Flexit
(In this mostly personal post, I go into detail about my recent decision to exit Florida, and the US. I discuss the forces that pushed us to re-uproot after only two years in the sunshine state. I don’t want to give too much away, but there will be talk of gambler’s ruin, dating apps, meat on a stick, ignored stocks, rusty sculptures, and the problems with everything that isn’t real estate.)
1. Intro
In my mid forties I ended up single again, due to a series of unfortunate events — and do I mean that literally. So I did what single people were supposed to do: I went on Tinder. And Bumble. And Hinge. And Feeld (don’t ask). What I found, to my pleasant surprise, was a dating market that favored me much more than I expected. It turns out that if a guy makes it to their 40s without acquiring a big black mark of one kind or another, that’s rare. And if he’s single, that’s rarer still. Over time, the pool of remaining available men winnows down to men who are only pretending to be single, guys living in their parent’s basement, weirdos (and not in a good way), criminals, morons, losers, the terminally timid, and those with a major flaw in their appearance1.
2. Survivorship is under-rated
As someone who makes the majority of his money from investments of one kind or another, my number one priority is avoiding gambler’s ruin. Gambler’s ruin is the mathematical certainty that, on a long enough timeline, even if, on average, your betting odds are favorable, you will go broke if you don’t manage your bet sizes properly. In other words, never bet your entire fortune on on a single gamble, even if that gamble seems really attractive. And whatever you do, don’t “tilt”, which in poker means to go nuts and abandon any rational strategy because your emotions got the best of you. In investing, this means not dumping good money after bad, or bitter-ending a venture that you know is already dead but can’t let go of. And yes, I’ve made both of those mistakes, though never with my entire nut. I haven’t survived because I only make good investment decisions, I’ve survived because I figured out when to walk away, and when to run.
3. From Canexit to Flexit
For reasons related to both investing and politics (I’ll get to those soon), it became clear by late 2022 that our time in Florida, and the US, was coming to an end. But where to next? If your goal is fundamentally conservative, which mine certainly is at this moment, that becomes a process of elimination. After putting our Florida home on the market, we flew up to Canada and spent a few weeks with my wife’s family. I love that our boys got time with grandparents and uncles and cousins, but a return to living in Canada is out, especially living in Ontario. The province is still suffering from a post-Covid hangover, with a small but significant population who refuse to let go of masking, and a continued obsession with public health theater in general. Eaton Centre in Toronto, one of the world’s finest malls2, removed all their public seating during Toronto’s highly restricted reopening. They still haven’t put them back. Downtown is half empty, the energy subdued, the customer service icier. My own memory of frozen bank accounts for supporting the trucker rallies will linger for a long time, as it should.
For a moment I considered Calgary, which has a lovely property market for the kind of houses we might want to live in, and is moving in a direction politically that has people talking about it as the Florida of Canada. But Calgary is burdened with inexcusably bad weather and a location as remote as anything in Montana. America may be once again be forcing me into exile, but that doesn’t mean I want to go live in Siberia, even if it has lovely homes and the business aren’t all posting “land acknowledgements”, which seems to be a requirement in Ontario these days.
4. Exile from exile
The move to Canada itself represented an exile of sorts. I moved there from the US with my ex and our young daughter in 2007, in part because I no longer wanted to pay taxes for the empire and its endless wars. As far as places to spend time in exile go, Toronto turned out to be a most excellent choice. For most of the 13 years I was there it was a boom town, with a growing restaurant scene, a vibrant property market, amazing tech startups3, and indie coffee shops filled with laptop jockeys like myself. I remember a date, during that single period I mentioned, at a restaurant called Copacabana, one of those Brazilian “rodizios” where they bring giant skewers of meat to your table and carve off portions onto your plate and you eat and drink until you’re nearly comatose. As I walked up back up their gorgeously decorated stairway with a plate full of food from their insanely good salad bar, I thought to myself, This can’t possibly last, can it?
It didn’t. Within a year or two I was pacing back and forth along our short span of rocky shoreline on lake Ontario, looking at downtown in the distance, trying to decide if it was time to go, and if so, where? I won’t re-litigate my decision to come to Florida, which I’ve already written about extensively. I’ll just note that leaving Toronto had huge non-financial costs, as any uprooting will, and yet I can’t imagine the misery of having stayed. Also, given that I left the US in part to avoid funding endless wars, I could hardly justify staying in Ontario and funding an endless lockdown/subsidy cycle that was still ramping up almost a year into the pandemic. Nor do I ever want to spend another minute living in a masked totalitarian state.
