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Old 09-04-2014, 10:59 PM   #21
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If you really have the secret sauce that lets you earn 25% on investments year in and year out ... then prove it with a few years of accumulation and retire when your SWR is more normal - like 4%.
Indeed it seems like (?) this is essentially the OP's ultimate objective. Unless I have misunderstood, he doesn't intend to fund actual retirement from ongoing options trading; rather, he just wants to use the next four or five years to build capital through aggressive speculation, and then invest the proceeds and live off the relatively modest income ("I am trying to retire in the next few years ... My thought is to continue to save and build up retirement accounts … The desired end state is to have 100k+ coming in from dividends/investments tax free …").

The strategy of employing options and margin is a risky, 'swing for the fences' approach. Apparently the OP realizes that ("I am trying to get out of the game well before 40 after all ... so the 'conventional wisdom' left the building some time ago"), so I have nothing more to say about his plan. I'm not really sure why he sought a critique: surely he must know that most people on this board are fairly conservative investors rather than gamblers?

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[A]s soon as your investments underperform you will be eating into principle principal so rapidly you will lose most of your capital base and have to start over.
Fixed!
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Old 09-05-2014, 01:41 AM   #22
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If you really have the secret sauce that lets you earn 25% on investments year in and year out (more than double what Bernie Madoff was able to do using his best methods) then prove it with a few years of accumulation and retire when your SWR is more normal - like 4%.

The secret sauce isn't a secret. It is margin/leverage right now. I am just working on getting the strategy right. You can get 36% running 2-1 on CEFL, which is a diversified ETN focusing on several closed end funds and would double every 2 years. That said, I'm not that brave and need to learn more about ETN's. Looking on the board, I haven't seen anyone mention CEFL or exchange traded notes.

Your plan is ridiculous.

I was hoping for a bit more substance than "Gee, that's crazy.", although I am sorta used to it. Maybe something on hedging/controlling left tail risk. I'm thinking 20-30% downside protection should be sufficient, looking at 2008. Buying vix or selling puts on it? That is helpful.

I've been told that retiring overseas is crazy and I'd get kidnapped in Ecuador or the Philippines.

I've been told that the philippines is dangerous and some parts are...then again, so is Chicago. At least in the Philippines I can get a .50 cal BMG or a M249 saw. (These are Heavy/light machine guns for the uninitiated, and no, I'm not joking)

I've heard investing in stocks is crazy, real estate is the way to go, no wait, gold, no wait, rare earth metals. I had a spirited debate earlier today with someone suggesting to them that sitting 100% in cash is not a safe thing due to inflation risk and that while it may not have a significant impact today, it will have a substantial impact over time.

Heck, the idea of retirement, much less early retirement, is crazy to some people. My dear mother asks me rhetorically what would you do if you didn't work, and I know there is a thread on here about that.

People say the USA is the greatest country on earth, its crazy to think about living anywhere else. Then I find out these people have never left the states, ever.
Personally, I think its nutso to invest in an actively managed fund as to a mathematical certainty, nearly all of them are going to underperform the market over time, yet there are multiple threads here on about which funds to invest in.

I don't understand why CEF PHK, which was actually recommended here for building an income portfolio, traded at a 70% premium back in 2012 and for 5 years has traded over a 50% premium. I don't understand why good income generating CEF's trade at a 11% discount, but if I had to choose between the two, I'll take the 11% discount with a healthy 7% yield. Is it risky buying a dollar for 89 cents? Maybe, but I'll take my chances.

I'm not really sure why he sought a critique: surely he must know that most people on this board are fairly conservative investors rather than gamblers?

Well, there aren't really many people who are looking at retiring overseas, particularly when they are young, so I figured this would be my best shot especially since early retirement is a fairly unconventional concept. I don't know everything and the more I learn, the more I find out what I don't know. If there is a retire at 40-45 overseas forum, I'd love to check it out.

Writing it down gets the strategy straight in my head and makes me really think about how to execute it. Peer reviews help me look at other elements I may have not considered, like a good withdrawal rate. Maybe I am off base on the taxation element, although IRS.gov seems pretty straightforward. Most of the stuff I have read on living and investing overseas is very heavy on sales and commercial content. Most retirement plans aren't tailored for people retiring at age 40, either so that is an added complexity.

