Getting Started Early on FI/RE

image of the cover of Daredevil #181

I started adopting the mindset that set me on the path for FI/RE (Financial Independence/Retire Early) when I was very young. I collected baseball cards when I was a kid and added comic collections when I was a bit older kid.

Early on I was paying attention to the investment potential. I enjoyed not just the collecting but also the idea of making money by buying something and then selling it later for more money (which is the fundamental idea of investing). It came naturally to me.

I never much liked spending money on something that lost its value. For some things, like ice cream, I could happily spend my money even though I would soon have nothing to show for it. But more often I would rather buy something I could enjoy and also believe I would be able to sell later at a higher price.

image of Watchmen comic cover

When I started actually trying to sell baseball cards for money I learned about he difference between reported “value” and the ability to get cash for what you owned. Not only can’t you sell items to a store at the “value” reported in pricing guides you often couldn’t sell them at all (they didn’t want the items at all).

In high school I started renting space to sell at shows. There you were selling to the public (or other dealers). I learned vivid examples of the challenges of turning assets into cash. And I also learned about the weaknesses in the economic ideals such as the market being efficient. I saw how often the very same product (the same baseball card) for sale in the same hall would have very different prices (over 100% more was not uncommon) and the sales were often not close to the best buys. The friction in this situation was much smaller than the typical purchase (all the items were in the same room, just a little bit of walking created the friction).

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Economics: Digital Nomads, Visas, Foreign Currency

This is a slighted edited version of my comment to someone asking about countries that have laws specifically detailing digital nomads are allowed to work on tourist visas. My background is in economics and investing based on economic understanding.

The question of digital nomads working encompasses legal questions (do I need a special visa etc.), regulatory realities (regardless of what the law says how is it enforced at the ground level?) and economics (I am talking here about the benefits to the country economically from having digital nomads).

I like the economic thinking that should drive what the government’s wish to accomplish. The prohibition against work on tourist visas makes sense when work is defined as it was historically (being hired by a company in the country that otherwise would have hired a citizen). So when I am thinking about it I find thinking about the macroeconomic level view and how that is manifest in laws and policy. From a practical standpoint of being a digital nomad what really matters is how that all gets filtered down to the government employees on the ground making decisions.

Few laws say what is legal, they normally say what is not. I would imagine few countries specifically say it is legal to do work from another country (as a digital nomad, as a employee answering an business email on their vacation, as a private investor reading the news and using the internet to buy or sell a stock, as a writer writing a book that will be published back home, an entrepreneur refining ideas to launch a new business back home or whatever).

The laws usually are pretty clear you can’t apply for jobs and get hired by a company inside that country to do work in that country on a tourist visa.

“Thailand” has said it is ok to work as a digital nomad (work for some company outside the country) while on a tourist visa. But these pronouncements by officials don’t carry much weight with other officials so they are not worth much.

What is helpful is knowing the prohibitions against working are primarily about not having foreigners take jobs of the citizens. Digital nomads don’t do that. So they are not meant to be prohibited anymore than the other examples (an executive participating in a conference call from work while on vacation etc.).

But since it isn’t clear cut it can be confused by officials as something not allowed. It is much easier not to have to get low level officials to comprehend the intent of the laws. They think of it as tourists can’t work in the country and that is essentially true. But how “work” is defined is the issue; and digital nomad work doesn’t fit the description of work in that context.

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Medical Tourism

Medical tourism (traveling overseas to get medical care) is growing and likely to continue to do so. The USA’s extremely high costs of medical care push people to find more reasonable health care solutions. Also in some countries the very rich seek out advanced treatments outside their country.

Seeking more cost effective and more customer focused health care options are likely to lead to booming markets in catering to these customers. Many countries have seen this as a smart market to focus on. And I think they are right.

It is a booming market and the USA’s mess of a health care system doesn’t seem to be getting any better and certainly isn’t getting cheaper. In Europe the demand is largely driven by services that have very long waits if done using their national health system. Those that can pay, can pay to have it done where they live, or they can travel and have it done much cheaper.

