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No, we aren’t still in the Crypto Dip-Toe series, and today’s topic is perhaps a good one for easing back out of the crypto world and onto other topics. In that series, we covered many facets of crypto and blockchain and why caution is warranted when interacting with those technologies and related investment opportunities. Still, I couldn’t agree more with Ms. Johnson’s general assessment. For years, I’ve been thinking about how cool it would be to have illiquid investments – commercial buildings, for example – sliced up into small pieces and owned by “the common folk.” In the blockchain world, that process is called “tokenization,” and maybe it will be a game changer. But that future crypto “on-chain” solution is not what we’re talking about today. Because what I’ve learned lately is that the future is already here, and that future is…wait for it…securitization. And securitization is definitely off-the-chain! In the context of a classic Spaceballs scene, this realization gave me the feeling that THEN has become NOW, now. Links mentioned in this episode: https://altblend.com https://thebahnsengroup.com

“Mortal as I am, I know that I am born for a day.” -Claudius Ptolemy For those who have forgotten some of the things we learned in school, Ptolemy was a Greek “mathematician, astronomer, astrologer, geographer, and music theorist” who lived about 1900 years ago. While he covered a lot of disciplines, the common thread seems to be that he dedicated his life to pushing knowledge forward and always asking, “what comes next?” With that in mind, today we’ll wrap up this initial crypto adventure contemplating what may be on the horizon for crypto and blockchain (though, as we’ve covered many times already, and I’ll be sure to remind you again, humans are terrible at predicting the future). Links mentioned in this episode: https://altblend.com https://thebahnsengroup.com

Since today’s update is just continuing a conversation from Part 7 (as I couldn’t fit it all into one edition), this may be the first time we’re not starting with a unique quote as a starting point. And, since I’m sure you have no shortage of more important things to keep in mind than my past ramblings, here’s a refresher: last time, we covered the recent/ongoing crypto crash and its similarity to tech; and then we learned about stablecoins, including those backed by fiat currencies, commodities, cryptocurrencies, and finally algorithms. I voiced my immediate concern regarding algorithmic stablecoins, and that’s where we’re picking up today. Here we go! Links mentioned in this episode: https://altblend.com https://thebahnsengroup.com

Volatility is often cited as a significant challenge for cryptocurrencies – and rightly so! If crypto eventually plays a role as day-to-day money in the future (as one potential use case), it will need to be stable. Some would call the recent events in the crypto space a drawdown, and others may deem it a full-blown bloodbath. I’ll let you decide, but first, we need to understand some more crypto basics before making sense of what happened. As foreshadowed last time, today we’ll learn more about Stablecoins and how those fit into the ongoing crypto conversation. And – to Coach Wooden’s point – perhaps flexibility is a necessary means to that stability. Bend, don’t break. Here we go! Links mentioned in this episode: https://altblend.com https://thebahnsengroup.com

Ether Ain’t What It Used To Be Ethereum and its cryptocurrency, Ether (ETH – or “eeth” for short), may seem like just another “crypto thing” we hear about in the news. But, if you aren’t already aware, you’ll soon learn why these could become an integral part of our digital future.  Perhaps unsurprisingly, part of the use case is in digital payments/banking and money transfers – topics often surround Bitcoin. More importantly, however, Ethereum is a platform on which to develop new solutions, aka “the world’s first programmable blockchain.” As we now know from Parts 1-5 of this series, “blockchain” is simply this new-ish protocol that can provide us with a secure, decentralized way to verify, trust, and track interactions, transactions, and other information. We’ve also learned that Bitcoin is one cryptocurrency constructed on one specific blockchain. Ethereum, in contrast, is a blockchain on which many digital currencies and other solutions can be created, and now we’re going to study it in more detail. Here we go! Links mentioned in this episode: https://altblend.com https://thebahnsengroup.com

