Crying over spilled milk is an adage most of us first heard at a young age. Minor inconveniences are blown out of proportion when they happen. Eventually someone says you should stop crying over spilled milk

We’re living a spilled milk event as I write. The stock market and the economy have been growing steadily for about eight years now. Constant media covered convinced a large percentage of the population things were dire. We were scared shi+less and tucked our hard-earned money in the mattress. There was no way you would be tricked into investing in a bad economy.

The years kept rolling by as the economy ticked ever higher with the stock market in tow. You not only kept your powder dry, you spent a large portion of it (a 100% loss) and kept the rest in a 0%, or nearly so, bank deposit.

Now the media says everything is good news. The economy and stock market have bent heavy to the left as it heads for the stars.

Tax cuts will stimulate an economy at or near full employment. Things have got to be good. They have to be!

You missed the bitcoin craze, but you refuse to be left behind again. This is it! You’re going to do it. You’re going to jump into this high flying market for your share of the bounty even if you have to borrow to do it.

The Road Well Traveled

You might not believe it, but I’ve seen this storyline play out before. The last time we saw tax cuts of this size the DJIA was under 800 (that is NOT a typo). The year was 1981. Inflation and unemployment were both double digits and draconian measures were needed as the economy was heading into the back leg of a double recession.

By 1987 the party was in full swing before a sunny day in October refocused attention on reality. In a few years the market was at new highs again and all was good.

The dotcom bubble — like the Nifty Fifty of the early 1970s — promised a brave new world of ever increasing profits. Then the century turned and so did the market.

The beginning of the current run started in 2009 with people screaming the world was coming to an end and the sky was falling. The ugliness started a year or so earlier.

In each case the market found a bottom, the world went along just fine and the market eventually made new highs.

We had the Nifty Fifty of the 70s, the tax cuts of the 80s, the dotcom world of the late 90s, and the housing bust of 2008. Now we are back to tax cuts, low inflation, low unemployment and a market promising to rise every day as if the Lord promised it himself.

So now you’re ready to invest.

Reality Check

I’m the last guy to tell you to time the market. This thing could rock for longer than anyone expects. What is certain is the day will come when it will stop going up temporarily. That is the day greed turns to fear. And fear is a far more powerful emotion than greed.

If you stayed out the stock market the last ten years I have a suggestion. Don’t invest now! This is not a market timing call either!

The market direction or conditions should have a relatively small bearing on your decision to consistently invest.

After all these years of economic and market growth and only now you think it’s the right time to invest? If this is true you don’t have the temperament to invest in equities (stocks, mutual funds, index funds or ETFs). Buying because everyone is talking about it is insanity!

My granddad was a farmer who saved at an insane rate. The guy tucked away in the neighborhood of 70% of his income. When he hit retirement age his saved half or more of his Social Security check! (You read that right.) He even took a part-time job to fill his days when he was in his 70s and 80s and saved the entire take-home pay!

I always called granddad Doc because he always studied natural healing. Doc is a value lesson in today’s market.

Doc invested about 10% of his money at AAL, now Thrivent, the Lutheran investment house. The rest of his money sat in several banks. He had CDs, money markets, savings accounts and some land.

The 1929 stock market crash was etched into his young mind. He was born in 1922. The Great Depression colored his opinions on money.

Doc understood guaranteed money. Banks offered guarantees up to the FDIC limits. My dad convinced Doc to put at least something in the broad market. Only the investment house connected to the church could be trusted.

Better Safe than Sorry

Putting money in the bank is not a good way to build your net worth fast. Regardless, he managed a sizable (seven figures) of liquid net worth before the farming world collapsed and he lost most of his money trying to save the family farm.

Undeterred, Doc went back to what he knew worked. He started filling bank accounts again and had another seven figures liquid by the time he died.

To recap, Doc spent a lifetime building a seven figure liquid net worth, lost it in the farming crisis of the early 1980s, kept saving all he earned, put maybe 10% in a rip-roaring market, put the rest into bank deposits and had seven figures liquid again when he died ~ 10 years ago.

Not Cowardice

People are passionate about the market as I write. Netflix in the last month alone went from 187 to 272. From top to bottom this is a 45% gain. This is rare for any company to accomplish, but even more significant from a company slated to burn up to $4 billion in negative free cash flow this year!

Coupled with the recent bitcoin craze and people are primed for action. It has the feel of a casino! (As a reminder, the house always wins.)

There are only two mistakes that will kill you in the market. The first is getting enticed into buying when everything looks perfect and the market is parabolic. And second, getting scared out of the market when the market is suffering a gut wrenching decline.

Most people fail at investing because they trade the market. Emotions WILL get the best of you if you PLAY the market. Doc knew his emotional readiness and did what any smart man would: put his money in guaranteed bank deposits.

If you’ve been investing a portion of your income every month you have the emotional stability to weather the inevitable storm. (Or the intelligence not to look at your retirement account balance.)

Now is not the time to get brave and jump into the stock market. Even if you use index funds or ETFs. Odds are there will come a day soon when painful reality sets in temporarily. The last thing you want to do is buy now and find yourself waiting a few years for a new market high. Or worse, selling at the low due to fear.

Borrowing money to invest in stocks is the worst! You could find yourself forced to sell as the market declines if you buy with debt. DON’T DO IT!

Dos and Don’ts

Missing the current market rally is spilled milk. Chasing the market is a crazy idea. Here are a few dos and don’ts to consider in today’s investing environment:

DO —

  • Use index funds or ETFs
  • Keep investing in your work retirement plan at least to the matching level and to the maximum if you have the mental and financial will to do so
  • Keep calm
  • Stay the course. Stay invested and keep automated investing active. You and I both don’t know where the market will be over the short term so stay the course. The long game is higher

DON’T —

  • Panic
  • Borrow money to invest
  • Try to time the market by selling
  • Listen to the media hype. Wall Street loves the hype so they can sell to the greenhorns as the market weakens
  • Get too excited about your account balance. Those just hitting their FI (financial independence) goal might want to consider sticking around a while long as the FI number is built on a market spike higher with a real possibility these numbers could temporarily decline
  • Listen to your hairdresser, taxi driver, Uber driver, buddy at the bar, mailman, or even your accountant on hot stock tips
  • Look at your account daily

 

Young investors have it worst. They haven’t experienced one of these cycles before. The last real market decline was a decade ago!

This isn’t new either. Every 10 -15 years we rinse and repeat. Each cycle is slightly different while humming the same tune.

Investing, even in a hot market, isn’t necessarily a bad idea. Doing crazy stuff and getting greedy is!

No borrowed money for investments in the market! If you have a regular investment plan, keep it. Your investments will ride out the storm when it comes along. If you haven’t invested yet, now is not the time to be brave. Bravery is easy now because the feeling you have is really FEAR you’ll miss out.

The steady hand will always win in the end. Warren Buffett tells us to be fearful when other are greedy and greedy when others are fearful. Greed is rampant now so a healthy dose of fear is warranted.

Steady, kind readers. Steady.

 

The greatest people on earth.

Back in 1982 Wisconsin a young man could legally belly up to the bar on his 18th birthday. That didn’t stop me from getting a jump start on adulthood.

In my later years of high school there were several rural bars where the owners could care less how old I was. The police rarely showed up (they never showed up when I was there, but I heard stories) and the penalties were light if caught selling to minors.

So I unwound after a long week of farm labor and sloughing off at school with a cold one in Brothertown. I drove the distance to tip a brew with my buddy, Ken.

Ken turned 18 our senior year and he promptly dropped out of school. My grades improved immediately. Ken and I were as thick as ticks on a hound, but I was starting to grow up while Ken was dropping out.

Our friendship faded with distance. Alcohol still played a large role in my life.

I met a young lady in a place called Quinney. It’s not really a town. More like a curve in the highway with a turnoff to the shore of Lake Winnebago.

The part about Quinney was it was on the way to Brothertown. Now with Ken fading into the distance I sometimes took a right turn toward Lake Winnebago and a bar called Chuck and Sue’s.

The name (Chuck and Sue’s) has meaning since my engagement to my high school sweetheart ended when she settled into another man’s arms and I eventually met Mrs. Accountant who happens to be named Sue.

