The Mandarin Class

The Mandarin is the latest super-villain in the MCU (“Marvel cinematic universe” for those of you behind the superhero movie curve). Pretty sure he was originally an Ironman foe, dating back to the Stan Lee heyday.

But I’m not using the term “mandarin” in the sense of a supervillain (although if the shoe fits …).

I’m using the word in the sense of the bureaucrats who essentially ruled China from the 7th century AD until the early 20th century. Mandarins were the professional administrators hired by the Imperial family to make sure that taxes were collected, roads were built, and justice was administered throughout the sprawling empire.

Notably, these were not hereditary positions. Instead, entry into this professional administrative agency was determined by performance on scholastic tests, and progress up the bureaucratic ladder was determined by performance on more difficult scholastic tests and the achievement of certain scholastic accolades. Mandarins were “bureaucrat-scholars”, and formal academic achievement was at the heart of their status.

For the mandarins who wrote and adjudicated China’s laws, this was literally the equivalent of going to law school, becoming a law professor or a prosecuting attorney, and ultimately being appointed to the judicial bench.

For the mandarins who collected and spent China’s taxes, this was literally the equivalent of going to grad school for a PhD, becoming an economics professor or a staff economist, and ultimately being appointed to a leadership position at the Federal Reserve.

Once admitted to this professional bureaucracy, you were in for life, and essentially all legal and economic policy decisions flowed through you and your fellow mandarins. Ultimately, as you might expect, these effective rulers of China began to see themselves as a privileged class, and sought to institutionalize their control over everyday legal and economic affairs in a way that could make this a hereditary position, so that they could pass down their power to their children. The easiest way to do this was through the accumulation of wealth, as power is most fungible and inheritable in the form of money, and so these bureaucrat-scholars became very rich and very adept at staying rich. Policy became as much an instrument for becoming rich and staying rich as it was an instrument for public service and advancement.

Sound familiar?

Mandarins were the ruling class of China for more than 1,000 years. They are our ruling class today.

Mortgage REIT day-trader (and former Boston Fed president) Eric Rosengren
SPX futures day-trader (and former Dallas Fed president) Robert Kaplan

Last year, Boston Fed President Eric Rosengren personally made more than a dozen trades in and out of four mortgage REITs – companies whose businesses are directly impacted by Fed purchases of mortgage-backed securities – at the same time as he was helping determine the size and shape of those Fed purchases. Last year, Dallas Fed President Robert Kaplan worked his personal account very actively, buying and shorting S&P 500 future contracts at $1 million-plus per trade – multiple times per week, all as short-term trades – at the same time as he was supposedly devoting his full-time energy and attention to securing full employment and stable prices for the American people.

If a junior analyst at Citi traded like this in her personal account, she’d be fired immediately and barred from the securities industry for life. Instead, Rosengren was allowed to resign “for health reasons”, and Kaplan resigned – not because what he did was wrong – but because “he didn’t want to be a distraction”.

Why did Rosengren and Kaplan do this? Why did they feel compelled to actively trade their personal accounts for personal gain while “serving” the public interest?

I don’t think they could help themselves. This is what rich people DO.

Rich people like Jay Powell.

On October 1 last year, the same day he had four calls with Treasury Secretary Steve Mnuchin about White House pushback on fiscal stimulus and Fed liquidity programs, Jay Powell sold $1-5 million of his personal stock market portfolio.

There’s not another trade by Powell anywhere near this size across all of his transactions last year.

To be clear, I don’t think there’s anything criminal about what Jay Powell did. Or what Eric Rosengren did. Or Rob Kaplan. Or Rich Clarida (another Fed governor who made large discretionary trades in his personal account).

No, I don’t think anything illegal happened here.

I think it’s worse than that.

I think Powell and Rosengren and Kaplan and Clarida are very prominent cogs in a system of banal bureaucratic corruption, where day-trading your millions is just a ho-hum part of a normal day of “public service”.

This is what mandarins DO.

I am all for Jay Powell being as rich as he wants to be! He and Rosengren and Kaplan and Clarida can day-trade or “rebalance their portfolios” or whatever to their hearts content, and I hope they do very well for themselves.