In the last edition of Alt Blend, we broadly examined the landscape of digital currencies, and the plan for this current update was to start learning about how some prominent cryptocurrencies function. Coincidentally, there have recently been some substantial challenges within crypto markets over the past couple of weeks (at the time of writing), and I think we’re only one or two editions from really being able to grasp what’s going on. Thus, if you haven’t followed the news or it’s just too confusing, stay tuned, and we’ll get to all of it by early summer. Links mentioned in this episode: https://altblend.com https://thebahnsengroup.com

It never hurts to have a reminder of the things that matter in life, and it’s fair to say that many people would be willing to exchange money for more time if only it were possible (I suppose it is indirectly possible, as money can improve longevity via better healthcare, nutrition, personal training, etc.). While we cannot have life without time, we certainly can have life without money; however, that doesn’t mean money isn’t important. Today’s title consists of a fun-to-say phrase I cobbled together from the pros and cons of digital currency. It loosely translates to the “willful parallel happenings (within digital currencies),” which is just what I’m planning to work toward today: improving our understanding of money and where things currently stand within the realm of digital currency. Continuing where we left off in Part 3 of this series, we find ourselves in a front-row seat for what may be one of the most notable developments in the history of money. The only problem is that we won’t know that until decades have passed and the ongoing “digital currency revolution” can be placed within a historical context. Here we go! Links mentioned in this episode: https://altblend.com https://thebahnsengroup.com

“Bitcoin and digital currency is just this thing that was always going to happen.” – Tyler Winklevoss The digital currency movement (including Bitcoin) is undoubtedly “a thing” that is happening, but I think the jury is still out on where it all goes. Will it: Take over the world of fiat currencies and function as the dominant form of global reserves? Find a place coexisting within our current system of centralized, country-specific money? Fizzle out? If you forced my hand, I’d choose “d” – some combination of the above that plays out in ways we’d never guess at this point. As we’ve touched on in the past, humans aren’t good at predicting the future, and tempering our expectations (in either direction) is probably a reasonable thing to do. Although we have no idea what the future of currency will be, we can take a brief look back to see where it’s been to have a firmer basis for thinking more critically about it. Links mentioned in this episode: https://altblend.com https://thebahnsengroup.com

“I am everywhere and I am nowhere. That’s the beauty of the Internet Age.” – Ai Weiwei In part one of this series, we touched on the origins of blockchain and cryptocurrency technology, so let’s build on that today by exploring how it works. Don’t worry – the goal isn’t to be able to code the next cryptocurrency (and sorry to disappoint you, if that’s your aspiration). But, by approaching this in “bit-sized” pieces, we can better understand what is really happening behind the scenes and, hopefully, make the whole topic less daunting. Here we go! Links mentioned in this episode: https://altblend.com https://thebahnsengroup.com

“I guess you guys aren’t ready for that yet. But your kids are gonna love it.” -Marty McFly. After bringing the Enchantment Under the Sea Dance to a dead stop with a blazing rendition of “Johnny B. Goode,” today’s quote was the line Marty uttered to the awestruck crowd before leaving the stage. I’d like to think that if they make a Back to the Future reboot that begins in the year 2045, and Marty travels back in time 30 years to 2015 (instead of the original 30-year leap from 1985 to 1955), he could use the same quote after giving a cryptocurrency/blockchain presentation at a retirement community. I’ll let you choose your own adventure regarding the backstory of why he would be doing such a thing, but perhaps it’s to trick an elderly Bif into unwisely investing his retirement savings? (I know, I should really get into writing screenplays). The whole “crypto” movement may feel very futuristic for many investors. While no one knows what the future holds, the extreme perspectives range from crypto/blockchain eventually being involved in nearly everything to just being a short-lived fad. What is for sure is that the crypto phenomenon has gained a lot of traction, grabbed a lot of headlines, and created/destroyed a lot of wealth over the last decade. And, since it’s “a thing” and definitely an alternative investment, it’s about time – now 36 posts into Alt Blend – that we learn the basics of how it works and what potential utility it holds for us and future generations. I’m not an expert on cryptocurrencies or the blockchain, so this may be more of a research project than most editions of Alt Blend, but maybe that means we’ll collectively learn even more than usual. Here we go! Links mentioned in this episode: https://altblend.com https://thebahnsengroup.com

