Critical Thinking Required

During this quarter of the year, one of the most popular questions is: I heard about tax-loss harvesting from my friends/CPA/family. Should I do it? Tax-loss harvesting is a strategy investors use to offset capital gains by intentionally selling investments in taxable accounts at a loss. While it may be useful for a complex taxable account, it doesn't necessarily make sense for someone with smaller investable assets.  It may even hurt the long-term performance if executed improperly. In this episode, Nathaniel discussed some misconceptions of this strategy, the pros, and the cons. Stay tuned.

When it comes to private investments, guess what topic we get asked the most? Yes, real estate! Today, we will discuss a strategy called the “1031 exchange”. The biggest advantage is the tax deferral function. You can keep rolling from one real estate investment to the next (with some nuances.) And if you do it right, it can potentially eliminate capital gains taxes entirely for your heirs. But as with all financial tools, it's not for everyone. A 1031 exchange also has some strict rules and significant drawbacks. Is it right for you?

This is our “How to pick a financial advisor” mini-series.  First, did you know that only roughly 15% of financial advisors are “fiduciaries”, meaning we are legally and ethically bound to act in the best interests of our clients.  The rest are operating their business under the “suitability rule”, meaning they don't need to do what's best for you, as long as it isn't grossly inappropriate.  Some brokers may say that they “act” as fiduciaries, but that may hold no legal validity.  Dan discusses why it's important to find a true fiduciary advisor, and how you can verify this information.

Today, we're breaking down the order to invest your money.  We hear this question from our clients all the time: my friends are investing in this private deal, should I do something like that as well?  Well, hold the horses a bit, because before we go all the way to the “private deal”, there are some other basic (maybe not as sexy as a private deal), but more important glasses we need to fill first.  Let me introduce you to our Investment Champagne Tower!

Investing can often feel like walking a tightrope. Balancing risk mitigation and return maximization is essential for any successful investment.  Should you take a high risk in the hope of a high return?  Or should you aim for safety and expect less?  In today's volatile market, which one should take priority?

Nathaniel talked about how high interest rates impact your investments previously.  In this episode, Tim discusses how interest rates impact daily financial planning, from mortgages, car loans, and credit cards, to savings and budgeting.  Tim said it so well: the point of planning is positioning.  It allows you to put yourself in a good position to take advantage when an opportunity presents itself!

As you may have already heard, the Federal Reserve announced that it plans to hold interest rates steady amid high inflation, and forecasted just one cut in 2024 instead of three to six.  In this episode, Nathaniel discussed what that means for your investments.  And why did the market keep going up in a high-interest rate environment when in theory should have gone down?

Today we're diving into a topic that's crucial for self-employed individuals: investment account types. Whether you're a freelancer, consultant, or small business owner, understanding these options can be a game-changer for your financial future and retirement. So, let's get started.

This is our 2024 first-quarter commentary.  Nathaniel discussed 3 main topics: US stock market performance, and why the S&P 500 doesn't truly reflect the overall stock market; inflation, and how it impacts your investments; and lastly, the 2024 presidential election and how it may affect your financial planning.

If you are planning to have a child, or you just had one, there are some financial preparations that you may find extremely beneficial in the long run:1. Cash Flow: Create a realistic budget and increase your emergency fund;2. Estate Planning: Pick your guardians, create a trust, or at least complete the free estate planning templates your state provides;3. Life Insurance: Now that you have (or are about to have) another person who depends on you, please review your insurance needs.  It's a risk management tool, not an investment!4. Education Planning: Utilize 529 plans and other useful investment vehicles for your child;5. Tax Breaks: Talk to your advisor and CPA about child and dependent care credits, FSAs, and other tax benefits.