But not while they’re at the Fed.

And then there’s this:

131 Federal Judges Broke the Law by Hearing Cases Where They Had a Financial Interest

The judges failed to recuse themselves from 685 lawsuits from 2010 to 2018 involving firms in which they or their family held shares, a Wall Street Journal investigation found.

Wall Street Journal, Sept. 28, 2021

Now this is absolutely against the law. Judges owning or trading stock in companies appearing in their court is a flagrant violation of federal law going back to 1792. There’s no exception for family members or managed accounts or whatever other excuse you want to make, and the 1974 overhaul of this section of the US Judicial Code specifically calls this out.

But excuses were made. My goodness, excuses were made. As the article explains, some of the judges blamed their court clerks. Others said it didn’t count because they lost money on the trade. The best excuse, however, was this gem:

Judge Ramos, who oversaw the Exxon case, was unaware of his violation, said an official, because his recusal list listed only parent Exxon Mobil Corp. and not the unit, whose name includes the additional word “oil.”

LOL. “Why yes, I knew that I had to recuse myself from a case involving Exxon Mobil Corporation, but Exxon Mobil Oil Corporation? I dunno, man, that sounded like a totally different company to me!”

But wait, there’s more:

Federal Judges or Their Brokers Traded Stocks of Litigants During Cases

Dozens of judges have reported share purchases and sales made while they presided in suits involving those companies, a WSJ investigation found

Wall Street Journal, Oct. 15, 2021

This follow-up Wall Street Journal article identified 61 judges who traded in or out of stock in companies while ruling on cases involving those companies.


To be clear, these aren’t judges frontrunning markets by making decisions that will move the stock. These aren’t judges profiting illegally from information gleaned in their courtroom.

No, it’s much worse than that.

These judges are part of a system of banal bureaucratic corruption, where the right to an impartial judge deciding your case – perhaps THE bedrock principle of American jurisprudence – is trumped by a what’s-the-big-deal assumption that of course it’s fine to have a financial interest in your decisions.

This is what mandarins DO.

I am all for these judges being as rich as they want to be! These judges can day-trade or “rebalance their portfolios” or whatever to their hearts content, and I hope they do very well for themselves.

But not while they’re on the bench.

What’s the answer? Well here’s what it ain’t.

269,461 Sun Shining Through Clouds Stock Photos, Pictures & Royalty-Free  Images - iStock

Fed Imposes New Restrictions on Officials’ Investment Activities

The new rules will require Fed officials and senior staff to provide 45 days’ advance notice for any purchases and sales of diversified investment vehicles, such as mutual funds. Officials will also be required to obtain prior approval for any investment purchases and sales, and they will be required to hold investments for a minimum of one year. Transactions won’t be allowed during periods of “heightened financial market stress,” the Fed said in a statement.”

Wall Street Journal, Oct. 21, 2021

Here’s my fave quote from this article, written by Jon Hilsenrath Nick Timiraos, the Fed’s current amanuensis at the WSJ.

Fed officials opted against requiring officials to put their assets into a blind trust—a separate option for distancing official decisions from personal finance matters—in part because of concerns that they could be unable to impose some of the requirements announced Thursday on those trusts. Government ethics officials have generally discouraged executive branch officials from using blind trusts.

LOL. What nonsense. A qualified blind trust is absolutely the correct solution here.

I understand that it’s possible to subvert or influence a blind trust if you really put your mind to it, particularly a non-qualified blind trust … but this is true for any rule structure. I understand that it’s difficult to “impose some of the requirements announced Thursday” on a blind trust, assuming they mean the no-trades-during-heightened-market-stress requirement … but there’s no need for it in a qualified blind trust, because the trustee won’t be privy to internal Fed information. I understand that holdings in a blind trust are undisclosed to the public, which is the usual ethics office objection … but the notion that transparency solves any of the systemic issues here, particularly when “transparency” can take months or years of effort to achieve, is as ludicrous as most of academic neoliberal theory.

The problem is not whether or not mandarins are well-meaning.