I probably need to go into more detail on the game plan and will do so tomorrow, but like I said, I'm developing it. Key tenants are going overseas to a lower COL country, making as much tax free money as possible when I am there, while still saving and contributing to retirement accounts. I would ideally like to build/buy a house while in the US and just leave so I would have no mortgage/rent payments, but realistically, I probably need to get boots on the ground for 3-6 months minimum.

Answers lead to more questions. Retiring overseas leads to issues with FACTA, but opportunities with the Foreign earned income exclusion. I've never claimed the deduction, and I don't have a foreign bank account, so I have no personal experience with it.

Anyone interested in making potentially 195k tax free annually, according to IRS.gov? Even if you don't make the max, you can get an instant 15% or more bonus on your investments and deduct housing costs, which you can't do in the states. You may feel better off giving that 15-20% to Uncle Sam, but I think I need that 20% in my pocket instead.

Figuring the Foreign Earned Income Exclusion

Did you know you can potentially skip out on medicare and SS too? I'm not going to get SS at my age, so I'd prefer to avoid paying it.

Social Security Tax Consequences of Working Abroad

Now, 200k tax free may be peanuts to you, but it certainly got my attention. All the cool kids on Wall St. are inverting, so I might as well too. That said, problem #1 is generating 200k annually, but honestly, in a lot of these places, even 100k would be more than enough to live very, very comfortably.

I have been to Ecuador (loved Quito and Cuenca. Want to see the coast) and Costa Rica (Nice, but a little too expensive) country shopping, but there are several countries in South America that I haven't been to that look to have potential (Argentina, Paraguay, Uruguay, Chile) that I have only read about.

Eh, I'm not sure how conservative they are. The CBOE links are pretty darn interesting to me at least from a risk adjusted alpha generating standpoint. Greater returns with less risk backtested 15, 20, and 25 years, I would think someone might be slightly interested in the prospect of lower risk and higher gains. 30% reduction in volatility? Screw that, Options are dangerous.

Granted, these are fairly new concepts and not many funds employing these strategies, so it may be a bit strange and different than what most people have heard of with just investing in an mutual fund for 30 years.
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Old 09-05-2014, 08:40 AM   #23
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Certainly there are dangers to retiring overseas, but there are dangers anywhere and many people do retire to other counties. That part of your plan may not be for everyone, but you seem to be getting a handle on it, except for the part about acquiring heavy machine guns to defend yourself.

The reason I called the financial part of your plan ridiculous is the assumption that you can earn 25% on capital, steadily and reliably. Sure, some risky investments and some risky leveraged speculations can earn 25% or more. For a time. There are market inefficiencies which can be exploited sometimes even for a few years to make that kind of money. But historically these schemes only work for a while, as is sometimes described here as they only work until they don't. And when they don't work, the portfolios tank.

Maybe you are ridiculously comfortable with risk and would accept the need to start over building your savings after the market wipes out your portfolio. Most retired people are looking for more safety net than that. Only you can assess your own risk tolerance, but what you describe in your plan is so much riskier than any other plan ever that I don't believe you actually believe the risk is real.
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Old 09-05-2014, 09:15 AM   #24
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I can only repeat my earlier advice to consult with a knowledgeable CPA or tax attorney before implementing your intended tax dodge. Passive investment income is not eligible for the foreign earned income exclusion, and forming a shell corporation and "hiring" yourself as the manager is not likely to get around this issue. I would guess trying this is a lot more likely to land yourself in a federal prison somewhere stateside, rather than relaxing on a beach overseas.
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Old 09-05-2014, 10:13 AM   #25
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And maybe to close of from my perspective.

If you can generate >25% returns (or even >15%), you better do the following:
  • Create a hedge fund, start with 200k of your own money
  • Generate returns of that sort three years in a row
  • Find additional investors in the mean time and afterwards. Charge management of 1% / 20%. Keep searching until you have 30+ million in assets under management.
  • Close the fund after 7 seven years with a few million earned in fees
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Old 09-05-2014, 10:19 AM   #26
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I have generated 30% returns for 13 years in my trading account and I doubt I could find someone willing to invest $5 if I created a hedge fund.