(HEY, EVERYBODY! The accountant guy let slip his wife’s name. Y’all gotta see this.)

Sorry about that. Nobody remember Mrs. Accountant’s name so she can keep some privacy. I promise to never say it again (here).

 

Drunken Stupor

My consumption of alcohol was getting out of control as I clawed toward the age of majority. There were nights I don’t remember driving home. And then there was the night I decorated the side of my dad’s van. And the night I came walking through the house in my BVDs when my parents had company. And then . . .

I think you get the picture.

I was drinking. I was drinking a lot. I was doing things I’m luck someone didn’t get killed from.

My high school sweetheart was gone so I headed back to Brothertown and my old friends. I was still part of the crowd, but everyone knew I wasn’t “like them”.

It became abundantly clear one Friday when a group of guys planned on running to Fond du Lac to catch a movie. They left without me.

I was numb. My fiancé left me and I was walking in a drunken stupor more than I was sober.

The final straw came when I headed to Brothertown in the middle of the week when the bar we frequented was mostly empty. I shot some stick and drank.

I ran out of cash so I wrote a $20 check. It bounced.

The bar owner called me and Ipromised to run over and satisfy the debt.

True to my word I made the run to Brothertown, paid the bar owner the $20 (plus bank fee) and ordered my last drink. Halfway finished, I pushed the beer back and left Brothertown, a way of life and alcohol forever.

Or so I thought.

Then I turned 18.

Growing Up

The reflection in the mirror was hard to look at. I failed in so many ways. I had no idea what I wanted.

Farm life was something unappealing to me at the time. It was all I knew so I wanted something more. Working day and night for peanuts and popcorn had no hold on me. Deep down I wanted to be more than a poor farmer. I wanted to know what life was like for people with money.

1982 was a bad year for the economy. Living in the Rust Belt, the recession hit hard, harder than the 2008 debacle. Unemployment was 20%+ in the area. Businesses wouldn’t even give you an application. The answer was no so there was no need to waste a piece of paper.

I went from drunk to teetotaler in a heartbeat. Before my 19th birthday I put the bottle into my past and embarked on a journey of entrepreneurship and wealth.

It sounds easy, doesn’t it? Sounds like I had a blast, right?

It wasn’t! I had no clue what I was doing. I tried everything. I sold stuff door-to-door, to retail stores and got serious for the first time about my writing.

Money came in bits and spurts. I saved it all and invested in mutual funds and some individual stocks.

But this story isn’t about my journey to wealth. I’ve told that before. No, this story is about facing myself in the mirror.

Who Is that Man?

I no longer recognized the person I’d become. The drunk was a stranger and now even the drunk was gone. It would be over twenty years before I took another drink.

The ride wasn’t smooth, but I eventually found my confidence and calling in life. As a side gig I prepared taxes without a clue the role accounting and taxes would play in my life.

Successes started to accumulate like an index fund in a bull market. I was happy and started to map a course to the life I wanted.

No longer inebriated on a regular basis I started to like the guy in the mirror. He had promise, if not a little crusty around the edges.

I met Mrs. Accountant while taking a few college courses here and there. That was the greatest stroke of luck I ever had. I won the trillion dollar lottery!

She didn’t know she was Mrs. Accountant at the time; I did.

You would think life would be a pretty smooth ride of luxury for a guy in his young 50s with an eight figure net worth. It wasn’t.

Life seemed to throw one challenge after another. The genius thing I did was never give up. Each obstacle was a challenge to conquer. And conquer we did.

Old School

Building wealth and even running a business can become rote formality. Saving at an insane rate was an ingrained habit sending my net worth into the heavens.

Mrs. Accountant and I traveled a bit. I hated every minute. The destination and learning was fun, but I soon discovered I preferred the world of my backyard. Eventually travel turned into something we did because business demanded it. In a way, business is the only thing that kept me from being a dweeb or hermit.

In the 90s I had a securities license for a few years. That required two trips every year. Before long I was frantically searching for a way out and I took the first opportunity.

Routine set in again.

Then I met the FIRE (financial independence, retire early) community and felt like I found long lost friends!

The gloss would wear off.

The Best People in the World

Somewhere in the early 2000s I allowed myself a shot of whisky now and again. I drank a few times in the winter if I had a sore throat and rarely any other time.

When I choose to stop drinking and when I drank nil for many years I never had an arrogant attitude toward those who consumed alcohol. If somebody wanted to drink I didn’t care. I was happy as a clam with a frosty Coca-Cola Classic.

As the years went by my drinking increased for short periods and then went back to nothing.

I was happy and enjoying life. Travel was in my past (Thank God!) and I finally was back living on a farm.

The farming life I hated so much as a kid was actually in my blood. My 10 acres of the world are small in the scope of things, but it’s my 10 acres with hiking trails, animals and all.

The rote formality of business was growing old. I had one more dream to conquer before I cashed in my chips.

Several times I started a countdown clock to retirement only to find my anxiety became uncontrollable as the due date arrived. You would think I was facing an IRS audit or something.

The clock was sent to the landfill.

One day I happened across a blog by some strange character who called himself Mr. Money Mustache. This funky dude from Colorado had it figured out better than me. He even found a way to walk away from work and do whatever he wanted!

So we loaded by the truck and we moved to Beverly. Hills that is . . .

I could never give up work, but I was lucky enough to be doing what I wanted to so there was no hurry.

Regardless, I felt inadequate. MMM cashed his check at age 30 and here I was putzing along closing in on 50. How had I failed so badly?

Back to the Suds

I started attending conferences within the community because I felt obligated. My meeting with MMM (and becoming his accountant) forced me to finally start writing this blog.

This in turn led to more offers. I was traveling again. Drinking, too. The mirror started to bother me for the first time in decades.

The FIRE community knows how to drink. Beer mostly, but liquor, too. A shot of whisky (a shot) is something I don’t mind every once in a while. Beer is something I never acquired a taste for.

Well, my new-found buds drank suds and I was part of them now so I drank, to hell with the mirror. If you focus hard enough you can swallow anything and down the hatch went the beer.

Before we get too far, let it be known a local brew called Spotted Cow is palatable to me.

The social media feeds listed my new buds enjoying a cold one on a more than a regular basis. Not everybody imbibed, but by and large the group knew how to throw a party.

Breaking the Mirror

I’m not a traditional FIRE community member. I’m even surprised they let me in the door. (Some have started to close doors.)

The drinking thing returned home with me and the travel I whined about so incessantly caused people to comment on my new-found itinerary abroad. (Anywhere outside the county is abroad in my book.)

Many nights I would have a few shots of whisky and even drank beer. Before long the memory of Brothertown and the bounced check in the bar came flooding back. This is not who I am. This is not who I want to be.

I recently made it clear my attendance at conferences would be limited. Even one trip a year is a chore to me. I did promise Mrs. Accountant and the girls a trip to Iowa this year to see the Hoover Presidential Library. It’s a 4-hour drive; I’ll live.

Expect to see me at FinCon in Orlando later this year as well.

And if God loves me I’ll not travel another lick the remainder of the year.

Nor drink more than a few shots of Jack either.

Peer Pressure

I’m a big boy now; I can make adult decisions when required. There is no doubt I succumbed to peer pressure when not a single soul within the FIRE community forced me to drink anything. If I drank a soda there wasn’t a single sound of admonishment.

Peer pressure is like that! Most peer pressure comes from inside your head and not from out there. It’s all perceived.

More, I wanted to be like those people instead of living my life my way. I thought living their life would make me happy. It didn’t and it was starting to show.

So what if people think I’m a weaselly guy from Treefarm, Wisconsin. I’m happy. This blog has proven there are more like me out there (people who loathe travel and enjoy home life).

No longer do I feel obligated to attend more and more conferences. I can live the way I want to live.

Here is where you come in, kind readers.

A common refrain in my email involves people wanting to be like me. NO YOU DON’T! The planet has a hard time dealing with one of me.

You can learn from my experiences to build wealth and a happier lifestyle. But you don’t have to do the same things I do.

