Trailblazer's Journal

Where are you and where are you going?
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Eureka
Posts: 280
Joined: Fri Jun 10, 2016 11:03 am
Location: Denmark

Re: I retired!

Post by Eureka » Fri Aug 11, 2017 3:28 am

trailblazer wrote:
Thu Jul 27, 2017 7:40 pm
I'm trying to think like an "owner" of my life - no excuses, I'm responsible for my future - corporate life is an assault on self esteem.
+1

Big congratulations on your retirement! Well done, it all sounds so right to me.
So we'll see what comes next. Immediate goals are physical fitness - currently woeful - and ways to involve myself in society that add value to the life of others (ideally in a way that adds cash flow to my life as well).
Any update on this part?

MDFIRE2024
Posts: 349
Joined: Fri Jan 06, 2017 5:09 pm
Location: Germany

Re: Trailblazer's Journal

Post by MDFIRE2024 » Fri Aug 11, 2017 5:27 am

trailblazer wrote:
Wed Aug 09, 2017 10:46 pm
My ideal setup is going to be some sort of low cost home base, with about 50% of the time spent on the road. I need to think that through further . . . Maybe extended stays in different countries mixed in with long trips home to visit close family, and/or buy a very cheap condo or trailer in the US. Perhaps periodically mix in short term freelance work projects.
Sounds like a good idea. Indeed, I also thought about this setup in the FIRE phase. Then you can have both: stability and freedom. I like to have a place which I call home, especially near friends and family. But also I like to have the freedom to do and try things somewhere else e.g. traveling... I guess that setup supports the P and J of the personality types of the MBTI. I guess a 100% P or J would have different setup e.g. vanlife or homeownership. However, I am looking forward to hear more retirement stories from you. :-)

Jason
Posts: 604
Joined: Mon Jan 30, 2017 8:37 am

Re: Trailblazer's Journal

Post by Jason » Fri Aug 11, 2017 1:32 pm

Great job Trailblazer. You are the poster child for Jacob's five year plan, give or take a few years.

Can live on a dollar a day. Sounds like a joke that begins with "What does Elon Musk and an ugly stripper have in common."

MDFIRE2024
Posts: 349
Joined: Fri Jan 06, 2017 5:09 pm
Location: Germany

Re: Trailblazer's Journal

Post by MDFIRE2024 » Sat Nov 04, 2017 1:41 am

Hi trailblazer. Have you "pulled the trigger" financially? ;-)
I thinking about a home base too for traveling shorter periods. Do you have any new ideas about it, as you thought about it in your last journal post?

trailblazer
Posts: 35
Joined: Sun Jan 03, 2016 8:18 pm

Re: Trailblazer's Journal

Post by trailblazer » Sat Nov 04, 2017 3:42 pm

Thanks MDFIRE, Eureka and Jason - time for an update!

May take a few posts . . . let’s start with diet, which has been my focus over the past couple months. I haven’t weighed myself but I’m down one belt notch (it’s possible I’m just pulling harder on the belt but I think it’s legit).

Overall: I was eating too many calories and spending at least $20 to $40 per day on food. Also, I wasn’t eating enough “healthy” ingredients. (I’m skeptical that anyone really knows what types of food are healthy, but I was maxing out the amount of processed/fast food.)

Prior efforts: my work schedule/stress provided a ready excuse. And I don’t stick with anything too extreme such as no carbs or significant calorie reduction plans.

Current approach: “one hard and fast rule plus a systems approach”

The only rule is I can’t exceed a daily calorie limit that is set at my current maintenance calorie level. Any shortfall carries over to the next day. This allows for some variance in daily consumption, but doesn’t allow for sustained overeating. So far I’ve stuck with it.

The “systems” element comes into play by focusing on improving what and how I eat. I stick with the reasonable calorie limit, but then experiment with different approaches to reduce appetite, save money and be healthy.

Some of the improvements I’ve made:

- First food of the day = hard boiled eggs. A couple hard boiled eggs seems to work like nothing else in terms of keeping appetite in check. I think it’s the mix of protein and fat plus no carbs. (Compare to a previous favorite: Burger King croissan'wiches.)

- Lots of oatmeal. Cheap, works as appetite suppressant. I find I can even have the “bad” sugar flavored kinds and it doesn’t mess with appetite control. Have a serving most mornings after the hard boiled eggs.

- Always have cheese, nuts, whole grain saltine crackers on hand. Makes a good chaser to the hard boiled eggs and oatmeal, or as an emergency snack.