Now if I touted that there was going to be a big crash every year and one year I was right, I could get billions.
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Old 09-05-2014, 10:52 AM   #27
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I have generated 30% returns for 13 years in my trading account and I doubt I could find someone willing to invest $5 if I created a hedge fund.

Now if I touted that there was going to be a big crash every year and one year I was right, I could get billions.
More than 30% every single year? or do you mean 30% CAGR.
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Old 09-05-2014, 11:35 AM   #28
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OP, getting defensive is not likely to result in more constructive criticism. Fleshing your ideas out more fully will help, though. You will not get a receptive audience on your trading strategy here, so don't expect it. I would however take seriously the commentary that your expectations of 25% a year every year are quite unrealistic. Plumb what the depths couple be if your strategy breaks down and come up with at least one Plan B (several would be better). If you flesh out all of the bits and pieces of your plan and execute it successfully, I would strongly encourage you to write it up in detail and stick it on a blog so that others can benefit. In the past I have looked for overseas retirement information mostly out of curiosity and I have found the same stuff you did: sleazy come-ons and precious little information.

On your specific comments on ETNs and CEFs:

- I personally really do not like ETNs. The chief reason is that they are generally unsecured (and sometimes subordinated) notes issued by completely opaque financial institutions. If they blow up, your outcomes are likely to be very poor. As a result, I avoid the structure.

- CEFs are another matter entirely. There are lots of funds out there with unusual strategies and there are many oddities when it comes to discounts/premiums to NAVs. shop this market regularly looking for opportunities. Premiums and discounts tend to be persistent. I won't own funds with a premium, preferring to buy at a generous discount, but we should not go into such an investment planning on making hay from the discount collapsing. This happens from time to time, but it is difficult to predict and often hinges on fund managers taking actions that may be detrimental to their own bottom line. WIW, for example, has been flopping around a 10+% discount for a number of years with no end in sight and no apparent move by fund managers to do anything about it. Other funds will take action, but tend to be gradual. PEO has had a giant discount for a long time. The management of the fund committed to a minimum distribution of a certain percentage of the fund's assets every year and they periodically buy back some shares in the open market. This serves as a mini-liquidation every year that can help close the gap over time, but it is unlikely to do so any time soon. That said, you can access very good managers and buy at a discount sometimes in this market. I own GIM and think it is a very attractive opportunity. Excellent managers with a good track record, reasonable fees (for a CEF) and trading at a much fatter than historically usual discount.
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Old 09-05-2014, 11:59 AM   #29
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The secret sauce isn't a secret. It is margin/leverage right now. I am just working on getting the strategy right. You can get 36% running 2-1 on CEFL, which is a diversified ETN focusing on several closed end funds and would double every 2 years.
I doubt that many (any?) people here doubt the potential for earning outsized returns. It's the ability to do so consistently, and without incurring substantial risk, that is in question.
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I've been told that retiring overseas is crazy and I'd get kidnapped in Ecuador or the Philippines.
Retiring overseas certainly doesn't appeal to everyone, but that doesn't make it crazy. If you have a flexible attitude and good language skills, it can result in inexpensive living and so provide FI at a young age.

I have no idea what the kidnapping risk is in those two countries, and I suspect that the people you're talking to don't either. Presumably you will conduct proper research before deciding exactly where you want to live in retirement.

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I heard investing in stocks is crazy, real estate is the way to go, no wait, gold, no wait, rare earth metals. I had a spirited debate earlier today with someone suggesting to them that sitting 100% in cash is not a safe thing due to inflation risk and that while it may not have a significant impact today, it will have a substantial impact over time.
No one has all the answers.

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People say the USA is the greatest country on earth, it's crazy to think about living anywhere else. Then I find out these people have never left the states, ever.
Yes, it's almost a cliché. People all over the world tend to prefer their own nation's culture/climate/health care/legal system/political system/whatever; but Americans are notorious for insisting that the US is "the best" in everything … despite the fact that fewer than 40% hold passports and consume little foreign media. Don't sweat it.

