diff --git a/src/timmy/semantic_memory.py b/src/timmy/semantic_memory.py
index 0ef70ef..853cfe5 100644
--- a/src/timmy/semantic_memory.py
+++ b/src/timmy/semantic_memory.py
@@ -436,10 +436,11 @@ def memory_write(content: str, context_type: str = "fact") -> str:
     try:
         from timmy.memory.vector_store import search_memories, store_memory
 
-        # Dedup check for facts — skip if a very similar fact already exists
+        # Dedup check for facts — skip if a similar fact already exists
+        # Threshold 0.75 catches paraphrases (was 0.9 which only caught near-exact)
         if context_type == "fact":
             existing = search_memories(
-                content.strip(), limit=3, context_type="fact", min_relevance=0.9
+                content.strip(), limit=3, context_type="fact", min_relevance=0.75
             )
             if existing:
                 return f"Similar fact already stored (id={existing[0].id[:8]}). Skipping duplicate."
diff --git a/src/timmy/thinking.py b/src/timmy/thinking.py
index 3d123ef..034bfbc 100644
--- a/src/timmy/thinking.py
+++ b/src/timmy/thinking.py
@@ -348,10 +348,23 @@ class ThinkingEngine:
             thought_text = "\n".join(f"- [{t.seed_type}] {t.content}" for t in reversed(recent))
 
             distill_prompt = (
-                "You are reviewing your own recent thoughts. Extract 0-3 lasting "
-                "insights, preferences, or facts worth remembering long-term. "
+                "You are reviewing your own recent thoughts. Extract 0-3 facts "
+                "worth remembering long-term.\n\n"
+                "GOOD facts (store these):\n"
+                "- User preferences: 'Alexander prefers YAML config over code changes'\n"
+                "- Project decisions: 'Switched from hardcoded personas to agents.yaml'\n"
+                "- Learned knowledge: 'Ollama supports concurrent model loading'\n"
+                "- User information: 'Alexander is interested in Bitcoin and sovereignty'\n\n"
+                "BAD facts (never store these):\n"
+                "- Self-referential observations about your own thinking process\n"
+                "- Meta-commentary about your memory, timestamps, or internal state\n"
+                "- Observations about being idle or having no chat messages\n"
+                "- File paths, tokens, API keys, or any credentials\n"
+                "- Restatements of your standing rules or system prompt\n\n"
                 "Return ONLY a JSON array of strings. If nothing is worth saving, "
-                "return []. Do not include ephemeral observations or repeated themes.\n\n"
+                "return []. Be selective — only store facts about the EXTERNAL WORLD "
+                "(the user, the project, technical knowledge), never about your own "
+                "internal process.\n\n"
                 f"Recent thoughts:\n{thought_text}\n\nJSON array:"
             )
 
@@ -373,10 +386,51 @@ class ThinkingEngine:
 
             from timmy.semantic_memory import memory_write
 
+            # Sensitive patterns that must never be stored as facts
+            _SENSITIVE_PATTERNS = [
+                "token",
+                "password",
+                "secret",
+                "api_key",
+                "apikey",
+                "credential",
+                ".config/",
+                "/token",
+                "access_token",
+                "private_key",
+                "ssh_key",
+            ]
+
             for fact in facts[:3]:  # Safety cap
-                if isinstance(fact, str) and len(fact.strip()) > 10:
-                    result = memory_write(fact.strip(), context_type="fact")
-                    logger.info("Distilled fact: %s → %s", fact[:60], result[:40])
+                if not isinstance(fact, str) or len(fact.strip()) <= 10:
+                    continue
+                fact_lower = fact.lower()
+                # Block sensitive information
+                if any(pat in fact_lower for pat in _SENSITIVE_PATTERNS):
+                    logger.warning("Distill: blocked sensitive fact: %s", fact[:60])
+                    continue
+                # Block self-referential meta-observations
+                if any(
+                    phrase in fact_lower
+                    for phrase in [
+                        "my own",
+                        "my thinking",
+                        "my memory",
+                        "my working ram",
+                        "self-declarative",
+                        "meta-observation",
+                        "internal state",
+                        "my pending",
+                        "my standing rules",
+                        "thoughts generated",
+                        "no chat messages",
+                        "no user interaction",
+                    ]
+                ):
+                    logger.debug("Distill: skipped meta-observation: %s", fact[:60])
+                    continue
+                result = memory_write(fact.strip(), context_type="fact")
+                logger.info("Distilled fact: %s → %s", fact[:60], result[:40])
 
         except Exception as exc:
             logger.debug("Thought distillation skipped: %s", exc)