Tales & Trails of a Traveling Wiseguy

You know your relationship with someone is bad when you find yourself doing the math to answer the question, How much longer until I can quit these clowns? In this case the clowns are my mortgage company, and "quit" means pay off my mortgage so I can be done with them.

I've noted before that I don't like my current mortgage company. My loan has been sold a few times, starting from the originator, whom I genuinely liked. Then it was sold from Originating Lender A to New Bank B. Bank B worked fine when everything could be automated but was a pain in the neck to deal with every single time the computers kicked out an exception that required human intervention. Now Scumbag Debt Collector C— yes, my new mortgage servicer is a scummy debt collector— pisses me off with every single communication they send me because, well, they're a debt collector. All their processes as they try to move into mortgage servicing still read like they're a debt collector, treating me like a deadbeat borrower who's fallen behind on payments.

The answer, BTW, is 6½ years. In another 6.5 years of steady monthly payments I'll have this loan paid off.

Could I be done with these clowns sooner? Oh hell yes! I could increase my monthly payments to retire the debt sooner. Hell, I could just write a check to pay off the balance. The whole balance. It's not that big anymore. I've been paying down the mortgage for 20+ years and have never taken cash out on refinancing.

Of course, just because the balance "is not that big" doesn't mean I have that kind of cash sitting around. I'd have sell a few things from my investment portfolio to pay it off. But the thing is, investments are investments. They earn money. And the cost of this mortgage— the financial cost— is small. I have a rate below 2.5%! It's financially a loss to sell assets that return way better than 2.5% APY to pay off a loan that costs less than 2.5% APR.

What would change that calculation? One thing is if the emotional cost of keeping the loan with these clowns becomes too expensive. The first time these clowns screw up in a way that's more than just passively irritating, I may just pay them off and be done with them.

"So, I see Southwest is changing to assigned seats," many relatives and friends of my inlaws' family prompted me during our Thanksgiving visit.

It may seem an odd conversation starter to you, but it makes sense to me as many of these folks know me as the one in the family who's always flying somewhere. And when they inquired how we got to Harrisburg, PA from San Francisco and I mentioned flying Southwest to BWI— where there's a nonstop to/from OAK several days a week!— they free-associated the one thing they've heard recently about Southwest.

Yes, it's true. Southwest is moving to assigned seating. It's a change from Southwest's "Open Seating" policy that no seats are assigned and passengers are free to choose any seat once they board. Open Seating has been their policy, and even part of their brand identity, for their entire 57 year history, making Southwest unique in the industry.

"Why'd they finally change that?" folks asked next. Or sometimes they'd put a sharper point on it: "What took them so long to standardize with the rest of the industry?"

With that I'd point out that the change to assigned seats is not about assigned seats, per se. It's about increasing revenues. I.e., getting passengers to pay more. And the way all the other airlines have gotten passengers to pay more over the past 20 years has been to introduce ancillary fees.

Ancillary Fees

What are "ancillary fees"? They're all those nuisance fees that airline passengers say they hate. Fees for checked bags, fees for getting a marginally better seat, fees for even choosing a seat at booking, fees for boarding with an earlier boarding group, even fees for asking an agent at check-in to print your boarding pass instead of doing it yourself.

Passengers say they hate being nickeled-and-dimed with fees, so airlines were cautious about introducing them 20 years ago. The industry quickly found that all passengers really cared about was the cheapest upfront ticket price, add-on fees later be damned. Plus, when all airlines were charging fees, there wasn't an alternative. ...Except that, all this time, Southwest has avoided most of those fees. It became one of their big selling points.

So, Southwest was virtually alone in charging way fewer fees to customers. Customers, smart customers, might look at that as, "Hey, that's a benefit!" A lot of investors take the opposite viewpoint. To them it's, "You proud fools are failing to siphon as much money as possible out of customers' pockets!"

That's where the pressure to change has come from: from investors. An activist investor has gotten involved, campaigning against the status quo among Southwest Airlines' board of directors. He's been lobbying them to pressure the airline execs to change the policies. But not because assigned seats are "better" or because they're "standard", but to make more money. To make more money by being able to charge passengers more fees.

A Complex Change

Charging people for better seats is one of the most obvious forms of ancillary revenue. To charge for better seats, though, Southwest has to switch to assigning them. Otherwise why pay? The people who board first would just take the better seats for free. So this whole change in long-standing policy and operations, is to support the charging of a new fee.