The problem is what mandarins DO.

A blind trust is the correct solution for blunting the power of the mandarin class because it prevents a professional bureaucrat from DOING trades in their personal account.

Why are we so intent on making excuses and finding convoluted paths for wealthy bureaucrats to trade their personal accounts? Is this so crucial for the just application of the law and the efficient application of economic policy?

Of course not. It’s only crucial for the interests of the mandarin class.

Nancy Pelosi and Mitch McConnell's homes vandalised - BBC News

And yes, the professional politician is just as much a mandarin as the professional bureaucrat.

Qualified blind trusts for all high-level “public servants”. Without exception. In every branch of government.

This is the way.

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  1. One of my clients is married to a (now retired) Federal judge. Whenever we would meet for our quarterly conversations I would give him my thoughts about this company or that one, we’d figure out if we could make improvements to the portfolio, and then he’d tell me he’d get back to me next week. See, he had to talk to his wife first and make sure that she wasn’t hearing any cases–at the moment or on the docket for the future–that involved any of the companies I was recommending. I worked with them for six years and they were always vigilant and adhered to the rules. Turns out that was the sucker move.

  2. Who, besides the mandarins themselves, is against this? In the past 20 years, I can’t recall even one regular person arguing that senators and congresspeople should be allowed to flagrantly trade on inside information.

    I used to work for a mutual fund company, in a freaking sales role, and I had to pre-clear every trade. My trade requests to trade a security would get rejected automatically if any fund had any open order (buy or sell) on that security. Our complex had a couple of 1-2 star large cap core funds that were in net-redemption virtually everyday, so that meant that I couldn’t trade most S&P 500 names on most days. I had to get a hardship exemption just to come up with the downpayment for my house. “Well, this is just one of the sacrifices you need to make in order to work in financial services.” was the standard refrain of management.

    There should absolutely be some personal sacrifices attached to the being elected or appointed to a position in which one is entrusted with the power to ensure the common good.

  3. Avatar for Zenzei Zenzei says:

    I would consider a different question…

    “Who is going to take on the formidable task of taking on the Mandarins to make real change?”

    the system has too much momentum and lacking a mechanism for fundamental change, momentum rules the day.

    This problem falls in the zone of important enough to get animated about, but not important enough to go out and expend real energy and effect change.

    At least, until all the walls come tumbling down and the inertia is gone.

  4. I never thought I’d want to pick up a history book and read all about Mandarins, until I read your post. Well done!

  5. Kleinbloo, loved your insights and thoughts ( and I’m definitely buying “Superpower “ ) , right up until the very end when you stated “crypto” is going to solve this (or anything).

    I’m with N Taleb on crypto, at least the coin version, it’s a bubble, akin to the Tulip bubble of 400 years ago in Holland ( without the aesthetics)

    The most speculative instrument in the most speculative market in our nation’s history.
    Thanks Federal Reserve…………

  6. Kleinbloo,
    First thought – Oof ! That was harsh. One reason I like “the pack” so much is because people don’t rip into other pack members like it’s no big deal. I like what Ben and Rusty have created, Don’t try to turn this good thing into something ugly.

    Honestly, I meant it when I complimented you on the great points and research you did on the mandarin history, it really was interesting.
    It was when you closed with “crypto fixes this” that I had my doubts. I never said

    Further , Taleb is certainly not the only serious thinker out in the universe who have doubts about the legitimacy of crypto-coins. Implying I depend on him for my reasoning isn’t fair or enlightening. BTW, dismissing him based on one comment vs the thousands he has made is odd.
    Who do you admire that is a regular commentator that has NEVER said something off to you?
    I and the other readers would love to find that perfect human being. Please tell us.

    What best encapsulated your comment has to be

    I’ll close with that and hope you will be more civil, understanding and empathetic in the future

  7. Avatar for jrs jrs says:

    I’m with Taleb as well, but weakly, and don’t own crypto because (1) I don’t have enough time to learn enough not to get scammed and (2) Taleb’s black paper on BTC.

