Double Journey

I had to work late tonight. The big problem I face these days is that I have lots of things I have to deliver, but I’m in meetings all day. Need to find a way to balance that out. It was a problem I often had at Microsoft and I never really found a solution to that one.

The nice thing about working late is that I can actually get a lot done. There are a few things that are guaranteed when you work late

• You won’t get pulled into any meetings
• Nobody will come by to distract you
• You won’t get any e-mails to distract you
• You will actually focus on getting done what needs getting done because the sooner you get it done, the sooner you get home

One of the things that has caught my attention, and frankly bothered me a little, was the fact that so many employees at my company come to work late. In L.A. it can make sense since traffic eases up. Who wouldn’t want to avoid traffic into Downtown L.A.? But it would make even more sense if they came late to stay late, because, quite frankly, we would be a much more productive company.

Alas, even though I’m almost always one of the first ones in (including today) there was nobody to be seen when I left the office. Heck, most people had scattered four hours before I finally called it a night.
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My Birthday was this weekend.  This would explain the lack of post on Friday as I took the day off of work to just lounge around and not do a heck of a lot.

It was a big birthday for me actually.  I’m now 30.  However, I’ve long gone past the point where I do anything really significant for my birthday.  I spent the day looking for some furniture and enjoying the California weather.   My girlfriend came down from Seattle this weekend and it was good timing for her.  While it was warm and sunny down here, I heard it was snowing in Seattle.  Sucks to be up north.

At night, we went to Ruth’s Chris Steakhouse.   We were going to eat in but I decided that it would be better (and frankly easier) to just go eat out.  Ruth Chris is well known for its steak, and it didn’t disappoint.  I got the Surf N’ Turf which meant a lobster tail and Ribeye steak.  It was mighty tasty.  Since I don’t really drink alcohol, and we generally don’t order apetizers, the bill came to “only” $130.

I was thinking as I was eating in the restaurant how fortunate I am to be able to go to this type of place when I feel like it.  I really don’t worry about how much money I’m spending at these types of things because I do it so rarely and have more than enough saved so that it doesn’t hurt my bank account.  At dinner, my girlfriend and I talked about her friend who is a lawyer who makes more money than I do yet has almost nothing saved.

Now if I wanted to, I could probably eat out at this type of restaurant almost every single night.  It would be expensive, and at the end of the month, I wouldn’t have very much saved, but I wouldn’t be going negative either, not even close  So it got me thinking what on earth can people be spending their money on to go through that much money.  If I can afford to go out to one of the nicer restaurants in the country every single night, what must someone who makes more money than I be spending his money on?

Other than that, it was a nice relaxed weekend.  The one other highlight was going to watch my friend Jenny play in a softball game and being part of her team’s first victory.  If you have seen them in other games, you would know what a big victory it was as most people have never played a game of softball in their life.  I think my cheer leading was a major reason they won as this was only my second game in attendance, and they generally lose.  Coincidence?  I think not!
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I wonder how much of a stigma still exist for people who work in tech? At times in the past, and probably still today, it was considered an occupation that only geeks and nerds would have. Images of scrawny cubicle dwellers in glasses spending hours in front of their computer are synonymous with IT workers. (And now that I think of it, it pretty much does describe a lot of my coworkers)

But is there a better job that is available to the masses than working as a computer engineer? Think about it for a second. In all the companies I have worked for the following is true

• Computer Engineers are well paid
• Computer Engineers have extremely flexible hours. They can come in late and leave early if they wish, so long as they finish their work
• Computer Engineers can easily get away with doing very little if they choose (see picture)
• Computer Engineers have physically undemanding jobs
• Computer Engineers are allowed, and usually encouraged, to take breaks during working hours (Foosball and Video games are the norm at my work)
• Computer Engineers are in demand and thus jobs tend to be pretty plentiful

Its hard to think of a job that can be as easy (if one chooses) and pays as well as those available in the tech industry. Now while I greatly respect the job, I don’t feel many other people do. I know when I was single and trying out the dating services I purposefully avoided saying I was a Software Development Manager. It paid off. Talking to my girlfriend afterwards, she told me she was already concerned that I went to Princeton, and that if I had stated what I did, her first impression would have been that I was too nerdy.

