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.

The Millionaire Next Door

This easy-to-read book is the first reading assignment in William Bernstein's If you can: How millennials can get rich slowly. Of note, the latter book is currently free on Kindle, though not expensive in paperback.

The Millionaire Next Door offers a behavioral commentary on the habits of millionaire's based on the authors' research. It is highly anectodal by necessity, as the research seems to have involved retrospective interviews with millionaires. Stanley and Dankos divide earners into Prodigious Accumulators of Wealth (PAW) and the other people (UAW, or Under Accumulator of Wealth). Throughout the book, they compare and contrast the behaviors and stories of these two groups.

The essential message, to consume far less than you earn and make value-based purchases in order to accumulate vs expend money, is not surprising to those who read consumer or behavioral finance even intermittently. The book's anecdotal style delivers deeper impact than a simple summary conveys. The authors delve into the education and training of their subjects, and I appreciated this deeper approach to the psychology of millionaires.

Just before the end of the book, the authors dive into business and occupations of self-employed millionaires. These are, likely, the true merchant class of our country. Their risk is insightfully addressed:

What is risk? Having a single source of income.

Actually, there is considerable financial risk in being a business owner. But business owners have a set of beliefs that helps them reduce their risk or at least their perceived risk:...

• Risk is working for a ruthless employer.

This book will not provide specific investing recommendations. It does address underlying behavioral tendencies that allow the investor to build capital to invest.

Lykke Needle Review

To Be Updated:
Update Part 1/Introduction

The folks at Knitting Fever kindly sent me a few Lykke needles to review. Lykke's moniker borrows from Norwegian, and means "happiness". It's an apt name.

The Lykke Flight needles are made of aluminum. They do not contain nickel. The Driftwood needles are birch. They arrived in contrasted packaging: the black Flight needles against a light tan background, the grayish Driftwood against a black background. Aren't the packaging/design elements great?  As shown in the picture above, I have two 10" straight needles (both US 7), one short Driftwood circular (US 5) and one 24" Flight circular (US 6). The straight needles reveal another spot of contrast, as the Flight have bright silver ends while the Driftwood have black ends. Each needle has its size printed on it, on the side of the circular needles and at the head of the straights.
Can you see the sizes on the circ's?

They look and feel very well made. The Driftwood 10" straights are very light. The 10" Flights were surprisingly heavy, and I would describe them as having a good heft without feeling heavy while knitting. For comparison, they feel heavier than my Knitter's pride 10" US 3 needles and lighter than the corresponding US 10 needles.

The tips are slightly shorter, and I think slightly blunter, than my beloved Chiaogoos. They are barely shorter than the Knitter's Pride needles, and slightly longer and pointier than my Clover/Takumi needles.
Left to right: US 5, US 6, US 7; A = Addi, Cl = Clover, Ch = Chiaogoo, KP = Knitter's Pride, L = Lykke

For some inexplicable reason, I started my Lykke trial with the yarn I hate most: dishcloth cotton. The aluminum Flight work perfectly for dishcloth cotton, and I have a new favorite cotton needle. They slide so easily that I found myself knitting faster without feeling that tight tension that I usually have to fight when using Chiaogoo for the same task. The Driftwood felt like knitting dishcloth cotton with wooden needles, i.e., awful, so I switched back to the Flight to finish the cloth.

I was a little concerned that the tips might not be quite pointy enough for lace, so I grabbed my herringbone swatch and slipped the Driftwood US 5 into my stitches. The yarn is a fingering weight 75% merino/25% nylon from Western Sky Knits. The Lykke knit my K2TBL and P2T stitches smoothly, and the tip slipped into the pairs of stitches ever so sweetly. I'm not going to be convinced that these are perfect for all lace until I try them, but that smooth glide has me wondering whether I will like these more than my pairs of Knitters Pride.

For the last batch of tests, I dug into my stash for a ball of worsted Brown Sheep Nature Spun yarn. The mothproofing makes the yarn feel a little tackier than most of my other wools, especially the slick superwash, and I wanted to see what it would do on the needles. I was happy with the Flight US 6 circulars. Again, they knit easily and steadily without dropping or splitting stitches. I intentionally cast on enough stitches to force the yarn to glide over the join, and that too is smooth. Finally, because I do like wool on wood, I transferred the swatch to the Driftwood #7. The Driftwood was perfect with the wool.

Importantly, the joins and cable are excellent. The cable doesn't seem to want to twist, bend, shimmy or tangle. It just is. The join doesn't snag or drag. For comparison, the cables are not as loose or flexible as Addi cables but not nearly as stiff as the Chiaogoo. I think they are a little firmer than Knitter's Pride cables, and probably most comparable to the Knitter's Pride cables.

It's hard to see the join - black on black - but it is smooth!















The cable keeps its own gentle loop. I didn't sit on it to straighten it (yet).













If there is a downside to these needles, it's probably the slightly blunter tips in the context of knitting complex lace. Ok, and the availability. Hopefully that will improve once both sets have started shipping.

Overall, I think these are really solid contenders for favorite needles. I may not be emotionally ready to admit that anything could beat Chiaogoos (except on dishcloth cotton!), but the Flight deserves to compete. I would be happy to recommend them to either a beginner or an experienced knitter. I am hoping to buy an interchangeable set of the Flight (sizes 2-15, pricing seems to run $99-109), and was disappointed to hear that they won't be shipping till after the holidays. My LYS does have a full set of the interchangeable Driftwood (pricing closer to $125-130, I think), so one of my knitting friends was happily knitting along with her new Driftwood needle last knit night. The circular cables are excellent, and the interchangeable joins are very smooth. In fact, as much as I enjoyed knitting with these, I think the cables and joins are the most dramatic technical advantage of these needles. They don't drag. They don't catch. They knit, smoothly and quickly. I Lykke them.

Have you tried them? What do you think? Do you have additional questions that I might be able to answer? Leave a comment if so!