Finance Fees
April 24, 2025
Financial advisors charge too much. It’s around 1% to 0.4% of total assets under management (AUM). For $5m that’s $50k to $20k per year. If a safe withdrawal rate is ~4%, then fees eat significantly into yearly income. For 1%, you’re paying 25% of your income and can only use 3%. For 0.4%, that’s 10% of your income. This is simply too much to pay for a fairly basic service. And they are, ultimately, sales people for their firm’s products. So their incentives aren’t aligned with yours.
A fiduciary, on the other hand, is supposed to work in the client’s best interests. I don’t know how or if that’s enforced somehow. There are RIAs (Registered Investment Advisors) that register with the SEC. I talked to a few but they still charge % of AUM.
There exists some fixed fee advisors. They can offer advice for a few grand. This seems fine, but they tend to be small firms and individuals. How can I know if their advice is good or complete? There are some newer firms that use more technology to streamline things. I’ve seen Range and Facet. Haven’t talked to any of them yet.
What do I want? I’m not sure. I think I want a simple Boglehead 3 fund portfolio that auto-rebalances and does tax-loss harvesting. It should also withdraw ~4% annually for retirement income in a tax-efficient way (long-term gains, retirement accounts, etc). This almost exists at Schwab, but I don’t think I can customize a portfolio. And the firm should do my taxes, since they have most of my data. Except for taxes, I think an LLM could answer most of my questions.
Notes on Trade Deficits
April 9, 2025
Here’s what I know about trade deficits:
- There are 2 big chunks of trade: goods and services. Goods are tangible stuff like your refrigerator. Services are things like software, finance and movies. Modern economies deliver high-end services, poor economies make t-shirts.
- The trade deficit in goods only looks at the final value of the product. For example, a laptop from China would be a $1000 deficit. However, that laptop has components from Intel, Samsung, Micron, and parts all over the world. China mostly does final assembly. So the real measure of a trade deficit is the “value added” deficit. This is hard to track but some economists say the deficit with China would be reduced by 30-40%.
- Similarly, exports from the US often go to giant ports like in the Netherlands and Singapore. They are then delivered all over Europe and Asia. However, the export is only credited to the ports, not to the final destination.
- Manufacturing jobs are declining everywhere. I think it’s flat in China. The cause is some mix of automation, global competition, and currency manipulation (dollar strong, renminbi kept low).
- Foreign Direct Investment into the US is truly massive. Like insanely bigly. $348B (2023) vs $42B to China.
- Ultimately, the US has been running a trade deficit for 50 years and the overall economy has been tremendous. It’s not clear what harmful effect trade deficits are having.
This is really a political issue. People who once earned a good wage from factories are seeing those jobs disappear. Rural communities are falling further behind, while urban areas are growing. The bottom 40% have seen incomes stagnate, while the top 1% are doing extremely well. These are all easy problems to solve, but there are interest groups on all sides making it difficult to change.
Why AGI Alarmists Are Wrong
March 27, 2025
I wrote a short list of reasons why I think AGI alarmists are wrong. I had Claude 3.7 convert it into well written arguments, then add its own opinion below. Could AGI replace bloggers?
The Slow March of Technology
Despite AIs already outperforming many humans in specific domains, these systems haven’t caused the mass job displacement many feared. This reflects a historical pattern: new technologies deploy gradually, not instantaneously. The integration of even revolutionary tools requires time for adoption, adaptation, and cultural acceptance.
My opinion: This argument has merit. Technology adoption does follow S-curves rather than vertical lines. However, AI may diffuse faster than previous technologies due to its software nature and existing digital infrastructure.
The Democratization of Expertise
AI promises to democratize access to high-quality expertise previously available only to the privileged few. Complex knowledge work in fields like medicine, law, finance, and scientific research—traditionally expensive and inaccessible to many—will become widely available. This represents not a threat but an unprecedented opportunity to reduce inequality in access to critical services and accelerate human progress across all socioeconomic levels.
My opinion: This point highlights an underappreciated potential benefit of AI. While there are valid concerns about quality assurance and the need for human oversight in critical domains, AI could indeed help bridge significant gaps in access to expertise, particularly in underserved communities and developing regions.