In this episode, Nathaniel and Tim discussed what the S&P 500 index is, its performance, and does it truly represent the overall stock market.  From January 1 to June 20, 2023, the S&P 500 increased 14.3%.  That's well above the 10-year and 20-year averages through that same time period of 3.6% and 3%, respectively.  "The markets must be doing really well this year then!", you may think.  But why are your 401(k)/retirement accounts not doing as well?  Did you know that the top 9 companies of this index (Apple, Microsoft, Amazon.com, Nvidia, Tesla, Alphabet, Meta Platforms, Berkshire Hathaway, and UnitedHealth Group) accounted for almost 31% of the market capitalization?  And if you exclude these top 9 stocks, the index would be up about 3% in the same time frame, making it a very mediocre year.  Nathaniel talked about what drives the 2023 jump, and the volatility of the short-term market.

In this episode, Tim and Nathaniel discussed estate planning for digital assets.  This is a relatively new concept for older generations.  Most of us are familiar with wills and trusts for cash, real estate, and other investments.  But what about digital assets like Bitcoin, online bank accounts, etc.?  If you are an influencer or work in the media industry, what about your social media accounts, movie/music rights?  Nathaniel and Tim also discussed password management.  We understand that estate planning is always difficult because we don't want to face our mortality.  But please give it a try, and do the hard work on estate planning, so that your loved ones can focus on mourning your passing and building a meaningful life afterward, instead of stressing out about where everything is.

In this episode, Tim and Nathaniel discussed private investments: what're their qualifications, why they have income/assets restrictions, and how should one view them.  A couple of research filters to go through: define your goals, understand the vehicles, consider the risk, know the management/leadership, and pay the right price.  Nathaniel made a great point: if you have a small business or part-time side business, the best private investment could actually be your own company.  You know the industry well, you understand the product/service, and you are in control of the execution.  When it comes to investments, new and shiny may not be the best option.  Why not put your money into things you know best?!

Threads is Meta's latest social media app.  It's a Twitter-like product with short missives you can share with followers.  It lets you post text, photos, links, and videos.  It reached 100 million subscribers in a record time: within 2 days.  In comparison: it took ChatGPT 2 months, TikTok 9 months, Instagram 30 months, cell phones 15 years, and telephones 75 years.  Tim and Nathaniel discussed from an investor's perspective, what Twitter's and Thread's (really Twitter and Meta's) pros and cons are and what the future may hold for them.

For this episode, Nathaniel and Tim discussed investments within the music industry.  The earning method has changed in the past decade with streaming services.  Nathaniel used Taylor Swift as a perfect example of how top artists can change the power dynamic with corporate giants.  There are many different types of organizations in the music industry (artists, music production, recording companies, publishing companies, agencies, etc.); which ones will Nathaniel choose to invest with?  He gave his answer and reasoning.

In the last episode, we discussed some frequent spending habits we've seen, and how we should interpret them.  For this episode, we are going to discuss budgeting.  Before we start, understand that this is going to be an emotional and hard exercise.  Ask yourself, are you really ready to make a lifestyle change if needed?  Be realistic about your expectations and numbers: if not, you are going to fail again and again, and create a negative emotion feedback.  Dan and Tim discussed delayed gratification, outliers, and the importance of understanding the value of your dollar: both quantitatively and qualitatively.  How you feel matters a lot when it comes to budgeting.

This is part one of our spending habits discussion.  Dan and Tim listed what people call “spending red flags”: frequent small expenses like coffee and restaurants; unused subscriptions and memberships; impulse purchases; and trying to keep up with your friends.  We are not disagreeing with these points, but it's also important to understand this: our spending is not about the objects/services that we pay for, but more about the emotions behind the purchase.  You have to ask yourself: why did I buy it, and does it bring me the maximum happiness?  

The crypto ETFs are not doing too well for the past year.  The fall of some leading players like Tierra/Luna and FTX hurt investors greatly, and the potential criminal fraud investigation is even more alarming.  And now, with the rise of ChatGPT, you can clearly see that crypto is no longer ETFs' favorite new baby; the money is moving to the AI world.  Investors are piling into shares of graphics chip maker Nvidia, Microsoft, Google, and other stocks that they think stand to benefit from AI technology. What can we learn from the crypto fallout, and should we jump on the new AI investing wagon?  Nathaniel and Tim discuss the four main reasons why investors lost millions over crypto and their thoughts on how to approach the new AI investment trend.

