phone and making it impossible to remove fully.

Then when I found secret Facebook spyware running in the background by default (“facebook service” or something), it was the last straw. I wiped the phone (which was malfunctioning anyway thanks to T-Mobile making my Sprint phone, which they sold me, incompatible with their network), and used T-Mobile’s buyback to switch to a Pixel.

Microsoft doesn’t add value, they ruin it. I can’t imagine that I was the only Samsung phone user who saw Microsoft Microsoft Microsoft popping up everywhere and went “LOL, no!”.

Bill Gates said in one of his “Creepy Uncle Says” articles the other day, that his “biggest mistake” was not “making Windows Phone what Android is today”, when “that was a natural place for Microsoft to be”.

Microsoft had Windows Phones, and they were cheap. Nobody wanted them. The only way they could dispose of them was selling them at a loss to Cricket Wireless customers with bad FICO scores and writing them off their taxes.

But they came back and forced themselves, as in rape, on people who used something else. That’s what they do. They corrupt and corrode. Samsung is finished.

The Galaxy S20 was the worst tech thing I ever bought, and I’m just glad I didn’t end up selling it to Amazon for a bag of cat food because T-Mobile offered me a 100% credit for giving it back.

It was such a bad phone (mostly because of the Microsoft deal) that I went in and said “Show me the iPhones and the Google phones.”

And almost like some sort of horrible comedy, the guy says “We’ll give you a Galaxy S22 if you want one.” I was like, “No.” He says, “Well it is a more expensive phone.” and I replied, “Well then anyone who pays that and gets another Samsung has my sympathy.”

Microsoft can’t seem to really enter into new markets, but it can do an enormous amount of damage on the way down. It’s basically turning Samsung into the sequel of what happened to Nokia.

There’s no telling exactly when this stock market is coming down, but it is probably “soon” and when it does, it will come down hard, and they’re not going to tell you when they plan to do it to you.

The people gravitating towards Microsoft and its ilk will get burned worse than others.

In the meantime, we can all enjoy the comedy. CNBC calls the Business Software Alliance (a legal trolling outfit operated by Microsoft, Adobe, and a few others, best known for running ads encouraging people to rat their employers out for “unlicensed software”) a “tech advocacy group” calling for “AI regulations”.

:/

Re-Balancing Mom’s Retirement. Chinese investments?

So, mom finally did set up online access to her retirement account and let me see the disaster her employer made for her.

For starters, they never submitted her beneficiary paperwork that she turned in after her divorce 8 years ago, so if anything had happened to her, her ex-husband would have inherited all of the money.

So we fixed that.

Then I took a look at the allocations that they made.

They threw a woman in her mid 60s in a fund that would have been more appropriate (risk) for a 30 year old.

The people setting these funds up are stupid. Just absolutely stupid.

She’s old enough that she’s making catch up contributions, and they had her in stocks including emerging markets (in South America, Asia, CHINA!!!), when none of those places are reliable investment opportunities.

You might make money in China, on paper, now try to get it out.

I read about a man who made $4.5 billion in Chinese investments and then tried to get it out of the country and bring it to the US, and the only thing the bank gave him were excuses about why he couldn’t have it. Questions about why he wanted it. He’s got $4.5 billion sitting there and the Chinese are such unreliable “investment partners” that they wouldn’t let him have it.

Now, with mom’s previous allocation, only about 3% was emerging markets.

But why in God’s name would you want any money in a country like China that says you can’t have it when you ask for it?

If you want a lot of money sitting there taunting you that you can’t actually have, you would have loved Celsius and FTX, which were just great. Just as good as Tencent.

So I blew that away and set up a nice re-balanced portfolio with 80% investment grade bonds and 20% stocks, mostly large cap US and developed countries with open markets and solid regulatory frameworks.

Growth prospects in the US and other developed countries are limited, but there’s some good dividend stocks to hold that aren’t going anywhere soon and where you can actually sell them and have money. There’s tight regulations around Bond funds here too. Do you really want to own Chinese bonds?

I don’t know how many lumps people who invest in China are going to have to take before they realize what’s going on over there.

China’s economy is mismanaged as Hell and if there’s going to be losses, their philosophy is that foreign investors will get fucked before their own, and if there’s a Chinese bank crisis (and there is), then their own people not only don’t get access to their funds through their version of the FDIC, but if they complain about losing ALL of their money in a failed Chinese bank, they get kidnapped by men in a van who show up so that they can be shown what comes next if they go to Beijing to complain to the authorities.

What kind of investment partner has this going on?

Who wants this crap in their retirement account?