I like my small farm in the middle of nowhere. A serious percentage of readers here would become insane in the same environment. (First one to comment its already driven me insane gets one in the puss.)

All I’m saying is don’t drive to Brothertown. The only thing you’ll find there is a bounced check in a bar long out of business.

I was contacted recently by an old acquaintance. Brad is a reader of this blog and started to take exception to my style of writing. He felt any idiot could write a blog and I can assure you any idiot is writing this one.

He felt it beneath a CPA to write what I do here. I assured him I’m no CPA; never have been never will be. Brad was starting to feel disappointed in his disappointment in me.

His final argument was it took no skill or knowledge to write a blog. True. But then he said it was easy to make money telling tall tales. Yikes! (Okay now, bloggers. Keep the cussing to a mild roar in the comments when you explain how “easy” it is to make real money blogging.)

Brad had several more complaints I’ll address shortly. We have enough material for a good start, however, to learn some valuable lessons.

Sons of Mogh

Brad was born in the same backwoods of Nowhere, Wisconsin I was. His wife was born so far in the backwoods maps generally list the area as Terra Incognito. What I’m saying is we didn’t come from grand beginnings.

Life hasn’t been easy for Brad. Life started hard and slid downhill from there. It was easy to develop an edge of cynicism. Several years ago the pendulum swung 180 degrees and opportunity knocked. Smart man Brad is, he answered.

Brad has a gift and can’t understand mine. He thinks writing is easy and a quick way to wealth. (Steady blogger friends.) All I have to do is tell BS stories or modified life events while sitting on the couch and watch people rush in.

Anybody can push a noun up against a verb. Heck, there are computer programs that will produce grammatically accurate sentences on demand. It’s not engaging reading, but it can be done.

There is a difference between what Stephen King does and what I do! There will be few arguments, especially from me, if people think King’s noun and verb pushing is better than mine. I think it has something to do with the order of the words. I think.

Brad’s gift is greater than mine and I understand it less. Whereas any literate person can write, few music lovers can create a sound pleasant to the ear.

You cannot believe the magic jumping from that man’s fingertips as he gently massages the strings of a bass guitar and I can prove it. He found his wife while performing before an audience sharing those soulful sounds. Okay! Brad doesn’t like it when I adlib and tell only part of the story. Truth is, his wife found him. That boy didn’t have a snowball’s chance in hell once she heard what his fingers can do. (Read that any way you want.)

Brad has more heart than any man I’ve met. It takes honor and bravery to tell such a painful personal story.

Developing a Gift

There is nothing special about Brad or me. Our difficult beginnings were somewhat different, but the pain was just as real.

Brad argued I used my daughter’s medical condition to garner sympathy. Duh! I hurt. My child hurts! Sharing the story is a natural act.

His final arguments involved me telling only part of the story. Of course! To include every detail is called an info-dump; editors hate it and modern readers don’t stick around. If you want to read the info-dump of the century read The Lord of the Rings. Of course the Rings books are awesome. But the first 128 pages (you read that right) are world building. There isn’t much story before that.

A show of hands. How many readers would grant me the luxury of a 128 page info-dump to satisfy the need for absolute accuracy before getting to the point? Nobody? Thought so. That’s why I don’t do it.

The last of the two final arguments involves my personal life. Brad asked what my readers would think if they knew I wrote erotica for profit in the past. Ah, I don’t know? I’ve mentioned it before. I also did a stand-up comedy act in Seattle a year and a half ago where twenty minutes of the gig was on my transgender flash fiction writing.

For the record, a large percentage of successful writers have written erotica. Science fiction writers after the Golden Age resorted to selling short stories to Penthouse (paying $1,500 a story) and Playboy (paying $2,000 a story) in the 1970s. I’ve never heard any complaints against these writers. And if no one has noticed, 50 Shades of Gray is a, ahem, romance novel about training a woman how to please a man while she’s tortured. I doubt anyone cares I’ve written practically every topic known to man, including erotica.

I bring up all these arguments because they play a role in today’s story, minus the info-dump. I’ve made it clear often that my stories are true unless otherwise noted with material facts changed to fit the story into the context of the discussion at hand and to protect privacy in certain instances (I never name clients).

I have no idea why Brad is so good playing bass. I’m not even sure why my writing is gaining such traction. Most of my prior material got modest pageviews with exception to the skanky blogs (I actually wrote two transgender flash fiction captioning blogs to double the profit) where after about a year I hit a groove that went wild with millions of pageviews.

And yes, I made money doing it! I love writing, but I prefer writing fantastic (read high science fiction) stories. I even published a short story here on New Year’s Day. I love writing that kind of tear-jerker. But do you know how well men sell tear-jerkers? Yeah, me neither.

Song of Songs

I lied above and I’m certain Brad will call me on it. I said I had no idea why he was so good at bass, but I do.

Brad didn’t leave the womb with a massive desire to grab a hunk of wood covered with resin and wires and start plucking it. Somewhere in his life he found music was an escape from all the demons.

You might have noticed how the best artists have dark pasts. There might be truth in the adage that artistic greatness is built on rivers of tears and mountains of pain.

I have no answer why some people buckle under the assault of life and others find beauty deep inside and refuse to let go until they share it. At some point the pain was so much Brad needed an outlet. He chose music and the rest is history.

In his hands the guitar gently weeps; in my hands it would be the sound of fingernails across a blackboard.

But it’s easy! Any idiot can fondle the strings of a guitar.

True. But knowing which strings, in which order with the right feeling and soul takes practice.

L. Ron Hubbard (yes, the Scientology guy) was a big name in science fiction in the day. He once said it took a writer 500,000 words before they found their voice. I’m not sure if his number is accurate, but personal experience says you paste plenty of words to page before the fingernails lift from the slate.

Music is harder!

Writing is subjective. Someone who enjoys a mystery might not like a horror novel; someone who enjoys horror might hate westerns; and so forth.

If I make a mistake writing (I do often) the story still goes on. Readers frequently miss the faux pas. Some stories hit well, others not so much. Certainly Stephen King has nothing to fear from your favorite accountant.

But what about Brad?  I prefer contemporary rock while still enjoying classical music when it plays, even an opera. Music is more broadly enjoyed and that’s the risk!

Can you imagine Brad on stage and missing a note? Fingernails are literally back on the chalkboard. If I make a grammatical error it is nothing more than a minor distraction to most readers.

Never quit. Never give up.

Two Geniuses in a Room

Brad and I share radically different viewpoints. We challenge each other with some serious remarks. Outsiders might find the barbs personal, but the banter is similar to bar buddies saying their friend is the best son-of-a, well, you know.

I share what I have and make no compromises on my desire to turn coin from my work. We can only share what we have. It is a call for sympathy. People with a heart respond to that.

It would have been easy for Brad or me to pack our bags and quit at any moment during our personal trials. Most people do quit!

I’ve included several YouTube videos to bring this story alive. Brad’s video of faith and redemption is powerful and moving. Highly recommended!

Please watch the Never Give Up! video. It’s important. Very important. Hearing the greatest people of our time saying again and again their true genius was in never giving up is motivational. Powerful and moving

The truth is, each and every one of us, kind readers, have a similar story. Life gives every single human alive a swift kick to the groin at least once in life. Going to a knee in pain isn’t the problem; staying on your knee is.

Brad is right. I make this look easy because I write a lot. Brad makes music look easy because he lives it.

You have a story inside you too. Maybe you have the gift to share it verbally or by spanking words to a digital page.

Or maybe you have to sing a song to move souls.

You never know, your wife might be listening.

 

My New Year’s resolution is to relax more like my bovine friends.

2017 was one heck of a year. Business was good, investments were good, personal life was awesome. The good news never seemed to stop.

Many people like to make New Year’s resolutions. Not me. I forgo the whole ritual.

Instead, I plan all year round. When an idea strikes I write it down. It’s a rare moment when I don’t have a pen and paper within striking distance.

Ideas are impossible to control. A chance encounter, an overheard word can trigger a thought process. In moments another blog post idea is ready for recording. The same applies to projects in the tax practice and in my personal life.

It was all good news (unless you watch anything political).