The Implausibility of Sudden AGI Takeoff
AGI improvements primarily come via two mechanisms: scaling (more computing resources and data) or algorithmic breakthroughs. An early-stage AGI would lack the physical capability to independently scale its hardware. While algorithmic self-improvement remains possible, history shows that major AI advances typically require large teams and significant resources, not sudden individual insights.
My opinion: This reasonably addresses the “foom” scenario. AI development does appear constrained by physical and organizational factors, though unprecedented algorithmic improvements remain a theoretical possibility.
Questioning the “Evil AI” Narrative
The assumption that AGI would inherently become malevolent projects human traits onto non-human systems. AIs have no intrinsic objectives beyond what they’re designed to pursue. While humans could certainly program harmful goals, this represents human malice, not AI agency. The paperclip maximizer scenario overlooks our ability to simply turn off systems that behave problematically.
My opinion: This somewhat oversimplifies alignment challenges. Advanced systems might resist shutdown or develop instrumental goals not explicitly programmed. The challenge isn’t necessarily “evil” but unintended consequences of optimization processes.
The False Deity of AGI
AGI alarmism often attributes god-like powers to these systems, assuming they’ll inevitably find ways around any constraints. This type of argument parallels religious apocalypticism more than rational analysis. Technical systems, however advanced, remain bounded by physical laws and practical limitations.
My opinion: This correctly identifies how some discussions anthropomorphize AI or treat it as supernatural. However, it understates how systems with human-level intelligence in certain domains could exploit real vulnerabilities in infrastructure or social systems.
Tax Loss Harvesting
March 25, 2025
One product financial advisors hawk is tax loss harvesting. The general idea is to sell an investment at a loss to offset gains, then immediately switch to a comparable investment to maintain the same market exposure. For example, invest $1m in a fund that tries to sort of replicate the SP500 index. It may hold 75-100 positions instead of 500. Let’s say a holding of Ford drops 10% from $10k to $9k. Sell it and record a $1k short-term capital loss. Then buy GM to preserve your position in a similar auto stock. At tax time you reduce your gains by $1k, which reduces your taxes by roughly 1/3 or $350. It is likely that Ford and GM dropped together, so the cost basis of your auto position goes down.
That’s the sales pitch. There are a few problems with this. First, tax loss harvesting can boost returns <1% in the first few years (pre tax). But as the cost basis resets down and the market generally moves up, it gets less likely stocks will fall below your cost basis to allow more tax losses. That’s not bad; however, funds charge a higher expense ratio on the whole fund whether or not they harvest tax losses. That could be 0.7% (Fidelity), which nearly eliminates any gains. Second, these funds are often “direct investment funds”, which means you directly own a bunch of stocks rather than a single fund. That’s not a problem; however, if you want to move your money to another broker then you might have to sell, triggering a capital gains tax. Finally, there is a risk of tracking error between the fund and the SP500 because it’s not holding all the stocks. If a single stock explodes (NVidia) the fund may not hold it, or it may hold it and not some other losers.
Wealthfront offers a tax-harvesting S&P500 fund with a 0.09% fee. So even if tax losses begin to wane after a few years the fee is quite low and worth holding. And they do allow you to transfer all the little holdings to another broker. It’s up to you to manage the mess. They offer a Smart Beta feature that deviates from the SP500 a bit based on some factors they think could improve performance. It has not! It’s really hard to beat the SP500 over the long term. Ultimately, this seems like a lot of hassle for a 0.35% potential improvement in returns.
Are blogs still a thing?
March 21, 2025
I was thinking about blogging again. My password manager reminded me of this old account on WordPress. I read some old posts and realized my style and opinions haven’t evolved much in 14 years. I don’t know if that’s good or bad. Regardless, I’ll continue this blog instead of starting a new thing.