In this episode, Nathaniel discussed 4 hot industries that he won't invest in, and what his exceptions are:1.     No commodities like oil, gold, and silver, etc., but yes to commodity royalties.2.     No Bitcoin, but yes to blockchain technology or other related industries.3.     No real estate as a landlord, but yes to professional real estate investment groups.4.     No cash-heavy and cyclical industries like shipping, but yes to utilities and railroads in the US.Overall, you can find a pattern: Nathaniel doesn't like asset-heavy and high-risk industries, and he doesn't like investments that require a lot of upfront capital-intensive work either.  But overall, that's not what ultimately stops him.  What Nathaniel truly cares about when he invests, is his circle of competence.  Kobe Bryant, LeBron James, Warren Buffett, Dr. Dre, what makes them successful?  They all stick with what they are good at: their own business, their strength, their core values.  When it comes to investing, most of the time “safe and boring” is good!  It's not worth it to chase the next “sexy new thing”.

The U.S. government has never defaulted on its debt, and it's unlikely it will default this time either.  But if it were to happen theoretically, it would have severe consequences for the country's economy and global financial markets, from rising interest rates to lower stock market prices, and from higher inflation to the end of the U.S. Dollar dominance.  What can one do to prepare for such a disaster?  Academics have differing opinions, but in real-life practice, our one golden rule is: position yourself well with complete and consistent financial planning and actually execute the plan.  Don't deviate from your ongoing investment contributions or distributions, be it your 401k or other retirement accounts.  CONSISTENCY IS KEY.  Nathaniel gave an example of 2011 when the U.S. came close to default, and what would have happened to your investment if you had sold everything in a panic vs. holding your position and riding the turmoil out.

Charlie Munger and Warren Buffett are Nathaniel's all-time favorite investors.  As always, they offered a lot of wisdom (and a couple of zings) at the 2023 Berkshire Hathaway annual meeting.  Tim and Nathaniel discussed the duo's take on: 1. Why are they against "diversification" when everyone else thinks it's the golden rule, and the importance of building up your circle of competence; 2. The pair called Elon Musk a "brilliant, brilliant man", but may "overestimate himself" sometimes; and 3. This is one of Nathaniel's favorite quotes: "You should write your obituary and figure out how to live up to it."  Overall, their take on life is simple, and yet requires a lot of self-discipline: "You spend less than you earn.  Invest shrewdly.  Avoid toxic people and toxic activities.  Try to keep learning all your life.  And do a lot of deferred gratification.  If you do all of those things, you are almost certain to succeed."

For this episode, we asked ChatGPT and Google Bard: "Write a podcast outline on how will ChatGPT/Google Bard change the financial planning industry?"  Here is the second part of each chatbot's outline.Discuss potential concerns and limitations of using ChatGPT in financial planning:o Make mistakes that could lead to financial losses.o Be biased in its advice, which could lead to people making poor financial decisions. o Not be able to understand all of the nuances of a person's financial situation, which could lead to bad advice.Overall all, we believe that AI technology is good at gathering, processing, and analyzing raw data.  It will help advisors to scale their practice rapidly.  But as always, a brilliant plan is only great when executed correctly.  Until the machine learns to feel (oh man, we hope not), we will always need a human touch in the financial planning industry.  Because most of the time, people choose not the best plan, but the one that makes them feel complete, relaxed, and happy.

For this episode, we asked ChatGPT and Google Bard: "Write a podcast outline on how will ChatGPT/Google Bard change the financial planning industry?"  Here is the first part of each chatbot's outline.From Chat GPT:I. Introduction A. Introduce the topic of how ChatGPT is poised to revolutionize the financial planning industry B. Briefly explain what ChatGPT is and its capabilitiesII. Background on the financial planning industryA. Discuss the traditional model of financial planning B. Identify the limitations of the traditional model C. Explain how technology has already begun to disrupt the financial planning industryIII. The role of ChatGPT in financial planningA. Explain how ChatGPT can improve upon the traditional model of financial planning B. Highlight some of the specific ways ChatGPT can help financial planners and their clients 1. Streamlining data collection and analysis2. Providing personalized investment recommendations3. Automating routine tasks4. Improving communication and customer serviceGoogle Bard:I. Introduction Introduce the topic of Google Bard and how it can change the financial planning industry.II. Discuss the potential benefits of using Google Bard for financial planning.A. Save more money by creating personalized budgets and investment plans. B. Make better financial decisions by providing access to unbiased information and advice.C. Reach their financial goals sooner by taking advantage of automated investing and other features.In the second part of the episode next week, we will discuss the rest of the outlines created by ChatGPT and Google Bard, which focuses more on potential problems and challenges.