Great Fortune

Time is an investor’s friend and 2017 added another year to the schedule of growth. The stock market performed well.

Of course, some years business isn’t all roses. The stock market can decline and the tax practice can be more challenge than profit or fun. This wasn’t one of those years.

I’ll mumble this out the side of my mouth because people react incorrectly when they know what I’m about to say. A certain farm boy from the backwoods of Wisconsin saw his net worth scratch a quarter inch above the $14 million mark at yearend. There I said it. Now forget it.

My greatest fortune is my girls. For the most part Mrs. Accountant and the kiddos were healthy. Who could ask for more? And we had more time together even with the oldest now getting serious about her education. They’re smart kids. I’ll take credit because without a doubt it has everything to do with genetics. Care to take a bow with me, Mrs. Accountant?

The Greatest Gift

After struggling with growing pains and changes in my business, I found solace this year.

Traffic to this blog has grown significantly in the last twelve months and the growth in demands followed. Procedures instituted to manage the flow have eased the feelings of overwhelm.

The overwhelm still exists, but I’m handling it better. By clearing my mind I’m making better decisions. The final pieces are falling into place which should allow me to add new clients to my tax practice without always being so far behind.

This has always bothered me. I struggle with saying “no” and I hate working to exhaustion daily and never keeping up. 2017 saw improvements; 2018 should knock it out of the park if staff additions and training work out as planned.

And I have learned to say “no” or just ignore some requests. It’s always a loaded question: Can you help me? Frequently the answer is yes, but I can’t because I’m six months out.

The good news is I’m able to help more while learning to say “no”. This leads to balance and balance leads to more life satisfaction.

Recognition

As if the world isn’t bright enough in this accountant’s world, I received the ultimate form of recognition: a Plutus Award for Best New Personal Finance Blog of the Year. I don’t think anyone understands how much this has meant to me.

Traffic and revenue are another form of recognition. Traffic has climbed steadily over the year and the first few days of 2018 are tremendously higher than the first few days of 2017. The trend is clear.

With traffic comes revenue; my favorite score card. Now that I’m committed to contributing the profits of this blog to charity I can focus on quality without a vested interest in the outcome. Money is the scorecard, a game of Monopoly if you will, to remind me the work I’m doing has value and that the value is growing.

Control Freak

All this said I still feel anxiety over issues I can’t control. I must constantly remind myself of the things I have control over and the things I don’t. Readers might recognize this as a Stoic principle. Well, I subscribe to the Stoic philosophy! Unfortunately, I’m not perfect at it. Consider it a work in progress.

With traffic comes comments from outside the demographic and from people whose only intention is to harm or irritate. I wish I could report my skin is thick enough to deflect all criticism. It isn’t. Sometimes I’m caught off guard and the attacks hurt. In taxes there is always another opinion. And just like law (taxes are the big section of the law library), everybody has an opinion. Too bad the Tax Courts around the country couldn’t agree. It’d make my job a lot easier.

Deep breaths, accountant. Deep breaths.

Planning for a Bright Future or Resolutions Writ Large

As awesome as the last year has been, the future holds even greater opportunities.

When I was at the top of my game I suffered a minor setback (my feelings were hurt) and I let’em have it with both barrels. I’ll be editing the bullets holes out shortly.

My primary goal is not to let people bring me down with insults or criticism. From the outside it must look petty. From the inside it hurts like heck! Everybody in the room isn’t going to agree with me. Thank God for that!

The Brain Trust in my abode.

Having more followers means there will be differing opinions. Even when someone unloads it probably has more to do with their personal experiences than reality.

I also have to be careful with clarity. The last post for New Year’s Day was a short story with an underlying financial moral. It was an emotional story told in the first person. One reader emailed to say sorry for my loss. He thought my wife really died! It was a story and I need to make sure readers know the difference between story to illustrate a point and fact. It’s important!

Here are some plans for the next year that will affect you, kind readers. Call them resolutions if it makes you feel better.

Tax practice: This is still my greatest challenge in life. Outsiders must wonder why I put myself through this hell when financially I don’t have to. I wish I had an answer, folks. Wish I had an answer.

2018 will be a year of growth. Three or four years ago Mr. Money Mustache gave me a shout-out and nearly killed me. It wasn’t intentional; it was meant as a “thank you”. Still, when a guy with 5 million plus pageviews a month says, “Here’s my guy” you’d better be prepared. Unfortunately, service businesses are labor intensive and finding that many good tax people fast is impossible.

It took a few years, but I think I have it. I will actually be able to add new clients and get their work done in a reasonable time (a week or less for most). This troglodyte clung tenaciously to old school methods of running a tax practice. We now have serious additions to our automation.

A few years back I dropped over $50,000 a year on a new computer network to beef up security to the highest level commercially available. Good for me. (Good for you, too.) Too bad I didn’t engage all the other neat features available to make my life easier.

That’s all history now. Our system can scan faster and better than ever. Data entry work will be reduced by magnitudes of order. This frees my team and me to focus on the value added work: review and consulting. We put the computers to work doing the mundane while my skilled staff focuses on serving the client with outstanding planning services.

I feel better about the upcoming tax season than I have in five years. Wish me luck! (Luck has nothing to do with it. Planning and hard work deserve the credit.)

Personal Life: My introduction to the FIRE (financial independence, early retirement) community required (it felt like it was required) me to attend more and more events around the country. This took me away from family and reduced my personal time.

Traveling is something I try to avoid unless absolutely necessary. People started joking about how much I was now traveling when I keep saying I don’t like it. A series of events brought me back to my senses. I CAN SAY “NO”!

I have no plans on killing anybody. But I do own a manual on how to get the job done. Just sayin’.

And so I have. As much as I love the FIRE community and enjoy meeting with like-minded people, my mental health is more important.

I will only attend one conference per year from now on. FinCon is my pick. FinCon 17 was mind-blowing. I’ll be better prepared for FinCon 18 in Orlando this time.

Other minor meet-ups, gatherings and conferences are almost certainly off the to-do list unless there is another reason for my attendance. (Keep reading to see what I have planned for my allotted conference plans.)

Hold onto your hats, kind readers, you’re not going to believe your ears. I am planning, yes, me, planning on a family vacation this year! Mrs. Accountant and the girls will all be there.

Where are we going, you ask? All the way to West Branch, Iowa, about a four hour drive. I know, I know. It’s not all that far, but just wait until I tell you what I have planed.

The crew and I are going to see the Herbert Hoover Presidential Library and Museum. I’m as giddy as a schoolgirl. I bet you can hear my voice screech as you read the page.

It’s okay if you don’t share my enthusiasm. President Hoover always intrigued me and a recent read of his biography has given me an exalted opinion of the man and his life’s accomplishments. I’ll be writing at least once this year on some lessons Hoover has for us today.

I’m so excited!

Blog: I bet you’re wondering what I have planned for your favorite blog? Well, it’s a secret. Mostly because I don’t have a clue of many of things I’m sure to pull out of my hat over the next twelve months.

Okay, okay! Stop pushing!

I do have some plans. The first involves pushing cash into the hands of subscribers. Periodically (usually associated with some tax due date) I will pick a subscriber at random and give her a $250 Amazon gift card.

This is my way of saying “thank you” to people kind enough to subscribe, the lifeblood of any blog.

There is one more surprise, but it needs a formal heading.

Camp Accountant: When I introduced the idea of Camp Accountant I had a large influx of emails asking when and where.

Many readers here are also in the tax profession. Several requests asked if I could offer continuing professional education (CPE) credits for tax professionals attending so their employer would pay their way. I’m working on it.

The best part is where the first Camp Accountant will be held.

Ask me! Just ask me where the first Camp Accountant will be held!

Well, I had several offers from readers willing to organize the event. One offer came from Hawaii (someday soon if I know what’s good for me (Note: Mrs. Accountant has always wanted to go to Hawaii) I will accept that offer).

Southern Ohio is another possibility.

But then I got an email that forced me to palm slap my forehead.

A highly intelligent reader said, “Pete (Mr. Money Mustache) has a nice new MMM world headquarters in Longmont that would be perfect for a Camp Accountant.”

