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Cryptocurrency and More

Jan Blakeley Holman, CFP, CIMA, ChFC, CDFA, CFS, GFS
Director of Advisor Education
18 May 2022
17 min listen
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Cryptocurrency and More

Hollis Walker: This is #NowMe. A podcast for financial advisors and their clients.

Hollis Walker: Hello. This is Hollis Walker with Jan Blakeley Holman, Director of Advisor Education at Thornburg Investment Management. Welcome back. Thanks for joining us for another episode of #NowMe. Hi, Jan. Nice to see you again.

Jan Blakeley Holman: Nice to see you, Hollis.

Hollis Walker: Jan, I know you have some strong opinions about cryptocurrency, and I know almost nothing about it. So, will you share those with us?

Jan Blakeley Holman: Yes. But I think I should preface this by saying these are my opinions, Hollis, and they’re not the opinions of Thornburg because our investment professionals will decide if and how they want to use cryptocurrencies in their portfolios. Right now, I don’t think they’re using them at all. But I want to make sure that you know, this is my opinion.

Hollis Walker: Good disclaimer.

Jan Blakeley Holman: As you know, Hollis, I’m fascinated by investment bubbles. Those are investments that get really, really big and then they pop. One of my favorites is the tulip bubble of the 1600s in the Netherlands. It happened when somebody decided that tulip bulbs had value and that you could trade tulip bulbs for goods and services. When people heard that and they saw that people were using bulbs as a form of currency, the price started to soar because the demand was sky high. At some point, somebody decided that the whole thing was stupid. And as quickly as tulip bulbs took off in value, they tanked. Now, before I get into crypto, I think it’s important to understand that this is one of those subjects that has people polarized. Some people love it, and some people think it’s absolutely bizarre. I won’t go far to say that cryptocurrency is definitely a bubble because I think the jury’s still out but there are some characteristics that make me think that cryptocurrency is not the best thing that’s ever come to the investment world.

Hollis Walker: It could turn out to be like floral currency, like tulips.

Jan Blakeley Holman: Absolutely. Here are the reasons why I think it’s really specious. First of all, it’s very complicated. I’ve been in this business for over 40 years and I’ve seen some complicated investments. But cryptocurrencies are the most complicated things I’ve ever seen. I mean, think about the password. What’s the deal with that? If you forget the password, your password to your digital wallet, you have ten chances to figure out what it is. And if you don’t figure out your password, within those ten chances, your money gets locked away from you and you’ll never be able to access it.

Ms. Walker: Wow.

Jan Blakeley Holman: I know that doesn’t sound like a really good idea, does it?

Hollis Walker: Right. And there’s no bank you can go down to and say, Hey, help me out here.

Jan Blakeley Holman: You’re totally right. That gets to the point where we talk about the fact that cryptocurrencies are decentralized. There is no main government or financial institution that houses them or that oversees them or anything like that. That also leads to the fact that they are unregulated, which means no bank no administrator, and investors are kind of hanging out there on their own. You remember the Securities Act of 1933, right?

Hollis Walker: Well, I wasn’t born then, but yes, I remember it.

Jan Blakeley Holman: Oh, I’m sorry, I forgot. I’m a few years older than you are. Well, the act put into place after the depression some really smart ways of protecting investors from companies that may be giving them information that’s not correct. So, under the act of 1933, what investors were required to receive with the new issue for example, was a prospectus that detailed all of the material facts about the investment, even the ones that might cause an investor not to invest in that investment. Another point of this is that these things are exceptionally volatile. One Bitcoin has traded as high as $67,000 and as low as $35,000 this year. Now, if we know that investors have issues trying to remain invested in high quality investments during times of volatility, how do we think that they’re going to remain invested in something like this that isn’t even necessarily something you could call high quality. It’s very expensive. Bitcoin is trading at about $40,000 per Bitcoin right now, and over the past six months that’s down 29% or $16,000.

Hollis Walker: Well, I bet tulips were even more predictable than that.

Jan Blakeley Holman: And they’re fun to look at. You know, you can’t even use cryptocurrency to buy a cup of coffee. Now, as soon as I say that Hollis, somebody is going to come out of the woodwork and say, yes, this place in Manhattan will let you buy coffee and a cinnamon roll using crypto. But all of those things together just spell danger to me. Especially to someone who is not an expert in investing. And that seems to be the type of person who is attracted to this type of investment. They want to make money fast. You know, I get it that looking at what it takes to be a successful investor in traditional types of securities is a long-term perspective. You have to invest on a regular basis. You have to hold on to your investments through bull and bear markets. It’s not easy. And it can also be kind of boring. Kind of like watching grass grow. But this is one of those things that investors should really stay away from unless they have a lot of money to speculate. I’ve heard of situations where people are putting their whole retirement plan, IRA money in cryptocurrencies. So my view, maybe they’ll really turn into something. Maybe they’ll be truly, broadly accepted But right now, beware.

Hollis Walker: Put your money in tulips.

Jan Blakeley Holman: I think so, yeah.

Hollis Walker: Especially those beautiful yellow ones. Thanks, Jan. I learned a lot from that. Now we’re going to introduce a new segment in our podcast. It’s called Ask Jan. From time to time we’ll feature questions from you, our listeners. Today we have a couple of letters with questions from our listeners. Here’s the first one. Dear Jan, I love the podcast and especially appreciate your insight on Social Security. Here’s my question. I’m 62 and just divorced my husband after a so-so marriage. I’m much happier now. I work part time in retail and have saved over the years, but plan on collecting Social Security in the next year or so. I read that a spouse may be able to collect part of an ex-spouse’s Social Security benefit after a divorce as long as the couple was married for ten years. I split from my husband after nine years and 11 months. Am I out of luck? What resources should I check? Signed single and soon on Social Security.