Anyway, so this is the mess I’ve been tasked with sorting out, and I disposed of the unreliable investment allocations.

I’m glad I don’t live in China. For so many reasons. I mean, like not having the police show up if I book airline tickets out and ask why I’m traveling because they’re scared that I’ll claim asylum when I get there is good. That’s a good place to start.

You put money in a bank and you don’t know what will happen if the bank goes under.

People living in the West might talk of cash shortages at ATMs or pressure to use the banking system or weird laws where they ask why you want lots of money, but we’re a long way from having no FDIC and kidnappers who show up in a van for people who complain about it.

In many ways, China isn’t just an authoritarian dictatorship, their banking system is really underdeveloped. They claim there’s deposit insurance but then what actually happens during a bank run is more like the US in the 1920s.

It would just really scare me to have any exposure to their markets.

As part of the things you couldn’t say or risk being kicked off “Social Media” a couple years ago, the Chinese Police Stations in the US are finally being reported in the Mainstream Media. They have to now because the government, which knew they were there and didn’t stop them until now, is arresting Chinese Secret Police agents.

When I quoted CNN and NPR about the Chinese Police Stations, “stux” cited that post as one of the reasons I was thrown off of mstdn dot social.

The left is still out there censoring this stuff even though it is now UNDENIABLE PROVEN FACT.

In addition to the two arrests in New York, there’s 28 Chinese Secret Police officials that are connected to that which are on the FBI’s wanted list.

You can’t criticize China. You can’t criticize China. You can’t criticize China.

No matter what crimes they are committing against your country, if you say it, you will have your Social Media accounts terminated.

And now it’s proven. They run illegal Secret Police Stations in the US which are harassing and threatening Americans. Biden was letting it go on, he was censoring the news, until he had to respond to breaches in our airspace with “something”.

So then the government, which knew about the Secret Police Stations all along, took the media blacklist off and made some arrests. That’s nice.

Cheaper than shooting down a $30,000 balloon with scrambling a fighter jet ($100,000) and shooting a missile at it ($400,000).

It’s not that Trump was any better. Apparently there were five of these damned things and all he did was let it happen and not talk about it.

The US government is looking pretty impotent under our most recent two Presidents, which are letting the enemy honk our nose and pull our underwear up over our head.

It really is demoralizing.

The MSM is both admitting all this stuff they were censoring before, and yet when you quote them, you still get called “a hoax” and thrown off “Social Media”, so someone isn’t getting the latest memos, apparently.

De-Dollarization?

I doubt it. Anyone who goes along with this will find out quickly that the Chinese are even more duplicitous than the American government.

If you “standardize” on the Yuan, you will hold a currency that is pegged to the Dollar anyway, and it will be issued by a bunch of double-dealing backstabbers who run a regime of terror against their own citizens.

You may even find that your investments can’t actually be sold for money later.

What the Hell are you supposed to do with Chinese Funny Money that can’t even leave the country, I wonder.

Maybe the ones that go along with it will be these unstable hyperinflationary BRICS countries that have been taken over by corrupt Socialists. It’s very easy for the Chinese to turn these places into a debt colony.

Although a lot of these “Belt and Road Initiative loans” have been denominated in US Dollars. So the Chinese may be slowing their purchase of Treasuries, but they still have to buy USD while they put their own citizens on the hook for expensive loans to banana republics.

Already, these loans are falling apart and the Chinese banks are just “adjusting the terms” to try to claim that it’s not a loss.

The United States tried to go down the same road a long time ago and trying to run an empire gets expensive and unravels eventually anyway.

Even if you can get your money out of China, why help them build their economy?

It’s bad enough that we have all these Chinese imports while so many Americans are out of work. That’s just starting to change, but in the mean time the best way to deal with China is to yank your retirement funds out of their companies and defund them.

If people take an active interest in their portfolios and gang up on China, we can do something about them even while our own government is coddling them.

401(k) Retirement Fund Day Trading. The Economy, the IRS and Bond, AGG Bond.

I just don’t like what I’m seeing out there in Corporate America these days.

All signs to me have my spidey sense twitching that stagnation is going to end with a huge market crash sometime later in the year.

I hate to call what’s been going on “secular stagnation” because it would imply that there is no demand for goods and services. There’s actually a lot of demand, but it’s hard, with all of the layoffs and stagnant paychecks, to earn enough to fulfill this demand.

The reason that the Fed is hiking rates anyway while the Bureau of Labor Statistics has turned into something that would make Joseph Stalin proud, is that they created a mess with the “pandemic” “stimulus” and now they have to contain it.

