For a really long time, I’ve wanted to operate my businesses remotely and explore living in another city… somewhere around the world.
Except I couldn’t’ figure out how to crack the code until, I think, tonight I stumbled on it in waves.
I met a feisty Australian lady named Sheryn. She lives in Bali, she runs a ridiculously gorgeous B&B I stayed at for $50/night. See pictures to see what I mean about ridiculous.
We got to talking and she told me about her blog. Then she took and friend and I out to dinner and introduced me to her ex-pat friends. It felt like hanging out with 60 year olds who talked, joked, and sassed like 35 year olds. It was fun! Apparently in Bali/Indo, there are 150,000 ex-pats living here. 150k! Like a buffet of cool people to meet.
Tonight I read her blog. It was amazing! Extremely eye opening as someone with questions about living here:
Need a good masseur? Need a hair dresser? A mechanic? Where to do laundry? Or buy organic X/Y/Z? Good inexpensive alcohol (impossible to find)? Fake driver’s license? Medical. Dental. Taxi’s. Pet-sitting. Tour guides. Best ice cream, fish, meat, you name it. Plumber? Tailor?
Basically, it got clear: what you need is one Sheryn in each city you’re interested in. Someone who spent a year or two figuring everything out, and who can brain dump it for you- Blah, after all my struggles and failures here, this is everything I know that’s best.
And what dinner showed me every Sheryn knows a ton of other ex-pats who have ex-pat friends… who have more ex-pat friends of friends. This vast network of very dialed in world travelers.
I got to thinking. I’m betting that with this one launch point, I could successfully meet someone who could introduce me to my own Sheryn for another city, say, BA. With her knowledge, I’d be wired and hit the ground running like – like a professional local.
I want the compressed knowledge of someone who is living in the city – best places to rent, fair pricing, best times to visit. What they love, what they hate.
Know what it costs labor only to hire a full time personal chef in Bali? $250-$300 A MONTH. What?! I learned what it costs to get a suit hand made from some of the nicest material (where the top suit makers buy their fabrics). What it costs to rent a place for a month in a great area of town. And I learned it all within 2 hours of landing in this city because I had Sheryn as my connection. It’s like a cross between an Amazon Echo and Apple Siri.
Give me 3-4 Sheryns in this city and I could live here as if I’ve been here for years within a week, with a fraction of the energy it normally would take to enjoy that life.
Introduce me to their friends in other cities, and quite possibly, the world just opened up. Not just to visit, but to live truly like a local – cheaper, less stressful, and way more fun.
While we were at dinner, another sassy Australian told me they had a strawberry farm. What they call strawberry farm, turned out to be a multi-home villa in the mountains. Now I have that connection/option.
What does this cost? That’s the crazy thing! With the right connections – you’re going to the best places, with the most fun people, and at the best price! It’s amazing. It’s like pixxy dust.
What I needed isn’t to work my ass off to research every city, try to optimize which is best, etc etc (which in my experience is both miserable and fails and makes one want to punch a baby in frustration).
I just need one fun, sassy, communicative, Sheryn in whatever city I am interested in – a person who has figured the best things out in her city, organized their thoughts, and is happy to share. I want to suck her brain dry.
A Sheryn in each town solves all the mechanical aspects of life and is a social launch pad to meet all of her friends, and their connections/experiences all over the world. Then the rest is up to me.
I’m betting that within a month, with Sheryn, all the mechanics of life and the emotionally connecting with other like minded individuals will be solid. Then the question will be, does this foreign city feel like a place I could call home?
And after meeting and talking with all of these ex-pats I’m told are here, the next question will be, what’s the next place that sounds like it might home?
Ideally, maybe develop different homes all over the world.
But first things first, let’s see what making this a home away from home feels like.
Someone recently asked me if “debt was good or bad.” A better question is, “Which types of debt are good, and which types are bad?”
This is debt for personal purchases – anything you consume – that is guaranteed to go DOWN in value. These are vacations, TVs, couches, cars, clothes, boats, etc.