- Significantly more brown rice. I purchased a large bulk bag, and regularly have a batch ready in my rice cooker. I’m trying lots of concoctions, such as hot sauce, guacamole, sour cream, meat, vegetables. Over time this makes up a greater proportion of my calories, saving money and I suppose improving health. Haven’t gotten into cooking beans yet but I think I’ll work them in soon.

- Have things like extra dark chocolate on hand. A small square of dark chocolate can do the trick, especially when eaten along with the items above (previous favorite: 1,000 calories ice cream).

- Still eat the bad stuff if I want . . . just keep it under the overall calorie limit, and focus on filling up on the good stuff first. I actually find I can have “bad” sugar or fast foods later in the day without bingeing as long as the bulk of the diet consists of the good stuff. Sadly, the truly bad processed foods combining sugar, fat and processed simple carbs (e.g., hostess cherry pies - my kryptonite) pretty much have to be avoided :?.

Note: This diet was largely inspired by Scott Adams’s book: “How to Fail at Almost Everything and Still Win Big” - he includes a chapter on diet, and essentially says forget about things like weight goals or calories. Start with your current diet, and gradually replace with better ingredients. Experiment to see what controls appetite. Over time, preferences will move in the direction of the better foods and correct proportions.

I’m still keeping an overall calorie limit in place but ideally that will go away at some point as the diet becomes more automatic.

trailblazer
Posts: 35
Joined: Sun Jan 03, 2016 8:18 pm

Re-allocating my assets

Post by trailblazer » Sat Nov 11, 2017 1:07 pm

Investments

Now that I’m retired I need to figure out how to re-allocate my assets.

What would you do based on the “hypothetical” below?

Total Assets:
For this exercise I want to allocate a third of a million dollars!

130K Brokerage
120K Traditional IRA
8K Roth IRA
12K Precious Metals
2K Cryptocurrency
46K Long-Term Bond*
15K+ Liquid Cash

Total $333,333.34

Debt Zero

*Note:

Assume the “Long-Term Bond” is a weird compensation plan from a prior employer . . . can’t touch or reallocate it other than to wait for payout in about 15 years. It’s not dependent on financial health of prior employer. I assign it a current value of 46K and it will compound at 5.25% per year to reach about 100K in 15 years and then pay out over 7 years.

Time Frame:

Will start drawing from this portfolio in 6 months. Other cash is set aside until then.

The assets need to last 25 years.

OK if the assets go to zero by the end of 25 years.

After 25 years, maintain similar spending levels by relying on social security, a very modest pension, an even more modest inheritance from parents, and any other assets earned and set aside over the next 25 years. (I realize this is controversial and person-dependent . . . to me it feels more unrealistic to not consider these things. If clouds appear over the next 25 years, adjustments will be required.)

Spending Level:

Ideally, would like to spend $2,000 per month, based on 2017 dollars.

OK with varying the spending level quite a bit. $1,500 and even $1,000 can be made to work when needed. Basic lifestyle costs $1,000 per month, with the extra $1,000 going to things like discretionary travel and consumer consumption.

Required Return:

Based on the annuity calculator at bankrate.com, the following real returns are needed for the assets to last 25 years at the desired spending levels:

- $2,000 per month 5.31%
- $1,500 per month 2.55%
- $1,000 per month <0%

Taxes & Liquidity

It will take some planning but I think it's possible to largely avoid taxes and maintain liquidity through Roth pipelines etc.

I’ll share my further thinking in a future post.

trailblazer
Posts: 35
Joined: Sun Jan 03, 2016 8:18 pm

Investments - Part 2

Post by trailblazer » Sat Nov 11, 2017 10:38 pm

In the movie It’s a Wonderful Life there’s a scene where the town’s bank is collapsing and Mr. Potter offers to save the day by paying people 50 cents on the dollar for their savings deposits. That’s how I want to invest!

If only I could go back in time and buy stocks in 2009 (or San Francisco housing), or gold in 2000. Countries, industries and individual companies collapse, yet generally recover and often boom.

Deep value investing feels natural to me and is primarily how I’ve invested in the past - it fits my investing personality.

Deep value stocks can still have large drawdowns. They’ve underperformed the last several years during a booming market, but over time they’ve been a solid and often countercyclical bet.