    But following Soros’ Human Uncertainty Principle, I’m not convinced that fundamentals actually matter at this point. What concerns me is the faith of a huge group of people in the idea of crypto. Everyday people who work with me, who make normal amounts of money and have significant amounts of it invested in crypto, amounts that can rival their annual salaries. Because, eg, they all know this one guy we work with who made a quick $30k on Doge.

    I hope I am wrong and these people are right and they all FIRE before SHTF or whatever, because frankly their jobs are harder than mine. But I fear what will happen when/if crypto falls and they are proven wrong and lose their money. I hope they will be adults about it and take it lying down, but they are so passionate and so incendiary about this that I’m not 100% sure.

  8. When I read this exchange my first thought was to create a new topic on this Forum called Forum Decorum. Taken in the context of “treat others as you would like to be treated yourself” this exchange merits some consideration. @kleinbl00 would not like being told that neither nobody needs his/her answer on a topic that where he/she has specifically replied to. @kleinbl00 is imo clearly in violation of Forum Decorum.

    Some quick thoughts:

    1. If we are a pack interested in the proper functioning and well being of the pack then @psherman should not be alone in standing up to a violation of Forum Decorum. I am involved in the fisheries and seafood industry. It is a very special industry because to a great extent it’s grounded in real people and community, like a pack, and that has a lot to do with treating others the way you would like to be treated yourself. If I were in @psherman place I would appreciate if a fellow pack member would speak up and stand with me on this for reinforcement of Forum Decorum. I have experienced this treatment in the industry and have appreciated it greatly. It helps me to formulate thinking around a pack mentality.

    2. Many of these discussions are emotionally charged, mixed in with other stimulus which we can’t escape, and many of us work or have worked in a full-contact environment . If a comment made by another pack member rubs you the wrong way, try to generously apply a liberal interpretation of their comment with a view to treating others as you would like to be treated yourself.

    1. There is a diverse and deep pool of expertise on this forum. We should be able to express differing points of view without it being taken as disregarding the expertise of others. A lot of views and expertise are shared on here each day and that is valuable to us all.
    2. When expressing a differing point of view, let us all take care to treat others as we’d like to be treated ourselves.
    3. "forum decorum’ may not even officially a thing, it just rhymes and is something to think about as we interact on here.
  9. Avatar for 010101 010101 says:

    For the sake of not arguing about trivia, I have been trying for days to ignore your use of the phrase ‘common good’.
    I can bear it no longer. I must say it:

    There is no such thing as the common good. It is a phantom of wishful thinking. It has been used by racoons to gain a
    socialist mandate too many times, for me to stay silent. The common denominator that it alludes to is not determined.
    Politics is mostly about resource allocation, a heterodoxy of distributing capital .There are many people on this planet who deserve all the help that I can spare. There are also many who do not. What is the commonality that can be supplied
    with goodness? We are an incredibly diverse species, there is less and less homogenous about us everyday. Please do not lump what is ‘good’ for a 100 year old Chinese national into the same frame as what benefits a western teenager, because in any practical sense, you can’t. The problem is obvious. Politics must pick winners and losers.

  10. Thank you for this important articulation. Manipulation of public sentiment by framing things as “common good” is one of those things that, once you’re aware of it, you’ll see it everywhere. Most initiatives focused on climate change are framed using some variation of the “common good” argument but clearly some will benefit more from that “common good” than others.

    A quick search of the topic turned up this article from The Atlantic which in a nutshell argues that if you don’t believe in the “common good” then you’re not a “good” person.

    You believe in the common good, don’t you? Don’t you??

  11. It has been a long time since I read the Black Swan. But, the underlying theme was calling out the arrogance of Wall Street and its very imperfect models. Reminding the reader that narratives form as substitutes for complete understanding of complex systems that are opaque to disentangle and are actually much more fragile. Only minor shifts in common knowledge can result in supposedly impossible to predict outcomes. BTW, these are surely things Ben and Rusty keep front and center in the ET content. My takeaway, bolstered by the firm he built with Mark Spitznagel (Universa), was to construct a portfolio without this dangerous set of blind spots so that it would be robust to the real world and not crumble when the “black swans” inevitably arrived.