During Stalin’s reign over the USSR, his Census officials brought him data that the population of the USSR had collapsed, so he had them all shot and the new ones brought him better figures.

While we’re not seeings American civil servants shot, we are seeing them lose THEIR jobs if the President doesn’t like what he sees.

In May of 2020, Trump had the BLS outright fake how many Americans had just lost their jobs in a single month, because the figures were horrific.

At the same time, he had the CDC model that only 56,000 Americans would die of COVID and that it would stop in August. We’ve lost over 1.5 million and COVID is still out there. My Grandmother in the nursing home just got it again.

When the Census was happening, Trump’s Census officials, true to their Stalinist inspiration, made absolutely no effort to count my spouse and me in Illinois, they didn’t even send us a form or a Census taker. Meanwhile, in states like Florida and Indiana, they had people driving around claiming that empty houses had entire families living in them.

And nothing, fundamentally, has improved, under Joe Biden. When the FDA was considering Aduhelm, their Scientific Advisory Panel voted almost unanimously against it. The FDA approved it anyway, nearly the entire Panel resigned, and they were replaced with more compliant officials.

My point, is, that in this day and age, you can trust little of what you see or hear.

Joe Biden has inherited all of the Organs of State that Donald Trump corrupted so badly, and uses them in the same manner.

The banking crisis last month is still bubbling under the surface, waiting to come back with a vengeance, while the officials pat themselves on the back for saving everybody.

Looking at the layoffs going on, the debt people are in, it’s clear that America is anything but a bunch of happy campers living in a well-adjusted country.

It’s a sad, sick, badly sick, place to live.

The stock market though, is stagnant. It’s been stagnant ever since Joe Biden has been in office. When you deduct the banking fees to manage my spouse’s 401(k) plan, there’s been no gains at all.

Given the limited fund options, I decided to execute a sell order for all of the S&P 500 ETF shares last night, purchase 100% shares in the Bond Index Fund which tracks the Bloomberg Barclays Aggregate Bond Index, and call it good.

This fund took massive losses last year while the Fed was hiking rates. Down nearly 16%.

Will the Fed continue hiking? Perhaps. But there’s starting to be a lot of arguments among Fed officials as to whether and by how much they can continue to get away with this before things blow up.

I think the fund has oversold and it’s still a very good value right now. If there are more Fed hikes, I think they will be muted (25 basis points at a time) for at least a while, as they try to gauge what the market response to all of this is.

The rapid hikes over the last 11 months or so jolted the Bond markets and rattled investors, because it caused “losses” in the form of making bonds paying lower rates sell at a steep discount to compensate what investors could make by buying newly issued bonds at higher rates.

Now that this has returned to something closer to undervalued to maybe fair value, the small rate hikes shouldn’t agitate the funds that much anymore, considering that the duration of the holdings averages 5-7 years, and so you have old bonds that the fund booked a loss on rolling off and being replaced with better bonds that lock in higher rates.

My primary concern is inflation risk, but that’s a risk where you don’t make enough in the fund to compensate for inflation.

This is not much of a concern when stock funds are doing poorly anyway, because you make no money there and inflation is still happening.

This is offset by the fact that the Bond Index Fund has a much lower expense ratio than the S&P 500 ETF. Every quarter, the bank statements assess a small fee for managing the funds, and the fee for being in the Bond Index Fund is about 150 times lower than the S&P 500 ETF. It’s not a huge difference with what we have in the account at this point, but it is something. The bank itself is a drag on your retirement.

What about default risk in bonds?

Well, first of all, the primary component (43% iirc) is United States federal government bonds, so those are quite safe.

The rest are a mix of corporate, state and local government debts, mortgage-backed securities, etc.

The good news is that when a bankruptcy happens in a corporation, if there is any money left, the bondholders get paid first. Then, and only then, if there is anything left, do stockholders get anything. For them it will be pennies, but they have a greater chance of being completely wiped out.

As it stands, the default rate in the AGG is only 1.01%. It’s quite low.

Even assuming no returns at all this year, why dial up your pretax 401(k) anyway?

I dialed my spouse’s up to 14% on his side. His employer will match 6%. We had been taking the 6%, but he just got a raise, our fixed-income investments at the bank (CDs) and bonds are earning more lately, and this is all taxable income on our 1040 at the end of the year.

In addition, there have been some massive class action settlements, mostly related to the Illinois BIPA, and the Facebook Cambridge Analytics Scandal.

I expect that this might push us over the AGI to claim the full $1,000 of the Retirement SAVERS Tax Credit, which is something the IRS puts out to encourage lower income workers to save for retirement.