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If there is a retire at 40-45 overseas forum, I'd love to check it out.
May be of interest: "Travel, Tourism and Living Abroad"; "Early Retirement Abroad"; "Retire Overseas on $1,200 a Month"; "Retirement Abroad: Pitfalls of Paradise"; "Early Retirement Abroad".
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Old 09-05-2014, 12:02 PM   #30
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The secret sauce isn't a secret. It is margin/leverage right now. I am just working on getting the strategy right. You can get 36% running 2-1 on CEFL, which is a diversified ETN focusing on several closed end funds and would double every 2 years.
I doubt that many (any?) people here doubt the potential for earning outsized returns. It's the ability to do so consistently, and without incurring substantial risk, that is in question.
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I've been told that retiring overseas is crazy and I'd get kidnapped in Ecuador or the Philippines.
Retiring overseas certainly doesn't appeal to everyone, but that doesn't make it crazy. If you have a flexible attitude and good language skills, it can result in inexpensive living and so provide FI at a young age.

I have no idea what the kidnapping risk is in those two countries, and I suspect that the people you're talking to don't either. Presumably you will conduct proper research before deciding exactly where you want to live in retirement. And once there, presumably you will conduct yourself prudently, avoid unnecessary 'bling', and stay away from rough areas. I think automatic weapons would be a bit much, though.

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I heard investing in stocks is crazy, real estate is the way to go, no wait, gold, no wait, rare earth metals. I had a spirited debate earlier today with someone suggesting to them that sitting 100% in cash is not a safe thing due to inflation risk and that while it may not have a significant impact today, it will have a substantial impact over time.
No one has all the answers.

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People say the USA is the greatest country on earth, it's crazy to think about living anywhere else. Then I find out these people have never left the states, ever.
People all over the world tend to prefer their own nation's culture/climate/health care/legal system/political system/whatever; but Americans are notorious for insisting that the US is "the best" in everything … despite the fact that fewer than 40% hold passports and consume little foreign media. It's almost a cliché, but don't sweat it.

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If there is a retire at 40-45 overseas forum, I'd love to check it out.
May be of interest: "Travel, Tourism and Living Abroad"; "Early Retirement Abroad"; "Retire Overseas on $1,200 a Month"; "Retirement Abroad: Pitfalls of Paradise"; "Early Retirement in the US vs. Abroad".
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Old 09-05-2014, 12:11 PM   #31
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More than 30% every single year? or do you mean 30% CAGR.
CAGR. If I had managed 30% in 2008 I really would start a hedge fund. I have had years of -30% and years of +70%.
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Old 09-05-2014, 12:33 PM   #32
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Yes, and then evaluate selling covered calls. What are your thoughts on the studies posted? Max drawdown of 8.9% vs 21% in a month?
Yeah, the studies show that it can work. Note that the puts being sold are cash-secured, without margin.

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(PUT) is based on selling a near-term fully cash-secured S&P 500 at-the-money put option
[emphasis added]

I have played with options on margin for SPX and RUT futures. At the end, I was making six figures writing puts. It lasted until August 2008. That's how I know about the capital loss carryback rules.

Sell puts in a spread. Buy VIX or VIX calls. Know that, eventually, you'll get caught by the steam roller. Have a plan for that.
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Old 09-05-2014, 02:14 PM   #33
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Maybe you are ridiculously comfortable with risk and would accept the need to start over building your savings after the market wipes out your portfolio. Most retired people are looking for more safety net than that. Only you can assess your own risk tolerance, but what you describe in your plan is so much riskier than any other plan ever that I don't believe you actually believe the risk is real.

Oh, I know the risk is real. I've taken my lumps over the years.

If you can generate >25% returns (or even >15%), you better do the following:

I've thought about starting a fund, even a plain vanilla mutual fund using these strategies. There aren't very many and the ones out there are very, very new and small. The only thing is that it takes about 100k to get started in one, and I don't think they are giving SBA loans to do that. Typically to get some backing, you need some track record.

I can only repeat my earlier advice to consult with a knowledgeable CPA or tax attorney

Good suggestion. I will, and I know just the guy. He is overseas right now, so he should have some good insight on it.

It's the ability to do so consistently, and without incurring substantial risk, that is in question.

I have a higher risk tolerance than most, although as I gain (hopefully) I'll be scaling that back quite a bit.

CEFs are another matter entirely.