  12. I think you nailed it on the head with this question.
    I remember in a political science or economics class we discussed concentration of political will. When a policy or status quo results in benefits being concentrated for a small group but the risk and cost is spread out over a large group the equilibrium stays the same, despite the large group disagreeing with the status quo.

    It’s all well and good to fight the establishment until you are the one that has to lead the charge.
    Add in that one can’t pay the bills by addressing systemic corruption and we’ve got a whole lot of incentives for status quo.

    In my personal effort to write posts with solutions, rather than simply highlighting problems, this seems like the kind of problem that 501c4’s are designed to address.

  13. I am going to pick up on this idea of The Mandarin Class and expand on it a bit.

    Who do you think is ruling us?

    For example who decided that ALL the Social Media companies simultaneously decided that of all the news that flowed that day --the New York Post article concerning Hunter Biden’s laptop needed to be taken down and not shared?

    That all the TV stations would cut away from Presidents Trumps news conference if he mentioned election fraud? Think a meeting was called beforehand or just every major news outlet decided that we cant handle the lie in unison?

    Some people go to jail when they lie to Congress , Some do not - who decides?

    Some military brass are praised as whistleblowers saving the the Republic , others are thrown into the Brigg when they speak out against their superiors --who decides?

    Who are the people President Biden openly refers to , telling him what questions he can answer and if he can take questions at all?

    How about a reporter that vented at one news organization- when her story on Jeffery Epstein was squashed , and then was fired months later at a different news organization when it was revealed ?

    Who decides that the most liberal Chief Justice in a generation has to be protected from her own words when her words don’t fit the narrative that the fiat news is pushing at the moment?

    It feels like we have Mandarin Class aright , and it runs ALOT deeper than some frontrunning.

  14. 100%. This falls in the exact same bucket as Term Limits, and the Constitutional Apportionment Amendment. Necessary structural reforms that will not be implemented because it relies on the Mandarins themselves to implement them. Turkeys would never willingly vote to implement Thanksgiving dinner.

  15. Cause if you don’t believe , that would be unfortunate.

  16. Avatar for jrs jrs says:

    As I said, I don’t have the time either way right now, because ISTM the topic is pretty complex. And while I do think Taleb is a bit of a rhino and is very obviously inconsistent on many things, at the same time his philosophy has improved my quality of life drastically, and so this is my default position.

    I hope to learn more about crypto in the future, but I already own significant index funds in my 401(k) that I can’t reasonably liquidate for many years, so I figure my first priority should be to protect them. Hence, my first investing priority when I free up some time in a few months will be to learn about tail risk hedging and other things to do with options in order to protect the stash I have. Spitznagel seems to lay out a good approach in his new book Safe Harbor, but it’s unclear to me whether small fry investors like me with less than a 7 figure portfolio can actually implement it.

    Otherwise, following the boomerlicious rantings of John T Reed, I’ve become more interested in investing in things I can eat, and live in, and that otherwise have value in use. As rich as crypto might make me, the fact that I can’t do those things with it (or stocks or bonds for that matter) also makes me less interested at present.

  17. Agree. As long as the Mandarins can vote on their own pay raises, their own benefits and on any legislation that affects their position, there will be no checks or balances. Have long thought that each new senator and representative should be given a civil service GS # upon taking the position, given a Civil Service benefits and rules handbook and governed accordingly. It may be naïve to believe that they would receive pay raises, retirement benefits or be disciplined under the same guidelines as every other civil service employee, but it would at least be something tangible beyond the threat of a recall election.

  18. Thank you for capturing my rage.

  19. A modest proposal:
    Any person who occupies an appointed or elected position of trust and authority in the Federal government must be required to liquidate their assets and place the proceeds in a trust paying only the going rate for a savings account. They must pay their entire salary, and any other remuneration they receive (say, for book deals or speaking engagements) into a separate account, likewise paying only the bank rate of interest. During their term of office, they will live in barrack conditions on a modest stipend tied to the median salary of their district, state, or country. On the expiration of their term of office, they get their original assets back (along with bank interest). But the populace gets to vote on whether the office holder gets all, some, or none of their remuneration account back.