5. The problem with Florida
The problem with Florida is mostly not a problem with the state of Florida, it’s a problem with its statehood. None of the issues that drove me out of the US in 2007 have been resolved, and while I love the fight DeSantis is waging to make Florida a great place to live, I have my doubts both about his ability to prevail and his willingness to push radical changes. For example, his bill to strip Disney of its special district status appears to be mostly toothless, and at any rate I would have preferred an approach that extended “city-state” status to all landholders able to maintain their own services with a certain level of neutrality of treatment, which would have been a much more radical, and positive, move. Likewise, the DeSantis approach to taking over left wing New College looks less like an an attack on the commies, and more like a swampy kickback to the school’s new president, who will take home $700k per year plus perks for running a school with a mere 700 students.
My doubts about DeSantis aside, we still have the problem of Florida’s continued status as one of the fifty, nifty, United States. As such, it doesn’t get to set its own travel or immigration rules. My wife, mother to my twin boys, is Canadian. After returning to the states she had to apply for a Green Card to stay in US, which we did, despite it being a nasty and complicated process that, if successful, rewards her with a lifetime of tax filing obligations. The application also includes a jab mandate, which of course was a non-starter for us, especially back when my wife was pregnant, but also now, because at this point, What the fuck? The mandate has a waiver form, which we began to prepare, but oh-my-god every aspect of the Green Card process is a nightmare. The complaint that it’s much easier to come to the US illegally than legally may be a cliché, but it’s spot on. No sane nation would reward criminal border crossers, while punishing high-quality, law-abiding migrants with endless paperwork and delays.
Beyond the vax mandate for Green Card applicants, there’s also a travel mandate still in effect for non-citizens. Rumor has it that some agents at land crossings aren’t enforcing it, but once we decided to step foot outside the US, even just to visit Carly’s family in Canada, we had to consider ourselves officially banished from the US for some unknown, indefinite period of time. It had been over two years since Carly had seen some members of her family, including many who had never met the twins.
All that would have been sufficient reason for us to break the glass and exit America, but there’s still one more huge dark cloud that’s that’s worth discussing, especially from an investment perspective.
6. Gambler’s ruin revisited
You may have heard the expression “buy the rumor, sell the news”. The idea is that the big profits are made by getting in early, then exiting once the stock price has adjusted to the thing that happened. An asset may still be worth holding even after the news has broken, it’s just that the information is now fully reflected in the price. If you are seeking alpha4, now is the time to take your profits and move along to another investment.
When we bought our house in the Keys in early 2021, the great migration to Florida was something more than a rumor, but news about it hadn’t yet gone mainstream, and people we’re just beginning to understand how much the different states had diverged on Covid policy and the long-term impacts of these different approaches. Meanwhile, in 2021 and through most of 2022 we were still riding a bull market in real estate, driven by accelerated internal migration, and by continued low interest rates. We’re no longer in that same place.
The good news, at least for Florida, is that the news about the Florida is still very good. It’s by far the most thriving US state of any consequence, and refugees from all over the US continue to pour in. More locally, if you want to live in Florida, both the Keys and our specific property are still phenomenal choices. Florida continues to be a promised land, at least insofar as anywhere in the US could be viewed as such, and we choose a great spot within that land. So why not just continue to battle over the green card, accept that we can’t travel outside the US for a while longer, and enjoy life in our little slice of paradise?
In practice, there’s another kind of gambler’s ruin that can befall certain investors, even if they are careful to match bet sizes to pot odds. As someone without much of a salary or or recurring revenue streams, I’m entirely dependent on the growth of my investment capital for everything, including the cost of the latte I just finished. Thus the additional problem for investors like myself is that standing still is loosing ground. This is especially true in the context of high inflation or a relative decline in the currency your assets are denominated in. To unpack that idea, avoiding ruin for me is harder than just avoiding bets which lead to bankruptcy. High inflation and long term risk to the US dollar’s relative value mean I’m running uphill (and so too, likely, are you). If I retire in 20 years with a nest egg of $20 million, that’s glorious by today’s standards! But it’s not so awesome if actual eggs cost $100 a piece in 2043, and importing a hydrogen-cell flying car from Germany eats up half your wealth. It’s possible to go effectively broke even with a wheelbarrow of cash on hand, as Deutschland itself showed us a hundred years ago. From my perspective, we’ve reached the moment where I need to cash in my FL house gains and put them in assets that aren’t US-dollar denominated, in particular foreign real estate.
7. The problem with everything but property (part 1)
I never wanted to spend so much time and energy thinking about real estate. For my investment money, I much prefer assets that aren’t so complicated and expensive to carry in your portfolio. Take for example domain names, one of my favorite investments over the years. Carrying costs until recently have been about $10 per name per year, and other than updating data (which can be done in bulk), or fussing about where I should direct the traffic, managing domains requires very little time and no special costs. But what do I do with the profits from their sale? Sure I can, and have, used a portion of the profits to buy more domains, but some of that money has to go towards living expenses, and my single biggest living expense, especially since I like living in lovely places, is housing. So why not take a large chunk of that profit and put it into an investment that comes with four bedrooms and a lakefront view? The problem with everything but real estate is that you can’t occupy any of those other investments, and you have to be an occupant somewhere.
