I wanted to write this post to teach people something they will find useful at work.  If you are not responsible for dates, do not give them out to other people.  It will be the death of you.  Let me explain.

I am in charge of dates at my company.  That is, when someone wants to know when something is going to be delivered, they come talk to me.  This is my job.  I’ve had a few instances at work now where people freely give up dates to senior level executives.  This is a very very bad idea.  Senior executives love it when individual contributors give dates.  Why?  Because they are almost always understated.

Most workers at the ground level do not see the big picture.  Take for instance a software developer.  They may be experts in coding and debugging, but many do not understand what has to happen to get a project out the door.  QA resources need to be lined up.  Other projects may be prioritized ahead of yours.  There may be code freezes in place.  Lots of things can prevent code from being shipped, and most of them are out of sight of these developers.   Now, when most people think about “done” they think about it when they will be “done”.  They do not consider what else it may mean to be “done”.  I have now had a few intances at work where a developer freely offered up a date for “done” to a senior executive.  This got the senior executive very happy.  They can not wait until Feature X is out and live.

Of course, reality sets in.  They eventually come talk to me for the real story and I of course tell them the truth.  This never comes out good.   Now we get upset executives.  Now we have to hear rants about how we can’t execute or why we cannot get it done on the “original” timeline.  I am usually able to mollify the situation, but it comes at a price.  Trust and goodwill is eroded.  Believe me, the person who originally opened their mouth is now looked at unfavorably.  In one particular instance, an entire project might be canceled becasue expectations were set incorrectly.  It is felt this person, through no real fault of his own, does not “get it”.

So please, keep your mouth shut.  Just act dumb and point whomever is asking you in the direction of the person who actually sets the date for you.  You will save yourself a lot of grief, trust me.

The Big 3 automakers went to Capitol Hill to beg congress to give them a $25 billion bailout package.  To their credit, congress questioned these CEOs about why the government should come to the aid of an industry that is clearly in decline.  I caught clips here and there throughout the day of their testimony.  Let’s look at some of the finer points.

 We are about to turn the corner.  We are in the middle of restructuring

The CEOs made it a point to mention that they just needed a “bridge loan” to make it through these difficult times.  It reminds me when Herbert Hoover said, in 1929, that “prosperity is just around the corner”.  Of course the Great Depression followed next.  Anytime that someone tells you, “just a little bit longer” or “just one more time” you know things are not good.

Further, why the hell did you wait so long? If you are so stupid that you did not realize that you need to restructure earlier, why on earth should we believe you are gong to do it right now? We bailed out one of them just a few decades ago, and yet they are back again.  What the hell is that?

 If we go, so will two million other jobs which are related to the auto industry

This is just pure scaremongering.  First off, if the government let things take their natural course, I highly doubt that all three of the car companies would go under.  In fact, if one were allowed to fail, it would actually strengthen the other two since more consumers would buy cars from the other three.  Also, do you really want me to believe that not as many industries are tied to real estate and finance.  Several large companies, like Lehman Brothers, have gone bankrupt. Financial companies affect all parts of the economy.  Real estate employs all sorts of workers from carpenters, contractors, and machine operators.  These industries have seen total collapses in their markets, and yet we haven’t reached Armageddon yet.  Why is the auto industry special?

It’s the economy!

I love this one.  Time and again, the CEOs used everyone’s favorite excuse, it’s the economy!  Yea, so what?  I’ve said it before and I will say it again, if you cannot run your business without being able to weather an economic downturn, you should not be running your business.  Everyone knows there are economic cycles.  CEOs know this better than anyone else.  Every single person is affected by this economy.  I know my industry is.  We are heavily dependent on ad revenue, which declines sharply when the economy goes south.  Should my company be able to ask for a hand out?  No.  It is up to plan for it, tighten our belt when it happens, and figure out to succeed in any environment.  We have to do it, so should the car makers.

The bottom line is that there is no way we are seeing this money back if we give it to the automakers.  Seriously.  If these guys actually had a legitimate plan, they would have no problem raising capital to  fund their plans.  They could go to any bank or investor, show them their plan, and people would be jumping in to invest.  The fact is that they don’t have a real plan, they are just waiting for some miracle to save them.  Unfortunately for us, I think this miracle will materialize in the form of the US government.  It probably won’t happen in the next month, but it wil before it is all said and done.