Duh!

Sometimes a certain accountant in the room can be pretty dense.

Now before we get carried away, let me remind you I haven’t asked Pete yet if this will work for him. But my plan is to get the initial stuff out of the way during the next few months (with all the free time I have over tax season) and then plan the venue in May.

The goal is for the last weekend in August or September.

Now, kind readers, I know many of you know each other and a few know Pete personally. Don’t go blab to him what I have in mind. He might not like the idea of me publishing my plans without first consulting him.

And that boy can run. I do his taxes, so trust me. I’m an ‘ol farm boy and know from personal experience the mustachioed man from Colorado can run like the wind. He can whoop up on me too.

That’s All Folks!

There you have it. Your favorite accountant’s plans for the next year.

A real family vacation without a business motive. What readers around here call a walk around the block.

Sending out free money several times during the year.

A new and improved tax practice.

I couldn’t be happ. . .

Oh, $hit! Somebody already squealed to Pete. I gotta run!

I can clearly remember the first time I heard about the Pay it Forward philosophy. The year was 2002; the location Schenectady, New York; the event Albacon.

Back in those days Mrs. Accountant and I were groupies of the science fiction convention circuit. The insanity only lasted a few years, but it was a fun ride while it lasted. We met scores of bestselling writers. I can’t speak for Mrs. Accountant, but I drank in every word.

I had recently discovered Mike Resnick. His only novel to grace the bestseller list hooked me.  Why Resnick never became a household name is beyond me.

Albacon is a science fiction convention held in the Albany, New York vicinity most years. It’s a small convention, at least it was back in 2002.

Once I read Santiago I started stalking Resnick. I read every book of his I could find. His style of Space Western appeals to me. His fast paced stories also caused me to miss more than a few nights of sleep.

I also read the few remaining science fiction magazines in 2002. Isaac Asimov’s Science Fiction Magazine listed a select number of upcoming conventions. I noticed Resnick was the Guest of Honor at Albacon. The road trip was on.

Not What I Expected

Albacon was either the first or one of the first SF conventions Mrs. Accountant and I attended. My hopes were high as we packed the car and drove from northeast Wisconsin to Schenectady. For the record, that is a long drive.

My expectations were high which is always a bad sign.

I figured my literary hero would welcome guests with open arms. He didn’t. He was there and mostly stuck with his friends.

High expectations usually end with disappointment when reality meets fantasy. Mike is a helluva nice guy and the problem was more with me than him. I’m rarely at a loss for words, but my dry tongue swelling in my mouth was a barren hole in the dead center of my face.

I sat listening to Mike talk with several groups and eventually managed a few minutes to express my gratitude. I sounded like an idiot actually. Mike Resnick was bigger than life in my eyes and I had no idea what to say to the man whose writing I spent so many hours enjoying.

As disappointed as I was with myself and the opportunity I squandered, I still received a gift I hadn’t recognized.

Pay It Forward

At one point in the weekend convention Mike spoke to the small group gathered in his honor and talked about paying it forward. He explained how he helped other writers find their legs as his way of paying it forward. The people he helped would have no way of paying Mike back. He did it with a promise from those he helped to keep the ball rolling and to pay it forward when they were in a position to do so.

You’d think I’d have heard about the Pay it Forward philosophy prior to Albacon 2002. I probably did, but the skull of a Neanderthal from the backwoods of Wisconsin is thick so it didn’t sink in.

Mike Resnick changed all that. Whatever he said, it sunk in and I thought it was the most brilliant idea ever devised. For a year or so I thought he was the guy who invented the idea. Backwoods, people. Real backwoods.

My Turn

The years have kept counting and my consumption of fiction of any kind has been declining. I still read a novel here and there, but the bulk of my reading in nonfiction.

It is with sadness that I report I haven’t read much of Resnick’s work of late either. His stories still resonate with me, but my interests changed.

The stories I did read are still buried inside me, bringing me continued pleasure. And I can never thank Mike enough for pounding the Pay it Forward concept into my head.

As we race to the finish line of 2017 it’s my turn to Pay it Forward. Don’t get me wrong. I’ve done plenty of paying it forward. It’s just that now I want to codify the process so I can ramp up my game.

I have been blessed beyond words. I started from humble beginnings and the journey to today has not always been smooth. What I’m saying is there was no free ride for the Accountant household.

As humble as those beginnings were I have achieved more than any one man deserves. I am fortunate to have the best wife to ever live. I can prove it too! She puts up with me. Nearly 30 years now.

I have two awesome daughters who never gave mom and dad any real reason for concern. They are moral, kind and generous.

My business life has been nothing short of phenomenal! I struggled early on with finding my way and later with figuring out how to run a growing business. Through it all I survived, even when the power that be worked very hard to destroy what I was building.

Financial success is the biggest surprise. There were no warnings signs some schmuck from the frozen tundra of nowhere would amount to anything. Yet, I managed to amass a tidy fortune recently breeching $14 million. The number has grown so big over the years it no longer moves me when another milestone is surpassed. The whole experience has turned surreal. I expect this to happen some day soon.

With all my good fortune, much is expected. I could pay it back to those who helped me along the way, but I never kept a list and the number of folks who supported me is legion. Besides, the people who helped me don’t need the favor returned!

All that remains is the future.

My business continues to add to the stack of wealth. This blog is starting to make a contribution as well. And all the previous investment soldiers are hard at work reproducing. The compounding effect is mindboggling.

And this is where it ends.

This blog earns a growing profit. I need a profit as a scorecard to motivate me. Once the numbers are in and I’m amply motivated, it’s time to make the most important business decision of my life.

Writing The Wealthy Accountant is a way of paying it forward. But more is expected of one who has been blessed so mightily.

From this point on all profits of this blog will go to charity. I recently outlined one avenue of charitable work. Reach Counseling will continue to enjoy the fruits of this blog’s success so they can expand their work helping abused women and children. Previous work with Special Olympics will also be expanded.

I will update you, kind readers, from time to time on the charitable work this blog is doing. When you support this blog it strokes my ego, but all the profit goes to those in need. My way of paying it forward.

Not Good Enough

As altruistic as the above statement is, it isn’t good enough. This blog has a tidy profit, but not overwhelmingly so, at least not yet. So giving the proceeds of this endeavor is still rather small.

I’ve discussed my giving habits in the past along with ways to use the tax code to increase the value of your gift.

Above the monetary contribution of this blog’s profits I will extend a helping hand to all bloggers and podcasters in the FIRE demographic contribute in an efficient way to charities they hold close to their heart without cost.

I know it sucks, but businesses have better opportunities to maximize the value of their charitable giving. The new tax bill makes it even worse. The tax code offers opportunities for businesses to give to charity and get a deduction on the business tax return; no itemizing required.

I wish I could extend this offer to everybody. Unfortunately, I am one human being with limited time and resources.

Bloggers and podcasters who want to donate to charity in a way that promotes their blog or podcast and maximizes the value of their gift should contact me. You still write and send the check. (You don’t have to give all your blog/podcast profits!) What I’ll do is help you decide the best way to give so you can give the most without a certain uncle in Washington taking his share first. I’ll even organize the necessary paperwork so you have no problems with the IRS.

I discussed this tax strategy in the past. In short, instead of giving a traditional gift, you sponsor a program at the charity of your choice. Since your blog/podcast gets recognition, the gift is really a promotional or advertising expense.

It not exactly that simple, but you get the idea. What I will do if you contact me and give me the go-ahead is I’ll contact the charity to find an appropriate program you can sponsor. You will get the necessary paperwork for your tax record. And you write and send the check. No money goes through my account. I don’t want the extra headache.

So there is my year-end offer to end 2017 with any even bigger bang than it already has been.

Life has been beyond awesome this year! We can do this together. We can pay it forward.

So the next generation has a chance to feel the same joy we experience every day.

Focus might, just might, be important at a time like this.

The world is crazier than it is sane. People complain about having no money and then get rid of what they have as fast as possible. How many people can’t make it until the following week without money issues? A short week and most people are already down to fumes. Thank God, payday is Thursday so you can stop at the bar on the way home. Anything to relieve the stress of money.