Now you would think that women would love to date a computer engineer and that it wouldn’t be a turn off. After all, it is a well paying, secure job, that still would leave time for her or their family. But I guess its just hard to overcome the image of Dilbert and Wally.

What do you think. What are some of the best jobs that an average American can have?
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I really wonder why HR is difficult at most companies.  It’s odd because

• It is one of those things that is found at every company.
• It is pretty much the same job function at every company.
• It is one of the more important things at every company as people really care about their benefits, pay, promotions, etc.

You would think that after all these years HR would be down to a science.  I haven’t had any major problems at my new job that couldn’t be dealt with but at the same time it hasn’t been the smoothest of things either.  I need to go to the eye doctor and somehow my information didn’t make it to the insurance company, so I have to wait until they can go and process it.  I’m kind of on a tight time line because I want to get some glasses for driving before I drive from Seattle to Los Angeles in a few weeks.  It’s just one of those things that should have been taken care of that isn’t.  It’s probably because they deal with such sensitive and important issues that one minor slip up seems magnified. So perhaps I am being a little unfair.

Now in fairness, I never really used HR at Microsoft because I never really had a problem.  They take good care of their employees, almost too good if you ask me.  The nice thing about Microsoft is that you can take care of most things on your own without ever having to deal with another human being.   Want to change your benefits, do it online.  Want to take vacation, just do it yourself online.  Maybe that’s the key to things, take the “human” out of Human Resources.

What are your thoughts?  Have you had issues with your HR department?
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From the obvious files, Treasury Secretary Paulson declared that  we have to do something to fix social security.  Not sure where he has been the last decade or so when it became pretty obvious that we had a mounting problem.

Clearly we can’t sustain the current path.  Either taxes need to be raised (they are already pretty high) or benefits need to be reduced.    Now, we all know how I feel about taxes, so I’m clearly not in favor of that.  I also see how it would be unfair to reduce benefits to those already retired or near retirement.  To me, the answer seems pretty simple.  Start promising less to people like myself and raise the retirement age.  If people near retirement need to work a little bit longer, so be it.  Social Security was never meant to fund people 1/3 of their life.

You know what the scary thing is?  I’m not sure if people fully realize the full extent of the problem.  Read the article.  It talks about how Social Security will start running a deficit in 2017 and go bankrupt in 2041.  What is not talked about is the fact that what happens in 2017 when the government has to start drawing from the “trust fund”.  The fund is nothing but government issued bonds.   This causes a double whammy.  When they come due, what do you think happens?  The government needs to somehow turn these bonds into actual money.  How do they do that?

The old trick of issuing bonds won’t work, can’t pay bonds with bonds.  So the government now has three horrible choices.

1. Cut spending somewhere else
2. Raise taxes yet again
3. Print money causing massive inflation

Considering how hard it is for the government to do either of the first two now when the pain would be relatively minor I have a bad feeling that the government will do #3.  So not only will I not get any benefit from Social Security, not only will I have to pay for everybody else’s benefit, but all the money that I have saved for myself will become worth a lot less.  Sounds like a great future.
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It’s been a little bit over three months since I moved back to California. Was it worth it? Well there are a couple of things to consider. Let’s talk about the negatives first.

1. In a little bit under 3 months, I’ve already paid $2000 in state income tax. My equivilent in Washington would be $0.
2. Traffic is bad enough that I’ve started taking the train every once in a while.

And that’s about it. On a personal note, my girlfriend is still in Seattle, so California has been a little bit of a drag without her. But she is moving down soon so that will soon rectify itself. Now let’s talk about the good things

1. Housing wasn’t as bad as I thought. I’m paying $1700 for my two bedroom. For this area, it’s a pretty good deal. Still slightly more than I would spend in Redmond, but not by much.
2. If you like looking at girls in short skirts, there are definitely more of them around. Not only are they better looking but they obviously have the opportunity to wear short skirts because …
3. The weather is SOOO Much better.

