Starting a new business after filing BK

[Spartan]

Does any one have any experience with filing Ch7, while owning an LLC?


Here is the timeline I am thinking of: The day after I file, I go and register a LLC. It takes 4 weeks for the LLC to be approved. Should I wait till after discharge to arrange borrowing? I can get personal loan for the LLC, if I file for BK to wipe the slate clean first.

To avoid complication, I am thinking of better to wait till after discharge. Any comment?

[HHM]

What state are you in where it takes 4 weeks to get an LLC...most states I am aware can get it done in less than 2 days, but anyway. (now a business licenses is a different story...those can take a few weeks).

I suppose a little background would be in order...what is the business and what do you hope to do.

Note, with most new businesses, you will have to personally guarantee much of the debt, you are coming out of BK and want to saddle yourself with business debt?

Strictly speaking, you, as a person, are not allowed to acquire new debt while in BK, so you would have to wait until after discharge if you were going to be required to personally guarantee any loan for the business.

[Spartan]

I am in MN. I believe it is 4 weeks. I could be wrong.

I know most people will freak out at this. But what the heck... it is the good ol' "I am know what I am doing."

My background/training is in finance, and more specifically trading. The trading part is self taught and via baptism by fire, ie, actually doing it with real money and learn by doing. Well, I made a go at it for a few years and by the time I got it figured out, capital/savings ran out. Same old story of undercapitalization .. Nothing new there. But the knowledge and skill acquired, is not lost. It is all still in my brain and on the software programs I created. If anything, I have continued to add to the knowledge base over the years. I have figured out the solutions to the past mistakes. Toward the end, there was simply insufficient capital to utilize the knowledge.

I have talked to a few people who are close friends and they are willing to fund an investment/trading account, to the tune of a few thousands each, for a total of $5- $6k. That is sufficient to trade 1 single contract Dow Emini futures or the emini Nasdaq or the emini SPX. I realize that just by mentioning futures trading, is enough to invoke "speculation", "gambling", "losses", "financial ruin", "RISK", and "disaster"....
Yes, all those can happen, IF you hold position over time, and things go against you, either suddenly or persistently. You can go burst if you don't know what you are doing. There are ways to control that and you will have to give up the dream/temptation/hope/prayer of striking it rich in one brilliant stroke. It is a matter of trade off. You can just work at it, in small bits and pieces, and just harvest the little things. Don't go for broke, then you wouldn't go broke. Always take precaution. There is no guarantee. But that is life.

I am no longer afraid of going broke. I would just be right back where I am, if catastrophy strikes. I will manage the risk that is manageable. Things like 911, political changes in the Middle East, etc, that cannot be helped, well, that is life. I will just have to start over then.

Whatever success I manage to create, I will shield the acquired assets fully, such that I am covered every new step I take. Kind of like mountain climbing. You do what you can to ensure that if you fall, you would just fall a few meters.


BTW, for what it is worth, I would like to share some insight with everyone. We are at the beginning of the biggest real estate bubble bust. Housing prices are dropping. Unsold inventory is skyrocketing. Home sales are plummeting. The effect of this is, the economy will very likely (80-90% chance) enter full blown recession in 2007. The economy over the past few years has been riding the biggest real estate boom. The ride is over. In this coming recession, the financial market will tank. Corporate profits will plunge. Layoff and unemployment will rise. Not a pretty sight...... I hope I am dead wrong on this one. But the economy data keeps coming up to point toward a recession.

[Spartan]

...Note, with most new businesses, you will have to personally guarantee much of the debt, you are coming out of BK and want to saddle yourself with business debt? ...

Incurring debt as a result of consumption is a no-no. Debt financing of an investment, is just a business strategy. With consumption, you get nothing back in return, besides a good time. With business investment, to the extend that it is successful, you are getting the whole stake back plus profits.

[HHM]

Well to each his own...now you are talking my language. When it comes to businesses, how are you going to set yourself apart, where and how are you going to get additional accounts, what are you going to do differently so what happened before does not happen again. How are you going to leverage your 5 basic resources, Money, Time, Process, Context, and Relationships.