Chaos is all around us. Concerns over an overheating stock market and economy are always present in the background. If it isn’t the economy being too good, it’s the bad economy. There is no just right.

Before anyone forgets, there’s plenty of chaos from politics. Talk about a distraction! Best if we all stand alert in case Rex Tillerson, the current Secretary of State, calls us for advice. One never knows.

Talking about politics, it’s hard to get any useful work done when a fat guy from the backwoods of Korea (not necessarily close to the backwoods of Wisconsin where your favorite accountant resides if anyone’s concerned) is waving missiles and nuclear weapons around.

It’s easy to get distracted with the chaos all around us. Traffic, work, a screaming client, the wife and kids all add to the endless disruption of our natural flow of productive activity.

Complaining doesn’t help; it only encourages complaint! There is good news, however. Great men and women throughout time have all had the uncanny ability to focus on the important while the world burned around them. If you don’t believe me, ask any mother with an infant.

An American Hero

President Herbert Hoover is an unlikely hero to most Americans. Most people consider him a failure because all they remember is the Great Depression starting about the same time as his presidency and he was unable to solve the issue. It’s the wrong impression. The Great Depression would have started when it did regardless who was President. If Hoover weren’t President, he would have been the guy called in to fix the problem.

I had the same distorted disillusion of Hoover most of my life. My interest in Hoover was more about the market collapse than about the man. Then a recent issue of The Economist recommended a book by Kenneth Whyte titled Hoover: An Extraordinary Life in Extraordinary Times. I love books and knew this one had the promise of heavy use for years so I bought it.

Over the years I built a spotty sketch of Hoover and his life. There were plenty of gaps and misconceptions. Whyte set me straight. So much so I have a planned post comparing Hoover to Trump since we sometimes hear the two Presidents have much in common. No they don’t! I think it’ll be an enlightening read once I get the words spanked onto the digital page.

Focusing on the sublime.

Today we will focus, ahem, on one facet of Hoover’s personality: his ability to focus under extreme conditions.

My favorite story of Hoover and his can-do attitude started in England.

On June 28, 1913, Archduke Franz Ferdinand of Austria was assassinated. It didn’t seem like a serious issue on the surface. Life went on as usual, but behind the scenes a diplomatic disaster was in the making. Then, a month later, the world exploded.

Americans were vacationing in Europe as usual on the eve of the Great War, as it was called until we decided to do it again even better twenty years later. It can be argued Europe was resting from November 12, 1918 until August 31, 1939; a sort of war halftime to regroup for the second half. (Yes, I know many consider WWII started when Japan made her move in China in 1931. We’ll stick to the European theatre for this installment.)

Hoover was in London with no warning of the impending armies gearing for war. When the fighting started a large number of Americans needed to be evacuated. A humanitarian disaster was certain if someone didn’t find a way to fix the problem.

Hoover never hesitated. He orchestrated the evacuation of Americans with unimaginable efficiency.

Once the continent was cleared of vacationing Americans, another even greater problem arose. Belgium was caught between the warring powers and the Belgium people were suffering. Food was scarce as the country was virtually quarantined.

People were dying! Civilians. Women and children. And neither side cared to help over concern it might bolster the opposing side.

Herbert Hoover with King Tut. The human side of an extraordinary man.

Herbert Hoover never wavered. He worked relentlessly with the Germans, British and Americans to provide relief for Belgium.

Germany controlled Belgium. Germany requested the right to cross Belgium in her run for Paris at the start of the war and moved within days without waiting for an answer. Belgium was defenseless and at the mercy of the German military. The suffering in Belgium during the Great War was some of the greatest human suffering in history.

Amidst the chaos Hoover went to work. He traveled to Berlin to seek aid from the German government to no avail. Great Britain didn’t trust the Germans and Hoover wasn’t even British!

Hoover built a relief effort rapidly, saving millions from starvation.  The U.S. government reluctantly, at Hoover’s incessant prodding, provided limited funding and permission to organize the American farmers into producing the food necessary for the relief effort. President Wilson, along with the British, feared the relief effort would help the Germans by diverting food to the German troops.

Enemies allowed Hoover free rein to travel across borders without restriction. He was the only man alive allowed to do so by both sides. His constant drive built the Commission for Relief in Belgium that helped American farmers produce more, raise private and public funding to deliver the goods to Great Britain and get the food to the Belgium people in desperate need.

Hoover visited Belgium several times during the war to see firsthand the devastation and suffering. His mind was always going, working on solutions to the intractable problems of feeding the Belgium people during the war.

At its peak the Commission had an $11 million a month budget with 78% provided by government grants. Over 10 million people were fed daily at the height of the effort.

Only when the U.S. entered the war did Hoover’s relief effort end. Germany would not allow an American behind German lines after that point.

Blocking Out the Noise

Hoover’s ability to focus when distractions were everywhere is legendary. Most people have a hard time reading a book unless there is silence! Hoover could concentrate in any environment.

The ability to focus during chaos will determine a large part of your success. If minor distractions, such as the stock market, can derail your financial plans you are in big trouble.

Marriage, or any relationship for that matter, will have distractions. Successful marriages don’t require all parties involved to never notice other people they find attractive. There will be attractive people! There will be kind, caring, attractive people willing to weasel into your relationship when you are under duress. Especially when you are at your weakest! The marriages that survive a lifetime find focus on the commitment to the relationship. It’s a team sport even when the night is darkest.

Business is the same. Do you really think owning a business is all fun with loads of money pouring in? Heck no! There are good days and bad days. Then a recession comes along and tests your grit. Fewer businesses survive than marriages. In my years as an accountant serving business owners I can attest most issues business owners face involve the lack of focus. Business owners want to do everything until they wear out and fail. Everybody thinks they can be Elon Musk, running 78 ½ different Fortune 500 companies. You’re not Elon Musk! And for the record, the jury is still out on Elon. The boy is amazing, but he has a full plate with no guarantees.

Happiness at the Focal Point

You and I don’t have to be Herbert Hoover. We can have Hoover’s focusing talent by following one simple rule:

  • Define your goal in its simplest form.

Hoover’s goal was simple: Feed the Belgium people.

My 30 year marriage is based on a similar simple rule: Remain faithful to Mrs. Accountant. All too often we try to focus and several things at once and fail. In my marriage I always focused on Mrs. Accountant. I would always try to take the path that would cause her the least anguish. Of course I failed at times! Focus isn’t about never failing. But my failures were relatively minor. I never cheated and never felt tempted. I know where I have it good because I focused there. Stupid mistakes happened, but faithful to my relationship with Mrs. Accountant I always was.

Moments of serenity can help build the focus muscle.

You need a focal point. I hear people with the financial goal of financial independence (FI) all the time. Well, what exactly is that? FI is a simple enough goal, but it’s not a defining goal!

A simple goal presented correctly will cover all the “how’s” later. FI is not clear so it misses the focal point. Define FI. Does this mean freedom to travel, retire to the country or run your own business? Focus when you set your most basic of goals.

A better simple goal: To attain a liquid net worth large enough to live off investment income without worry so I can pursue my dream of (travel/running my dream business/pursuing philosophical studies).

The how-to automatically fills in as you focus on the goal. The 4% Rule comes into play without mentioning it in your goal. Saving and investing are automatic in your financial goal.

Focus is a learned trait. Herbert Hoover was in London for business when the world called his name. No other man alive was in the right place at the right time to do what he did. Once tragedy arose there was no time to practice; you’d better be prepared for the unexpected.

You may never face the challenges of Hoover during the Great War. Then again, Hoover never realized his number was about to be called the day before hostilities broke out.

Your eyes must be trained to the focal point at all times.

You never know when they’ll call your name.

 

 

There are no signs showing how to make the loop onto the bridge. If you miss the loop you take the long way.

Earlier this week I had the opportunity to extend my Thanksgiving holiday by attending a few days of continuing education training. Northeast Wisconsin isn’t a bad place to get an education as long as you can get to Green Bay or the Fox Cities. But when you live in the middle of nowhere it takes planning and strategy to git er done.

