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Kevin Taylor

Let Bitcoin Fail

Let Bitcoin Fail Before it becomes, too big to fail also. The Federal Reserve and Treasury need to establish a better policy regarding their role and behavior when Bitcoin fails. Continued ‘bailout’ for speculative players in the market has a critical and damning effect on the rest of us. Taxpayers have already lived through the negative economic and social impacts of watching banks and speculators who took on unjustified risks get reimbursed for their recklessness once this century. Watching banks stash and store cryptocurrencies under the same speculative bubble is foreboding. The U.S. simply cannot afford to bail out speculators who have driven the market of Bitcoin past $1T with no concern for uninsured assets. It is already bad enough that U.S. financial regulators have proven to be ill-equipped to enforce current AML and BSA policies in the wake of crypto adoptions. Financial institutions’ exposure to the crypto-asset industry is affecting their bank’s anti-money laundering compliance and oversight and several years’ worth of infractions are piling up at some of the nation’s biggest banks. Additionally, several of the ‘online’ banks that are continuing to offer crypto-trading as part of their expanded services are doing so without the proper due diligence and vetting of their counterparties. Market regulators aren’t watching closely to see how financial institutions’ exposure to the crypto-asset industry is affecting their banks’ anti-money laundering and compliance. As the broader public becomes more interested in crypto assets, some bank customers are seeking ways to fund crypto trading. In this environment, banks need to assess how these activities are isolated from their current operations and be prepared to mitigate illicit finance risks emanating from these new assets. Additionally, the Fed and FDIC allowing high-risk speculative assets to be connected to U.S. currency is as irresponsible as the housing crisis demonstrated; and these Federal authorities need to make more clear that they will let this speculation fail or rise under its own power and that using taxpayers institutions to protect this asset is not in our best interest and a lesson in moral hazard that should eventually be learned. Suspend FDIC insurance for all banks that continue to mask their crypto-speculation with support and protection of the Fed and the FDIC Now.  Contagion is Spreading As major U.S. Banks are getting swept up into the asset bubble they are taking our oversight and insurance institutions with them. In February the U.S. Office of the Comptroller of the Currency (OCC) issued a cease and desist order to New York-based Safra Bank. In the order, the OCC cited that “the bank gave accounts to money service businesses (MSBs) that facilitated crypto-asset trading” but that the bank did not “address the increased Bank Secrecy Act and Anti-Money Laundering (BSA/AML) risks associated with these accounts.” While the OCC has caught this bank, the ecosystem of back offering these ‘crypto trading accounts’ is outpacing the oversight of the banks and regulators. Simply put – the market is growing beyond our ability to control, and U.S. banks supported by the Federal Reserve are connected to this exposure.   In the Safra Bank case, the bank allegedly did not have sufficient transaction monitoring systems in place in the onboarding process to confirm these new “digital asset customers” were legitimate and this caused its volume of domestic and international wires and ACH transfers to spike.  Unfortunately, the OCC has yet to specify the crypto-asset-focused companies involved with Safra’s breach of the KYC ecosystem.  Though the San Francisco Open Exchange (SFOX), has allowed SFOX traders to maintain FDIC-insured cash accounts at the bank. This is general incompetence and complacency that is allowing the crypto asset bubble to contaminate the federally insured accounts at other banks. Liquidity is Drying Up The world’s largest cryptocurrency, bitcoin sits just below $60,000 today, as the total market cap of BTC is above $1.1 trillion. Despite the recent price jump, there is a major concern BTC holders and even non-speculators should be aware of. That is the liquidity of Bitcoin. JP Morgan’s strategist Nikolaos Panigirtzoglou writes “the market liquidity in Bitcoin is significantly lower than S&P 500 and gold.” Panigirtzoglou adds that “even a small change in Bitcoin flows can have a large impact on the price of BTC.” The liquidity issue is driving up the speculative costs of bitcoin but should be a major concern for those that purport the BTC is some kind of store of capital. Low liquidity will have a negative impact on the rash of new Bitcoin lending schemes that are proliferating in the market. Several new companies are offering interest on bitcoin deposits made possible by lending out those coins to speculative investors. As the underlying price of bitcoin rises out of control the borrowers become less and less likely to return the borrowed coin (almost an impossible default rate to handicap). These defaults, coupled with the lack of liquidity, will make it almost impossible for borrowers to cover. If this ‘bank run’ scenario were to play out in cash the Fed can step in to increase liquidity and control interest rates, and the FDIC can insure the lenders against defaults and make them whole. There is no such protection for Bitcoin lenders.   Low Reputation Counter Parties The crypto market has still yet to solve its illegal and illicit underbelly. While widespread adoption is making for more legitimate transactions, it is similarly eroding the capacity of regulators and compliance officers to confirm they are not transacting with corrupting counterparties. While making the ecosystem ‘bigger’ lowers the percentage of bad actors, it also increases their space to hide among legitimate actors. Criminals who keep their funds in cryptocurrency tend to launder funds through a small cluster of online services that exist outside of regulator authority. Essentially saying, banks and speculators are doing business with criminals (if done in dollars is criminal also) but because it’s done in crypto it is willfully existing outside the law. Services like high-risk (low-reputation) crypto-exchange portals, online gambling platforms, cryptocurrency mixing services, and financial services