However, I’m now way too overweight in cash at this point.  If you add up all my non-retirement assets, I’m about  77% in cash and the rest in equities (I don’t own any bonds or bond funds). For someone my age, this is a pretty silly to be this far into cash, even if you are as bearish as I am.  I am still not ready to jump totally into this market, I do think there is probably some more room to the downside, but I definitely should not have this much cash on hand.  Some of this has been caused by the shrinking value of my equity portfolio.  I’m probably down at least 40% over the last year or two.  But most of it is simply staying on the sidelines and continuously earning more money which just turns into cash in my savings account.  Yes I know, its a nice problem to have.

So I need to start looking very hard at my shopping list.   There are some things that are extremely interesting to me at the current prices.  There are some things that are extremely scary too.  For example.  Goldman Sachs.  I thought it was a buy if it were to ever hit $120, and now that stock is trading close to $60.  Was I right before, or is this stock going down even more?  In this market, it is extremely hard to say.  That’s why I won’t deploy all that cash, probably just a third of it over the next few weeks.  If the market becomes more stable, I might look to divest another third of the cash.  Not sure if I will deploy that last third anytime soon unless I really think the market gets into bull mode, which I honestly don’t see happening in the next few years.

So what is the first thing I should buy?  So hard to make a decision right now …

So bad, my cat has moved into a paper bag. I’m actually not too sure why he likes to do this, but he seems to like to get himself into small tight spaces like paper bags or boxes.  It’s odd.

Just a quick post tonight.  Lots of things going on at work, some of which I will blog about later, but don’t have the energy to do it tonight.  One thing, the market rallied on almost no news.  I was about to go long, since I had closed my short position yesterday as I mentioned in my last post, but all the turmoil at work once again got in my way of making any trades.

No way to play the market where it is right now.  I will just wait and hope we rally a bit more before I go short again.  Another 5% up from here, or the S&P 500 being at about 950, and I will look to get short again.  Until then, I’m probably out and won’t make any trades.

The market promptly dropped testing the lows of the market.  The S&P is now close to the lows we saw on October 10th.  That day, the market reached a low of 839.  The market closed today at 852, leaving it just  1.5% away from the low.  If the market is able to break through that, we have a very scary situation.  The problem becomes that in bear markets, you continue to go down if you create new lows.  The reverse of this is true, in bull markets you keep making new highs.  Considering the S&P is already 42% down, thinking it can go down more is pretty painful.

I honestly think we will break through that low.  After the market close, Intel announced that it had a very bad quarter, and the market is for sure going to open down.   Unfortunately for me, I closed out my short position today.  I had made a 15% profit in that position in a little over four trading days, it was a pretty good trade for me.  However, I did not want to be greedy, and decided to get out even though I was pretty sure the market was going to go down from there.  This market is hard, and anytime you can take a quick 15%, you take it and don’t look back.  I don’t feel bad about covering, it was the right move, but now I have no downside protection.  If the market tanks, my portfolio will go with it since I no longer have a hedge.  So I’m a little worried about what will happen in the next few days.

Every time Hank Paulson, or anyone from the government for that matter, opens his mouth, the market does crazy things.  Just please stop talking.  While you are at it, please stop doing anything.  The more you do, the worse things get.

In another stupid move, the US government outlined a plan to help borrowers get better terms on their mortgages.  The basic gist of the solution is that through Fannie and Freddie, the US government will encourage loan modifications.  They won’t allow for an outright reduction in the amount owed, but they are willing to allow the mortgage to be extended say from 30 years to 40 years, and they will allow the interest rate to be lowered, which will temporarily make payments more affordable.  Before I go criticize this plan, because I will, there are some things that are not all that horrible.

First off, I have no real problem with private institutions making loan modifications that actually reduce the amount owed on the mortgage.  While I tend to think all homeowners who took out a loan for an overpriced home are responsible for the full amount, I have absolutely no issue if two private parties want to sit down and negotiate new terms.  If it is in the best interest of both parties to keep the person in the house, and one side is willing to take a loss in the deal, then so be it.  A lot of private banks are deciding to do this, and I’m all for it as long as they do not do it with my tax dollars.