In this episode, Ying and Nathaniel discussed the fight between Disney World and the state of Florida.  Back in 2022, the state of Florida passed the Parental Rights in Education bill, aka “Don't Say Gay” law.  Because of Disney World's pushback, the Governor of Florida sought to take away Disney's special tax district until he realized that the abolishment of the district would require taxpayers in Orange and Osceola Counties to pick up the tab for services paid by Disney World like fire protection and road maintenance, and more than $1 billion in debt.  Instead, a new bill was passed to take control of the special zone's board.  The Governor also implied that the government wanted more control over Disney's content within the parks.  In response, Disney passed a Declaration which essentially took control away from the future board and gave it back to Disney, the company.  There is a unique time period term “King Charles III clause" assigned to the Declaration, which makes the new Declaration valid virtually forever.  We believe any company has the right to make a stand on social matters; but at the same time, the power balance between the government and corporations is quite delicate.  It will be interesting to see how this event will continue to unfold, mostly at the cost of Florida's taxpayers and Disney.

Many studies have been done from quality and quantity perspectives on whether money can buy happiness.  It can, to a certain level.  Caroline recommended reading the book: "Happy Money: The New Science of Smarter Spending" by Elizabeth Dunn and Michael Norton.  The authors discussed 5 ways to actually increase happiness with money: 1. buying experiences; 2. buying time; 3. making it a treat; 4. paying now and consuming later; and 5. investing in others.  How does all that tie in with financial planning?  We don't care where you spend your money (well, as long as it's legal). What we do care about is whether you understand your spending patterns?  Is it sustainable?  Do you have enough cash to be prepared for unexpected life changes?  And lastly, is your spending matching your ultimate life goals?

In today's world, with social media's help (or curse?), we are beyond "keeping up with the Joneses."  Billions of people on the internet are our "neighbor Jones" that we are trying to keep up and compete with, from the five bedrooms house in the Valley to the new Porsche, from traveling to Naples on a whim with some friends to the new Birkin special order.  Social pressure spending can get out of control fast.  Dan gave some chilling data: did you know 40% of millennials have gone into debt to keep up with their friends?  Oh my... Gary gave some tips on keeping your FOMO ("fear of missing out") spending in check.  One of my personal favorites: practice gratitude!

Nathaniel and Tim discussed the collapse of Silicon Valley Bank: what happened and what went wrong.  First, unlike most banks, most of SVB's clients are not retail individuals/small businesses, but VC-funded tech/crypto startups.  As you know, they are having a tough year.  They are burning through cash and thus taking significant deposits out of SVB.  SVB had to sell its long-term bonds/Treasuries at a loss to cover its withdrawals.  The snowball started to roll from there.  Because most of its clients are VC-funded startups, the average account is a whopping $4.2 million, far over the FDIC's threshold of $250,000 per account per bank (the definition is more complex than this).  Therefore, when the snowball got going, depositors had a legitimate worry that they may not get their money back, creating a feedback loop that exacerbated the situation.  We believe this is an isolated situation because of SVB's unique client base and its management's apparent risk management oversight.   Of course, nothing is risk-free (not even U.S. Treasuries), but the average person's accounts are likely safe.