This post is a helpful reminder that I need to consistently prioritize setting my and client expectations as an essential component of successful investing, especially for Alts. Like most investments and life itself, Alts will rarely play out as originally intended. They may be better, and they may be worse. Still, the management of each strategy involves continuous adaptation to unforeseen circumstances, which is something we must expect and accept when investing. Diversifying across a mix of strategies (even ones that may be inherently diversified) and sizing investments appropriately can help smooth out the total portfolio impact and our experience. And all of that can better align outcomes with our (hopefully realistic) expectations. There WILL be unpredictable investment journeys, but what we must avoid at all costs are potentially catastrophic outcomes related to concentration risk, thus allowing us to fight another day, try again, fail again, and fail better. Links mentioned in this episode: https://altblend.com https://thebahnsengroup.com

I could’ve more predictably started this post with a quote from F.A. Hayek, well known in economics for what is concisely named “the knowledge problem,” which he lays out in his short writing, “The Use of Knowledge in Society.” But what fun is predictability? And, if it’s knowledge-problem quotes you desire, an entire chapter of this There’s No Free Lunch book is dedicated to the subject. I took more of the “roundabout” path into wealth management (via engineering rather than economics), but – from my non-economist perspective – the knowledge problem can be summarized as follows: it’s impossible to make good decisions without complete information, and NO ONE has complete information because everyone’s circumstances vary so significantly. The POTUS cannot possibly make broad (macro) decisions that are in the best interest of every US citizen at their particular (micro) level. But even making decisions at the local level is not going to be the best thing for every person. There are always tradeoffs. However, the beauty of free markets is that local decisions made with local, specific knowledge can aggregate to good overall outcomes for society. When I first learned of the knowledge problem (which, I assure you was much later in life than it probably should have been), it screamed “RELATIVITY” to me, and that brings us to today’s quote and Einstein. While Isaac Newton did a relatively (😊) good job explaining motion observed in the world around us, his equations – though extremely impressive for their 1686 origins – weren’t perfect. Einstein introduced his theory of “Special Relativity” in a 1905 paper to help address the shortcomings of Newtonian Mechanics, particularly related to explaining light, including the well-known equation, E=mc2 (if you think about light for a minute, it’s tricky to pin down, so it was a big pain-point of physics: What is it, actually? Does it have mass? Is it a wave or a particle?).

Unless you have some type of tax-sheltering structure in place (or tax losses that can help offset income or gains), then Uncle Sam will almost always be taking a slice of your “pie” (aka investment distributions). The way in which investments are taxed varies significantly, but how does that work, exactly? Also, where do fees fit into the equation, and – to finally discuss the question that prompted this series over a month ago – why are investment returns often confusing? Listen for the answers. Links mentioned in this episode: https://altblend.com https://thebahnsengroup.com

“Money, well, get back. I’m alright, Jack, keep your hands off of my stack.” -Pink Floyd, Money Your investment portfolio may seem a bit ethereal, as it’s held electronically at a custodian under the guidance of a trusted wealth management team (hopefully TBG), helping to capitalize companies and economic activity throughout the world. But, if you’re distributing income (aka yield) from your portfolio, that can feel much closer to home, contributing directly to your local “stack” of cash (or bank account). It’s worth spending “some time” on the concept of yield because it can be confusing. And it turns out (in hindsight) “some time” is a precise term meaning an entire edition of Alt Blend, instead of the originally planned four topics I thought we’d cover today. With that in mind, let’s discuss more than you probably ever wanted to know about yield. Here we go! Links mentioned in this episode: https://altblend.com https://thebahnsengroup.com

