Key InSights: Too few investors have an active tax strategy The efficiency or a potential write off should not be the reason you own or sell an investment Managing federal and state income taxes is a year-long process Taxes are a permanent erosion of wealth Using the right investment and the appropriate accounts can help keep more of your money invested Certain strategies and accounts can support the causes you care about, transfer more money to your family, all while paying less in taxes Most tax strategies require little or no investment, and even the complex long term strategies can be developed and enshrined with little costs  We work with clients and prospects who will happily spend untold hours researching stocks, bonds, and funds for the highest possible return on investment. They will bookmark and read articles about new funds, strategies, and investment opportunities. They watch investment shows, the news, and will ask friends for help and advice. In the past, we have addressed the importance of acknowledging the difference between accretive and erosive debt, and likewise, we think it’s important to discuss the difference between active and passive tax strategies.  The vast majority of investors can be serviced better by addressing the most logical source of manageable loss in a portfolio: tax efficiency. We love picking the right investments in a portfolio – but even the best funds and stocks outperform irregularly. However, a regular source of loss in a portfolio and one of the most avoidable is in the tax ecosystem investors build for themselves both inside and outside of a portfolio. This is the difference between a passive tax strategy and an active tax strategy.  Investing with tax-efficiency in mind doesn’t have to be complicated but it does take some planning. While taxes should never be the primary driver of an investment strategy, tax awareness and some tax infrastructure does have the potential to improve after-tax returns for most investors.  Passive Tax Strategy Most investors and seemingly all of the do-it-yourself investors are part of the passive tax group. These are investors who will trade in and out of stocks of funds through the year, and come February and March of the following year, will likely need to write a check (or get their refund reduced) as a result of this methodology. Taking a year-end inventory of your investments and income will likely result in a double-digit taxation loss that might otherwise have been avoidable. Additionally, several of the best and easiest ways to mitigate taxes can only be established before the taxable event has happened. Many of the passive tax strategies investors implement begin with managing a gain or loss when ideally they should begin months before so that all options can be weighed. Without knowing some of these tax-efficient strategies, investors have theoretically chosen to put blinders on and stick to their plan, or worse off, change it when it’s too late. Additionally, investors sometimes miss impactful tax law changes that tend to occur every couple of years.  The harsh reality is that this method of tax planning over 30 years costs a person with a Bachelors’s Degree level of income about $226,000 in avoidable taxation over the course of their earning years. That sum mitigated differently and invested routinely can be worth over a million dollars in retirement or passed down to an heir or charity. For many that million-dollar difference is the difference between fully supporting their investment and legacy goals and being forced to sacrifice some part of their plan.  There are several lever and investment manager can pull to try to manage federal and income taxes: selecting investment products, timing of buy and sell decisions, choosing accounts, taking advantage of realized losses, and specific strategies such as charitable giving can all be pulled together into a cohesive approach that can help you manage, defer, and reduce taxes. Of course, investment decisions should be driven primarily by your goals, financial situation, timeline, and risk tolerance. But as part of that framework, factoring in federal and state income taxes may help you build wealth faster. Active Tax Strategy Investors have a variety of levers at their disposal they can use to transform their income and or investment tax strategy: selecting investment products, the timing of buys/sells, account types, tax harvesting, and specific strategies such as charitable giving can all be pulled together into a cohesive approach that can help you manage, defer, and reduce taxes. We have addressed many of those ideas below.  But as I stated above, taxes shouldn’t be the driver for your investment decisions.  Those should be determined by your goals, financial situation, timeline, and risk tolerance. But as a complement to that framework, factoring in an active tax strategy for income and taxes may help you build wealth faster and in most cases, make you better prepared for life after work. Tax budgeting: Part of a tax and financial plan involves knowing what the acceptable range for paying taxes is as part of the long-term equation. Generating income for the most part will result in taxation. But the difference between knowing a strategy for income and an investment that will generate a 38% tax liability or a 15% liability can save investors tens of thousands of dollars in a given year.  Tax losses and loss carryforwards: Many investors are aware that a loss on the sale of security should be used to offset any realized investment gains. Fewer know that up to $3,000 in taxable losses can be used to offset ordinary income annually. In some cases, if your realized losses exceed the limits for deductions in the year they occur, the tax losses can be “carried forward” to offset future realized income. All gains and losses are “on paper” only until you sell the investment. Tax-loss harvesting: This strategy involves taking advantage of losses as part of the rebalancing process. Deliberate capturing of losses can provide tax relief when investors have positions that have unrealized gains that

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