Raison D’etre

There are some things in life that it does not hurt to stop and consider. You hear talk of getting different perspectives on a thing, for instance, but let’s draw it out a bit. Perspective is about decision-making and varying degrees of reaction time. Some things are in the moment. Now. Then there are things that are more distant, whether physically far away or just removed in time. Finally, there’s the bona fide long term. I think there it probably depends on your age a bit. Months to years when you are young; decades when you get older. Although, to be honest, I’d recommend younger people consider taking an old man's advice.

The old saying is don’t put off what you can do right away to plan for the future.

It doesn’t matter what age you are when you start to make financial plans, but a wise younger person has an advantage. If that is you, take my advice and learn about the power of compound interest. Formulate a plan to set aside even a modest amount, whether from wages or windfalls. For the younger person, it’s important to be assertive in your investing. Be aggressive but be smart. I also advise that you take at least 30% and invest it into interest or dividend-paying instruments. We are headed into a new time where you may live to be well past 100, and the longer-lived you are, the longer the compounding goes on. I’m older but still pretty daring and aggressive financially. I collect a range of rates from 4.5% up to 21%.

I think I’ll write more about some of the more advanced decision-making and my perspective in the financial realm. For instance, I’m always on the outlook for intermediate-term deals as well. Typically, I look for good companies in some sort of distress. Like UPS and its breakup with Amazon. Ford when Covid-19 hit. IBM when it was out of favor with the market but had a CEO who bet the company on the future of AI. These are all companies that, because I bought them when they were down—now that the turnaround at each happened—are paying in the 8% to 12% range on their dividends. The way compounding works is you keep your money going. You take the 8% or whatever and you immediately reinvest it, thus accruing additional capital that will in turn pay dividends for years ahead. With stocks, you typically just turn it on for your entire account.

In crypto, it’s called staking rewards, although there is straight-up interest paid on virtual dollars. Although to be honest, that’s the slow game. One does want to keep an eye out with crypto for deals or news that might move sometime. Part of the appeal is the 10x, 100x, or even 1000x run-up in a token. It’s most likely to happen on something cheap in terms of a 1000x. Say, costing a fraction of a cent. To maintain that price level, though, there has to be a good selling point. I recently purchased 10,000 MON, or Monad. It’s substantive. Monad should be set to fill a huge, huge market need. Ethereum is the big kahuna. $500 billion in market cap. It is a Level 1 chain, as is Monad. There is a growing constellation of Level 2 chains that are connected to Ethereum. Ethereum provides secure transactions but it gets congested. When that happens, the cost of operating on the chain skyrockets. That’s a problem with Ethereum, and one solution was to offload some of the processing to the Level 2s. Let them bundle transactions and submit them to the blockchain in “blobs.” Except the Level 2s lost something.

Currently, Ethereum Level 2 is a collection of chains that don’t work on the same standard. They all use Ethereum, but it’s not compatible with original Ether, nor are they compatible with each other. That matters because it affects business viability. Now in steps Monad. Another Level 1, except with some of the traits of the Level 2s; a Level 1 built from the ground up to incorporate the EVM, or Ethereum Virtual Machine. Which is the mechanism the Level 2s use to communicate with the 800-lb gorilla, Ether.

Except Monad is billed as being both 100x as fast as Ethereum and compatible with all the Ethereum Level 2s. Not only that, but they claim they will fix the issue of incompatible currencies across all the Level 2 chains. It’s potentially momentous, and it does depend on how they play their hand. If Monad succeeds, Ether may fade. Not disappear, but Monad should be well-positioned to take away all those transactions in the Level 2s. That’s most of them. Transactions are just too expensive on the Ether Mainnet except for rich folks. Even most of the whales are probably too cheap. Provided there is a faster and therefore cheaper alternative that proves to be solid on security. Security is Ether’s raison d'être, so that will be one thing Monad must master. There’s a lot of stories in crypto, though.

So, a younger person investing in crypto? Well, my advice on both crypto and other financial instruments is to start slow and modest. Until you sort of figure it out a bit. Most banks can put you in a bond of some sort for about $1,000. A good goal. Of course, in time, you may want to enter the wider financial world. For instance: there are stocks and there are bonds, and a wide variety of both in the world. A huge amount of them are American. There are, however, hybrid instruments. One example is the Preferred Share. I noted above that I look for companies that are down on their luck perhaps but still have a solid brand. Like Target. It needs to make a concerted effort to win back its customers, but if they do that, then eventually the share price will go back up. The dividend is at about 5%, but of course, you have to believe they will be able to continue paying it. In Target’s case, I think it likely. But then they have debt. Bonds. Some of them go out 30 years. The same factors that drove down the stock also drove down the price of the bonds. When the price of a bond drops, the yield on it moves inversely up. A hybrid option, though, is a third contender that I think is not a bad deal for a younger person looking to compound. Preferred Shares are part bond, part stock. Like the stock and the bond, so too is the preferred share affected by the same factors as the other two. They generally have a stated face value of $25. That can drop, which it has with Target. The yield goes up. Sometimes for up to 30 years. You never know; I might be around. I’d be 87 though. 2055.

Or you can buy an ETF that invests in Preferreds. I have one that pays about 6%, but monthly. I do like monthly stipends. The quarterly ones tend to be larger amounts, but that might change in time; we’ll see. Trust me, when you are older you’ll be glad you did it in terms of securing quarterly and monthly payments for yourselves. And crypto? Well, that’s not really what I’m talking about here. I would, however, say that in terms of future history, I think it highly likely that the technology merges with the old Web 2.0 financial world to create the next one.

So, the more I work on writing, the more I think I might have some ideas and insights that people might find useful.