And it's a major change. Not only will Southwest have to change its data systems to manage seat assignment— a whole new dimension of operations that they never had to in their entire history—but they'll have to refit all their aircraft with the better seats they'll charge more for. No, "better seats" will not be first class. They'll just be ordinary seats with a few inches more legroom, like United Airlines' Economy Plus and American Airlines' Main Cabin Extra. But still, that's a lot of work. Refitting their entire fleet will take time, which means— among many other substantial challenges and risks— there will be a period of probably months when passengers are invited to pay extra money for choice seats but then find they're boarded onto an aircraft that doesn't have premium seats. Oops! 🤬

Bags Still Fly Free

At least one other passenger-friendly policy at Southwest is not changing: Bags Fly Free. Every passenger continues to be able to check 2 ordinary sized bags without charge. Southwest frequent flyers held their breath for a few months once that activist investor started clamoring for more fees, worried that Bag Fly Free might be first benefit to go. It would be a vastly simpler change for the airline to make than refitting all its aircraft and rewriting all its software to manage seat assignments for the first time in 57 years. But Bags Fly Free is still there. For now.

Over the past several years I've made a habit of using New Year's as a time to reflect on, and take stock of, the year just finished. Ideally I would've shared my reflections on 2023 three weeks ago, at the turn of the new year. I've left this idling because it's been a challenge figuring out how to frame it. The challenge has been that my gut reaction to the question, "What was 2023 like?" has been basically Ugh, but when I start to consider specifics to substantiate that overall feeling of disgust, the facts don't support the negativity.

Why, then, the sense of malaise about 2023? That's the million dollar question, as "malaise" describes how many people felt, broadly, throughout the year. So many things, objectively, were good; yet there was such anxiety or over-emphasis on the negatives that it drove widespread overall pessimism.

Given this schism about whether 2023 was a good year or bad, I'm going to title it 2023: The Year That Was.

Travel & Experiences: Positive

As I break it down to understand what was good or bad about 2023, one aspect of 2023 that I should be feeling warm about is travel and experiences. 2023 was a strong year for going places and having fun, especially after the crimp that Coronavirus put on such things in 2020 through parts of 2021 and 2022. The joys seem too quickly fleeting so I remind myself:

• How we traveled so much in April and May I felt like I wasn't working anymore. We had not one but two really fun long weekends at waterpark resorts in Phoenix; a great trip of several days in New Orleans and Mississippi; and a most-expenses paid trip to Cayman Islands. Oh, and a few other trips, too, in the span of 9 weeks.


• We did two fantastic week-long trips, including a long-awaited trip to Australia at the end of December.


• We took lots of shorter trips (2-3 days) that were still packed with activity, like that day we hiked 7 or 8 waterfalls in one day. Wait, which day was that; there were two such days!

Friends & Family: Negative

2023 was a year of seeing my count of family and friends dwindle. One I lost to cancer. I've written extensively about that over the past year so I won't belabor it here.

A few friends I lost because I fired them from the position of being my friend. It wasn't easy, and they (predictably) blamed me 100% for having to do it, but I decided it was necessary. When people carry on like complete jackasses, when they lie and distort, and when they attack me when I challenge them on their plain untruths, and when all the above is not just a misunderstanding or them having a bad day but is their true character, I don't wish to associate with them anymore. I will not stay silent for the purposes of "keeping the peace". There's nothing worth keeping.

So, I was down a few friends in 2023. On the other side of the ledger, I didn't really make any new friends. Maybe in another 20 years after real friends keep dying I'll wish for lying, offensive jackasses who'll talk to me as long as I don't call out their bullshit.

Finances: Positive (though everyone feels negative)

Money. If there's one aspect of life that's the poster child for malaise in 2023 it's money. By and large people spent the whole year worried about money. For most of the year nearly everybody was predicting an imminent recession. That's a big part of the malaise: people's anticipation of bad times to come was far worse than reality.

That's not to say 2023 was a banner year. It wasn't. There was strong growth in the top few companies in the stock market— the "Magnificent Seven" of Amazon, Apple, Facebook, Google, Microsoft, Netflix, and Nvidia— but the broader market spent most of the year struggling just to stay even. As recently as mid-November the rest of the market was slightly in the red for the year. A December rally brought things up into the black for 2023. Overall my portfolio finished up almost 15% (net of new cash added) for the year.

Why money matters: I watch my portfolio carefully because I aim to retire soon. With no pension (companies had largely done away with those by the time I entered the professional workforce) and not being close to 65 yet (or even 62) it's totally self funded. Even once I'm 65 I'll want plenty of self funding since the social safety net in the US is so spotty.