Yes, they are. I have found there seems to be great misunderstandings about CEF's, especially covered call option ones and return of capital. Doug Albo a real money manager has some great analysis on them over at seeking alpha, but essentially ROC with option income funds isn't destructive like it is with a typical fund. When you add in a sustained and significant discount, you can also get as he describes them windfall returns, so an CEF is paying $1.00 and is at 10/share for easy math, you get a 10% yield.

With a 10% discount, though at $9, you get an extra 1% kicker. Reinvesting and compounding can help drive that advantage.

I have played with options on margin for SPX and RUT futures. At the end, I was making six figures writing puts. It lasted until August 2008.

What were you doing to manage the downside? I'd be interested in discussing that more over PM if you prefer.

OP, getting defensive is not likely to result in more constructive criticism.

Fair point. I will write up the game plan and a few scenarios tonight.
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Old 09-05-2014, 02:54 PM   #34
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And made it all back triple fold by 2012. Markettimer
Yeah, but there's a lot more to it than that. His summaries:

"Summary: Econ grad student applies Mortgage Your Retirement theory at the top of the last bull market, starting around 2x leverage, loses $210K of borrowed money, and is forced is to sell what's left of his portfolio at S&P 821 in November 2008. The complete wipeout results in a reflective period where he recollects the circumstances that led him to adopt this strategy, some of which will be included in a book. He spends five weeks in Asia and begins writing about how risk and progress can be framed. Returning to the US, he slashes his expenses, finds several ways to increase income, earns 914% on the IRBLTG Fund, and pays off all his high interest credit card debt."

And later:

"Net worth has steadily climbed to $350K since the Q4 2008 trough of -$210K. The past few years have been spent dealing with the consequences of going so far into debt, while trying to move on with life in the direction that had been planned pre-crash. I married Borte (mentioned earlier in thread), finished my PhD, and am about to become an expat in Southeast Asia."

This discussion would seem germane to OP's plan in that - yes, "markettimer" has seen his NW rise to $350K (threefold) since his experiment started in 2007, but he also had to move BACK to the US due to being $210,000 in margin debt alone with no income to support it, margin calls, high interest credit card debt, etc. etc. Six years later, he's in a better place, but the toll it took on him in the mean time likely makes this plan unsupportable for the several decades OP would need.

In other words, if his SO is willling to go through potential bankruptcy, having to move from the PI back to the States, and they can handle the stress of waiting out the next margin call while wondering what they're going to eat that day - sure, have at it!
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Old 09-05-2014, 03:23 PM   #35
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People say the USA is the greatest country on earth, its crazy to think about living anywhere else. Then I find out these people have never left the states, ever.

I have been to Ecuador (loved Quito and Cuenca. Want to see the coast) and Costa Rica (Nice, but a little too expensive) country shopping, but there are several countries in South America that I haven't been to that look to have potential (Argentina, Paraguay, Uruguay, Chile) that I have only read about.
I have lived in Bahrain and Japan for several years as well as the US. I have traveled to the Phillippines, Singapore, Hong Kong, South Korea, India, Qatar, UAE, Kuwait, Thailand, along with various places in Europe and Australia.

The standard of living in the United States far exceeds every one of those non-Euro/Australian countries I listed. Besides Chennai (India), Manila was the worst place I have ever visited. The overpopulation in that country (along with Indonesia) is a real concern. No offense to your SO, but I would do some serious homework before agreeing to move to the PI with her. Others have commented on what amounts to scams coming out of there - supporting entire families, etc. As a Navy guy, I know plenty of Filipinos who are very successful in the US... and they stay in the US other than to visit family. There's a reason for that.

Comparing the violence that occurs in the Philippines with that in, say, Chicago is disingenuous. Three "neighborhoods" or "districts" in inner-city Chicago account for the vast majority of violent crime, with murder rates ten times or more than that in the suburbs. I doubt (though I could be wrong) that you're looking to retire in Washington Park.

Meanwhile, the overall murder rate in the PI is 25% higher than that in the US overall. There are plenty of fun terrorist groups actively operating (as in blowing stuff up or murdering people multiple times per year) in the PI: Abu Sayyaf, MILF, MNLF, and the New Communist Army. Some even characterize the PI as "at war" with the latter... on their own territory, mind you, not in far off Iraq, Syria, Afghanistan, etc.