Try this as an experiment. Take that $70 sweater, or $3000 couch you bought a year ago and look for what it sells for on Craigslist (or try to sell it to learn). What is it worth? In my experience, when you add in taxes on a new item, the loss is on average 75%-ish. Now imagine financing a 75% losing investment. Financing costs often make make something 50% to 100% more expensive. Now the loss goes to 90%+.
While you’re paying 50%-100% more than the original price, the value does the opposite – going down 75%. It’s one of the best ways, most efficient ways to light money on fire.
Zoom out. Big picture. People put 5k in their Roth IRA for retirement but have a 40k cars/boats/crap/etc that depreciates at 10-15k/year. They feel bewilderment about why they never seem to get ahead. It was mathematically certain when most of the places money is spent decreases in value by 90%.
Here’s the rule. It’s simple. Consumer debt = BAD.
If you can’t pay cash for it, you don’t buy it.
The advanced version of that rule is to not only pay cash, but try to buy all of those items for 50-75% off (to avoid the very thing we just talked about). It’s a skill that once developed makes it almost impossible to pay rack rate for anything. Multiplied over years, this substantially lowers the bar for monthly personal expenses (making it faster/easier to retire) and funnels more money into savings (again, making it faster/easier to retire).
This is debt used to purchase things that generate INCOME.
Examples of things that generate income: rental properties, businesses, flipping, etc.
Rental Properties: This means property that each month pays the mortgage AND makes you positive cashflow. Keep in mind the higher the debt the higher the risk. Options here include using a 15 year mortgage or taking your time to buy a property 20-50% below market value. If bought right, and in an area likely to have quality tenants, this can be a relatively stable investment. I tend to prefer paying cash for rental properties because I prefer that high level of safety. But a strong argument can be made for using debt to finance the right kinds of investment properties. You just need to be sure you can survive down cycles – real life isn’t a clean, linear excel spreadsheet. No point in having rentals for 7-8 years and then getting busted when the market changes out because you’re overleveraged. That said, I love rentals. I know more people who have become millionaires from real estate/rentals who are “normal” people (not inventing facebook) than from any other way.
Businesses: I have friends who have used debt to buy other people’s businesses and through their management skills to lower costs and raise revenue. The business then throws off enough cash to pay for the business AND generate a chunk of extra money. Not only is the value of the business increasing, it’s throwing off extra money, and in 5-7 years it’s paid off and throwing off a lot of money.
Flipping: I’m a big fan of this approach. It’s the most basic buy low, sell high approach and it can be applied to almost anything from houses to cars to tons of weird stuff that sells online. This is the exact opposite of consumer spending, of buying high and eventually selling low. Instead, you should have already locked in your profit when you buy low. I like using flipping to generate money as an active full time or part time business and then take the profits and use it to buy passive income producing assets. Note the debt associated with flipping is usually very short-term in nature (a couple months tops assuming you’re flipping quick, which is the goal). This is lower risk because it means you don’t have to predict how the market/economy will be doing in 10 years. You only have to have a sense of how things will be in 2-3 months, which is much easier.
The key thing to note is debt is used here to MAKE money. With consumer debt, it’s used – often unknowingly – to LOSE money.
And simply put, that’s why consumer debt is bad, and investment debt (used carefully/wisely) is good. One makes you very poor and a financial prisoner. The other makes you richer and freer.
Advanced. Final note, I have very successful friends who finance their cars/toys instead of paying cash. The difference is WHY they do it. They could pay cash, but if the bank will give them a loan at 3% on the car they want and they then invest it in their businesses / properties / etc and make 20-50%, making them more money. Note the reason they took the debt on was to MAKE more money, not because that was the only way they could afford it.
Advanced #2. Investments debt can be highly leveraged. If you buy a rental house with 5% down and the market goes up 5% you’ve doubled your money (in over simplified terms neglecting selling costs). Great! If the market goes down 5%, you lose 100%. Holy crap! This is why if you’re using leverage that I’m a fan of buying fairly substantially below market value. That way if the market goes down you have space built in when you bought. Otherwise the margin for error depends on hoping the market goes up / nothing goes wrong. In my view, better to be patient and move slow and be safe.