Well, the plan was fine; the strategy could have used a bit more work. It’s been a while since I weaseled my way to Green Bay where the training classes were. The fastest way there was to take side roads the whole way.

My memory has started to slip these past years as the birthdays add up. Not having to visit Green Bay in a bit, I knew the trip was a straight forward drive with one exception; at Wrightstown I had to make a loop to get on the bridge to cross the river.

The first day I started early and relied on memory — you know, the thing starting to go with age. It was a good thing I started early.

If you don’t cross the bridge at Wrightstown you have to take a longer, slower route deeper into Green Bay before swinging hard west to head out to the casino where the class was held. Confident as only an American can be, I went off memory. It was a gamble I was willing to take.

Sitting in a classroom all day listening to tax law is grueling. As soon as class was over I wanted to get home. Now less willing to trust my normally reliable brain, I decided to use the phone’s GPS. The last thing I needed was to miss the turn at Wrightstown. Then I’d end up going all the way to the Fox Cites to get home and that would add twenty minutes or so to the ride.

The GPS worked swimmingly at Wrightstown. GPS loves highways and it loved the route turning off at Wrightstown. But it didn’t want to take the side roads the way I wanted!

I followed the GPS directions and knew I was going off course. The darn thing wanted me to take highways as much as possible so I ended up on Highway 32/57. It wasn’t a terrible distance out of the way, but added ten to fifteen minutes to the drive.

Such was Day 1.

I passed! Honest.

I was ready for Day 2! I used the GPS to get to the casino for class in record time. I was even able to use side roads, too.

Day 2 is always brutal. Day 1 wears you out and Day 2 grinds you into putty. Sixteen hours of intense tax law review has that effect on normal humans.

I wanted the fastest way home and hoped the GPS would be as kind on the return trip as the morning drive. Once again things went swimmingly at the Wrightstown turnoff. Then the GPS wanted me to keep going east until I hit 32/57.

I was ready.

Suspecting the ruse from the GPS I took note of how the squirrely turn at Wrightstown fed to the side road I wanted to take. When the GPS said to go straight I made the loop I made that morning and found my true heading home.

Rather than turn the GPS off now that I knew the way home I decided to leave it on and focus on my driving. There are a lot of deer roaming and it gets dark early this time of time. I wanted to get home and was in no mood to tenderize some venison.

The GPS kept telling me to hang a left at every cross road until I was only a few miles from home. The GPS didn’t care the side roads were a faster route; it wanted to get to a highway, any highway, as quickly as possible.

The Day the Sun Went Out

This past August we had a total eclipse of the sun. A new friend from this blog, Bernie, invited the Accountant family to stay at his place only a few miles from totality in Kentucky.

It was an awesome experience and included a new friend. But that isn’t the interesting part of today’s story.

When the eclipse was over our plan was to head to the Interstate and back to Bernie’s. Except seven quadrillion other people had the same idea.

The GPS loaded where we watched the eclipse, but once we got on the interstate coverage died. And so did the traffic.

The highway was wall-to-wall cars and weren’t moving. It took an hour to move a mile! I don’t see stuff like that in the backwoods of Wisconsin. Where I live a car coming down the road is an event. Either one of the few neighbors I have is up to something, we have visitors or someone is lost. Now I saw cars as far as the eye could see!

The Accountant family moments before the sun went out.

After a few hours some people were getting in trouble as their gas got low. Good thing I was smart enough to fill up after the eclipse before we headed back. Okay, maybe luck had more to do with it.

Cars were pulling to the side and some were stranded. If emergency services were needed you were SOL.

I’d had enough. Mrs. Accountant wanted to drive back so I studied the map. Without GPS the map was incomplete. Sick of the traffic and with evening fast approaching I wanted an alternative before it got dark and our gas started getting low.

I told Mrs. Accountant to take the next turnoff a half mile ahead.

“Are you sure?”

“No.”

Mrs. Accountant trusted my instinct. It took another hour to travel that half mile to the turnoff, but we eventually made it.

Some people had the same idea, but it was a serious minority.

Traffic on the side roads we light. We still had one problem. We needed to cross the interstate to get home. And like the crazy loop in Wrightstown, it wasn’t going to be easy.

Cell service was spotty but did click long enough to expand the map in the phone. As we traveled toward home we noticed every approach to the interstate was backed up for miles. Crossing the interstate could take half the night!

I searched the map for a side road crossing under the interstate without on-ramps. It was a gravel road, but there was only one other car on the road and we were moving just fine.

Once on the other side of the interstate we drove at the speed limit all the way back to Bernie’s place. It was dark by the time we got there.

Mrs. Accountant and I still think there are people out there on that interstate in Kentucky still waiting to move a few more feet.

The Best Choice Isn’t Obvious

The two stories above reveal the same lesson: the obvious choice isn’t always the best one. The GPS in Kentucky showed massive traffic issues and still demanded we stay on the interstate! I think people were staying on the interstate because they were preprogrammed to take the most obvious course home and their presupposed assumptions were affirmed by a piece of technology. If my GPS was giving bad advice; the same must be said for the rest of the crowd.

The interstate is frequently the right choice. Unfortunately it’s also the crowded choice. The side roads and lesser highways might be slower, but the traffic is generally lighter and the scenery better. The interstate doesn’t allow much opportunity to meet locals. State highways wind through small towns where you can get out and chat with folks. In my opinion it’s the only way to travel.

Other areas of life face the same dilemma. Technology wants us to always run for the nearest highway when that is the worst possible choice! People, unfortunately, react the same way the technology does.

Wealth experiences the same issues. Everyone is a genius right about now. The stock market has been straight up for nine years. Virtually every other asset class has also enjoyed heady gains. Bonds have been higher as interest rates declined. And now we get cryptocurrencies to add to the growing list of assets turning everyone into Einstein.

History is an important guide. Following the crowd doesn’t lead to riches. At best the crowd leads to mediocrity; at worst it leads to the poorhouse.

I don’t trust what technology always tells me. Right now technology (and the experts) tells us to pile into bitcoin and the stock market. Weeeeeeeee!

What could possibly go wrong?

Like the interstate in Kentucky after the eclipse, we might find it hard to move anywhere or even get off the crowded road. Before long we end up with real problems as night approaches and gas is running low with the kids in the back seat.

Heading for the highway sounds like the smart move. Sometimes it’s not! It can extend the drive a few minutes like my trip to Green Bay for a class or create serious problems like it did after the total eclipse in Kentucky.

The side roads are seldom crowded. Sometimes you get behind a tractor for a short distance or have to navigate twisting roads and frequent stop signs.

But at least you have the road to yourself and a whole lot less stress.

Cryptocurrencies are all the rage with bitcoin (BTC) leading the pack. As I write, BTC blew past a 1,000% return year to date and posted its first trade above $10,000. Experts claim BTC could increase another 400% between now and the end of next year to $40,000 or more! If that doesn’t make your eyes water, remember BTC traded at a $1 in early 2011. I don’t know about you, but this is nosebleed territory.

Bitcoin will continue growing until 21,000,000 BTC exist. Actually, the programming to mine BTC stops 3 bitcents shy of the 21 million mark, which at the current growth rate could be worth a few million dollars. It will take until 2140 to complete the BTC mining process. On June 1st, 2017 there were 16,366,275 BTC in existence, if that is the right word to use. (It isn’t.) More BTC has been mined since June 1st.

This means the total value of BTC is approaching $200 billion in value. If BTC climbs 400% in the next year, as some suggest, the total value of BTC will approach $800 billion and the market cap of Apple!* When all 21 million BTC are mined, if the price is $40,000 to 1 BTC the total value of all BTC will reach $840 billion. Then it gets absurd.

The Insane Logic

If you bought BTC seven years ago (early 2011) for $1 per BTC I salute you; you are a genius. Unfortunately, schmucks buying today will never see those kinds on return in seven years or a thousand! The starry-eyed fools jumping in today looking for similar returns will need BTC to climb another 10,000 times. Okay. Let’s add all the zeros. BTC is at 10,000. Add four more zeros and you get $100,000,000 per BTC!

Well, it could happen!