I am 37. I don't like my job and am aiming for ER at around age 42. Even if my means weren't what they are (a COLAed pension coming), there is no way that I would plan for such an extreme lifestyle shift in order to get out of the rat race early. Any retirement plan requiring extreme risk with investments, the potential of bankruptcy, and where I'm justifying it saying that at least I can purchase heavy machine guns for protection isn't for me. I mean, think about that: you're going to risk your financial future in order to fund a lifestyle where you just said you could buy a SAW to protect yourself (instead of, say, a new Tesla). That's crazy to me. YMMV.

Good luck.
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Old 09-05-2014, 05:03 PM   #36
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The only thing is that it takes about 100k to get started in one, and I don't think they are giving SBA loans to do that. Typically to get some backing, you need some track record.
If you only need 100k: family, fools, friends and your own capital.

With consistent returns above 15% it is easy to attract that kind of money. If you have a good backtested strategy (so not even proof!) even collecting 1M from several investors is easy to do.
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Old 09-10-2014, 08:44 AM   #37
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If you really have the secret sauce that lets you earn 25% on investments year in and year out (more than double what Bernie Madoff was able to do using his best methods) then prove it with a few years of accumulation and retire when your SWR is more normal - like 4%.

The secret sauce isn't a secret. It is margin/leverage right now. I am just working on getting the strategy right. You can get 36% running 2-1 on CEFL, which is a diversified ETN focusing on several closed end funds and would double every 2 years. That said, I'm not that brave and need to learn more about ETN's. Looking on the board, I haven't seen anyone mention CEFL or exchange traded notes.

Your plan is ridiculous.
I was hoping for a bit more substance than "Gee, that's crazy.", although I am sorta used to it. Maybe something on hedging/controlling left tail risk. I'm thinking 20-30% downside protection should be sufficient, looking at 2008. Buying vix or selling puts on it? That is helpful.

I've been told that retiring overseas is crazy and I'd get kidnapped in Ecuador or the Philippines.

I've been told that the philippines is dangerous and some parts are...then again, so is Chicago. At least in the Philippines I can get a .50 cal BMG or a M249 saw. (These are Heavy/light machine guns for the uninitiated, and no, I'm not joking)

I've heard investing in stocks is crazy, real estate is the way to go, no wait, gold, no wait, rare earth metals. I had a spirited debate earlier today with someone suggesting to them that sitting 100% in cash is not a safe thing due to inflation risk and that while it may not have a significant impact today, it will have a substantial impact over time.

Heck, the idea of retirement, much less early retirement, is crazy to some people. My dear mother asks me rhetorically what would you do if you didn't work, and I know there is a thread on here about that.

People say the USA is the greatest country on earth, its crazy to think about living anywhere else. Then I find out these people have never left the states, ever.
Personally, I think its nutso to invest in an actively managed fund as to a mathematical certainty, nearly all of them are going to underperform the market over time, yet there are multiple threads here on about which funds to invest in.

I don't understand why CEF PHK, which was actually recommended here for building an income portfolio, traded at a 70% premium back in 2012 and for 5 years has traded over a 50% premium. I don't understand why good income generating CEF's trade at a 11% discount, but if I had to choose between the two, I'll take the 11% discount with a healthy 7% yield. Is it risky buying a dollar for 89 cents? Maybe, but I'll take my chances.

I'm not really sure why he sought a critique: surely he must know that most people on this board are fairly conservative investors rather than gamblers?

Well, there aren't really many people who are looking at retiring overseas, particularly when they are young, so I figured this would be my best shot especially since early retirement is a fairly unconventional concept. I don't know everything and the more I learn, the more I find out what I don't know. If there is a retire at 40-45 overseas forum, I'd love to check it out.

Writing it down gets the strategy straight in my head and makes me really think about how to execute it. Peer reviews help me look at other elements I may have not considered, like a good withdrawal rate. Maybe I am off base on the taxation element, although IRS.gov seems pretty straightforward. Most of the stuff I have read on living and investing overseas is very heavy on sales and commercial content. Most retirement plans aren't tailored for people retiring at age 40, either so that is an added complexity.

