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Deciphering Cryptocurrency

Deciphering-CryptocurrencyOne of my life's great regrets was not buying Bitcoin in 2011, when it was worth just 40 cents. I knew about Bitcoin early on and the idea seemed fascinating. It was the world's first crypto-currency, backed by computational power, limited supply, and an unbreakable code.

If I had made a minimal $1,000 purchase, that speculation would now be worth... $2.5 million dollars.

The problem was this: Bitcoin felt "sketchy". Still does. And the SEC seems to agree on this point, as it recently dismissed an application for the world's first Bitcoin ETF.

Today, Bitcoin is mostly used by Chinese nationals seeking flight capital. It has been helpful for Venezuelans in their most recent currency crisis. However, most Americans don't have much need for it. The real value of Bitcoin is based in its software DNA, known as the blockchain.

"Bitcoin the currency, I think, is going to go nowhere... the blockchain is a technology which we've been studying and yes it's real." Jamie Dimon, CEO of JPMorgan Chase

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Real Estate Disappears

3FuturecityFutures come in many shapes and sizes. There are possible futures, probable futures, and preferred futures. Each of these comes with a different set of tools from the futurist's workshop.

The thing is... there isn't just ONE future. We get to choose.

So, I found it difficult to give a straight answer when asked about the future of real estate earlier this month. Anyone who gives predictions won't last long as a futurist. Among the occupational hazards of this work includes the fact that any statement made about the future may, in hindsight, appear to be obvious, wrong, or worse yet, obviously wrong.

What we can talk about are trends and possibilities. And here are a few things that I'm seeing regarding the future(s) of where and how we live:

The Post-Consumer Generation

Millennials are absolutely terrified of buying houses, getting married, and having kids. This is for good reason. It is difficult to make long-term financial decisions without having some basic level of economic stability.

My parent's generation had the benefit of lifetime employment. Today's millennials expect that they will stay with their current employer for an average of just three years. They are perfectly adapted to an uncertain world.

The implication is that millennials may be slow to enter the housing market because they can't afford it, or can't commit. On an inflation-adjusted basis, millennials earn about 20% less than their boomer parents did at the same age. This isn't quite a mortgage payment, but... you get the point.

Meanwhile, give a millennial a cell phone, laptop, knapsack, and a fresh pair of underwear and he or she is ready for the world.

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6 Easy Ways to Save Money on Boring Monthly Bills

Where did money goThere are some things that we all enjoy buying. These are the "fun" purchases that motivate, bring us joy, satisfaction, and a sense of well-being. For some people, it might be a morning cup of coffee, or going out to dinner for "date night" once a week.

Other bills we pay a little less enthusiastically. Here are a few power-tips for saving money on regular expenses that nobody gets excited about:

Student Loans: Few people realize that student loans can be refinanced. Everyone gets the same high interest rates when they apply for a student loan, because we all start without a credit history. After spending a few years successfully navigating the working world, college graduates may qualify for a better deal. Rates for refinanced student loans can be as low as 2.2%. Check out LendEdu.com

Mortgages: If you have a variable rate loan, now is an excellent time to consider refinancing with a fixed mortgage. This may be your last opportunity to lock-in to low interest rates. Bankrate.com is a great place to start looking (and it is also a great place to find better deals on credit cards). If your situation is on the complicated side, you may want to find a mortgage broker, such as Magnum Opus Federal.

Income Taxes: There are many ways to trim income taxes, but the most urgent is to start making contributions to a qualified retirement plan at your place of work. You can reduce your taxable income on a dollar-for-dollar basis. Not only that, but you will also systematically build your investment portfolio!

Ask your employer about what might be available to you. Solo entrepreneurs can easily open up a SEP-IRA account, while small businesses have many plans to choose from.

Utility Bills: You might be able to save 15% on your electric and gas bills by simply changing providers. The process is seamless and easy. Visit ChooseEnergy.com

Cell Phone: Comparing cell-phone rates can be dizzying and complicated. However, this definitely qualifies as a bill that nobody enjoys paying! Here is the best resource that I could find on shopping for wireless carriers.

Insurance: Find better deals on term life, property, and casualty insurance at LowerMyBills.com

Building wealth involves time and effort. Having good habits makes it so much easier. The pain-free way to save money is to be a smart consumer on things that you might not always care about.

Jim Lee, CFA, CMT, CFP

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The Financial "Power Tool" in Your Wallet

Credit Card PileCredit cards are a "power-tool" that don't require safety googles or gloves. However, like many other tools, they need to be handled with a bit of common sense.

Some people get accidently buried in credit cards, while others use successfully use them to build their business. The really smart ones know how to work their perks.

I became familiar with credit cards while temping for a number of banks during my college years in the late 1980's. The industry has evolved considerably since then -- credit cards have become far more specialized and competitive.

Some great websites for making comparisons include www.bankrate.com and www.nerdwallet.com.