Caroline and Tim discussed some highlights of SECURE ACT 2.0 and how it impacts us:1. The age changes of RMDs (Required Minimum Distributions).2. Allowing direct transfers from 529 plans to Roth IRAs under certain circumstances.3. Changes with 401(k)s.4. 401(k) catch-up contributions.5. New Roth SIMPLE/SEP IRAs for small businesses and self-employment.6. Employer's match for emergency savings.All these new rules have nuances/circumstances built around them; please consult an Advisor and see if they make sense for you.

1.Free estate planning documents.2.Guardianship for minor children (or your pets!)3.Is Trust right for me?4.Burial instructions.5.End-of-life instructions (Living Will).6.POAs.7.Asset distribution.8.Knick-knacks.9.Communicating with your loved ones about where you store your documents.10.Routine review.

Some people say that with today's technology, there's no need to have a financial advisor anymore.  Robo/AI advisor has its uses: it's relatively cheaper, it can work 24/7 without any vacation, and the algorithms make objective investment decisions without bias.  But does this mean we no longer need a human touch in financial decisions?  Absolutely not!  We are the information generation, and there's certainly no lack of data or information.  But then what?  How do I interpret the data?  How do I apply the solution to myself?  How do I put all the different pieces together and compile the complete financial picture of my household?  And most importantly, how do I FEEL about my money and my life?  Robo/AI advisors can't tell you these answers.  The algorithms can calculate data and present you with possibilities, but it's still up to a human who is capable of empathy to interpret the data and advise.

For part II of the episode, Dan and Kennidy discussed how to manage your financial routine as a couple/partner.  Do you join finances?  Do you consolidate debts?  How do you define the roles of finances?  Is one of you taking the lead?  Do you value your partners' non-monetary contributions?  How to effectively discuss financial goals such as college planning, retirement, inheritance, charitable giving, estate planning, etc.?  How do you navigate conflict and what happens when your income changes significantly?  As much as we don't want to admit it, finance can often make or break a relationship.  Consistent communication is always a key component.  Talk finance to your partner!

This is part I of the episode where we discuss how can a couple/partners talk about finances.  A survey showed that 41% of divorced Gen Xers and 29% of Boomers say they ended their marriage due to disagreements about money. Talking about money is important for any couple, whether you are dating, are domestic partners, or are married.  “Even at the dating phase?” you ask.  Yes!  Money means different things to different people.  It may be about security, reward, ability, a means to an end, or to a lot of first-generational wealth: empowerment.  So it's a good idea to ask yourself and then your date, what does money mean to you?  That answer may significantly impact your dating pool.  Second phase: now you are in a steady relationship, you need to build a routine together: Do you want to join finances?; Should you have prenuptial conversations?; How do you feel about gifting/charity?  As we always say, it's better to have these awkward but critical discussions when everything is good.  For part II of the episode, we are going to talk about the third phase: managing your finance routine as a couple.

There's increasing discussion about Central Bank Digital Currency (CBDC) - don't confuse it with Bitcoin or other cryptocurrencies.  CBDC is not a new crypto.  It's still US dollars released by the Federal Reserve, just in the digital format.  The benefits are clear: more efficient and low-cost; faster access to assets and financial systems; it can also continue to strengthen USD as a global currency.  However, the drawbacks and risks may also be potentially astronomical if not planned carefully: cybersecurity risks to not only your savings but the stock market, investments, banking, etc.; how can people get access if they live remotely?; privacy concerns for citizens from the government, etc.  Overall, with blockchain and other technologies, some type of digital currency is coming, one way or another.  It will be very interesting to see how will the Federal Reserve sets it all up!

Because the U.S. has been running on a deficit (less tax revenue than the total spending) for the last few decades (with a few exceptions), we have a debt problem.  The U.S. national debt hit $31.51 trillion as of Jan. 26. 2023.  Our current debt ceiling is $31.4 trillion.  What happens then?  Nathaniel and Tim discussed how Congress can increase the debt ceiling (once again), how the dollar being a global reserve currency plays an important role in our national debt issue, and what happens if the country defaults on its debt.  Overall, the odds of default are unlikely now.  But for the long term, it's definitely something that we should keep a pulse on, for the consenquences will be catastrophic.