  20. Avatar for jrs jrs says:

    It’s a good start. But how would this prevent the revolving door issue where former elected officials are offered plum positions in private industry after they step down, in exchange for helping the raccoons while in office?

    I like Barry’s idea of a good stipend while they’re in office, and possibly after they leave office, in exchange for very strict rules about what they do with their lives afterward. Of course this is probably all very naive and theoretical and the people who are most motivated to seek office would find a clever way around it…

  21. There is a class of people who we can categorize as Mandarin-adjacent, but that’s not a catchy enough name.

    I’m thinking specifically of the scientists who ran cover for Fauci & Co when the lab leak hypothesis was still a crazy conspiracy* and not, you know, a viable alternative that should be studied. A whole lot of Experts :tm: went pretty far out on various limbs to assure us that it was impossible. When you dug into the careers of many of those people you found that they relied heavily on the funding of NIH, NIAID, and their money laundering operation Eco Health Alliance. So they’re not really Mandarins per se, but they cannot live without staying in the good graces of them. And I suppose it’s warm enough under the dragon’s wing that they felt no need to keep their reputations intact when the tradeoff was their livelihoods. We should have a term for this particular class since they’re the ones who are carrying out the missions of the Mandarins and are functionally servants to them.

    *FTR it was never a crazy conspiracy to the people who had nothing to lose if it turned out to be true. It was only a conspiracy to the people who were invested in it being untrue.

  22. So while Congress day trades individual stocks on inside info, and Fed governors go long and short index futures, you are hamstrung by a limited set of long-only index funds with no ability to hedge the downside, or de-risk, or express your interest in a very specific industry or company.
    –Sounds like you aren’t part of the Mandarin class.

    To protect seems like having the Fed continue supporting the index by keeping rates low for companies to finance share buy backs.

  23. In our analysis we refer to these people as “old boys”. Old boys exist within a constructed network of old boys, and they have an essential role in the system - to tow the line of whichever dominant mandarin or oligarch under which their network is intended to operate. In exchange for being “good old boys” they receive all sorts of preferential treatment and enjoy all sorts of privileges. Thirty years ago there were practically no scientists or women among the old boys, but society has changed a lot and now scientists and women bring real strategic value to old boy networks and there is no shortage of them willing to embrace the attendant opportunities for power and advancement.

  24. Avatar for jrs jrs says:

    No, I’m not a Mandarin, although I might’ve swung that way if I was more skilled at swallowing my own vomit. I’m just glorified shift-work Labor that is rather highly-paid… for now. Not gonna repeat the mistake of putting too much of this pay into my 401(k)/CBP.

    I don’t fool myself that I have any edge in any specific industry or company, so I mostly just stick with VTSAX/VTI. That is the first part of the Boglehead religion. The second part, with which I take issue, is that therefore we should all just relax and have faith that everything will go up forever on average, because American exceptionalism or something. I need a bit more personal control than that.

    Not strictly long-only as I can buy calls and puts and also write a subset of them (ie, Vanguard Level 2). I can also swap out the specific funds/ETFs/stocks I own. But I know next to nothing about options at this point, except that the simplest possible strategy to buy protective puts on VTI does not seem cost-effective at present.