Career: Mostly Negative

I enjoyed a bit of job recognition early in the year when I won nomination to president's club at my company. That provided a fun vacation to the Caribbean but alas not the stepping stone in my career I was looking for. I.e., I've been angling for a substantial increase in job title, to recognize the level of skill and capability I demonstrate, but that didn't come. And with new managers in my department since then I've now actually fallen backward a few steps as the new managers expect me to start over at square one in proving myself.

New management is also frustrating in other ways. I won't elaborate specifics here as I'm keeping this blog open, but let's just say multiple signs are telling me it's past time to leave. That's sad because I've been with this company for over 6 years and have had some good times and done some great work here.

The notion of it being time to find a new job is complicated by the fact I'm looking to retire soon. I really don't want to start a new job just to work it for a short period of time. When I decide I'm done here, am I done-done? As in ready to retire? I've been holding on in this deteriorating job for a few years now, telling myself I'm on a glide path. I've swallowed my frustration at numerous things for a few years, telling myself I've just got to keep gliding a little longer. How much longer now? I'd like to say this is the final year but I'm not sure. Meanwhile the frustrations mount.

I saw an interesting article about saving money the other day. "A couple who retired early with $4.3 million says the FIRE lifestyle is wearing thin: ‘We don't want to just keep throwing money on the pile and keep being cheap.’" The story has been picked up by a number of news outlets. Here's a Yahoo! article link (25 Jun 2023) because it's the least likely to disappear behind a paywall. The story tells of a couple, Mindy and Carl, who are multi-millionaires but spend too much time and emotional energy agonizing over small purchases. Their habit of extreme frugality has made it hard for them to enjoy the fruits of their labor.

Let me offer a definition here for those who are wondering. "FIRE" is Financial Independence/Retire Early. The term was coined in 1992, in the book Your Money or Your Life. The FIRE movement, as it's often called, has gotten closer to the mainstream in recent years as bloggers and influencers have popularized it with younger generations of adults getting an early start on planning ahead for retirement.

The idea of FIRE is simple: you save aggressively, and invest your money wisely, building a portfolio of assets big enough to make you financially independent (FI-), enabling you to quit your job and retire early (-RE). How big is "big enough"? Big enough that the cash flow you earn from your investments basically replaces your need for salaries. And how aggressive is "save aggressively"? Ah, there's the rub.

Typical FIRE success stories tell of couples who worked well-paying professional jobs for as little as 10 years, saved every penny they could, and retired by age 40. Common in these stories is financial self-denial. People take their upper-middle class incomes from jobs as software developers, finance pros, and lawyers and budget themselves like starving grad students. They live in small, plain apartments or houses, even leeching off generous parents if they can to avoid paying for housing, stint on travel and material goods, and eat meals of cheap foodstuffs like rice and beans.

Let me emphasize, people who live in shared housing, or buy cheap groceries and rarely eat out, or own a bicycle instead of a car because they can't afford more are different from FIRE followers. FIRE people typically earn 6 figures, often well into the 6 figures, and save half or more of their pay.

One of my computer-engineer colleagues in the late 1990s was a FIRE adherent. Instead of renting an apartment in pricey Silicon Valley he kept a bedroll under his desk at the office and slept there. He showered at the company gym in an adjoining building and kept a few of his possessions locked in the trunk of his well-used economy car down in the parking garage. "I'm saving an extra $15k a year not paying rent and utilities!" he boasted. Today the figure would be at least double.

Sleeping under your desk and showering at the office to avoid renting an apartment may seem like taking frugality to an extreme, but that's the sort of tradeoff FIRE adherents seriously consider. I've always been a frugal person myself, or at least have always had frugal tendencies— see my example from a few years ago about how long I wore a pair of sandals before spending to replacing them— but to me that's beyond the pale. I decided back in school that as I embarked on a well-paying career I would strike a balance between saving money for the future and enjoying the fruits of my labor in the present.

Silicon Valley Bank has collapsed. "So what?" you might think, "Isn't that just some community bank for liberal techies who care more about whether the lollipops in the lobby are cruelty free and LGBTQIA+ positive than what the interest rate is?"

First, SVB is not a community bank but a commercial bank. That means instead of offering personal checking accounts and home mortgage loans and lollipops, they do banking and loans for businesses. They've focused for their entire 40 year history on helping small Silicon Valley businesses grow big. If you're at a tech startup in Silicon Valley— or in Boston, where they have branches, too— SVB is likely one of your stakeholders.