My Strategy

I plan to devote most of my equity investing to deep value approaches. The four key strategies (roughly equal weighting) are:

- Global Value ETF (GVAL) holds the deepest value stocks in the most undervalued countries - sort of like Dogs of the Dow but on a global basis, with lots more mid and small caps.
- ETF Rotation - buy the biggest crashing ETF’s for countries and industries. Right now lots of natural resources. A related article: “Why You Should Ask For Coal in Your Stocking This Holiday” http://mebfaber.com/2015/11/11/why-you- ... iy-season/.
- Alpha Architect ETFs (QVAL,QMOM,IVAL,IMOM) - these 4 ETFs work together, providing global coverage and mixing 50% value with 50% momentum. Momentum investing feels a lot less intuitive to me, but the long-term data seems to back it up as a powerful factor - and it makes a good balance to my value heavy portfolio
- Acquirer’s Multiple with momentum twist. Buy stocks with very low acquirer's multiple (enterprise value/operating income multiples), but buy the ones with highest momentum

For fun, I also have one 10K investment in a single stock that I plan to hold forever, and about 8K in my Roth IRA. The Roth IRA will eventually grow as I do my Roth pipeline. For now I’m using the 8K as seed money to start buying Benjamin Graham net-nets. These are stocks whose market value is less than their current assets minus total liabilities.

Frankly, I should probably just put all my money in Vanguard Total World Index (VT). But I think I can do better . . . famous last words. Worst case, I don’t think I will trail the market by much over time, as I’ll be systematically investing in a diversified set of companies bought at lower prices. Taxes should be minimal if not zero - the more active strategies occur in tax sheltered accounts.

Other Items

As noted in my prior post, I also have some other non-equity items. They are pretty straightforward and I don’t foresee any changes.

- 12K Precious Metals - I have one year of my basic "survival" lifestyle ($1,000/month) hidden away in an undisclosed location. This feels right to me - potentially buys me a year or more of time in the event of global chaos, and/or can be sold to cover emergency cash flow needs.
- Long-Term “Bond” (46K current value / 100K value in 15 years) - see prior post for details - nothing I can do with it except wait 15 years. It will cover several years of living, even taking inflation into account.
- 15K+ Cash - I’ll always plan to have at least 6 to 12 months of liquid cash.
- 2K Cryptocurrency - James Altucher had a great quote a few years ago - “cryptocurrency has a 1% chance of succeeding, thus I put 1% of my net worth in it” - had I followed his advice at the time the cryptocurrency would be worth 30 to 50% of my net worth, but I didn’t. I have $2K - mostly bitcoin - surely a sucker’s bet at this point, but will be fun to watch. Don’t plan to buy more.

Conclusion

The 18+ months of cash/metal described above, plus the “bond” down the road and my willingness to reduce spending as needed, should allow just enough of a hedge to survive a stock market crash.

Potential worst case scenarios? A sustained 50% drawdown could be survived, and an 80% drawdown could be managed for two years before permanent destruction of capital begins. Anything bigger or more sustained than that and all bets are off anyway.

frommi
Posts: 36
Joined: Sat Jun 29, 2013 4:09 am

Re: Trailblazer's Journal

Post by frommi » Sun Nov 12, 2017 3:16 am

If you are so interested in deep value investing and graham netnet`s, why don`t you do it? :)

trailblazer
Posts: 35
Joined: Sun Jan 03, 2016 8:18 pm

Re: Trailblazer's Journal

Post by trailblazer » Mon Nov 13, 2017 5:44 pm

frommi wrote:
Sun Nov 12, 2017 3:16 am
If you are so interested in deep value investing and graham netnet`s, why don`t you do it? :)
Thanks frommi - I think I will! :D

classical_Liberal
Posts: 195
Joined: Sun Mar 20, 2016 6:05 am

Re: Trailblazer's Journal

Post by classical_Liberal » Mon Nov 13, 2017 7:48 pm

@Trailblazer

A belated congrats on your decision!

I'm very surprised I haven't run across your journal until now; the way you think regarding your current ERE is VERY similar to my thoughts. Particularly regarding SS and the idea more income will likely show up at some point with a free mind and body. My eventual plan is to take a couple of years "wandering" after ERE as well. Also like you I have taken "sabbatical" type ERE's in the past without knowing it. Each time I ran into burnout of a previous career, then took a year off doing minimal sustenance-level work. Unfortunately, each time it was followed by a new education (potential for a more fulfilling career) and the student loan debt to go with it! Hopefully "third time is the charm" for me, as I'm feeling the beginnings of brownout in my current line of work, but this time am thinking in longer terms.

I will follow your journal with excitement! Anecdotes are powerful, and reading your story will hopefully give me the confidence to start my journey (FU, but not really FI) when the time is right in 1-2 years. Thanks!

trailblazer
Posts: 35
Joined: Sun Jan 03, 2016 8:18 pm

Re: Trailblazer's Journal

Post by trailblazer » Tue Nov 14, 2017 11:21 am

@classical_Liberal - thanks! I appreciate it a lot. My posting habits are less than consistent.