Depending on your needs, here are a few of my favorites:

Best Card for Balance Transfers: Discover It card offers a 0% annual interest rate for the first 18 months with no annual fee, plus 1% cash back on purchases. For those with fair credit, the Barclay Arrival Plus Mastercard offers a 0% intro rate for the first 12 months, with a $89 annual fee (waived the first year).

If you can't pay down your card within a few months, you may want to consider a home equity line of credit. The rate will be lower, plus you may receive a tax-deduction on the interest paid.

Best Credit Card for Cash Back: Capital One Quicksilver provides unlimited 1.5% cash back on all purchases with no annual fee. Cash rewards can be sent via check, or used to credit your account. The card also offers travel benefits, including no foreign transactions fees, concierge service, travel and emergency services, emergency roadside dispatch, and auto rental collision damage waivers.

Capital One Spark Business offers most of the same travel benefits, but with 2.0% cash back. Cash back rewards accumulate when you need them the most. (I put most of my business expenses on this card and accumulated $800 in rewards last year.)

Best Card for Perks/Big Spenders: The Chase Sapphire Reserve card has so many perks that they don't even bother with advertising. The annual fee is very steep at $450 per year, however, that includes $300 in annual travel credits. Triple points are earned for airfare, hotel, and dining purchases. Travel redemptions booked through Chase Ultimate Rewards receive a 50% bonus. Cardholders also have special access to over 900 first-class airport lounges worldwide through complimentary Priority Pass membership. Travel protection features include trip cancellation insurance, auto rental collision damage waivers, and lost luggage reimbursement.

There is also the legendary American Express Black Card, which comes with a $2,500 annual fee.

OK, now back to reality... here are a few guidelines to follow when managing your
credit cards:

* Pay off your balances every month.

* Find out what benefits your existing credits cards offer. You may be surprised. Go online and see if you've accumulated points or cash rewards.

* American Express and Discover cards may offer good benefits, but are not accepted everywhere.

* Small business owners should consider paying all their regular bills by credit card rather than by cash or check. This makes accounting and record-keeping easier, frees up cash flow, and accumulates the most cash/travel rewards.

* Be careful of credit cards that offer big up-front rewards or special interest rates.

* Avoid credit cards attached to a single retailer or merchant.

* Don't build a collection of credit cards. Having a back-up card is fine, but signing up for too many credit cards could damage your credit rating and make you vulnerable to identity theft. Keep it simple.

* To close a credit card account, simply pay your bill in full, cut your card in half, and mail it to the issuer with a request to close the account. Keeping old credit cards will generally have a better effect on your credit rating than keeping new ones.

As a habit, it is good to review your personal credit report once every year or two.  A free copy is available here.

James H. Lee, CFA, CMT, CFP®

 

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The Logo Story

Logo Color PositiveFour years ago, I needed to create a logo for StratFI. The problem was my complete lack of artistic talent. Investment managers are good at other things, such as geeking out in front of the computer, obsessing over quarterly earnings reports, or making sense of economic statistics. We also love to read.

After finishing The 4-Hour Workweek (quite possibly the most dangerous book on entrepreneurship ever written), I learned about crowdsourcing and decided to give it a try. It was a bit like asking everyone on the internet for advice.

The best place for this was at Crowdspring. I offered a few hundred dollars for a logo and business card set and was expecting a dozen or two designs. Within three days, there were one-hundred and forty-six submissions. Talk about overwhelmed with possibilities!

This whole crowdsourcing thing worked out pretty well, so it made sense to reach out to family and friends via Survey Monkey. Opinions were freely given and much appreciated. The most useful piece of feedback -- one of my favorite designs looked like "a logo for a dying 1990's pharmaceutical company." That made the selection process much easier.

After a week, the award was given to a designer in Malaysia, who didn't speak a word of English. Our entire correspondence was done via Google Translate. We had to change a few things to make my business cards "local", such as using American-style contact information. The final logo design is what you see at the top of this newsletter, and I was quite delighted.

What It All Means

The logo consists of three columns, wrapped by a "halo". These columns represent the pillars of our investment discipline.

Strategic Foresight is the process of using what we know about the future to make better decisions today. Having a graduate degree as a futurist has been tremendously useful in finding emerging opportunities for clients.

Fundamental Analysis is about crunching the numbers and performing due diligence on individual companies. This is where being a Chartered Financial Analyst is essential. I simply couldn't be a stock-picker or a portfolio manager without this training.

Technical Analysis provides information about investor sentiment. It involves looking at various indicators to determine the best entry and exit points. This is a whole different discipline, and comes from being a Chartered Market Technician.

Together, these disciplines took over twenty-years of ongoing study. They provide tools for the three key questions of investing --where to find opportunities, what companies to buy, and when to invest.

You may also notice that the middle column is a little taller than the other two. When viewed together, they form a simple bell curve (a key concept in statistics).

By far the easiest symbol to understand is the golden "halo". This reflects the importance of having good relationships and solid ethics. It is about always trying to do the right things for people. Without it, nothing else matters.

James H. Lee, CFA, CMT, CFP®