So that being said, I also have no problem with what the government is doing here.  They are extending the length of the deal and the interest rate temporarily, but the overall deal remains the same.  Now, I’m sure they are taking a small hit in profitability here since the term is longer and the terms of the deal probably favor the homeowner, but overall, the deal is still a net positive (assuming the borrower doesn’t eventually default which is probably a bad assumption).  Further,  the government is not putting any tax payer money directly in the hands of borrowers.  Something I am sure that will eventually happen but at least not with this plan.

But of course this plan has its problems as well.  And, like the GM situation it comes down to one fundamental problem.   You can not, over the long haul, create demand for a product at an artifically high price.  This is exactly why we have a housing bubble.  Houses are STILL overpriced.  Just look at some of the statistics in the Los Angeles market.  The median sale price is around $375,000 (look at the average listing price for a good chuckle).  While that may sound like a bargain compared to prices before, this is still way overinflated.  The median sales price in 2000 was just around $160,000.  Are you trying to tell me that given all the turmoil we have seen recently, that prices deserve to be double what they were just 8 years ago considering that salaries are relatively flat?  A family making $50,000 a year, which is the California average (the Los Angeles average is even lower) can nowhere near afford a mortgage to buy a $375,000 house.

There is nothing the government can do to fix this fundamental affordability problem.  In fact, the government is actually making things worse with every action they take.  If the market doesn’t just correct, and wipe out this fake equity, the market will languish for years. No doubt, a lot of people will be hurt, but how many more will be hurt if we just stay like we are over the next decade?  We will have an entire generation which won’t be able to buy affordable housing while we prop up an overinflated market.  The vast majority of people who own their homes did not buy them in the last 5 years and have mortgages they can afford. Should all of us suffer because of the small minority that did and can’t?

Now that we have given even more money to save AIG and the rest of the financial industry, should we listen to those calling for us to save GM from bankruptcy?  To hear the arguments, GM is too big to fail.  If they fail, they take the whole economy with it. By some estimates, GM is responsible for a few million jobs.  Let them fall and all the ancillary industries like car dealerships and car part makers will go with them.  This causes a domino effect that will bring down the rest of the country with it.

What a load of crap.  There is no company too big to fail.  Do we really have so little faith in the rest of the American population to think that these resources couldn’t be redeployed into something more useful?  Give me a break.  GM failing does not mean people will stop buying cars.  A lack of supply does not mean demand just evaporates.  These buyers will find other cars to buy.  The better parts maker will find a way to retool and provide parts to either service the cars out there now or to whatever company replaces the cars that GM would have sold.

No matter what the bailout entails, it can’t do one key thing.  It can’t make people want to buy GM cars.  This is the heart of the problem.  Nothing else matters. GM is failing not because of a bad economy; they are failing because not enough people want to buy their product at the price they are offering it.  GM is a failed business model and proves it over and over again.  Any company that can’t survive an economic downturn, does not deserve to be in existence.   It is exactly in these circumstances that the strongest companies rise to the top while those who are weak fall into bankruptcy.  Without this cycle, horrible inefficiencies, like GM, are allowed to persist.

Of course, the automobile lobby is a strong one.  They will convince those in Washington how crucial they are to the entire economy.  They will convince them that they should be allowed to make crappy products that too few people want at prices that can’t compete with their better competition.  Of course, that will mean that America will continue to deploy resources in an industry it is not suited to win.  Forget trying to deploy these resources in things that America actually does have a competitive advantage in like software development, medical research, and alternative energy engineering.  Let’s try and prop up old and dying industries that have no chance of winning in a global marketplace.  Is that not the best way to run a business?  Do not most business invest their capital in projects that have the lowest return?   When resources are tight, is it not best to forget where your strengths are instead be more inefficient and focus on the things you have no chance of succeeding in?

If we are going to give them money I would like a few things answered.  Let us treat it like venture capital.

• What are your prospects for success?
• What is the likely return on investment?
• What is your business plan to get you to profitability?
• Why are you likely to succeed vs. your competition?
• Why should I give you the money rather than directly investing in the people and business that will be hurt if I let you fail?