8. The problem with everything but property (part 2)
Let’s say you decide to invest wisely in a bespoke portfolio of stocks. You pick an industry that’s poised for growth, and research the companies in that space. In the end you buy shares in a handful of promising companies. Now fast forward five years. Do you still own the same number of shares in each of those companies?
If you don’t, that’s probably because you are an active, informed investor. You read the quarterly SEC filings for each company. You have Google alerts setup for the company names so you know whenever news breaks about one of them. You adjust your investment between those original stocks, and with others, as prices fluctuate, to avoid having an outsized amount invested in any one company. In short, you’re either a day trader, or keeping up with your market position is an intensive hobby for you.
For everyone else, buying stocks, even ones you’ve taken the time to carefully choose, is a buy-and-forget process. Yes, you’ll get the monthly or quarterly portfolio statements by mail (or digitally, even easier to ignore). But for most of us, myself certainly included, we buy some stocks, hold them for a while, and then sell based on our need for cash, or on the realization that maybe our picks were good five years ago, but a lot has happened to the underlying companies since then and we no longer have enough knowledge to justify holding a stake in them.
By comparison, if you own a piece of real estate, and you live there, you will keep an eye on the value and condition of that investment, because you are basically forced to. Even if you ignore the many points of data about your local market that will be, in some cases, delivered right to your home in the form of the ebb and flow of realtor flyers or unsolicited offers, and ignore the ebb and flow of “for sale” signs in the neighborhood and how long the signs linger, you won’t ignore your updated property tax assessment, and you can’t ignore the need for a new roof if the old one starts to leak, and unless you’re an absolute hermit who keeps their blinds shut, you’re not going to ignore the changes to your neighborhood, the new construction or overgrown lawns, the local Starbucks being replaced by a Payday loans store, or vice versa.
The problem with everything but real estate is that among investments that need to be watched carefully, only (lived in) real estate will ensure that you actively watch it as a matter of course.
9. The problem with everything but property (part 3)
This last one is the most complicated, but by far the most profitable one to really understand. If you have a PhD in physics, and your company provides you with a supercomputer that has a high-bandwidth, low latency connection direct to the NYSE, then your best money-making option might be algorithmic trading. But for the rest of us mortals, it’s probably best to look for less liquid, more idiosyncratic markets to play in.
The residential real estate market, especially in certain cities and for certain categories of residences, falls into the “just right” category along a number of axes. Let’s start with the one that’s most on my mind right now: a reasonable cost vs. liquidity curve. For most retail investors in the stock market, this is a non issue. Your 50 or even 5000 shares of Amazon can be sold (or bought) within seconds for very close to whatever Yahoo finance says the market price is. That’s great if you need to cash out quickly, but a side-effect is that, again because you don’t have that direct pipeline to the NYSE (ok, Nasdaq in this case), there’s no chance you can take advantage of your ability to act faster than the investors around you.
Real estate can move almost as quickly. Before buying that house on lake Ontario with the rocky but pace-able shoreline, I looked at a number of Toronto condos, including a very nice one in the Distillery District. My agent got us in to see it on the first day of listing. After viewing all the rooms, we hung out in the main living area and looked south and discussed how long it would take before the land cordoned off nearby would turn into another condo that might, depending on how many stories it got approved for, block this unit’s glorious view. Ten minutes into our conversation my agent got a call from the seller’s agent. The unit was gone. Taken. Sold sight unseen.
Highly liquid markets like this are great for sellers, challenging for buyers. But if you’re willing to put in the time and energy as a buyer to overcome that challenge, and you don’t lose your cool in a bidding war, you get the win. Even more importantly for me, great property markets provide liquidity even up into the millions of dollars, but with a slightly more relaxed price. In other words, you can still guarantee your multi-million dollar home (priced appropriately) will find a buyer, but within weeks or months, not days or hours, giving buyers like me a chance to do due diligence and negotiate with a certain level of calm.
Which brings me to another important axis. Other than car sales and certain collectables, very few markets have both a strong baseline of value and a significant amount of “wiggle room” that gets resolved based on negotiating skills and strength of position. At one extreme you have a literally one-of-a-kind, slightly rusty, mid-sized Alexander Calder statue. Negotiating skill, and especially your ability to target potential buyers, is everything in these markets. People say things are worth whatever someone will pay for them, but that’s only true in thin markets like this. At the other end you have what are essentially commodities, like your 50 shares in Amazon, where the price is the price, and your marketing or negotiating skills are irrelevant.