The jobs provided in countries serving medical tourism are very good. And it brings in a great flow of foreign currency. Singapore, Malaysia, Thailand, Philippines and Mexico are putting forth smart governmental efforts to boost this industry in their countries.

photo of Raffles Hospital in Singapore

Raffles Hospital, Singapore by John. See more of my photos from Singapore.

Most of the time health insurance won’t pay for optional (emergency care while you travel depends on your policy) health care internationally. So most medical tourism is paid for by the person being treated. This is a somewhat silly policy as insurers could save a great deal of money even by only paying say 50% or less of what they would pay locally for those who were willing to travel.

And some insurers are letting people travel for health care (and even giving them incentives to do so). The governments seem willing to pay inflated local prices and so use things like the fear of untrustworthy foreign health care as unsuitable. And then they work with local health industry interests to restrict covered health care options. There is some sense in worrying about abuse but there is also hundred of billions of dollars that countries like the USA could save by letting people seek out health care solutions much more cheaply overseas. Europe could also save a great deal.

Some countries are doing smart things. At the same time Singapore is building up medical tourism for complex medical solutions (drawing people from SE Asia and further away) they are also working to boost the use of Malaysia to provide less complex medical solutions to Singaporeans. As is often the case, Singapore’s government is acting wisely.

Malaysia, Thailand and the Philippines are going after the large market for reasonably priced basic health care. Which is smart for all 3. They are also looking to move up-market (especially Malaysia and Thailand) which is also fine, but there is likely to be great competition and a much smaller market so I would suggest they do so, but do so with caution.

India has potential but has the general problems with infrastructure and a difficult business climate. The potential is huge though. Other countries targeting this market include Brazil, Hungary and Costa Rica.

Related: The Growing Market for International Travel for Medical Care (2013)Traveling for Health Care (2007)Finding an International Business Bank as a Digital Nomad

Negative Interest Rates and the US Dollar

US $ are accepted in many countries. Often visa fees in SE Asia are quoted in US Dollars (USD) – they may or may not accept other currencies. In some countries the USD is the regular currency or the main currency anyway.

For example, in Cambodia the USD is used for almost everything but for change under US$1 local Riels are used. For the US this can actually be a nice benefit. US currency serves as a loan to the US government. When the USA prints dollars and distributes they avoid issuing bonds or treasury bills for their spending.

When interest rates were 10% on long term bonds if the USA had an extra $800 billion in currency floating around outside the USA they saved $80 billion every year in interest payments (when interest rates were 5% they would have saved $40 billion a year). In addition if those bills are destroyed or lost that open the way for the USA to put new USD into circulation and avoid that much borrowing.

image of the front of the current USA dollar

It really doesn’t amount to a huge amount of help given how much the USA government spends but still it is a benefit. But with negative interest rates the reverse would be true. Currency offers what is normally seen as only 0% but in the crazy new world created by the central bankers bailing out the too-big-too-fail banks all over the world (creating massive amounts of liquidity [cash]) they started a path that has now led to the crazy situation of negative interest rates.

A negative interest rate means that say the German government borrows $10 billion today and pays back less money in 5 years. So if they got $10.5 billion today they would only have to pay back $10 billion in 5 years. This seems crazy mainly because it is.

Now the USA rates are not negative yet for long term rates (I think maybe in some really short term bills – under 60 days – it may have been). But negative interest rates have spring up in Euro denominated bonds from Germany (and a few other countries).

I find it funny that in such a case the USA would actually be giving those using their currency around the world a higher yield than those holding their long term bonds.

According the US Federal Reserve there is about $1.2 trillion dollars of USA currency in circulation (July 2013). The Federal Reserve estimates that the majority of the cash in circulation today is outside the United States.

The increased demand for the USD abroad also helps keep the USD value from declining in the face of huge trade deficits. To some extent we ship dollar bills to countries and they ship us food, cars, smart phones, etc..

Countries that use the USD as an official currency (though they may also have a local currency at least for small amounts – often under US$1): Panama, Ecuador, El Salvador, Zimbabwe and East Timor.

In some places it may seem on the ground that the USD is the official currency but it is really just the currency used without an official declaration: Cambodia, Peru and Uruguay

Related: Finding an International Business Bank as a Digital NomadCredit Card Currency Conversion CostsWhich Currency is the Least Bad? The USD (2012 post)