I assume by your language of "debt financing of an investment", you are talking about trading on margin, or are you referring to generally about borrowing money to help fund business expenses.

BTW, for what it is worth, I would like to share some insight with everyone. We are at the beginning of the biggest real estate bubble bust. Housing prices are dropping. Unsold inventory is skyrocketing. Home sales are plummeting. The effect of this is, the economy will very likely (80-90% chance) enter full blown recession in 2007. The economy over the past few years has been riding the biggest real estate boom. The ride is over. In this coming recession, the financial market will tank. Corporate profits will plunge. Layoff and unemployment will rise. Not a pretty sight...... I hope I am dead wrong on this one. But the economy data keeps coming up to point toward a recession.

I will disagree with this premise...it has more to do with press negativity and talking-head mongering, but the numbers really don't bare out such a drastic scenario. Actually, just this last month, unsold inventory dropped, and just today unemployment is at its lowest rate in 5 years and wages increased. I think we would need an "event" to trigger a recession in 2007...I do think the rate of growth will be slower but generally, corporate earnings will stay relatively steady. On the technology side, we are going to see a big upgrade cycle coming in 2007 so a lot of core purchases are going to be made. Regarding real estate, there is a difference between a slowing market (which have) and a busting market. Except on the margins, homeowners haven't really "lost" money in real estate, there just not making money in the "short" term, that is not a recipe for a bust, in addition, the default rates have thus far not increased as everyone feared.

So long as commodity prices stay relatively stable, and the fed does not tighten, we should have a descent year in 2007.

[Spartan]

Debt financing means borrowing money to invest, in real business or financial assets.

In financial assets investing, if you borrow from your friends, it is a loan. If you borrow from the brokerage, it is margin. If you trade futures, you are using leverage. Futures is not risky. It is the leverage that kills you when you are on the wrong side. When things go your way, $10000 in a day is no sweat. You can fund a futures contract in full, and basically turn it into an index fund. Then you give up the leverage, along with the upside and downside volatility.

In the investment business, the biggest money is in OPM, other people's money. Before we get to that, let's look at life in the financial trenches...

There are traders who are living legends b/c they managed to trade a few thousands $ into a multi-million dollar fortune. That takes a tremenduous amount of skills. The technical term is edge. You have to have an edge. Everything else is not enough, w/o that edge. That edge is about what to trade, which side to trade, how much to bet, when to hold and when to fold. The absolute rule that is paramount: You have got to know how much you are going to lose WHEN you are wrong. B/c you WILL be wrong, and wrong many times. If you can limit the size of your loses, and capitalize that properly, then you have some idea as to how many hits can you get, before that winner comes along to lift you above water. The winners will come, but there is no way to know when or where. Meanwhile, small hits will also be chipping at your capital. If you can control the loses, then you have a fighting chance. War of attrition here. That's the idea/strategy. How to achieve that is everybody's closely guarded trade secrets. I have figured out something.

That is the futures trading strategy.

There is stock market timing, using leveraged Index funds like the Pro Funds and Ultra funds. This is less demanding in terms of skill and expertise, relative to futures trading. The leverage is a lot less. The stress is a lot less. You can afford to sit around and contemplate philosophy and what not.
There are ways to time the market. You can get rich, slower than you would in the futures market. You can't make a fortune out of a few thousands doing this. But, if you have a sizable nest egg, then you can be cruising on easy street on this vehicle. It is all groovy and gravy... lol

If you are capable, you can augment your stock market timing/leveraged index funds with index options when there are times the trend is strongly in your favour. Needless to say, you need to be able to identify that. Again, there are methods for achieving that, and are all considered trade secrets. My approach would be trend following. I know that is a bit ambiguous. But you don't go publish your trade secret to the world. I am sure you can understand that.