I probably need to go into more detail on the game plan and will do so tomorrow, but like I said, I'm developing it. Key tenants are going overseas to a lower COL country, making as much tax free money as possible when I am there, while still saving and contributing to retirement accounts. I would ideally like to build/buy a house while in the US and just leave so I would have no mortgage/rent payments, but realistically, I probably need to get boots on the ground for 3-6 months minimum.

Answers lead to more questions. Retiring overseas leads to issues with FACTA, but opportunities with the Foreign earned income exclusion. I've never claimed the deduction, and I don't have a foreign bank account, so I have no personal experience with it.

Anyone interested in making potentially 195k tax free annually, according to IRS.gov? Even if you don't make the max, you can get an instant 15% or more bonus on your investments and deduct housing costs, which you can't do in the states. You may feel better off giving that 15-20% to Uncle Sam, but I think I need that 20% in my pocket instead.

Figuring the Foreign Earned Income Exclusion

Did you know you can potentially skip out on medicare and SS too? I'm not going to get SS at my age, so I'd prefer to avoid paying it.

Social Security Tax Consequences of Working Abroad

Now, 200k tax free may be peanuts to you, but it certainly got my attention. All the cool kids on Wall St. are inverting, so I might as well too. That said, problem #1 is generating 200k annually, but honestly, in a lot of these places, even 100k would be more than enough to live very, very comfortably.

I have been to Ecuador (loved Quito and Cuenca. Want to see the coast) and Costa Rica (Nice, but a little too expensive) country shopping, but there are several countries in South America that I haven't been to that look to have potential (Argentina, Paraguay, Uruguay, Chile) that I have only read about.

Eh, I'm not sure how conservative they are. The CBOE links are pretty darn interesting to me at least from a risk adjusted alpha generating standpoint. Greater returns with less risk backtested 15, 20, and 25 years, I would think someone might be slightly interested in the prospect of lower risk and higher gains. 30% reduction in volatility? Screw that, Options are dangerous.

Granted, these are fairly new concepts and not many funds employing these strategies, so it may be a bit strange and different than what most people have heard of with just investing in an mutual fund for 30 years.


I think you posted in wrong board.
You should post here: Elite Trader

Good luck to you
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Old 09-10-2014, 09:15 AM   #38
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I'm skeptical. If you have been steadily earning 30% per year for 13 years, why do you not have the 100k to start your fund already.
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Old 09-10-2014, 09:19 AM   #39
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I'm skeptical. If you have been steadily earning 30% per year for 13 years, why do you not have the 100k to start your fund already.
I think you are mixing up the OP and me. I was the one saying I have earned over 30% per year for 13 years, but I only started with $1700.

The OP was talking about something else to do with $100K and a fund...
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Old 09-16-2014, 02:42 PM   #40
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Ok, so I have had a few discussions with CPA's and tax pro's that are familiar with expat taxes, and they do confirm that you can essentially trade/invest through a LLC, pay yourself a reasonable salary, and claim the FEIE and collect up to 200kish tax free for a husband/wife.

One can't entirely dodge all taxes, though, as you would owe self-employment taxes, BUT if you structure it as an S- corp, you can pay yourself a reasonable salary and then take anything over that as a distribution free of Federal taxes thanks to the FEIE and skip out on the self-employment taxes as well on the distribution. Your net taxable rate would be something in the mid single digits, probably 5-7% on 200k in income.

I read some interesting tax court cases and learned most IRS actions against S corps are for people who haven't paid themselves anything at all. Folks that brought in 300k in income and paid 100% of it out in income. There has only been one case that I read where someone actually paid themselves a salary, which was like 24k on well over 100k in income for 2 years. I'm sure if they had paid themselves something more reasonable like 50-60k they wouldn't have drawn as much attention.

As far as funds needed, I don't think I need more than 4-5k per month personally for living expenses, once the basics are taken care of (food/shelter), so while I would like to make 100k/year, half of that at least is going to get reinvested, just as a goal/concept. I know with a longer horizon, I need to continue to grow my portfolio.

Understand as far as starting a fund, I do have the 100k, but those are the fees just to LAUNCH the fund in the first year, not capital to invest. Funds typically need 40-50M to be profitable, figuring 1% in fees.

I'm acquainted with elite trader forum. Great board.

As far as hedging, I'm shorting VIX puts and have shorted IWM. I think I am going to run about 20-30% of the portfolio short on IWM/SPY.
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