Like you, my working and not working seems to have gone in phases. A few years ago I would spend all afternoon at my desk calculating "here's how I can get to $1 million within the next 15 years" . . . that gradually evolved into "here's how I can get out of here by next month"

Great screen name btw!

trailblazer
Posts: 35
Joined: Sun Jan 03, 2016 8:18 pm

Re: Stocks Could Crash 90%

Post by trailblazer » Tue Nov 14, 2017 12:02 pm

Back in 1999, I had my first taste of student loans. I was thrilled with the experience. When told I was eligible for up to $18K to cover living expenses, I took only $14K, responsibly declining the rest because I didn’t need it.

I used 8K to pay off my used car and several small credit cards. In my mind I was now “debt free” - and had 6K left for pocket money (I was living with family).

2000

The next year, I was again eligible for 18K. I took the full amount. I had seen an ad for Oak Associates mutual funds. They had a family of aggressive growth mutual funds, each named after a different type of oak tree. All the funds looked attractive, and I wanted the Red Oak Technology Select Fund.

In late August 2000, I recall rushing to the financial aid office, picking up my check, then rushing to the bank, then rushing to the post office. I don’t recall if I used a normal stamp or a priority mail stamp, but my money was now on its way to Oak.

It turns out the Red Oak fund still exists! Here’s a chart of performance over the past 20 years.

Image

The peak value ($44 per share) is September of 2000. I’m happy to report that I got out in late December 2000 ($21 per share), thus losing only 50%. By late 2002 the share price was $3. Today’s price is $25 - still 40% down from my purchase price in 2000.

2008-2009

Fast forward to 2008. I have an extended family member with a modest 401(k) - about $75K. They know nothing about finances, so I help them manage it.

Stocks were getting very high in mid 2008, and both the market and the world at large just didn’t feel good, so we moved 90% of the money into the fund’s money market fund.

It sat there, safe and stable, as the market got destroyed.

A happy ending? Well . . . the funds continued to sit in the money market until 2016. We still had 10% in stocks, so it ended up being a modest savings account-type return. Good enough for the family member, but what could have been.

They would have let me invest it however I wanted, but I never wanted to go back into stocks and risk losing their money. (A year ago we moved it into a Bogleheadish allocation - the person doesn’t rely on the funds for their retirement, so I figure we’ll let it ride.)

The Future

In a vague sense, I’m incredibly optimistic about both my own life and the economy’s future. But as the Black Swan would tell us, the market could crash 90% tomorrow. I highly doubt that it will . . . but that’s his point. I have no clue what’s ahead.

I’ve just retired and am at 100% stocks, aside from a bit of cash and precious metals, and a bond that will mature many years from now.

I’m comfortable with this choice, although the temptation to put it all into cash and just wait for the crash does exist.

The past few years I’ve been much more aggressive with my own money than I was with the family member’s money. I’ve mostly invested in index funds, but have also done quite a few low dollar experiments with deep value (very comfortable to me), options (bad idea, at least for me) and other trading strategies (mostly bad ideas).

So I’ve decided in advance to ride out whatever comes. If the market crashes 90% tomorrow I plan to calmly say “look it crashed 90%, so that’s what it looks like” and then try to avoid selling any of my equity for as long as I can.

Let’s see what happens!

2Birds1Stone
Posts: 67
Joined: Thu Nov 19, 2015 11:20 am

Re: Trailblazer's Journal

Post by 2Birds1Stone » Wed Nov 15, 2017 12:48 pm

So happy I came back in to this journal.

It looks like you are successfully outside of the corporate world.

You inspire me to reevaluate my own timelines.

trailblazer
Posts: 35
Joined: Sun Jan 03, 2016 8:18 pm

My Life + Numbers

Post by trailblazer » Fri Nov 17, 2017 6:05 pm

@2Birds - thanks! I enjoy your journal - you are crushing it.

My Life + Numbers: Periodic Update

I’m going to periodically share my finances and other life updates in a more systematic format.

Finances

Retirement portfolio is now fully implemented. These will be my official “Day 1” values that I will update in the future.

75% Stocks 259,098
14% Bonds 48,041
4% Metals 12,429
1% Crypto 2,295
6% Cash 20,212

Total Assets 342,075
Portfolio Must Last: 25.62 years

Monthly Spending Levels:
Annual Return Needed
$2,000: 5.16%
$1,500: 2.47%
$1,000: -0.82%

At beginning of January, I will begin drawing my monthly living expenses from the portfolio and will track spending in more detail. Until now, I've been using a separate Transition Fund I set aside.