Why is it important to talk about finance in the family?  Because money is not just about money.  It's particularly hard to discuss finance with your aging parents/loved ones because it makes them feel vulnerable.  In addition, you can be 60 years old, but your 88-year-old father still views you as a child.  Some important topics you should cover with your parents: estate planning (parents, please don't leave the terrible burden “should we pull dad's tube?” to your kids.  Have a Living Will!), inheritance, college planning, business succession, etc.  Dan offered some tips: do it together as a family, don't play telephone between the siblings; be sensitive, be patient and be calm; make it a routine because things may change and evolve; and last but not least, communicate, communicate and communicate!  It's the crucial ingredient in all relationships. 

How's the first week of your 2023 so far?  Dan and Tim discussed the 2023 new year's resolutions for personal finance.  First, before you start creating your list, take a step back, and think about two questions: what does money mean to you?  What does enough mean to you?  Some great financial resolutions are: get your taxes done earlier; plan your medical/specialty visit earlier; adjust account allocations if needed for 401k, 529, stock option/RSUs, etc.; make contributions to your retirement accounts: Roth, back-door Roth, conversion, 401k, etc.; understand SECURE Act 2.0 which may greatly impact your retirement savings; think about making gifting/charity donations earlier; income planning and how to allocate it.  Overall, the most important thing is to set realistic and achievable goals so that you can create a positive feedback loop within your personal finances.  What are your new year's resolutions?

There are some investment vehicles that allow you to save and invest for retirement with tremendous tax benefits: 401(k)s, IRAs, Roth IRAs, etc.  Basically, traditional IRAs allow you to take the tax deductions today, but you will have to pay income taxes in the future when you take out distributions; meanwhile, Roth IRAs make you pay your taxes now, and grow tax-free for the rest of your life.  Nathaniel and Tim discussed the power of compounding and how you may benefit from long-term planning and investment strategy.  Remember, Social Security was never meant to cover all of your retirement expenses, and retirement account contributions are critical to almost everyone.  Discuss with your advisor and see if you should put more towards them.

A Roth conversion refers to taking all or part of the balance of an existing traditional IRA (or 401(k), 403(b), 457(b), etc.) and moving it into a Roth IRA.  The point is to pay the tax now so that the assets can grow tax-free for the rest of your life.  One of the myths we frequently hear from people refusing to do a Roth conversion is that: I will be in a lower tax bracket when I'm retired and I will pay my taxes then.  Dan and Tim discussed it and explained why this may or may not apply to you.  In addition, if you are lucky enough to have other assets for your retirement, you may also want to consider your children's earning potential to know if a Roth conversion makes sense when they inherit your assets.  Overall, as with most financial tools, there is no absolute good or bad, only if it suits your situation or not.  Talk to your advisor and see if a Roth conversion is beneficial to you!

In today's market, where interest rates are high, but sellers still think they can get premium prices, people are often more hesitant to invest.  However, as legendary investor Warren Buffett once said, “be fearful when others are greedy, and greedy when others are fearful.”  There are always great deals if you understand the fundamental mechanics of the business and have a margin of safety.  As with any investment, the price you pay matters the most.  Plus, Jorjio also pointed out so insightfully, why sometimes the higher interest rates may be an advantage for the investor.  Tim asked about the potential risks and things you need to consider before investing in real estate.

We invited Jorjio from MLG Capital back to the podcast and discussed more on real estate investing.  How does real estate fit in people's overall portfolio, compared with equities, fixed income, etc.?  How can we build our real estate portfolios from scratch?  Jorjio talked about the advantages and disadvantages of passive and active real estate investing.  Tim asked what should one consider when investing in real estate in today's inflationary environment.  For next week, Jorjio is going to talk more about the current housing market: growing interest rates and yet still sky-high prices.

