The Overtaxed Investor

Unfortunately, many of the details in DeMuth's The Overtaxed Investor will be irrelevant if the currently proposed tax bill passes.

The concepts, however, remain. I'm sure he will adjust his recommendations with a new edition once a new tax bill passes.

Overall, this is an easy read written in a punchy style. Many of the concepts are not new relative to years of reading the blogosphere, but they are succinctly and clearly delivered.

I have three take-home lessons from the book:
1. A tax deferred is a tax not paid (yet). Minimize taxes to maximize the gains you keep.
2. Minimizing taxes is a strategic process. The book's value derives in large part from DeMuth's clearly elucidated approach to strategy.
3. Dividend-free stocks are essential for minimizing taxes on investments that cannot be tax-protected in another way.

The fourth lesson, which I will admit I incompletely understand, is to maximize tax-loss harvesting. Somehow this feels incredibly counterintuitive.

Common Sense on Mutual Funds

 Bogle's book is the second recommendation in Bernstein's Bernstein's If You Can...., as a basic introduction to investing.

This book is a slog.

21 hours by audio book. Next time I might stick with a paper copy.

Regardless, I will highly recommend this book as worthy of great perseverance. My experience of the first dozen chapters is shaded by years of reading the opinions, experiences, philosophy and calculations of Bogleheads. I reached a turning point, learned something new and exciting, and by the end was utterly delighted by the clarity and determination of Bogle's ethical underpinnings. The nuggets of wisdom and clarity throughout culminate in a straightforward commentary on leadership, humanity and philosophy. 

After 3 hours of listening, I was convinced that the focus of the book is the investor's inability to predict the market, with the associated importance of long-term investment. Bogle includes example after example to hammer these points home.

Transitioning via the Talmud's recommendation to "...always keep... wealth in three forms: one third in real estate, another in merchandise, and the remainder in liquid assets," Bogle addresses asset allocation. He first argues that investment policy is the key factor in explaining variation among investment portfolios (research: pension funds, variation over quarters). However, costs and fees significantly affect the investor's long-term yields. "Investors owning all stocks in a given market will achieve the market's gross return before the deduction of the costs of investing." Once those costs are deducted, proceeds lag behind the gross return.

Much of the book reads as an argument for indexing, minimization of costs and thoughtful consideration of the balance between risk and return with the key caveat that increased risk does not actually produce consistently greater return. After a thorough review of bonds and almost 9 hours of listening, I gave up on the audio book. Those 21 hours were damming my flow of books and hindering both my reading and study time.

In the midst of the comparisons of returns, analysis of academic studies, and demonstrations of the "tyranny" of fees, Bogle describes target date retirement funds as "funds of funds", which are apparently generally less risk-averse than most rule-of-thumb investors. This is new and interesting, and I will have to look at the target date fund options that I have used (and mainly discarded) in the past. They seemed like they should be a good idea, yet were somewhat complex and opaque compared to sector-focused index funds.

Despite my overall frustration with the length of the book, which continued to blockade reading list progress, I was happy to see that Bogle addressed portfolio size. Within this section, he pithily inserts highly generalizable wisdom:

(1) short-term strategies are more costly to implement than long-term strategies; (2) momentum trades are more costly than trades based on fundamentals; (3) information-sensitive trades (based on purported market knowledge) are more costly than informationless trades (i.e., index fund transactions); and (4) aggressive trades made with speedy execution as the goal are more costly than opportunistic (contrarian) trades. 

Chapter 13 was particularly high-yield. This chapter reviews the effect of taxes on investment yields. I had not realized that tax-efficient, long-term funds exist. This chapter is worth reviewing and researching.

To close the book, Bogle focuses on personal experience. He describes the inception and trajectory of his career and of Vanguard. I do note his admission that he founded Vanguard in the midst of one depression and recognizes growth commensurate with the market. He delves into his perspective on leadership, arguing the importance of readiness, foresight, purpose, passion, service, failure, persistence, patience and courage. From Chapter 21:
"I too have come to regard passion, the fourth trait that I cite, as one of the central characteristics of leadership. A flamboyant display of passion is hardly necessary; a quiet passion that brooks no doubt about its intensity is equally adequate, perhaps even better."

Bogle's final chapters on humanity and on the effects of good governance are frankly inspirational and highly rewarding. The book is worth reading just to be able to appreciate these chapters in context, and then probably worth rereading with these chapters as background. It will be a while before I read it again, but this book may end up in paper on my wooden shelves so I have the opportunity. 

Lykke Needles: The Smooth Wood... and cosmetics and longevity

Finally, it's time to upload some more Lykke Driftwood pictures! I have a US#7 straight needle, which I haven't been using much, and a US #5 short 16" circular needle that I have been keeping busy.