Second, SVB is actually a fairly big bank even if few people outside the Silicon Valley tech industry have heard of it. At the end of 2022 it had over $200 billion in total assets. It was one of the 20 largest commercial banks in the US. And its failure represents the largest bank failure since 2008. ...Yes, that 2008; the year when multiple big banks failed in the sub-prime lending crisis.

SVB suffered a rapid demise that belies the old saying, "A big ship sinks slowly." SVB collapsed in under 48 hours.

A Classic Run On The Bank

What happened at SVB is a form of the classic run-on-the-bank story.

SVB announced Wednesday afternoon, after market close, that it had had to sell some of its bond holdings at a loss to pay customer withdrawals. To cover that loss the bank would issue over $1B of new stock.

Investors on Thursday were spooked by this news and sold their shares. The bank's stock, ticker symbol SIVB, closed the day down more than 85%.

Depositors were spooked by the sudden risk of failure, too. Many company CFOs moved to withdraw deposits.

Friday morning the bank's stock traded down even further in the market's opening minutes before regulators intervened to shut the bank. It's now in receivership (a form of bankruptcy control) under the Federal Deposit Insurance Corporation (FDIC).

What's My Risk?

I mentioned above that SVB is a commercial bank, not a community bank. I've never had a loan or an account there. Though if I did have an account, my money would be insured up to $250,000 per account by the FDIC. (Yay, government.)

I have worked for companies that bank at SVB. A small company I worked at for 7 years, for example, had most of its money there. Our paychecks, for example, were drawn on that bank. And the company's deposits there were likely, at times, way, way more than $250,000.

I learned in a Slack message this morning from my CEO that my present employer has accounts at SVB. ...Actually he didn't say accounts but "a relationship". It's not specified what that relationship is. The CEO assured us that there won't be problems with payroll. I am feeling alarmed and more than a bit skeptical until more detail is shared.

Update: additional insights in comments below and in a followup article I wrote Mar 13, Treasury Steps in to Prevent Further Bank Runs.

Last week I wrote Coming Out Ahead with a 401(k) providing a simple example of how investing through a tax deferred account such as a 401(k) nets you more money than investing through a taxable account. Two things about that....

• One, it was frankly too simple as it showed an investment that grew only through capital appreciation. Fewer than 20% of individual stocks in the S&P 500 fit that profile and pretty much no mutual funds do. And mutual funds are generally all that's available in employer sponsored 401(k) plans.


• Two, the example showed the 401(k) coming out only 26% ahead after 20 years. 26% is nothing to sneeze at— we're talking 26% mo' money here— but shouldn't much-ballyhooed 401(k)s do even better than that?

It turns out that addressing one concern addresses both.

For Scenario 2, here, I'm going to change one of the assumptions from Scenario 1:

• Instead of investing in stock XYZ, which grows 7% annually and pays no dividend, you invest in mutual fund PQRST, which grows 4% annually in addition to paying a 3% distribution annually.

All other assumptions remain the same.

Note that PQRST and XYZ have the same 7% compound annual growth rate but the way they deliver that growth is different. That difference has tax implications.

The math gets complex as now there's tax due every year in the taxable account (the distributions are taxed in the year they're paid) so I'll illustrate how Scenario 2A-B works with a spreadsheet:



Click/tap the image to enlarge.

Look at the bottom line in the chart. Investing in PQRST through the 401(k) pays almost 42% better than investing in a taxable account. That's a way better advantage than the 26% we saw in Scenario 1.

The contribution limit for 401(k) accounts is increasing for 2023. The government has upped the individual contribution limit a whopping $2,000, from $20,500 to $22,500. The catch-up contribution limit for employees 50+ rises $1k to $7,500. That means for me, as a 50+ person, I get to jam an additional $3k in my account next year.



Yes, I'm maxing out my 401(k) contributions. Yes, I'm fortunate to be able to do that. Not everybody earns enough to save that much. Though frankly it's not just about how much you earn; there's also a choice one makes about how much to save. My partner and I made a choice years ago when our salaries reached a certain point well beyond our current expenses that we would not increase our expenses (say, by buying a larger, expensive house, as so many of our friends did) just because "we could afford it" but instead would save aggressively to afford ourselves a comfortable retirement.

Treasury Bills. Wow, talk about boring topics. This one's like pressing the snooze button on your alarm, right? I used to think so, too, but recently I discovered they're useful right now. As I've noted in recent blogs about buying CDs and Series I savings bonds it's important in this era of high inflation and rising interest rates to find a better place to park cash than in a traditional savings account.

Here are Five Things about Treasury Bills:

1) Treasury Bills (T-Bills) are short duration issues, with maturities ranging from just 4 weeks to 1 year. There are also Treasury Notes and Treasury Bonds, with durations ranging from 2 years to 30 years. Recently I bought a 13-week bill and a 26-week bill.