  25. Sorry. I was a little too cryptic. Not actually targeting you. I was pointing out very specifically the hypocrisy in financial markets and how the Mandarins set up constraints to force others (you) into the opposite side of their trades, and limit your alternatives. Because apparently inside information of the highest order isn’t enough of an advantage already.
    Average Joe, working hard to contribute to the economy, saves most of his wealth in home equity and his company 401k with a broad range of typical long only index funds.
    Joe can invest in a much broader spectrum of investments in an IRA (still limited), his 401k is extremely limited. Long only, passive index, no option protection. That makes it easy for Fed governor day traders to scalp a few bps a day to their personal accounts.
    It makes me sick to think of the thousands of people who have sued large companies for real harm probably never considering at that moment they own that company in an index fund in their 401k and still do after losing. @bhunt writes about judges owning the stock. What about the plaintiff being forced to either own a company that killed their spouse, or select a far less ideal portfolio. I’ve thought about looking for someone to suggest they sue their retirement plan for coercion by not giving them any options other than to harm themselves.
    With current technology and costs, there’s simply no justification for such gross limits on the general population.
    Peter Thiel owned Paypal as a private start up in his Roth. And people are mad about his tax savings. If the average person with a large 401k balance has a friend with a good business idea, they can’t invest in it - at least not as far as they know. They don’t even know it’s legally possible (Mandarins do it). But your company might restrict in service rollovers to an outside IRA or self-employed 401k. The Mandarin owner of a company can change that rule for himself (move his assets to a more accommodating custodian) and then add the restriction back to keep assets in the plan if he wants.
    Democracy and freedom for my capital, but you aren’t smart enough to make your own choices. It might not be as bad in the US, but it’s certainly on the same spectrum with the limitations to the general public in China from bank wealth management products.

  26. Avatar for jrs jrs says:

    It makes me sick to think of the thousands of people who have sued large companies for real harm probably never considering at that moment they own that company in an index fund in their 401k and still do after losing.

    Exactly. The enemy is us.

    I’m actually 1099 and funnel it through my own S-corp so I should look into how to invest in my own ideas via a 401(k) as you discuss. (I imagine it involves dumping Vanguard?)

    Or I could just keep all my income in taxable, take the 34% fed+CA bracket hit, and try to wash this machine right out of my hair. To use an awful mixed metaphor.

  27. That last paragraph, bang on the money. My 12 Yr old Godson, smart as (High Functioning Autist) and all of his peers are for the lack of a better term “balls to the wall” on #BTC excetra.
    If it is the new padadigm, great good on him. Will be able to purchase his first house when the great Aussie property bubble pops in BTC. If it isnt what they hope it is, i would rather they learn that lesson sooner than later.
    As it stands, when we talk of generations and market cycles, anyone in the millenials or after is going to get crushed if this experiment in "markets"fails.
    The younger of that cohort might take #BITFD Literally

  28. Avatar for jrs jrs says:

    Yes, my US coworkers in their 20s-30s are the same. Going crazy for BTC, SHIB, SQUID, OMFGBBQ. And platforms that derivativize the same.

    I was in grad school during the GFC. I made $25k, just enough to pay the mortgage on a condo, whose value ultimately was flat when I sold and moved away 7 years later for the next part of my career. In retrospect I consider myself lucky that I didn’t have anything else to lose in 2008 and was too focused on academics to mess with speculation.

    Following reflexivity, I do have a tiny amount invested in GBTC, so I am part of the problem from one perspective. And I hope this time is different, just like the cover of Wired said it was in 1999, just like lots of people said it was in 2005.

    I also hope your godson is not a true believer and sees that he doesn’t need to go all Mad Max, but just needs to make enough off this thing to be more financially independent. Assuming the whole paradigm is not BTFD’d by the true believers shortly after they themselves are burned, again.

  29. Not sure if you have employees. Either way, you can do a self-directed 401k. But if you have employees, you have to allow it as an option to them. I’m sure plenty of plan consultants would spout off thousands of reasons it’s a bad idea to let employees have free reign of day trading their 401k accounts. If you don’t have employees, I believe you can do a solo-401k with most brokerages (would need to confirm w/ S-Corp taxed as self-employed). The restrictions I’ve seen are no shorting (short ETFs are fine), no naked derivatives without plenty of equity to back it up. (Level 3 options authority). There’s very little restriction with that.
    You can also custody retirement accounts at a self-directed custodian that can allow investments like directly owned rental real estate, or private equity. It’s expensive and there are very specific rules to avoid prohibited transactions (which you must absolutely understand). Pacific Premier Trust (former Pensco) is a popular custodian. That’s who Theil used for custody of his Roth IRA that had Paypal in it. Service can be horrible. The business model is not as profitable since they don’t make money off trading, money market expense ratios, or rebates from funds and ETFs. But you take what you can get.

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