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Articles
Kevin Taylor

What to know about investments in Multifamily investments

Investing in multifamily properties, which are buildings with multiple residential units, can be a profitable investment opportunity for those looking to enter the real estate market. However, like any investment, it comes with its share of benefits and drawbacks. Benefits of owning Multifamily investment properties: Steady income stream: Multifamily properties can provide a steady income stream through rental income from tenants who occupy the units. Diversification: Investing in multiple residential units provides diversification compared to investing in a single-family home. Scalability: Investors can scale their investments by acquiring additional multifamily properties, increasing their potential for income and growth. Tax benefits: Investors may be able to take advantage of tax deductions and depreciation benefits. Drawbacks of owning Multifamily investment properties: Property management: Managing multifamily properties can be time-consuming and may require additional investment in property management services. Tenant turnover: High tenant turnover can impact occupancy rates and rental income. Maintenance costs: Multifamily properties require ongoing maintenance and repairs, which can be costly. Market conditions: Market conditions, including economic downturns and changes in tenant preferences, can impact the value and potential for rental income. The most lucrative benefit of investing in multifamily properties is the potential for a steady income stream and diversification. The cap rate, or the ratio of net operating income to property value, should be evaluated to ensure a good return on investment. Generally, a higher cap rate indicates a better return on investment, but this can vary depending on the location and condition of the property. There is a moderate level of risk involved in investing in multifamily properties. Property management, tenant turnover, maintenance costs, and market conditions are all factors that can impact the value and potential for rental income. People typically invest in a variety of multifamily properties, including apartment buildings, townhouses, and condominiums. The specific type of multifamily property depends on the investor’s goals and market conditions. Investments in multifamily properties can provide a steady income stream and diversification for investors. However, careful evaluation of the property and market conditions is necessary to minimize risk and maximize returns.

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Mental Health
Articles
Kevin Taylor

Money Stress and the Impact on Your Health

No one likes stress. Its impact on our decisions and relationships is bad, but the effect on our health can be permanent. We have all felt the effect of money stress, but often it’s only after the fact, or after the nearness of the stress has passed that we recognize the totality of its impact on our finances and our health. Stress related to financial issues can be especially toxic. Taboos surrounding discussing both finances and mental health can make the subject particularly covert. Some signs that financial stress may be having a negative effect on your wellness: Delayed healthcare As budgets get stretched, people who are already under financial pressure begin to cut corners. One of the first and possibly most harmful is sacrificing healthcare services. According to Gallup’s annual Health and Healthcare poll, 29% of American adults held off seeking medical care in 2018 because of cost. That’s right, 3 in 10 people went without medical care for fear of the cost. This is not only heart breaking, it is quite possibly fraught with more costly long term consequences. Delaying medical care can actually lead to worse health outcomes and higher costs, both of which can lead to more stress. This reactionary posture to both money and health can snowball quickly.  Poor mental health Mental health and financial wellness are very correlated. Health is cyclical—poor financial wellness often leads to poor mental health. For years, studies have shown that people in debt have higher rates of mental health issues like depression and anxiety than those who are debt-free. They demonstrate higher cortisol levels, poor sleep habits, and generally lower quality of life.  Poor physical health Ongoing stress about money has been linked to heart conditions, dietary ailments, diabetes, sleep problems, alcohol and drug dependence, and more. Without proper treatment for both the physical and financial damages, these conditions can lead to life-threatening and long term illnesses, which can plunge you even further into debt. Unhealthy coping behaviors Financial stress can cause you to engage in a variety of unhealthy behaviors and jeopardize your relationships with people. People suffering from financial stress report higher rates of stress eating, domestic violence, self harm, and alcohol and drug misuse. If you’re experiencing any of these warning signs it’s in your best interest to seek professional help in order to find more productive coping responses. Although easy to coach to, asking for help is a great first step.  At InSight, we guide our clients through stressful situations and decisions because being validated with a difficult choice can provide clarity rather than our clients feeling a sense of doubt or fear on whether or not they made the right decision.

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