The next route to riches, is the good ol stock investing. You can go the route of the methodology championed by William O'Neil of The Investor's Business Daily, or you can go Warren Buffet way. There are many different strategies. They all work. But you need to learn the real stuff, and not the superficial BS that everybody mouths about. My approach is to use trend following, but augment it with fundamental analysis. Just like everything else, the company whose stocks you buy, has got to have some edge. And you have to get an idea what that is, and if that is what it takes for the company to make it. That calls for knowledge about the business world. It is about what is actually going on, and NOT about what you THINK/BELIEVE is going on. A lot of people lie to themselves and not knowing it. For example, if I were to buy Medtronic, then I would need to research their product lines and their market, as well as the competition, the whole enchilada. It is a lot easier if you are at an investment firm, b/c you would access to all the research that Wall Street analysts produce. Now, you should be wise enough to just use them as sources for information and throw their opinions and recommendation straight into the waste basket. lol Anyway, that is the general idea. I can write a book on this. lol

Now, lets get back to where the real fortune is. The real and obscenely huge fortune is in managing OPM for a fee. I mean you are talking about 10's of millions of dollars of fees a year @85-90% gross!!! You typically charge 1% fees. If you manage $500 million, that is $5 million income. And guess what? You can run that outfit with 2 people!! IT doesn't matter if you lose money for the year, you still get your fees billed quarterly. This is equity market, ie stocks and mutual funds stuff. In futures, you also get 20% cut of the profit, but you don't share the loses! lol If you lose money for the year, you still get your fees, but no profit-sharing until you make up for the loses.

Now, it is very hard for a new guy to get a few hundred millions undermanagement, unless you already have a successful record at another place. You need to build up a 2 year track record of solid and marketable performance. Then you can go knocking on doors to the institution clients.
The competition is extremely intensive. You will run into all kind of characters, all fighting for the same account. It is cut throat. If you are new guy, with no pedigree, not much of a track record, then you are at the bottom of the rung. You would need a full time marketing guy who is a super salesperson. I have seen this from the inside. I have some ideas how things work in what you call an investment management boutique. Hell, I can help set one up for you, if you can fund the start up. LOL

There is different route to big money, ie the mutual funds! Yes, you can start your own funds, and if you are good, in a year or 2, your result will be 'discovered' by the media. People will line up to throw money at you, literally. You don't need to do any marketing. No need to suck up to anyone. No need to knock on doors. Everybody loves a winner. And if you are that winner, you got it made. Now, I have watched winners turned cold hand, and your admirers would leave you in a heart beat. One year, you are on top of the world with a few billion dollars under management. After a few lousy years, you may be managing $800 millions. $8 million in fee revenue a year is hard to live on. lol

To set up a mutual fund would set you back $100K in start up fees. And you wouldn't get listed in the newspaper (so no one would notice, if even at that) until you have about 1000 investors and $20 mil in total assets. That is the last info I have. I am not current on that. But it doesn't matter. In a year or two, if you are good, you will have a marketable product, and a juicy financial story that you can go actively promote with financial news writers and publications. They love to 'discover a hidden gem'. That is the stuff people subscribe to them for. I have witnessed an obscure firm laboring for years, and then got 'discovered'. Instant stardom! Highway to Financial Heavan!!

Think about it, $100k and a couple of year of laboring in obscurity. That's nothing compared to what is waiting at the other end of the ride. All you need, is the skill. (And the $100k +seed money)

Now, if you were born under a lucky star and your old man happened to operate a mutual fund company, then you got it made too!! I have seen dumb idiots just ride their old men's coat tail to riches beyond imagination.


Since we don't get to choose our parents, you got to know what you are doing. You can't bullshit your way through. You can bullshit, for a little while. Unless you are with big firms, then you can just keep on bullshitting and delivering sub-par result year after year. Your customers will continue to be mesmerized by the prestige of your big firm, and continue to be like Bambi in front of the headlight. In Wall Street, perception is every thing. In some part of it, perception is the ONLY thing. And then in the trenches where you live and die by the performance you deliver. Choose your niches carefully.