Let’s look at that last one shall we. The weather forecast for tomorrow in Redmond is

It’s going to be fairly cold and pretty rainy. Typical March weather. The forecast for Pasadena tomorrow.

Not quite the same thing. It is actually pretty damn hot down here lately. If you go outside and stand in the sun for a while you will actually start to sweat.

So on the one hand you have pretty girls and nice weather on one side and traffic and a few thousand dollars on the other. So is it worth it? Yes! There are some things money can’t buy, and most of the good things you can find right here in California
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For the most part, I haven’t talked too much about the housing mess that is causing a ripple effect in the rest of the economy. This despite the fact that I actually have pretty strong feelings on the subject. Government plans to help troubled borrowers are growing by the day. Local news story are constantly featuring poor borrowers who were “tricked” into buying a house or worse yet felt they have a right to own their house despite the fact that they could never afford the payments.

Despite all the sob stories, I will admit I feel very little sympathy for most people. If you count my girlfriend and I as a household, we are in the top 5% of households in terms of income. Yet we have deliberately stayed out of the housing market these past few years because it was very clear to any rational person that housing prices were over inflated. If we could barely afford payments on a standard loan on a regular house, how was anyone else affording it?

The answer is they couldn’t. These people took out loans that they would eventually not be able to afford or could never afford in the first place. That’s why I don’t feel bad for most people. The people I really don’t feel sorry for are

• Anyone who took out a stated-income (liar’s) loan.
• Anyone who refinanced their house and took equity out to pay for consumer goods they didn’t need like a new car or vacation.
• Anyone who didn’t read the fine print and who uses it as an excuse
• Anyone who bought a 2nd house as an investment (Investments lose money.  They are risky, it is the nature of investing)

How anybody can feel bad for someone who took out a liar’s loan is beyond me. They are called Liar’s loans for a reason. There is a reason that banks require documentation of income for loans. They want to be sure that you can actually pay the loan back. Most people’s income is documentable. So the only reason for most people to use a stated income loan is that they in fact can’t afford the loan they are applying for. How much common sense (or maybe it is lack of common sense) does it take to not get into one of these loans?

As for the third one, people who argue they didn’t read the fine print. Can’t really feel bad for those people either. It is the biggest purchase you will ever make. You need to take the time to understand what you are getting into. If it is too difficult for you to understand, find somebody who can understand it. You can not trust your real estate agent or mortgage broker on this one. They have a vested interest in making sure you sign the loan and structuring it in a way that makes them the most money.

So while it may sound harsh and somewhat cruel, I really do hope our government does nothing to help people out of a mess they got themselves into. While I’m sure there are rare and isolated cases where people were deceived, I believe this not the norm and there are avenues of recourse for people who were legitimately deceived. But anything close to a wholesale bailout for those who should have known better is akin to rewarding stupidity. It makes me think of the movie Idiocracy where stupid people breed the smart people out of existence.
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I keep commenting on the stock market because it is on one heck of a ride and makes for pretty interesting drama. You could make a lot of money if you just bet on the volatility of the market.

A casual observer would wonder what the heck is going on. It looks like for every up day there will be a down day. Anybody who has watched the market for any length of time knows that these fluctuations are not normal. So what the heck is going on? Here is my explanation.

These problems all start with the Fed,technology, and globalization. In the early part of the decade, money was very easy to come by. To stave off a recession, the Fed pumped money into the market by lowering rates to ridiculously low levels. Added to this were new financial instruments which made it easy to slice and dice debt in ways neverthought of before. You sell these in a global market hungry for returns and safe investments and you have a situation where money is easy to come by and nobody knows who really owns what.

Now imagine you are a consumer who can get credit cards very easily. If you are like most Americans you are going to get as many as you can get and start spending. Well that’s what happened here. Now imagine you have a scenario where not only can you get cards easily but chances are if you run up debt, the bank might not be able to figure out you actually owe them money. What do you think is going to happen?