So if you shove more money into your pretax account at work, it lowers your AGI, and you can still qualify for the credit, even if your “Social Security and Medicare Income” on your W-2 are still a fair bit higher.

Traditional 401(k) pretax contributions are not the only way to get your AGI down.

Much of the insurance your employer offers can do it too, including health, dental, and vision premiums in many cases. If your employer offers you the choice, take the pretax premiums.

(Why are your Social Security and Medicare earnings still taxed at the full gross income level? Well, be glad they are! Your earnings record is how Social Security determines what to pay you when you claim it.)

For older couples where one is still working and the other gets Social Security, or people who get Social Security and still have W-2 income, the case for doing pretax 401(k) contributions is greater.

See, the more your earned income on the tax return goes up (from either spouse or for you if you’re single), the more Social Security income becomes taxable.

Using pre-tax 401(k) contributions and putting in more, you can “bend the curve” and bring down your taxable Social Security benefits at the same time.

Here’s a calculator so you can try that yourself.

Most low income workers completely ignore the tax benefits of 401(k) accounts.

You should always aim to be under the maximum AGI (which those pretax contributions can get you to even if you make more!) for the Retirement SAVERS Credit, even if it puts a pinch on your household finances or you have to break open something like those No Penalty CDs I’ve been buying up with our Savings.

That $1,000 credit comes directly, dollar-for-dollar, off your tax obligation at the end of the year (but it’s not refundable, so you can’t go below $0, although if you get to $0 and still had refundable credits, it could get you another $1000 because the refundable credits would start from $0 and keep going!).

In our case, it leaves us with an annual tax obligation to the feds of a few hundred instead of well north of a thousand, because we can lower the AGI using top of the line deductions.

Does it mean that we don’t go to Disney World and lay out $8,000 and come back to reality with banks and hospitals on the phone wondering where their money is?

Yes, we live within our means. We don’t “buy nothing”, but I make sure that our accounts are in order.

Even low income workers should save for retirement and do some financial planning, it’s not that hard.

We have no debts, we have a low tax obligation, and we have money in retirement funds.

Meanwhile, my in-laws…. My sister-in-law has three jobs, her husband has two I think. They make several hundred thousand a year. They make no headway with the 7 credit cards, the mortgage with the property tax bill that goes skyrocketing every year because it’s Illinois, the two kids that cost them millions of dollars and contribute nothing to the household budget, and the three car payments and repair bills.

It’s easier to have a good head on your shoulder for finances than it is to be a five job, two kid, no income household.

I’ve witnessed five US recessions and have studied more as a hobby. Here’s what I think about Bitcoin.

I’ve witnessed five US recessions and have studied them as a historical phenomenon as a hobby. Here’s what I think about Bitcoin.

If you look at the fake coins bloodbath and bankruptcy proceedings going on right now, that alone is another dotcom bubble, and Bitcoin and clones turned out to be Flooz 2.0.

Remember Flooz? If you’re much under 40, you probably don’t.

There was going to be an “Internet Currency” that you could exchange USD for because online merchants weren’t established to take credit cards and stuff yet.

I got some as part of a promotion and used them to buy some cigars from a cigar Web site through the mail when I was underage. I think the statute of limitations is up on that. It was over 23 years ago.

Anyway, Flooz got Whoopi Goldberg doing commercials for them, similarly to the way Matt Damon and others were doing Super Bowl ads for crypto exchanges that are now defunct, only months later.

Most of the Flooz (and similar company, Beenz) activity ended up being Russian oligarchs using it to launder money.

When the company shut its doors with no warning in the middle of the night (like crypto exchanges that now freeze transactions because there is no money and head to bankruptcy court), people flooded Web forums to complain that they had a bunch of them and when they called the 1-800 number it said the line was disconnected.

Bitcoin+Clones and the exchanges are just a fancy Flooz.

The problem is that cryptocurrencies got very big because people figured that it would always go up, it appealed to Libertarian cranks who thought they had something real like Gold or Silver (and they didn’t) just from some buzzwords about it not being “legal tender”, which turned out to be a problem when it lost 70% of its value and continues plummeting, and then the tax evaders started getting letters from the IRS saying “We know what you did last year and we want money.”.

Ironically, people who bought Bitcoins last year have about 29 cents on the dollar today, while people who just held onto the dollar still have 91 cents even if they didn’t invest it.

And a full inflation-adjusted dollar if they bought inflation-backed treasury bonds.

So while my sister-in-law is tearing out her hair, my Treasury Bonds have not lost a single penny.

She comes from the slums of Manila and fancies herself an investor who drives a BMW.

They’re probably going to want that back.