For stock allocation, ended up going with global deep value approach. Rough estimate of average P/E is <12 and P/B <1.5 (though I screen on other things). 50% non-US. Small cap heavy.

Lots of basic materials, energy, financial, consumer/traditional retail (sorry no Amazon). Lots of Japan/Eastern & Central Europe/Latin America. Lots of gut-wrenching company names, like a good value portfolio should have.

If you want to explore this investing approach further, I recommend starting with this article by quant guru Wes Gray. Its a sober-yet-fun look into quantitative investing, of which deep value is one approach. https://alphaarchitect.com/2015/08/17/t ... -not-easy/

Wandering

Heading out late January for 6+ months of global wandering - probably mix of US/Europe/wild card (Asia?). Will scout locations for permanent settlement, and experiment with 1 month apartment rental in cheap locations.

Housing

Finishing up short-term lease on cheap apartment in US - nothing too exciting. No longer in expensive big city. Still need to figure out how I can balance my almost constant desire to wander with my periodic need for a stable home.

Time Available for Reading and Doing Whatever

Unlimited!

Diet

If my prior grade was an “F” I’m now approaching “D” territory. Keeping daily calories within limits and slowly increasing % of calories that are ERE compliant.

Exercise

Walking more and rebuilding body weight fitness routine - happiest and healthiest in the past when I’ve done this, and only realistic thing I’ll stick with. Want to hike and swim more - I’m imagining myself wandering around the world, taking leisurely day hikes and then swimming in a lake. Want to do long-distance hike someday - the one extreme physical feat I can see myself pulling off. Trying to start strength training again but really hurts my shoulder. Want to experiment with kettle bells. Don’t want to be reliant on equipment while wandering.

Past Work Life

Recently, my old boss and a former client both asked me to consider different job opportunities (don’t worry - NOT going back! - but good to know I have social capital). I keep in touch with a few friends from prior job. They tell me just enough work gossip to make me glad I’m gone.

Social

Still an introvert - but I think I’m getting enough human interaction. Holidays coming up - weighing how much time to spend with family. I’ve told them I’m now a “freelance worker.”

Interesting Quote I Saw on Twitter

“Never trust the thought and science of anyone who is not free. Being free means no honors, no positions, nothing other than one’s own thoughts.”

classical_Liberal
Posts: 195
Joined: Sun Mar 20, 2016 6:05 am

Re: My Life + Numbers

Post by classical_Liberal » Fri Nov 17, 2017 10:37 pm

I remain extremely appreciative of your journal. This accounting of your situation is super helpful for someone who is a year or two behind you with such a similar plan.
trailblazer wrote:
Fri Nov 17, 2017 6:05 pm
Still need to figure out how I can balance my almost constant desire to wander with my periodic need for a stable home.
This is truly the beast for someone who wants travel in spurts, but also chill at home, maybe make some money for awhile. I regularly oscillate between options. Renting is the default, but rent continues to rise in the more appealing places and I would really not rather have to find roommate(s) in every new area I wish to live for a few months. Options like your previous housing (private space with community baths/kitchens) are few and far between; when they do exisit they are generally reserved for college kids or homeless. With a budget similar to yours, COL from a rental housing perspective could price me out of many areas I'd like to try out.

Van/RV is an option and could be stored rather cheaply when traveling outside North America, but this lifestyle has it's downsides. I've experimented traveling for 2-3 weeks staying only in my car on BLM/campgrounds/rest areas, etc (admittedly smaller than van/RV). It's great for a vacation, but after time, I find myself lusting for the indoor privacy a home offers and daily showers.

Owning would, at least, make housing costs predictable. However, those predictable costs apply even when traveling, unless it's rented when you are gone. That is a relative hassle (or cost for management company), one I would not want to deal with when out of the country. What if I need to cut international travel short and it's leased? It also forces a person to pick location and stay, since real estate transactions are so expensive; ties up a fair amount of net worth even if you leverage part of it, etc.

I occasionally look at very small single family homes in the rural Midwest (an hour or so from cities/airports/potential PT income sources) which are priced VERY low. Risk is lower if I could pick up a house for <50K (which is possible in the rural areas). I also occasionally look at owner occupied 3-4plex situations in moderate sized cities. With leverage, one could potentially break even on housing given some time, even if using a management company. Still, it carries with it all the unpleasantness of being a landlord and stuck in one location.

If you find a perfect solution please post it! I will shower you with praise and compliments for payment!

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