Now you are seeing it play out on a trillion dollar scale. People are starting to wonder who is going to pay the bills. Companies who have these loans on their books know this but are stuck. They need to have cash in hand for either margin calls or to run operations but they don’t have much assets to sell other than what could be worthless loans. They could try to sell the loans but they would have to take pennies on the dollar. So they sell other assets. Assets which are much more liquid. This causes the market to drop quickly. Of course whenever this happens, the Fed, for god knows what reason, steps in to save the day giving access to easy money yet again making the panic subside. Since markets go up when money is cheap, the market rebounds.

It still doesn’t fix the inevitable problem, there are a lot of bad loans out there and someone is going to have to pay for them. This is why I’m still so bearish on the market.

For all the bluster about how bad housing is, prices are still pretty high. I look around at the houses for sale in California, and for all the doom and gloom most are still for sale at or above 2005 prices. That’s nuts. What is going on is that sellers are refusing to believe they can’t get the ridiculously high prices, so they just hold on, praying for the best. That’s why the housing market hasn’t bottomed yet. But eventually it will have to, because there are enough people who eventually have to sell because they have to move or they can’t afford the payments anymore. The same thing will happen to this market. Companies are praying a miracle will happen that will make these loans worth something. That miracle isn’t going to happen, and eventually they will have to write them down. When that day comes, then we will really be in a bear market, and only then will it be time to go all in.
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Much like I figured it would, the market reversed sharply. At the beginning of the day, stocks started higher, but eventually fear took over greed and stocks plummeted.  Much of it can be attributed to the exact opposite reason that stocks went up.  There was hope that the financial sector had seen the worse of it.  This move down shows that the fear still exist that the worse is not over.

However, there was one bright spot.  Visa had its IPO and it was up about 28% from the open.  Now the good thing about Visa is that its market is actually growing and some would argue that it is almost recession proof.  You see, Visa makes money on its transaction fees.  It owns the largest credit card network in the world and makes money each time one of its cards are swiped.

Its actually a fantastic business model.  If you are like me you can appreciate it because you pay for everything with credit cards, even the little transactions.  What’s even better is that they actually don’t have liability for consumers who don’t pay their bills, that is the responsibility of the issuing bank.

So do I think its a buy?  Maybe.  Mastercard has quadrupled since its IPO, and Visa is the better company.  I still think its kind of dicey right now to be playing in the market, but if you want a good risk in a time when nothing really looks very good, Visa may be it.
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The fed, as expected, cut the rate 0.75%.  This was slightly less than a lot of people were betting on as the fed funds future rate actually seemed to imply a 1% expectation.

That being said, the market celebrated with a gigantic day with the major indexes up over 3%.  So it’s time to celebrate, pop the champagne, and go running into the market right? The economy is saved! Not so fast.

The feds action definitely helps the banks who got themselves into a mess by taking the easy money and making some bad loans.  The Fed’s actions are squarely to ease the credit crunch which is hammering the financial markets. However, the fed has no control over what the banks do with the easy money.  And by all indications the banks aren’t passing on the money to their customers.

Despite the Fed rate cuts, the cost of mortgages are actually going up.  The
average 30 year fixed mortgage is just under 6%.   This despite the fact that the 10 year note currently stands at 3.5%.  For those that don’t see the significance, this 2.5% difference (referred to as the spreads) is normally only 1.5%.  The spread represents the risk a bank is willing to take and the widening of the spread shows that they aren’t willing to take very much.  Add that to the fact that they are owning willing to lend to those with high credit scores, and you can see how this isn’t helping the average American very much.

So what are the banks doing with the easy money?  There is actually an arbitrage opportunity here since they can borrow the money and invest it in higher yielding government bonds.  Of course, you can’t do this since you can’t borrow from the Fed.  Sucks huh?

But at least the Fed cut isn’t hurting you right?  Saving the banks is a good thing isn’t it?  Sure if you don’t mind higher inflation and a weaker dollar (causing the price of imports and commodities like oil to rise).   If you don’t mind taxpayer dollars being used to bail out billion dollar banks.  If you believe that the way to fix the problems caused by easy money is to throw more easy money than the fed is doing the exact right thing.
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