Anyway, “Flooz on a Blockchain” (cryptocurrency) didn’t actually work out all that well, like I kept trying to say it wouldn’t.

Now who will clean up all of these ridiculous Bitcoin ATMs?

They managed to litter them at Merchandise Mart in Chicago and at gas stations in the suburban ghettos, and they’re rather unsightly.

US Savings Bonds are at a 25 year high. Are these a good alternative to stocks right now?

US Savings Bonds. If you were a kid in the 90s and you had parents that wanted to teach you about investing and interest rates, they probably took you down to the bank to buy some with your allowance or paper route money.

Or maybe you got one when you won the spelling bee at school. You probably thought it was pretty lame back then. Instead of a Nintendo game, you had a bond that you had to hold onto to cash in at some point in the future. With interest, but kids, and many adults today, demand instant gratification. And compounding interest is a force of nature, but it accumulates over time.

With the Federal Reserve Bank System keeping interest rates low, ostensibly to “stimulate” the economy, but really just continuing to “hit” a flatlined patient long after the doctors should have called the time, it’s time to consider income-based investments.

The stock market is down. It’s still massively overvalued. We’re back to valuations we haven’t seen since the 90s, and it’s taking lots of inflation to keep this show apparently on the road. It’s like Japan’s Lost Decade.

Your bank account probably isn’t paying anything right now, and if it is, it’s probably half a percent. But there’s an alternative that pays 7.12%, and the interest earned is immune from state and local income taxes.

The humble US Savings Bond, Series I.

The I is for Inflation. The bonds are indexed to inflation, and change rates every 6 months. They are currently paying 7.12%, and could go even higher soon.

Even if you cash them out after the 12 month minimum hold time and take a penalty of 3 months interest, it’s still better than a bank account.

Better yet, if you buy them at the end of the month, you only have to hold them for 11 months, yet you get paid 9 months interest if you were to cash them out after the 11 months, as they earn interest backdated to the first of the month in which they were issued.

You can buy these bonds if:

You are a US citizen, Green Card holder (Permanent Resident), or a “US Person” (basically a resident alien by the IRS Substantial Presence Test, which includes international students).

You have a Social Security number.

You have a US bank account with which to fund purchases and redeem bonds to.

To purchase these bonds, you can use Treasury Direct.

The Treasury Direct system is a little wonky, but straightforward.

You basically get an account number and set a password and a 2FA recovery email address (for one time codes).

Then you tell it your bank account routing and account numbers from where you want to buy and redeem bonds (you can add multiple accounts, as long as your name is on them).

Optional: Add your driver’s license/state ID number. (I emailed asking if this would affect buying or redeeming the bonds and was told by the Treasury that it does not. It just helps them verify your identity some more in case there are any questions.).

The wonkiest thing about the Treasury Direct site is the virtual keyboard.

To enter your password, there is a really strange virtual keyboard, and you use your mouse to click on the letters.

The Treasury says this is to avoid fraud involving keyboard emulators and malware (mainly a Windows problem….I am able to manage my Treasury account effectively from most browsers on Debian GNU/Linux).

In addition to the state and local tax exemption, Treasury Direct Savings Bonds have another perk.

While the Treasury site is a bit weird, it charges no commissions, as most trading platforms do. So you save some more money.

Limitations of Savings Bonds and Treasury Direct:

The Treasury will ONLY pay the bonds back to the person who bought them, and you cannot sell Savings Bonds to other investors, only back to the government.

There is a purchasing limit of $5,000 per year, per US person. Obviously, married couples can double this by each buying $5,000. You can use Payable On Death on the bond to leave it to your spouse (or anyone else)and put their Social Security Number on it, and this would avoid the probate process.

The interest earned on the bond is taxable, but only by the federal government. No state may tax it. And the federal government will waive the taxes on the bond interest under certain cases, such as if you pay for qualifying college tuition expenses with it. The tax is deferred, meaning that you owe taxes on the interest on the bonds you redeem for the tax year in which they are redeemed.

There is no requirement to pay tax on the interest until you redeem it, or until 30 years later when the bond makes its final interest payment.

In summary:

The stock market is in the toilet this year, and it didn’t manage to do much better than I series Savings Bonds last year. Even though these are a Savings investment, when they outperform the stock market, and with no risk to principle, it can be hard to argue with the logic of buying them,.

As you would normally have done with a CD, you can “stair step” your bonds so that you always have more coming available if you need the cash for something. Just stagger your purchases.

If something radically changes in the future and inflation falls back to lower than gains in the rest of the market, you can get your money back out with very little penalty. There is no interest penalty at all if the bonds are at least 5 years old.