A lot has happened since I was last here. I’ve had some interesting jobs, including at a university your kids can’t get into. I’m rich now. My wife, totally on her own, also got rich. A close relative is RICH: private jets, over the top vacations, massive mansion. I’m merely rich: I can retire comfortably, get a second home in Italy, stay in fancy hotels, buy anything a lawyer or banker income can buy. However, I don’t want any stuff and I have zero envy for my uber-RICH relative. So I got a low-stress job doing cool stuff while I figure out my next steps. My future will, of course, include blackjack and hookers.
What’s the point of public writing if no one reads it? It’s mostly a place for me to think out loud, write outlandish clickbait, and timestamp thoughts so I can say “see! I had that same idea!”. On rare occasions I may write on obscure topics that can help others in a similar situation. I don’t know how long before most information is regurgitated thru AIs rather than search engines. Maybe the AI will mention me in the footnotes.
Power is wrong on Libya
March 30, 2011
Earlier I complained about Samantha Power’s book about Western powers’ failure to prevent genocides in recent history. Her book had aspects of historical fiction. For example, she asserts that had the US destroyed and jammed Rwandan communications the genocide would have fizzled out. Would those murderers really have given up so easily? Her position assumes that genocide can be averted cheaply with little risk to American soldiers. Now she’s back arguing that the US should prevent mass murder in Libya. Her position will be put to the test because Qaddafi will likely fight to the bloody end. If air support is not enough and the ragtag rebels can’t push towards Tripoli, Libya will descend into long-term civil war. Will the US and NATO provide more assistance to help the rebels, such as weapons, training, communications, air power, etc? How much and for how long will the West support one side in a civil war? It’s been 10 years since her book was published and she still doesn’t have a rationale beyond “genocide is bad, please stop it!”.
I believe that the US must commit to a policy goal and be willing to apply all resources to quickly achieve that goal. But that means you need the support of the people and Congress, which probably requires that it be a direct threat to the US. Obama said it is US policy that Qaddafi must go. Is he willing to commit US troops to finish the job? Are the American people willing to see soldiers die (remember Somalia?) for a civil war that doesn’t threaten us? I doubt it. Afghantistan is the only recent war that was a direct threat to the US and deserved to get smashed. Pakistan’s Waziristan area is IMO looking like another area that deserves to get flattened.
Right now the best NATO can hope for is another Afghanistan. US Special Forces armed, trained and followed Afghan Northern Alliance fighters. They were able to call in air support to destroy Taliban forces and quickly capture the country. It is very likely that the US is threatening and bribing the generals around Qaddafi right now, urging them to give up or die. If I were running things, I’d tell the various tribes in Libya that they’ll get double their current income from oil without Qaddafi stealing all that money. In the end, money talks.
Kissinger is wrong on Egypt
March 24, 2011
I’m listening to Henry Kissinger defend supporting dictators for our national security interests. The choice is not obviously autocracy vs. democracy with an amiable government. Everyone would choose a nice Nordic democracy were it possible. Instead, the choice is usually presented as autocracy vs. some scary unknown bogeyman. In Egypt the bogeyman is the Muslim Brotherhood, an organization dedicated to destroying Israel and opposing the US. Given a choice like that, everyone would hold their nose and choose the dictator. And dictators know this. They kill the political center to leave the lunatics as the only alternative. This forces the US to continue supporting the dictators.
This approach looks good in the short-term, but is bad for the US in the long-term. By supporting Mubarak and the military, we’ve made 1 friend and 80 million enemies. We’ve also condemned Egypt to 50 years of terror and economic stagnation under Sadat and Mubarak. During the Cold War this may have been the only alternative, especially since the Muslim Brotherhood really were wackos back then. But since the Cold War ended and the US is the last superpower standing, we are in a position to generally take the high road in foreign policy. This means sacrificing some short-term stability for, hopefully, longer-term gains. Despite the rhetoric of the Bush and Obama administrations, they’ve continued to coddle dictators.
The main reasons the US meddles in the Middle East is (1) to guarantee our supply of oil and (2) to protect Israel. The first is not a serious problem. Most oil producing countries are in such severe debt that they need to sell oil in the international market to keep their kleptocracies going. And if they raise prices too much we’ve got the know-how, but not the self-control, to cut oil consumption enormously. I’m pretty sure higher oil prices give the US an economic advantage vs. China. The second is also fairly easy. Put American arms and troops in Israel and promise to blow the shit out of any attacker, just as the US already does now in Korea.