These feel a touch slicker and harder to me than the Knitter's Pride wooden needles. By comparison, KP feels almost grippy. I think the Driftwood are slightly blunter than KP, though the tip taper is almost the same length. The Driftwood are made of resin-infused birch, sourced in the USA, manufactured and packaged in India. The joins do not swivel. The join is my favorite part of the Driftwood, largely because it is so smooth. It may not be fair to compare my fixed circular Driftwood to an interchangeable KP, but I've found myself preferring the Driftwood, in part because of that smooth join. Admittedly, I knit very tightly when knitting English. Most of the projects below were knit Continental.

Here's what I've been knitting with the Driftwood:
The superwash fingering weight swatch using Western Sky Knits' Aspen Sock yarn. We know I like this one, and that it knits smoothly.
Dish cotton, an experience I do not intend to repeat.
Brown sheep moth proofed wool, an easy knit. Perhaps the ultimate conclusion of my experiments is that the Driftwood pairs perfectly with wool and similar fibers. This was one of my few knits with straight needles, and I liked them. I just don't knit much with straights.


Cascade 220 superwash, in the round, for a Real Hat. The reddish needle in the first shot is a US 5 (same size) Knitter's Pride for tip comparison.
This was overall a satisfactory experience. I love the fluid join, especially when knitting with a needle that is too small. The tight stitches would otherwise have caught and tortured me, but the join let me get away with abusing the yarn with a too-small needle. Still, the needle almost split the yarn several times. I think this is my fault for knitting Cascade 220 with a US 5, though my experience with my larger Colonial needles was far less pleasant in general. The needle is simply too small, and I found the stitches too tight... even for me. It just didn't match the yarn's desired gauge. This project did finally convince me of the utility of short circular needles, though. When I received this needle, I didn't know how on earth I was going to use it, but after knitting several hats on short circs, I may never go back to magic loop with the stiff cables of larger needles.

 A linen/hemp circular wash rag, or washandje. This was pleasant to knit, though the needle felt almost too slick. I cast on too many stitches and ultimately frogged it.
Lastly, this was a wonderful and quick knit. This is a new yarn from a Canadian company called Sugarbush, and I absolutely love it. I also love it on these needles. This was a cabled headband. The yarn and needles matched perfectly, with just the right slip, just the right tip and just the right drag to keep the yarn from flying off the needles. I may have marched back to my LYS to show this off and bought enough yarn for a black headband, purple cap, and purple cowl. Just maybe.

A couple comments on my original blog post describe breaks in the interchangeable cables. There was one similar comment on Ravelry, which may or may not have been posted by the author of one of my comments. I don't know. The company directed those posters to the return/quality control section of the website, so at least they seem to be replacing problematic sets. Otherwise, I don't know what to make of these scattered reports. Are they a minor setback? Chiaogoo intermittently replaces needles for breaks and cable issues, and they've sold enough needles to be reasonably certain that these are infrequent events.

Unfortunately, I should detour back to the Flight needles. I have personally confirmed the cosmetic cause for the recall of the aluminum (Flight) needles. The black anodized coating, which I do rather like, scrapes off. I didn't expect it to happen to me because I don't hear much clicking when I knit. However, the progressive scraping has bared the tips of my needles. It doesn't seem to affect their function. I've progressively knit faster with these needles, and I suspect that this increase in speed has increased clicking and increased scraping. Hopefully the new and improved Flight will still be beautiful with their new sheen, whatever it may be.

For now, when I have the option, I choose my little circular Driftwood needles over my Knitters Pride interchangeable equivalent, both because of the point, the slightly harder and slicker feel to the needle, and that wonderful join. If the Driftwood have no consistent major quality issues in a few months, I may buy an interchangeable set. My LYS owner just told me that Lykke is releasing a set of 3.5in tips for the interchangeable needles, and if I can test drive them, that may be my compromise. Otherwise... well, I might have to sell the Knitter's Pride interchangeables, which would make me feel a little silly.

That was very long. And very chatty. I would still love to hear comments and experiences with the Lykke, especially as I continue to knit with mine while considering a large set purchase. It took about 3 years for me to decide to buy a KP set, so I have some time to ponder!

Rest, by Alex Pang

This is another library find, courtesy of the staff selections area. Rest will not live on my bookshelf right now, but I certainly may pull it off the library shelves in a year or two to re-read it.

Alex Pang describes the importance of leisure, dedicated hobbies, sabbaticals, and independent creativity that he calls "deep play" to excellence. He uses a mix of examples and studies, varying his approach to maintain variety across the book. This is an easy book to read and holds lessons that American culture often seems to have forgotten.

Lykke Needles Update (1)

In November, I wrote a review of the new Lykke needles. I really liked them, though I will admit a personal preference for the aluminum Flight needles over the birch Driftwood needles. It's hard not to focus on the needle that I now want to use to knit every. future. dishcloth. ever.

However, I may have scribed the Driftwood needles a short shrift. Some beta testers found a cosmetic flaw in the initial/beta release of the aluminum Flight needles, so they have been sent back to the factory. This unfortunately means that my review is far less helpful than I would like it to be.

I've been knitting with the Driftwood needles to fill in the gaps. I do actually like them quite a bit. They are very smooth and very easy to knit with. So coming soon, a dedicated Driftwood review.