I like to bet money on elections so I can’t afford to be emotional about who I want to win. I only care about who will win. In 2012, I won over $5,400 on political bets.
For the Republican nomination in 2016, I predict Trump will win.
There are a number of unique R-nomination factors when compared to the D nomination process, and ALL of them favor Trump. and give him a disproportionate lead compared to what polls show alone (which is a substantial lead). Because the R nomination is much more complicated than the D process, in 2012, I built a spreadsheet to model the process. You can see the spreadsheet here.
Observations / Conclusions:
- Having more candidates stay in the race longer, especially until March 15th or later, strongly favors Trump.
- There are a number of winner-takes-all states. These all favor Trump.
- There are a number of states with minimum floor requirements, meaning candidates often have to earn 15-20% of the vote to receive any delegates. A number of states have candidates hovering around 10-17%. They may get 0% of the delegates instead. This system strongly favors Trump.
- By March 15th, Trump will likely have more delegates than all of the other candidates combined plus an additional 25-50%.
- By March 15th, 60% of the delegates will be decided. It will be very difficult to candidates who are behind to catch up. This strongly favors Trump.
Karl Rove wrote a WSJ piece outlining that unless some candidates drop out and their supporters rally around a single non-Trump alternative by March 8th, it’s highly unlikely anyone catch Trump. I see no indications that Rubio or Cruz will drop out in time.
On March 15th, Trump will likely be substantially ahead in the delegate count and it will be so late in the process that anyone catching him will be a remote chance at best.
The betting markets reflect that Trump is a favorite to win the R nomination by 75% odds. Interestingly, while Cruz in the #2 candidate in polls with 20%, the markets are putting him at last place with abysmal odds of less than 2%. Rubio has odds of ~17%.
In the presidential contest, I also predict that Trump will lose to Clinton.
Sidenote: While the polling data for the R process isn’t nearly as good as the D side, the delegate projections will have a wider margin of error but conclusion that Trump will be the nominee doesn’t change.
(I wrote this about 5 months ago at the same time as the Clinton prediction – I forgot to hit post)
I predicted back in 2013 Clinton would run. And if she ran she’d be the nominee and subsequently she’d be the next president.
With 6 months to go, I wanted to offer a look at the odds of that prediction being accurate.
The media paints a picture of a close race. BS. They are motivated to do that because it sells advertising and it’s what people want to believe/feel.
When you look at people who’ve built their reputation on predicting elections (not selling ads), you get a different picture. Back in 2012, I used this discrepancy between media/public feeling/perception and pro perception to make 54% on a 10k bet in 3 days.
Prediction Pros. These aren’t talking heads on TV. They’re political data junkies. They don’t just look at some polls, they look at ALL polls. They have formulas to adjust polls which polls are skewed to favor R’s or D’s. They look at the state polls, county polls, economic data, likely turn out models, key demographics inside key counties inside key swing states. They don’t compete to call who will win an election – boring, too easy, and they’d nearly all being agreeing with each other – they compete on the exact margin on election day campaigns will win by.
Here are the people I’ve found to be the most credible/reliable calling who will win and by how much:
Sabato: 347 Clinton vs 191 Trump. A professor of PoliSci at University of Virginia, he puts out a free newsletter (I recommend) and calls everything from Presidential races to Governorships to individual Senate and (much more difficult) House races. His prediction as of 6/23/16 (link is live updated).
ElectionProjection.com: 349 Clinton vs 189 Trump. This is a normal guy who blogs but is obsessed with guessing political outcomes accurately. I began following him back in 2004 when he started and he’s a damn good guesser. His prediction as of 7/1/16 (link is live updated):
Outcome based analysis. Every pro is calling a Clinton electorate vote blow out and they differ (not by much) in calling that margin of victory.
Probabilities. It’s good to think of a prediction as the most likely outcome. That said, a more nuanced perspective looks at probabilities to get a sense of likelihood of an outcome. When it comes to betting, upsets happen. The predicts outcomes above are black and white. Here is the grey:
Probabilities of Clinton Winning (taken on 7/1/16):
73% Vegas market makers.
81% FiveThirtyEight’s probability model.