All should be fairly simple to answer.  I suspect none of the answers would likely satisfy anybody actually looking to invest in the company.

I’ve decided to buy myself a digital SLR camera. I, like always, did a lot of research on what to buy, and I ended up deciding to buy the Canon Rebel XSi. I’ve been interested in photography for quite a while. I owned a Canon Elan 7E and was pretty happy with it so I decided to stick with the Canon line.  It has the additional benefit that I can use most of my old lenses on the new camera, so I should save some money since I won’t be buying all new gear.

This is actually a little unusual for me.  When I buy electronics, I almost never buy the entry level.  I’m a firm believer that you should basically buy the upper middle of a product line.  You should not buy the best because usually the price premium is too great to justify the benefit you get out of the extra features.  You usually should not buy the entry level either because the manufacturer often saves the better, more useful features for the step up models.  The upper middle of a product line tends to be where the sweet spot is in terms of price and performance, so it is what I generally recommend people do.

Now while I could have afforded to buy the step up model, either the EOS 40D or the EOS 50D, I decided that this time the entry level model just made more sense to me. The step up features did not seem to mean too much to me.  The step up models have better construction, higher ISO settings, and a few more controls to tweak.  None of these are a show stopper for me, and not worth the price gap of over $300, or over a 50% premium.  The resolution of the XSi is actually better than the 40D and slightly under the 50D but I don’t expect this to make much difference.  Photography at high levels depends much more on your lenses than it does on the camera body, so for me I think it is all a wash.  So this time, I decided to save the cash and hopefully use the price difference to buy a nice lens or two.

I also decided to just save some money on this purchase.  It is not as if I’m worried about my finances, far from it, but it cannot hurt right now to be a little cautious just in case.  In fact, I’m saving money mostly because there is a host of other things I want to buy and I did not want to go overboard buying too much photography equipment; especially when you consider the fact that I’ve taken a few years off from this hobby and I’m not so sure how much energy I’m going to put back into it.

So if anyone has any experience with this camera, or any of the other ones I’ve mentioned, let me know what you think.  I’ll be buying it off Amazon soon, much like I will be for most of my purchases going forward, to get around some of the things going on in California.  More on that later …

240,000 jobs is an awful number.  6.5% unemployment is high when compared to where we have been in the last decade.  There are now 10 million people who are considered unemployed.  This is the same number of people in the state of Michigan.  The scary part, it really is going to get worse.  Like I said in my last post, there are more and more employers announcing layoffs.  So this will easily get worse before it gets better. I don’t expect depression like numbers, but I do expect unemployment to continue to rise through the end of the year.

The play here, fade the rally.  For those who don’t understand it, it basically means you should start selling your stock into rallies because the general direction is down.  You are getting a short term bounce, so you should use it to your advantage.  There is one caveat here.  I think the market could easily rally depending what comes out of Obama’s economic summit.  If he came out and gave news that was very investor friendly, like he would extend the capital gains rate past the 2010 expiration, I can see the market having a violent rally upwards.  These types of moves are why most investors should stay out of this market.  It just isn’t a market that amateurs should be messing around with.

As the Market rallied somewhere around 18% this past week, I held on to my short position.  I had no doubt in my mind that the market would eventually reverse and have a violent move down.  That’s what we have seen in the last two days with the market down over 10%.  Do people really understand how crazy this is?  You usually don’t get double digit moves in a year.  We are seeing them regularly over days.  The thing is, the market is going to go down from here, so I will continue to hold on to my short position for at least a few more percentage points.

I’m very short term bearish on this market.  If you can hold on to stocks for years, it might be a good time to buy, but the news coming out is consistently bad.  Earnings are bad at almost every company reporting, layoffs are being announced almost hourly, and the governmetn can’t seem to get anything right.  I find it very hard to believe that any of the professional investors out there are going to put much capital in the market until at least the beginning of the year.  Most if not all will attempt to liquidate any positions they have remaining on every market rally.

So here is the recipe that I’m using.  When the S&P drops to around 880, you want to be out of any short position.  If you are brave, you might want to go long at this point.  When the S&P gets to around 950 its time to short.  You play this range, and be disciplined, and you will probably do just fine.  If you are smarter, you just stay out all together.