Jan Blakeley Holman: First of all, thank you for your question. It’s a good one and it’s a bit tricky. Maybe I shouldn’t use the word tricky because we had a president who carried that nickname, didn’t we, Hollis?

Hollis Walker: Yes, I remember him.

Jan Blakeley Holman: You are right in saying that individuals can collect an ex-spouse’s Social Security retirement benefit, which could not be more than 50% of what the spouse is receiving. But these four conditions have to be in place. First, of all, the two have to have been married for more than ten years. The divorce has to have been final for at least two years. The ex-spouse must already be claiming their benefit, and the receiving spouse can’t have remarried. Now, the problem with that is that you ask, am I out of luck? And the truth is, yes, you’re out of luck. If you would have stayed married for one more month, assuming that you mean that you split in nine years and 11 months and your date of the divorce was within nine years and 11 months. Assuming that’s true, you don’t qualify to receive half of your ex-spouse’s retirement benefit And how would anyone know about this opportunity, let’s call it? Well, first of all, they have to get very knowledgeable about Social Security. Second, think about the person who has been divorced for 30 years, has no idea where their spouse is and never remarried. They could probably look into collecting the benefit, but what if they don’t even know that’s an option? So Social Security administrator and web site SSA.gov is a resource. Your financial advisor is a resource. But unfortunately, it’s one of those things that people don’t know enough about to ask about. So you’re really hoping that you have an advisor who’s on top of all of those things.

Hollis Walker: Jan, what if you’re not on good terms with your ex-spouse or like your example, you don’t even know where they are? How would you know if they were claiming their Social Security benefits?

Jan Blakeley Holman: Well, if you’re not on great terms, it would be really awkward to call them up and say, hey, what’s your primary insurance amount? Because I want to get half of it wouldn’t it? This is one example where the Social Security Administration has approached this logically. In fact, you don’t have to reach out to an ex-spouse. You just go into the Social Security office, your local office, and schedule a meeting and when you’re scheduling that meeting, ask the person what documentation you need to take with you to that meeting.

Hollis Walker: Like maybe your divorce decree and your wedding or your marriage certificate.

Jan Blakeley Holman: Yes. And I mean, and your birth certificate. So there are a number of things that people wouldn’t really think about. And do you even know where your marriage certificate is or your divorce decree? It gets complicated, but you can do it.

Hollis Walker: Thanks, Jan. That was enlightening too. I’m not sure I know where all those documents are. So here’s our second letter. Dear Jan. It occurs to me that lots of couples close to retirement may be making financial decisions about retirement that assume they will remain married until they die. For example, they may be thinking when we retire will take money out of your IRA and leave mine alone. But you can’t just assume that everything will be hunky dory, can you? After all, we know that the divorce rates for those 50 and older has more than doubled since 1990. Which means couples assuming they’ll be together forever, may maybe making a big mistake and bad financial decisions as a result. So how does an individual in a marriage make decisions that are the best for her or him? Signed. Too much coupling.

Jan Blakeley Holman: Dear coupling. Of course, I don’t know if you’re married right now, but I totally understand your question. If you’re married, the simplest answer is to tell you that planning for a retirement that assumes you will be married forever isn’t for you. Because it sounds like you’re thinking about yourself, even though you’re saying, why do people plan as a couple. If you work with a financial adviser while you’re doing the planning, even when your spouse is there, you can talk about what happens when you consider taking more of one of your retirement benefits than the others. I mean, they may be unequal in terms of dollar amount, so you have to deal with that. But there is a reason why your advisor would recommend that you start taking distributions from certain types of accounts before others. It’s important for our listeners to know that in the event of a divorce, you and your spouse will work with a financial advisor or a mediator, and you’ll ask your advisor to give you a statement of your individual and your joint assets. If you’ve already retired you will get an accounting of the amount of money that’s come out of each of your respective retirement accounts. So you can see what’s been happening. If there’s an imbalance, the accounting will provide the information needed. So that you can compare the withdrawals and determine what action, if any, should be taken.

Hollis Walker: Thanks, Jan. That clarified a lot for me. And that’s all the time we have today. You’ve been listening to #NowMe with me, your host, Hollis Walker and Jan Blakeley Holman, director of advisor education at Thornburg Investment Management. If you want to suggest a topic for us, email us at NowMe@Thornburg.com. If you’d like to hear more episodes of #NowMe, you can find us on Apple, Spotify, Google Podcasts, or your favorite audio provider, or by visiting us at Thornburg.com/podcasts. Jan can also be found on LinkedIn. If you like us, subscribe, share us on social media and leave us a review. Until next time, thanks for listening.

This podcast is for informational purposes only, and should not be relied upon as investment, legal, accounting, or tax advice. It is not intended to predict the performance of any investment or market, and is not a recommendation, offer, or solicitation to buy or sell any security or product, or adopt any investment strategy. Past performance is not an indication of future performance. Investing involves risk including possible loss of the money you invest. Consult your investment advisor before making any investment decisions. The information contained herein has been obtained from sources believed to be reliable. However, Thornburg Investment Management makes no representations or guarantees as to the accuracy or completeness of the information and has no obligation to provide any updates or changes. The views expressed are subject to change and do not necessarily reflect the views of Thornburg Investment Management. This podcast is for your personal and non-commercial use only. You may not use it in any other manner without the prior written consent of Thornburg Investment Management. Thank you for listening.

 

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