Summary. 6 months before the election, all pros are seeing a likely Clinton blow out (measured by Electorate Votes). While Vegas-like betting markets are putting odds, around 70-ish%, most political pros are 80-ish%.
Betting. When I made my last bet, there was a significant market inefficiency. Currently, the market inefficiency is (=83/73) ~14%. Meh, margin but not enough to make the risk/reward worth it to me.
At it’s most basic, retirement means one thing: passive income. It doesn’t matter if you’re a millionaire or even more, if you don’t have money rolling in each month, passively, you still gotta go to work. Getting clear about exactly what it takes to retire means you’re much more likely to make financial decisions that get you there. There are 4 stages I think make sense to use a framework when thinking about passive income.
Stage 0.5 – PARTIAL RETIREMENT: Imagine your monthly expenses are 5k a month. For many people starting at 0 that might seem like an unattainable number – so they imagine retirement to be binary – either retired or not retired – and as something in the far off future they hope to achieve “someday.” But could you get to 2.5k a month? Because then you could work half as many hours each week and still be covering expenses! How would it feel to work 20 hours a week instead of 40? Pretty damn awesome. Is it irresponsible to not work 40 hours? Hell no. If you’re making the same amount of money you were before and your investments are getting you half way there – now you have choices. Play with all that extra time. Work and use the savings for other things – like Stage 1.
Stage 1: SURVIVAL: Survival means you are at 5k a month in passive income and 5k a month in expenses. You can survive fully on your passive income. This stage is really liberating. You can wake up every day for a month or a year, and do effectively nothing. You can work 40 hours a week, 70 hours a week, or zero. Want a vacation? for 3 months overseas? Done. It’s a game changer. However, you’ll realize you have no margin for error – which in real life, always happens.
STAGE 2: SAFETY: I like to define safety as 2x your monthly expenses. This would mean that half of you income could disappear and you are still good. That’s a large buffer and truth is anything above 1x expenses is safety money. At 2x you have reached a distinct safety level. Lots can go wrong and your life is still good. Market changes, rents go down, unexpected medical expenses, want to help a friend in need, whatever – you can absorb a very, very high degree of unexpectedness. You can even afford to splurge here and there and still feel very safe. This stage sounds amazing because it is. It’s not just retirement, it’s a whole next level of peace and safety. You’re not on the edge of retirement – you have such a buffer that when people worry about changing economic conditions you already planned for it. Hard to imagine financially anything better.
STAGE 3: LUXURY: Passive income is 3x your monthly expenses. At this stage monthly expenses (survival) are covered, a substantial buffer of safety exists Chances are quite high if you’ve achieved this level you’re frugal with your spending and a good investor with your money. When you keep continuing those traits they eventually get you to “luxury.” Where each month even if you went crazy playing / traveling / spending, you’d still end the month with more than you started. This is a stage where you can start asking, what’s something I really want that is a luxury? Not for others, but for you. Love to cook? Nicest kitchen you can think of. Love cars? Which car? Want to pay for family trips? Really this stage is where money starts to border on irrelevant for most expenses. You really start to feel the diminishing utility of extra money at this stage. 1k more when you’re in partial retirement is HUGE. At luxury, it’s nice. It buys nicer plane tickets, an extra trip. Mostly what it buys is that it substantially removes the cost of something from the analysis. It’s more a question of do you really want it. In fact, when you can have anything, then the question is what do you really want (much less what does it cost). What I’ve found with people who reach this level is the opposite of what poor people expect. Instead of buying everything in sight, they actually start to thin a lot of the stuff they already have. A realization that you can have nearly anything gets rid of the “scarcity” of not being able to have something. Quickly stuff just feels like clutter. Instead you want minimal things – but what you have is high quality. Instead of stuff, you buy time. You buy experiences – travel, time with loved ones, freedom from doing things you don’t enjoy, convenience (skipping airport lines, pre-cooked healthy food, etc). At this stage, life at this stage is the least about money.
Most people think of retirement in a binary way – retired or not retired. I think it’s much more helpful to see and experience it as a continuum from partial retirement to survival to safety to luxury.