2) You can buy treasuries at straight from the source (the federal government) at TreasuryDirect.gov. Yes, that's the same place as savings bonds. Yes, the website's still antiquated. Yes, it tends to crash every 6 months when people mob it to buy I-Bonds the last day or two before a rate change. The site has always worked for me, though.

3) T-Bills are sold at a small discount, say $97.80 versus a face price of $100. The government pays you the face price at maturity. The spread between what you paid and what you get is your return on investment. It's taxed as interest. If you pay $97.80 and get $100 six months later you've earned an annual rate of 4.5%. ( (100-97.80) / 97.80 * 2 = 4.5%.) A table of recent Treasury auction prices & rates is at https://www.treasurydirect.gov/auctions/announcements-data-results/.

4) T-Bills play the same role in my savings as CDs. I hold some of my short-term savings in these bills with maturities staggered ("laddered") at monthly intervals over a 6 month period. As I noted before in my blog about CDs, this is not investing, per se; it is cash management. I am finding places to get better, and safe, returns on the the emergency 6-month savings my partner and I set aside.

5) T-Bills actually pay slightly better than CDs, due to tax treatment. That's why I got interested in T-Bills recently. After I bought a few CDs I continued looking at alternatives. I noticed that T-Bills pay about the same nominal rate, roughly 4.5% annualized on a 6-month issue, but are not subject to state tax. I live in California, a high tax state, so getting that tax exemption makes a difference for me. At my marginal tax rate of 9.3%, a 4.5% return on T-Bills is like getting almost 5% on a CD. Given a choice between two safe investments, one that pays 4.5% and one that pays 5%, wouldn't you take the bigger one.

The US Bureau of Labor Statistics today published the much anticipated consumer price index (CPI) for October. Economists' consensus was that it'd come in at 7.9%. That'd be a high rate, though less than June's 9.1%, a 40 year peak, or even last month's 8.2% level. Well, the figure came in slightly less bad than expected: only 7.7%. But Wall Street went wild.



Stocks went on a tear today. The S&P 500 index rose 5.5%. The tech-heavy NASDAQ rose more than 7.3%. Within the technology sector heavy hitter Apple was +7.3%, Amazon +12.2%, NVidia +14.3%.

While traders on Wall Street were living it up, I was out grocery shopping on Main Street. The price of the carton of milk I bought today was 13% higher than just one week ago.

It's not just milk that's getting more expensive. Across the past year I've seen prices on many grocery staples rise by 50% or more.

"Why isn't the inflation number higher, like 50%, then?" you might ask.

It's because the official inflation metric used excludes "volatile" things like food. Riiight, one of the core necessities of life, food, is excluded from the statistics.

Several weeks ago I bought some US Savings Bonds. Yes, the tool my grandparents used for savings is still around! And it's still relevant, too.

Just how old-fashioned are savings bonds? Consider that in the movie Captain America the third act (using a Shakespearean 5-act model) is all about the title character hawking savings bonds in, like, 1943:



Yes, as I bought my bonds I hummed, "I'm the star-spangled man with a plan!" 🤣

What I bought, though, are Series I Savings Bonds, or I-Bonds for short. They're a newer creation, dating to only 1998, that work a bit differently than the classic savings bonds created back in 1935. Here are Five Things about I Bonds:

1) I Bonds pay a variable rate that is indexed to inflation. That's created renewed interest in the them as inflation spikes to high-single-digit rates not seen in 40 years.

2) The rate on I Bonds is set every 6 months, in May and November. Smart investors rush to buy them in late April and October, when they can still lock in the current rate for 6 months and can also estimate, based on published reports about inflation, what the rate for the next 6 months will be. For example, the rate in April was 7.12%. In May it jumped to to 9.62%. These are phenomenal, risk-free rates in the current investment market!

3) Once purchased, an I Bond cannot be redeemed for 12 months. There are some exceptions for specific hardship cases, but basically the money's locked up for 12 months. This makes it a tool that's not for everyone.

4) After 12 months an I Bond can be redeemed, but doing so forfeits the last 3 months of interest. At 5 years a bond can be redeemed anytime without penalty.

5) There's a limit of $10,000 per year, per individual, on buying I Bonds. That's a clue that there's something special there. Treasury bonds, for example, can be bought by the billions by institutions. They pay a way lower rate. There's a low limit on I Bonds because their high rate, at times of inflation like now, is the government doing a solid for middle class savers.