FTX went from a crypto exchange leader with a $32 billion valuation to bankruptcy in a matter of days, with potential criminal investigations and class-action lawsuits pending.  What happened?  FTX is a crypto exchange that was started by Sam Bankman-Fried (SBF).  Prior to FTX, he started a hedge fund Alameda Research, which the main purpose was to "act as a liquidity provider on FTX" according to Sam himself.  In early November this year, a CoinDesk report showed that Alameda's investment foundation was in FTT, the token that its sister company had invented, not a fiat currency or other cryptocurrency per industry best practices.  In addition, due to the sharp price decrease of most cryptocurrencies, FTX lent about $10 billion of customers' assets to Alameda.  All this bad news created a "bank run": FTX got over $5 billion worth of withdrawal requests within one day.  After Binance, the world's biggest crypto exchange refused to buy FTX out, it had no choice but to start the bankruptcy process.  Is this the end of crypto and blockchain?  Of course not!  But as always, understanding your investments is crucial.  If you want to make an asymmetric investment where the amount is insignificant to your overall assets and you don't mind losing it all, go ahead and have some fun.  Otherwise, please don't risk a big chunk of your assets on something trendy, and yet most of us don't truly understand.

2022 has been a crazy volatile year for the stock market. In the US, the S&P 500 index is down more than 20% year-to-date.  Considering the fact that the index had a positive 26.61% annual return for 2021, this certainly has been a roller coaster.  In this episode, Nathaniel and Kennidy discussed the emotions of an investor.  We had clients pressuring us to buy trendy tech companies at the end of 2021 when they were at historical highs; we also have clients begging us to sell everything when we entered the bear market.  What do we do?  Now don't get us wrong, all our clients are more talented and smarter than us in a certain way, but keeping emotions in check when investing is kind of Nathaniel's specialty!  Kennidy introduced some relaxing techniques in moments of high anxiety and stress.  Let's all take a deep breath, and practice some self-care in this crazy world!

Today we are going to discuss the high-trending event: Elon Musk's Twitter purchase.  Musk offered to purchase Twitter back in April 2022 and waived due diligence.  Then in July, he attempted to back out of the deal due to a spam bots claim, and Twitter sued.  The acquisition was closed on October 2022.  Nathaniel spoke of Musk's Twitter debt and cash flow (spoil alert: virtually nonexistent), and why he thinks that Musk may have overpaid for the deal.  Now that Twitter is a private company without needing to report everything to the public, where is Musk taking the company?  He promised a "platform of freedom", and yet days later assured the ad sponsors "business as usual"; he claimed that he bought Twitter to "help humanity", and yet threatened to fire 75% of employees and believes working-crazy-hours-culture.  This is just the beginning.  We can't wait to see where the future lands for Twitter.

As you know, here in LBW we have four partners: Dan, Tim, Nathaniel, and Ying.  None of us are mind readers.  How do we ensure we are on the same page?  How do we communicate?  First, talk about what you want, constantly.  Not just business needs, but sometimes personal/household needs.  Have an operating agreement (even if your partners are your family & friends) before things go bad, not after.  Second, value each other's role on the team regardless of whether that puts you in the spotlight.  For example, Nathaniel is our CFO. He handles the tedious finance and operations behind the door.  No client really cares about that.  He's not the face of the company.  But the team literally can't survive without him.  Third, have compassion and empathy towards each other.  Dan said it well: just like a marriage, your business partners deserve your respect, care, and love.

Most of the people we work with are first-generation wealth.  This means many of them, even though they're rich now, are still developing their relationship with money.  How can they help their kids have a healthier relationship with finance, without the "taboo" feeling associated with wealth?  Dan and Kennidy spoke about their respective childhoods, and how they negatively impacted their feelings about money.  Dan talked about how he will teach his daughter Leyora differently to better understand the value of the dollar and have better financial habits.  Please remember, just because you felt it a certain way growing up, doesn't mean this has to be your kids' experience.  Break that generational curse, and help them grow into a financially-literate person.

Treasuries have been a trendy product for investors recently due to inflation and higher interest rates.  Nathaniel explained what U.S. Treasuries are: bills, notes, and bonds.  They're considered relatively risk-free investments (as long as the U.S. government doesn't default on its debt).  So if you want a fixed income portion within your investment portfolio, and don't want to expose all your assets to the volatile stock market, they could be a useful tool.  Even though people say Treasuries are risk-free, there are still some concepts you need to explore before investing: duration (interest rates), opportunity cost, credit risk, liquidity risk, inflation/deflation risk, maturity risk, etc.  As always, what may make sense for others, doesn't necessarily make sense for you.  Speak with your advisor to see if Treasuries are a good choice for you.