I would add that while I think these stages are pretty applicable for everyone, the multiplier you use could vary greatly from what I used. If you’re a school teacher in retirement, your income is VERY predictable so 2x income may be greatly excessive for safety. Maybe 25% would qualfy. Luxury might be 50%. The greater your income could vary, the wider the margin of safety you might want is.
After making the decision to buy a Tesla, the analysis then shifted to how to get the best deal for my money.
Fortunately for me, what I wanted (a Model S 85) was only available used. That ruled out new. I looked at Telsa’s Certified Pre-Owned program but found I could find other deals online cheaper – usually by ~10k. So that sent me focused outside of Tesla for used.
What I found was that since Tesla’s are a rather unique vehicle with a variety of configurations, used ask prices were all over the place. Before I could get a “good” deal I had to manually figure out the “market” for used Teslas.
I built a spreadsheet that tracked the year, model, battery, and options for all Tesla’s for sale that matched what I wanted across the nation – and had my assistant keep continuously updating it. We then tracked Actives (for sale), and solds/pendings. The important information was really getting a solid feel for Solds so when an extra good deal came up, I felt confident so I could move quickly (and negotiate, as it turned out).
What we found were market inefficiencies and pricing all over the place. The gap between ask and sale prices often exceeded 20k. And even sold prices for very similar cars could vary substantially – understandably. People were buying substantially blind.
In the end, I almost bought a car for 68k (plus 2k in shipping/fees = ~70k) that was almost exactly what I wanted. It was a great deal and I pounced. They were emailing me the paperwork. Locally, I had found what I wanted – exactly what I wanted – but they were asking 85k, firm. 15k higher. I wanted to try one more time to talk him down.
I ended up convincing the guy to meet with me, asap, and used my spreadsheet to my advantage. He agreed he could ask anything he wanted, but what mattered is what he would sell for. He had no idea what “reasonable” was. I had the data. Emotionally, he had just paid a fortune new and didn’t want to lose a fortune. I showed him the data. To have an equivalent car (to the 70k deal above) with this local car’s upgrades, a good deal would be to pay 72.5k-ish. We settled on 73.5k. It got me exactly what I wanted (Model S 85, tech, autopilot, 19’s, upgraded stereo and upgraded interior package) and I could see/touch it and know exactly the condition it was in.
Having the data helped me save $11.5k and gave me confidence it was a solid deal.
If interested is seeing the layout/data, I’ve put a link to the spreadsheet I built here.
My initial Tesla test drive experience was decidedly mixed. I *loved* the autopilot but the ride was rough and loud. It was enough to make me stop plans of buying the car.
But the initial auto-pilot experience emotionally engaged me and made me want to learn more.
It made me curious to see what the quietest Model S I could find was like. I did a lot of research and A/B tested different options:
- Motors: Single vs Dual: The single motor in the rear was noticeably quieter than having the second motor right by the driver.
- Tires: 19’s vs 21’s. 19″ tires really changed the ride quality and noise levels.
- Suspension: The “upgrade smart suspension” vs the cheaper coiled suspension – the original coiled suspension was a much softer, more Lexus-like ride.
- Sunroof: Unfortunately, I couldn’t test any Tesla’s to test drive that didn’t have sunroofs. Research indicated no sunroof reduced wind noise a lot.
Overall, a single motor Model S with coiled suspension and 19’s was the quietest Tesla available – a pretty quiet, decent ride – vastly improved over the P85D with 21’s and smart suspension I originally test drove.
Was it tolerable enough when you add autopilot in to make it worth buying? I couldn’t decide.
I did pro/cons on a variety of areas:
Sound deadening – just wait. Eventually Tesla would get sound deadening figured out – people were already risking taking apart their Teslas and doing it themselves. My best guess was a year, maybe year and a half. At that stage owning a quiet, performance beast would be possible. On the other, it would necessitate buying a brand new car to get this new sound deadening – which would be very expensive – and be a long time in the waiting. The “quietest” version was already reasonably comfortable enough, much cheaper, and available now.