After days of my waffling about a counter-offer on that lakefront Toronto home I keep mentioning, my real estate agency’s top gun, who had yet to see the place, said we should meet there and talk. I had only made an offer on the home after the seller made a major price cut, and even after that I’d come in with something that was close to a low ball. After going back and forth, we were somewhere in the middle, but I was still worried about whether the value matched the price. Top gun comes in, reviews the home, does his own calculations about land value and house value, said the deal was solid and that if I walk, I will just be handing some other buyer the benefit of all the work we’d done to bring down the seller’s price expectations. I made a final offer that was accepted, and whether or not we got a good deal, I was able to sell the house for significantly more just a year-and-a-half later. Prices in a good real estate market, especially at the mid-to-high end, have enough wiggle room to reward skillful participants (with good agents), but also — so long as you stay away from “quirky” properties!5 — protect participants against catastrophic mistakes. Remember that part about gambler’s ruin? Assuming you pay cash and aren’t amazingly dumb or unlucky, real estate investing is risky, but losses of greater than 50% are extremely rare.
One final axes of note: the ROI to localized knowledge and scalability. This is the one that trips up institutional investors, and why I don’t worry about Black Rock someday owning All The Homes. Yes, they have tons of data about the market. But I have data too, certainly enough to make a decision about one particular house, and I have feet. And eyes. And ears and a nose. I’m able to evaluate things that can’t or won’t ever make it onto a spreadsheet, and you can too. Back in 2018, I made a trip to Grand Cayman to talk with the director of their enterprise zone6 and to scope out real estate. I was particularly interested in a house for sale right along the island’s famed Seven Mile Beach that was slightly outside of my price range (see photo above). What I only found out by visiting, and spending time hanging out there, was just how surprisingly unpleasant it was to be in the house. The large main area, with its big windows, was a few feet below the peak level of the beach, so instead of a gorgeous view of the shoreline, you saw a small dune and the ocean way off in the distance. The vibes only got worse from there, and I won’t go into details, other than to mention that if there’s any chance your neighbors could accidentally block your vehicle in, especially if those neighbors might AirBnB their house to a group of partiers, you should bake into your calculations the frustration of banging on that neighbor’s door at 8am until a hung-over 23-year-old with too much money finally comes out to move his rented Land Rover.
The point is, whatever database or algorithmic jujitsu Zillow or Redfin or Black Rock have for deciding which places to buy and how much to offer, I guarantee they don’t have the time, resources, or talent to evaluate the idiosyncrasies of individual houses, and certainly not at scale. So long as I take my time, understand the local market, pick a good agent, and negotiate well, I can outperform those giants, even with the extra commission costs that they might avoid by having their own, in-house real estate agents.
The problem with everything but real estate is that only property markets give you the ability to profitably leverage your time, energy and general skills as a human being, to buy and sell assets, one by one, with a very low risk of financial ruin.
10. Invoking the mercy rule
This post has already gone on way too long, so for now I’ll wrap up. As might be expected, I’ll have more to say about real estate as time goes on, as well as the reveal of where we decided to go with our lives and investment dollars. In the near term, though, I promise my readers a return to providing analysis of more lenses (or filters, if you will) for analyzing our world.
I don’t take any argument for criminalizing prostitution seriously unless it comes with a plan for guys who can’t get laid. That shrill harpy who wants it banned, is she going to blow that guy in the wheelchair with twigs for legs? Because someone has to take care of him, along with all those other guys who women literally won’t touch unless it’s their job to do so.
I will die on this hill, at least in terms of Eaton Centre in pre-lockdown days. It was large but not intimidating, open, had a great fountain that served as a meeting point, and was on the cutting edge of food court innovation, as one of the first malls in the world to not only upscale every aspect of the experience, from signage to real silverware and glasses, but to implement tray stations where you left your leftovers for someone else to sort out.
I attended some of the earliest meetups and hackathons for Ethereum, and was part of a team that won a hackathon judged in part by Vitalik Buterin. I almost got involved directly with the Ethereum platform, but in the early days it was a buggy disaster and Vitalik was changing the scripting language every ten minutes. In retrospect, at least financially, I should have had more faith in the teenage genius.
In finance, “alpha” is your return. Your investment profit. Higher levels of alpha tend to correlate with higher levels of risk, or volatility, which is often referred to as “beta”.
My favorite listings to look at (but only virtually!) are geodomes, repurposed churches, and crazy things like old water towers and silos. God help you if you ever have to find a buyer for a home like that.
A lovely gentleman named Charles Kirkconnell, with a long family history in Cayman. The “Enterprise City” program he runs is a great option for tech entrepreneurs looking for a friendly jurisdiction to call home. For me though, real estate options aside, I found the island to be the opposite of a cozy beach town.
right there with you on so many issues. I grapple with and have grappled with many of the same issues, in investing, and in life. Thanks for sharing.
I'm curious, what makes you and your family a better migrant who lives off investments rather than the border crossers who probably made and served your latte and built the home that is your investment?