It is true that democracy is more than just elections. Democracy is a culture that allows Bush to take office even though the Supreme Court blatantly stole the election. The most likely scenario for Egypt’s next election is there will be rampant voter fraud, the winner will be illegitimate, all sides will go nuts and the military will install another strong man to enforce order.
Girls with Sandy Vaginas
November 1, 2010
Recently girls everywhere shrieked hysterically because the interwebs was rude to one of them. An anonymous troll complimented a female cartoonist with an over-the-top joke playing on her gender. She felt offended by the comment and a minor fracas ensued. I will now fulfill panel #9 in the linked cartoon above and Mansplain why women are wrong.
The Internet is rude, crass, juvenile and funny. There’s a style of humor that is popular on many forums dominated by grown-up boys that is similar to Beavis & Butthead. Unfortunately, this style of humor doesn’t go over well with everyone. For example, the phrase “sandy vagina” is hilarious to some men, but some women find it offensive. When a friend is complaining about something, I might say, “What’s the matter Bob, got sand in your vagina?” It’s intended as a humorous way of saying Bob is getting worked up about something trivial. Why use this particular phrase? Honestly, I don’t know where it came from but the imagery is funny. I might have said “Bob has a bee in his bonnet”, but that’s a dated expression and not at all funny.
When someone utters the phrase “sandy vagina”, does the intent and context of the comment matter? Some women are arguing that if they feel offended, it is offensive. I think many men consider the intent of the comment before deciding to be offended. Of course this can also lead to confusion: if I call Bob a douchebag in jest, he may think I’m serious and punch me in the nose. For some reason this doesn’t happen often. Men don’t seem to take these comments too seriously.
This all reminds me of the court cases involving the Child Online Protection Act (COPA) in 2004. In an attempt to attack Internet pornography, federal prosecutors twisted the “offends the community standard” test by filing suit in the most conservative community they could find. They argued that if any one community is offended, then that porn is offensive and should be stopped by COPA. Lewd and crude comments on the Internet are similar. I’m not offended, nor are most people on Fark, reddit, Digg, Youtube, etc. But some women believe that if any one person or group is offended, then those comments are, de facto, offensive. I disagree based on the same logic that defends porn from COPA. Those women need to get the sand out of their collective vagina and toughen up.
I might be an Aspie
September 14, 2010
I might have a teeny tiny bit of Asperger’s syndrome. Whenever I take those online tests for empathy or systematizing I score far into the autistic range. Of course, these are just online tests and should not be taken seriously. The thing that struck me is that many people who scored very low on empathy described exactly my experience interacting with people. I can’t read how people feel at all. In the absence of information, I assume people dislike me. If I’m talking to someone, I’ll assume they’re bored and end the conversation quickly to let them escape from me. Smalltalk bores me to tears. I am entirely logical and rarely feel strong emotions. I don’t understand other people’s motivations. And women are especially perplexing because they seem to be a giant bundle of contradictions. Women seem to find my sense of humor off-putting, which then makes me nervous talking to them. I have to censor everything I say to carefully be as banal and non-threatening as possible. With men, on the other hand, I can let my humor rip because only pansies are going to get upset. Nevertheless, I’m going to try to do something about it. I’m going to try to chat with people until they punch me in the face. No pain, no gain.
Taxes are our money
September 10, 2010
Just now Obama said that extending the Bush tax cuts would “give” an average of $100K back to millionaires. While I agree with him that the tax cuts should not be extended, I don’t like the rhetoric of Democrats on taxes. The money we pay in taxes is OUR money, taken by force by the government. I know that sounds hysterically right wing, but if you fail to pay taxes guys with guns will throw you in jail. This unfortunate attitude among Democrats causes them to act like they’ve got a pile of free money that they can redistribute as They see fit. The phrasing I would prefer is tax cuts will “take less” money, rather than tax cuts will “give” money, to the American people. I want government officials to feel deeply that they must spend MY money carefully. That’s not the way things work now.
Daily Curmudgeonry 