Other upcoming auto options. Auto-makers from Toyota to GM to Mercedes to Audi to BMW are in a race to create self driving cars – maybe in a year or two or three something would come out that’s gas-powered – which avoided unknowns around owning an all-electric car. But how good would they be? I couldn’t shake the feeling that when it came to auto-driving technology, Tesla was a tech company first and foremost, who’d designed their cars to download improved operating system updates like a cell phone. Other car makers just seemed so far behind the curve and even if they came out with something it felt like Tesla would keep updating, quickly, automatically, and for free, with something better. For now, and for the foreseeable future, Tesla seemed like the clear auto-pilot leader.
Apple car. Apple is clearly working on an anything-but-secret car named Project Titan, but all reports indicate it’s 4-ish years away from something a consumer can buy. But worth knowing/analyzing and considering when making a big purchase.
Battery degradation. Reports indicated that over 50,000 miles the car only depleted on average 6% of it’s capacity and the degradation slows down the more miles that are driven (see link)… that was a surprisingly good compared to my initial concerns.
Battery range: 85 vs 90D. The P85D I test drove performed far below expected range. User reviews of those who bought/tested a new car with dual motors compared to their old car with a single mtoor seemed suggest that somehow Tesla has figured out how the game the EPA ratings since the same battery with dual motors seemed to noticeably underperform a single motor when it came to range. I believe a lower capacity 85 with a single motor would likely have a similar range to highest available 90 battery with dual motors (which is a require the dual motor option) and be much cheaper in real world performance (which is what I care about).
Autopilot 2.0: This was probably my biggest variable (above battery degradation). Tesla is working on an upgraded autopilot that will drive on city streets. When released, this upgrade will be hardware related and require substantially more sensors around the car to facilitate the transition from a relatively simple highway autopilot to a much more complex, inner-city auto-pilot. The hardware will not be retro-fitable. If you’ve seen pictures of Google’s self-driving cars covered in sensors, that will give you an idea of the scope of difference. Realizing this bought me an awareness: anything I bought would soon be outdated like an outdated early model iPhone cell phone. To someone who is used to driving cars into the ground, buying a new Tesla and then a year or so later doing it again bothered me. A lot.
3-Year Leasing: Autopilot 2.0 analysis, combined with how many miles I drive (25-30k/year), basically killed any desire to do a 3 year, 12k miles/year lease. 3 years from now the technology will likely be much different – and I’ll want to upgrade before then.
Upgrading: The more analysis / research I did, the more it felt like when the first few versions of the iPhone came out. The hardware changes were so significant in the beginning that upgrading each cycle really did make a huge difference. I knew I wouldn’t own the initial iPhone 1, or 2, or 3 or 3G for for 3+ years. Even though all these iPhones did software upgrades (like the Tesla), the hardware improvements were enough to really make me want the newest version (I also have a passion for tech).
Model 3: It’s supposed to ship at the end of 2017. Tesla has never hit a deadline. My best guess was 2 years from when they started taking pre-orders and even then, after doing detailed analysis on quality issues coming out of Telsa, I wouldn’t want a car in the first batch of 50,000. Meh.
New perspective: So it looked like my first Tesla wasn’t going to be my end-all car after all – which is initially what I thought when I started shopping for a Tesla – because of the ride/sound issues but really because of Auto-Pilot 2.0. The self-driving technology is changing so rapidly I would probably own the car for 1-2 years and then flip it out when AP 2.0 came out. Given that it would be an “in-between” car, the less money I wasted, the better.
Conclusion. I decided that IF I were to get a Tesla, what made the most sense for me was a used Tesla Model S 85 with a single motor, 19″ tires, coiled suspension, no sunroof – and auto-pilot. My ideal car at the moment was (fortunately) a used Tesla with very few upgrades!
* * *
I was still decidedly undecided, until recently, on another 4 hour drive over the pass, I hit an emotional wall. I was done. I wanted to buy my time back. Autopilot could buy back 8 hours a week. The thoughts then shifted from researching / analysis of the car, to researching how to buy it. My next post is about the spreadsheet I built to determine the market value of the specific niche Tesla I wanted and then how to go about getting the best deal on it.
** UPDATE ** Elon Musk says AP 2.0 announcement coming at end of 2016.