In this episode, Nathaniel discussed with Kennidy why he's a firm advocate for "buy and hold" long-term investing instead of market timing, and short-term trading.  Do you know that if you had invested in the S&P 500 starting in 1930 and never touched that money again, your total return by the end of 2020 would have been a stunning 17,715%?  And yet, if you went in and out of the market, and missed only the 10 best-performed days of each decade, your total return would have shrunk to merely 28%!  Nathaniel gave more data to support the power of long-term investing.  Understanding your investment time horizon is extremely essential before investing.  If you need the cash in the short term (within 5 years), maybe the stock market is not the ideal choice.  If you are investing for the long run, then: 1. understand your investment, understand its business and leadership; 2. buy it at a reasonable price with a margin of safety; 3. be consistent in your strategy; 4. review your investment periodically; 5. stay the course through market volatility.

We invited Danan Kirby from Ariel Funds to join us and discuss investing in sports.  Danan started with some interesting data: for the past 25 years, what do you think is the average return for an investment in the average sports team?  The answer is a whopping 19.9 times!  And that's just the average team.  Even though investing in sports teams usually is for the ultra-rich, the general public can invest in the related ecosystem, sports media, for example.  With younger generations consuming sports via vastly different mediums, it comes with different investment opportunities.  Nathaniel is interested in Danan's view on the sports bundle streaming business.  Ultimately, the big players are more likely to win with consolidation, adaption, and technology upgrades.  The team also discussed the fact that there's a big valuation discount at many publicly-traded companies related to sports and media, and what that means for the investors.  Overall, if you are a sports and investing enthusiast, this is a must-watch episode.

Two weeks after Nathaniel talked about his homebuying journey where he said they hadn't found "the one" yet, Ying and Nathaniel bought a beautiful condo with a gorgeous view.  So, we invited them back to talk about their journey of finding their forever home.  They talked about how they locked in an amazing 2.25% mortgage rate, their emotional journey, what they considered a true "purchasing budget", the "stress test" exercise, and what their future plans are regarding splitting time between Madison and Shanghai.  Ying shared her thoughts: express your feelings to your partner always; but let the numbers guide you to the final decision.  Nathaniel can't stress enough the importance of financial planning and positioning: to prep for their dream home, they have been positioning themselves ever since they are adults, even before knowing each other.  They didn't start to get ready when they wanted to buy a house; they were ready before they got to that point.  They waited for the fat pitch, and swung, hard.

This is a reaction video to some financial advice we found on TikTok recently.  "Don't put a down payment on your house, always put down as little as possible", "Buy crypto here, sell it there, and you will be rich".  Say what?????  Let's take a look.

For LBW Book Club, the team read Annie Duke's “Thinking in Bets: Making Smarter Decisions When You Don't Have All the Facts” recently.  A couple of concepts really stood out, and impacted our daily planning decisions greatly.  First, think about your best decision for the past year, and then think about your worst decision… Ready?  I bet you didn't think about the best and worst “decision”, but the best and worst “outcome/result”.  The resulting bias is everywhere.  Just because you have a positive outcome (you came home safely), doesn't mean you made a good decision (you decided to drive while drunk), and certainly doesn't mean you should repeat that decision over and over.  Secondly, the concept of backcasting and premortem: this is a planning method that starts with defining a desirable (or failed) future and then working backward to identify policies and programs that will connect that specified future to the present.  Oh man, isn't this why we do financial planning precisely?!  Third, the power of group thinking and decision pod.  Don't just talk to people that you know will confirm your belief, but have a decision pod with different knowledge, cultural background, and skill sets, to review your decision from different angles.  Again, don't discuss the result, but talk about the decision: how did we get here?  Overall, we recommend this book to anyone who strives to make better decisions in life!