Of course when you multiple $100 million by 21 million BTC you get, well, more money than currently exists by a very large margin! ($2.1 quadrillion if I calculated it right.  You have to forgive any errors. Other than my own investment account, I’m not used to playing with such large numbers.)

I can hear you already. It doesn’t have to climb another 10,000 times to turn a tidy profit. I agree. However, name anything that rose so far so fast without ending in tears?

I’ve seen this stunt several times in my short lifetime. As a child I watched the Nifty Fifty crash and burn in the 1970s. The dotcom bloodbath at the turn of the millennium should have provided lessons for today’s investors. The housing and banking collapse of 2008-9 should be fresh in everyone’s mind as it happened less than a decade ago. But memories are short when stupidity runs rampant, I guess.

This Time is Different

As with every bubble, this time is different. The tulip bulb mania of the early 17th Century (1636-7) was different. In all honesty, tulip bulbs always had value and best I can tell are still around. I can pick up a large bag at my local garden center for a few dollars. Tulip bulb prices ended up where they started. There was always value, just not the insane valuations. This is our first lesson. There is a grain (or bulb) of truth in every bubble.

The U.S stock market of the late 1920s is another example of value turning into a buying frenzy at any price.

Just because a volcano is quiet doesn’t mean it’s safe.

Tears. Remember it ended in tears.

The stock market is a favorite vehicle for bubble creation. The Nifty Fifty of the late 1960s and early 1970s were stocks people felt could be bought at any price and held forever without worry. By 1974 there was worry. The only stock I can image did well was Kimberly-Clark, the maker of Kleenex tissues.

The stock market pump was over-primed in the mid-1980s ending in the biggest percentage loss for one day in market history on a fateful October day in 1987.

But this time is different.

Once again as the millennium raced toward the finish line stocks went insane. Dotcom stocks traded for hundreds of times revenue (not profits!) if they had any revenue at all. But many stocks (companies) did have real value so this time is different.

Then came housing in 2008. Fed Chair, Ben Bernanke, said housing prices would continue climbing only at a slower pace. Good call, Ben. And he was an expert.

For some reason people never learn. They go from one hot stock to another. People get killed in a bubble collapse, take a decade to rebuild reserves and go at it again with their battle cry, “THIS TIME IS DIFFERENT!” No it’s not.

Where is the Value?

In most bubbles of the past there was underlying value. Tulip bulbs were worth something. Not much, but something. Stocks (publicly traded “businesses”) certainly have value.

Today we have several expanding bubbles due to the massive money creation of central banks around the globe. Bonds are arguably overpriced. How else can you explain bond yields less than inflation?

We can go into other possible bubbles, but BTC is turning out to be a doozy by historical standards. Boys and girls, you might live through a bubble spike bigger than any other in recorded human history on an item worth absolutely nothing!

Bitcoin’s real value?

Stocks, bonds, real estate and even tulip bulbs have some intrinsic value. But what about BTC? Does BTC really have any value? Let’s examine.

What is a bitcoin? Some call it a pyramid scheme, but it really doesn’t resemble one. Is it a currency? Economists say a currency has three characteristics: a medium of exchange, a store of value and a unit of account. BTC doesn’t exhibit any of these features to any large extent. Yes, BTC is used in a small percentage of transactions, mostly involving nefarious transfers. The massive price fluctuations make BTC more a speculative investment than a store of value or unit of account.

Think about it this way. Why would anyone buy something with BTC? To do so when BTC prices are climbing triple digits or more each year is industrial strength stupid. Only a fool would do that! Using dollars to buy stuff and pay for services because your BTC will be worth more tomorrow seems the smart move when BTC is such an awesome investment. Just read the news, they’ll tell you.

Compare BTC to dollars. Yes, dollars are fiat money, backed by nothing more than faith in the government and the economy to give you value. No physical commodity supports fiat currencies. The U.S. government can tax more to pay back its debts if necessary. And currency IS debt. It says so right on paper currency: Federal Reserve Note. A note is a loan! (Ie. you have a mortgage note.)

BTC has no government or economy supporting it. BTC is fiat money**! No physical commodity backs its value. Scarcity doesn’t imply value as many buying BTC today contend. There might be a limited supply (intentionally) of plaid shirts. That doesn’t mean plaid shirts are worth more and more every day due to this limited supply!

BTC is supported by nothing and is fiat money. When BTC collapses who will want to accept BTC as payment for goods and services? When the price rises who in their right mind would use BTC to buy something; that’s a de facto sale.

There is no government or economy supporting BTC. BTC has value because people say it has value. Just like gold has value because people say it has value. (And because it’s pretty, useful in art and industry.)

When someone decides there is nothing but air underneath BTC the rush for the door will not be pretty. Most will not get out as the building burns. If you think the rush to buy is tremendous, just wait until fear sets in.

This is BTC’s Achilles heel.

Signs of a Bubble

I don’t want to dissuade anyone from investing in BTC if that is their heart’s desire. All I urge is caution.

Here are a few indications the party may be nearing its end. Over the preceding long Thanksgiving weekend here in the States over 300,000 new accounts were opened to buy BTC. BTC jumped over 10% during the long weekend. People are buying BTC with credit cards they are so desperate to get in.

Hedge funds are starting to invest in BTC, not use it as a currency. ETFs and futures contracts are ready to debut in the BTC arena. On December 10th when futures begin trading on BTC it could actually hurt BTC pricing! With a futures market you can play BTC without actually buying BTC. With such an easy vehicle to trade BTC without owning it could be a catalyst for problems. I’m not making a prediction, only offering insight. Like program trading in the 1980s, it might take a few years before BTC has its October 19, 1987. Or it could happen much, much sooner.

Taxes on BTC

This part of the discussion is for U.S. readers and those subject to U.S. taxes.

The IRS has clarified the tax treatment of bitcoin and other cryptocurrencies in Notice 2014-21.

Real money?

Under tax law, BTC is NOT considered a currency! It is considered property. If you pay employees with BTC you still include the amount of U.S. dollar equivalent on their W-2. If a merchant accepts BTC as payment, the amount received at fair market value on the date of receipt is income. A miner of BTC includes BTC received as income and may be subject to self-employment tax.

Here is where it can get ugly. Most people are buying BTC to hold as an investment. If you buy something with BTC you may have a gain or loss on the transaction, technically a sale of BTC to buy said product or service. If you sell BTC at a gain you get either long- or short-term capital gain consideration.

If you sell BTC at a loss you can only claim the loss against other capital gains, plus $3,000 per year against other income. People buying into the hype could face serious losses and those losses may not be deductible for a very long time, if ever. You can carry unused losses forward. However, when you die, the capital loss carry forwards die with you. Ouch!

I’ve been in this business for a very long time. (The first one to leave a comment on my age gets one in the puss.) I remember the mess caused by stock options when the dotcom bubble burst. The Alternative Minimum Tax (AMT) issues were incredible. It took special action by Congress to offer relief to some of the victims. They suffered years before help arrived.

The good news is that this accountant sees no AMT issues (other than normal AMT issues) with BTC. The real issue with BTC is that losses could be strung out on tax returns for decades or longer. People who borrowed money will need to earn money, pay tax on the earned money and use the remainder to pay off debt lost trading BTC.

Coda

I am unqualified to call the future price of BTC.  I could be wrong and this time could be different. Amazon was caught in the dotcom mess and did pretty darn well if I don’t say so myself. However, BTC is not Amazon. It’s not even a currency technically.

BTC has no real value. BTCs entire value is built on faith and faith has a habit of letting people down when they need help the most. At best BTC is fiat money; at worst it’s a fool’s game.

For BTC to continue climbing in price, more buyers willing to pay a higher price, need to step forward. The day will come when nobody wants to pay a higher price. That is the day we find out if BTC is for real or another chapter in the history book of insane bubbles. With no intrinsic value I have a bad feeling where this is going to end.

 

* Remember, more BTC are created every day so the supply keeps going up. If BTC continues to rocket higher, the total value of all BTC will climb faster as more BTC are available at the higher price.

** This isn’t really true. Fiat money is technically “from decree”. In this instance I use fiat as meaning a currency without the backing of any commodity or government taxing authority.