[Spartan]

...
I will disagree with this premise...it has more to do with press negativity and talking-head mongering, but the numbers really don't bare out such a drastic scenario. Actually, just this last month, unsold inventory dropped, and just today unemployment is at its lowest rate in 5 years and wages increased. I think we would need an "event" to trigger a recession in 2007...I do think the rate of growth will be slower but generally, corporate earnings will stay relatively steady. On the technology side, we are going to see a big upgrade cycle coming in 2007 so a lot of core purchases are going to be made. Regarding real estate, there is a difference between a slowing market (which have) and a busting market. Except on the margins, homeowners haven't really "lost" money in real estate, there just not making money in the "short" term, that is not a recipe for a bust, in addition, the default rates have thus far not increased as everyone feared.

So long as commodity prices stay relatively stable, and the fed does not tighten, we should have a descent year in 2007.

I dunno. I hope you are right. My sources are pointing to something else. Debating where the economy is going is one of the most tedious and mind numbling endeavour. Since few economists have actually made it big in investing... yike.. lol

[Spartan]

I know people are going to say, with all those knowledge and experience and skills, and yet you are flat broke? Ain't life funny, huh?

I would go hang myself if I dwelled on 'what might have been'. But there is no point in that. You learn from your mistakes and you move on.

It doesn't matter what happend yesterday or last month or the last years. Today is the first day of the rest of your life. That is the only thing that really matters. You wipe the slate clean and start anew when the sun comes up tomorrow.

[TomJ1]

Well, I made a go at it for a few years and by the time I got it figured out, capital/savings ran out. Same old story of undercapitalization .. Nothing new there.

Translation: I was on a winning streak. If only I had more money, I could have turned it around and made a fortune.

You have a serious gambling problem. The fact that you gamble on Wall Street does not make it any less of an addiction than if you parked your behind in Las Vegas at a slot machine.

If more capital was all you needed, you would have sold everything you owned, borrowed everything from friends and family, maxed out every credit card, and then you would have paid them all back with a HUGE profit.

You have a serious problem. The fact that you're dragging your family and friends down this sewer with you is absolutely disgusting. You should be truly ashamed of yourself. You need professional help.

I don't doubt for one second that you will slam me or feel angry. Look where you are. You just lost everything. You filed bankruptcy. Now you want to take money from the people who love you and care about you and TRUST you. Do you get that? They TRUST you. And you want to take that and use your sure-fire strategy to make them a fortune.

If the stock market were so predictable, everyone would be rich.

[HHM]

Translation: I was on a winning streak. If only I had more money, I could have turned it around and made a fortune.

You have a serious gambling problem. The fact that you gamble on Wall Street does not make it any less of an addiction than if you parked your behind in Las Vegas at a slot machine.

If more capital was all you needed, you would have sold everything you owned, borrowed everything from friends and family, maxed out every credit card, and then you would have paid them all back with a HUGE profit.

You have a serious problem. The fact that you're dragging your family and friends down this sewer with you is absolutely disgusting. You should be truly ashamed of yourself. You need professional help.

I don't doubt for one second that you will slam me or feel angry. Look where you are. You just lost everything. You filed bankruptcy. Now you want to take money from the people who love you and care about you and TRUST you. Do you get that? They TRUST you. And you want to take that and use your sure-fire strategy to make them a fortune.

If the stock market were so predictable, everyone would be rich.

LOL, translation

Doing the same thing and expecting different results...is crazy

TomJ1 kinda has a point.

Spartan, don't flame him...I'd give you the benefit of the doubt...but when I asked what you would do differently, so you don't get the same result, you oddly avoided the question and just went on a rant about the stock market and the benefit of index options etc.

[TomJ1]

I am no longer afraid of going broke. I would just be right back where I am, if catastrophy strikes. I will manage the risk that is manageable. Things like 911, political changes in the Middle East, etc, that cannot be helped, well, that is life. I will just have to start over then.

Not only would he not do anything different, he's not at all concerned about losing everything, including his friends' and family's money and filing BK all over again.

[Spartan]

Translation: I was on a winning streak. If only I had more money, I could have turned it around and made a fortune.

You have a serious gambling problem. The fact that you gamble on Wall Street does not make it any less of an addiction than if you parked your behind in Las Vegas at a slot machine.

If more capital was all you needed, you would have sold everything you owned, borrowed everything from friends and family, maxed out every credit card, and then you would have paid them all back with a HUGE profit.