“Money, it’s a gas. Grab that cash with both hands and make a stash.” – Pink Floyd, Money Not so fast. Yes, many people receive income from their investments into their accounts, which they can reinvest, spend, or use to “make a stash.” However, my hunch is that very few investors understand how the income distribution process works and its impact on the investments themselves. While it’s not typically an issue, sometimes this lack of understanding can cause unnecessary concern. For example, in December 2021, our clients – or at least the ones who follow their accounts closely – awoke one morning to discover that one of their mutual funds had dropped -17% overnight. If your initial reaction was, “Yikes! What happened to that fund?” you’re not alone, and that situation naturally led to some incoming client questions. But what if I told you that there was absolutely no issue with the investment and that the “loss” was simply a matter of optics related to an income distribution? That real-life situation is partially what prompted this current Alt Blend series. And with our income-generation basics in mind from Part 1, it’s what we’re going to continue learning more about today. Here we go… Links mentioned in this episode: https://altblend.com https://thebahnsengroup.com

You’re likely already familiar with many different types of investments and distribution terms like interest, dividends, capital gains, and return of capital. But what are the similarities and differences between different types of distributions? How do distributions affect the value of an investment? What are the tax implications? THAT is what we’re going to begin talking about today:  how different investment options generate income and how that income is distributed to investors. Links mentioned in this episode: https://altblend.com https://thebahnsengroup.com

Over the past two weeks, I’ve realized that the first anniversary of Alt Blend blew right past us (it was officially October 14, 2020). So, happy anniversary-ish to us! Yes, it’s already been over a year of this mindnumbing blast of Alts goodness. Don’t worry, “meh” is the correct reaction. Moving on… As we’re about to put 2021 in the record books, today’s edition of Alt Blend is an index (loosely speaking) intended to a) archive all of the posts-to-date to help you free up some precious space in your brain for the new memories you’ll be making in 2022, b) briefly recap everything we’ve talked about over the past year (ish) for easy future reference, and/or c) bring to light topics that you may want to pull from the archives to re-read (or read for the first time, in the case of newer readers). I’ll try to be concise and break it into palatable blocks of information. And it may very well be the boringest Alt Blend yet, so my apologies in advance. Here we go! Links mentioned in this episode: http://altblend.com http://thebahnsengroup.com

Even if you don’t immediately recognize the name Edie McClurg, if you’re old enough to remember the 1980s and ‘90s, then you’ll almost certainly know her the instant you see her photo. Somehow she was everywhere and nowhere for the better part of my childhood, appearing in movies like Ferris Bueller’s Day Off, Mr. Mom, Planes, Trains, and Automobiles (a Thanksgiving classic for not-quite the whole family), and sitcoms including The Hogan Family. You can also hear her voice in several well-known animated films, like The Little Mermaid and Cars (so even my young daughters have familiarity). Was she the star of the show? Never, as far as I can tell. Was she there time and time again as a very dependable supporting cast member? You betcha. She is even credited with the quote, “Acting isn’t a singular profession, it is a collaborative profession.” It takes a small army to create the shows and movies that have meant so much to us over the years (try reading the credits some time), and it seems Ms. McClurg embraced this notion. Links mentioned in this episode: http://altblend.com http://thebahnsengroup.com

In the previous edition of alt.Blend, we discussed the due diligence process and some considerations involved in both investment due diligence (IDD) and operational due diligence (ODD). To expand on that topic, this week I am joined by Chris Hughes, Chief Operating Officer of Axonic Capital – a structured credit manager – to gain an inside perspective on ODD and the continued evolution of the due diligence process. Links mentioned in this episode: http://altblend.com http://thebahnsengroup.com

In a recent edition of Dividend Café, David Bahnsen revisited the premise that economics is, at its core, the study of human action. It’s easily overlooked on a day-to-day basis, but the combined diligence of individuals in a society is what drives all of the economic growth and investment opportunities we experience. With this in mind, today’s quote applies not only at a personal level but also, more importantly, to our communities and society as a whole. We can all use a reminder to be grateful for the efforts of everyone else, as – without all of our collective efforts – the opportunity set for each of us would be diminished (or nonexistent). Links mentioned in this episode: http://www.altblend.com http://www.thebahnsengroup.com