You have a serious problem. The fact that you're dragging your family and friends down this sewer with you is absolutely disgusting. You should be truly ashamed of yourself. You need professional help.

I don't doubt for one second that you will slam me or feel angry. Look where you are. You just lost everything. You filed bankruptcy. Now you want to take money from the people who love you and care about you and TRUST you. Do you get that? They TRUST you. And you want to take that and use your sure-fire strategy to make them a fortune.

If the stock market were so predictable, everyone would be rich.

Actually, I am neither pissed at your nor feel there is a need to slam you. You are simply telling me that you do not understand the business and are speaking from an outsider's view.

If you are interested in learning a bit more about the industry, I can recommend a few books that offer you a glimpse of what it is like in the industry.

Jack D. Swagger wrote a series of books based on his interview with top traders. They are highly regarded.

1. Market Wizards: Interviews with Top Traders

2. The New Market Wizards: Conversations with America's Top Traders

3. Stock Market Wizards: Interviews with America's Top Stock Traders

It can't hurt you to take a peek.

[Spartan]

LOL, translation

Doing the same thing and expecting different results...is crazy

TomJ1 kinda has a point.

Spartan, don't flame him...I'd give you the benefit of the doubt...but when I asked what you would do differently, so you don't get the same result, you oddly avoided the question and just went on a rant about the stock market and the benefit of index options etc.

Ah.. it isn't about doing the same thing and expecting different results..
That would mean you didn't do your homework. You should have done your homework, and studied what you did wrong, and deviced possible solutions, and tested your solutions, verified the test data. Then you implement your improved method. Everybody in the business knows that there is no way you can succeed if you do not learn from your failure and mistakes.

Oh, you want to know what I would do differently? LOL Well, you would need be in investor and sign a NDA first. In this business, you dont' disclose your trade secret. If you let the cat out of the back, others can reverse engineer it, and they may very likely to be better capitalized than you are, in exploiting it. It is quite easy to reverse engineer trading ideas and reconstruct the methodology. In the academics world, it is publish or perish. In the trading business, it is publish AND perish. lol


Btw, what I wrote about the industry is insider views. It ain't just some rant. I wrote it because you mentioned something about "now you are talking my language". I just assumed that it would be some information that may be you can resonate with and something that you would find interesting. Sorry I bored you.


"..TomJ1 kinda has a point..." Except that it is not a valid point. I can see where he is coming from. But it is based on a false understanding of the business. Outsiders see it as gambling. Everyone in the business knows the key to succes is not hope and pray, but hard work and risk management.

[Spartan]

Not only would he not do anything different, he's not at all concerned about losing everything, including his friends' and family's money and filing BK all over again.

You assumed incorrectly. I was referring to the mental/psychology aspect of trading. If you go into battle constantly worrying about dying, then you can't do your job well. You have to put the fear of dying aside, and concentrate at the task at hand. Then you may have a chance of coming out alive. If you are besieged by the fear of failure, then failure will find you.

You selectively quoted my post and left out the part where I mentioned catastrophy strikes.. Guess what? Catastrophy can hit and you can be out of a job. That can happen to anyone of us. That is life.

[Spartan]

I want to add 2 observations.

1. The response so far, is about the same response many successful traders have received when they stumbled in their early years. I have read about them hearing just about the exact same thing said here.

2. In the financial business, if you come up with something, and everyone agrees that it is the greatest thing since slice bread, then it probably is going to flop. lol Anything that is too obvious, is often obviously wrong. lol If everybody thinks it is crap, then may be it is gonna be ok.


I am not posting this thread to prove anything. I asked question, b/c I am interested in learning about any other's experience in this area. I only went into detail, after I saw HHM wrote that this is 'his language'.

Since this thread is of little use or interest to members of the forum, and will probably be taken the wrong way, the mods and admin please feel free to delete it or lock it, do whatever you deem neceassary. It does not serve any purpose to get people jumping in to express their disapproval of the trading business.

If anyone has questions, then I will do my best to answer them. If you just want to tell me I am full of shit and should be ashamed of myself and what I plan to do, then I thankyou for your view and wish you the best.