Saturday, November 26, 2011


Back in the day, even during recessions, life seemed a lot easier. If you wanted to search for a new job, you typed up a one page (no more) all purpose resume and carried it down to your neighborhood print shop. The printer would set the type and print one hundred copies of your resume on a decent quality cotton bond paper. Then you would compose a specific, targeted cover letter indicating you knew something about the company in your gun sights, drop the two of them into an envelope, and hope for the best. In my first major job search without the help of my university’s Career Services Office, I sent out about 35 resumes with hand written cover letters. I dabbled with calligraphy back in the day. My efforts produced 2 serious interviews and one offer.

By the time I graduated from Engineering School in 1985, the world was already changing. This time I sent out something over 100 resumes and cover letters. The resumes were still professionally printed but the cover letter was produced by a primitive word processing program that resided on the University’s VAX cluster. My efforts at direct mail marketing produced two serious interviews and a job offer I didn’t want. To be fair, my prospective employers looked at my resume thinking plant manager material. I wanted to work in Research and Development. After nine years, I had a belly full of the manufacturing. This effort did produce a marvelous collection of rejection letters that were so similar it was comical. They ran something like this, “While we were thrilled and amazed with your talents and experience, we have no openings at this time that would match your incomparable abilities.”

Serious people from new generation management, like Seth Godin, believe the day of the resume is over. Networking combined with a body of work produces jobs. The old model of filling a defined position from a pool of interested applicants only exists in the Government or large bureaucratic corporations. Both Government and large corporations are downsizing and/or outsourcing.

Who you know has always been more important than what you know.

Even back in 1985 I was able to get my foot in the door of my current employer not with my resume or my academic record, but with photographs of my junior design team project, a small electric powered all terrain vehicle we built for a crippled child. The woman representing my current employer at the career fair was in charge of the handicapped hiring program. She personally saw to it that I was connected with the right people. Interestingly, some six months after I started work at my laboratory I received a rejection notice from our personnel office generated by my resume. It is still one of my most treasured keepsakes.

A resume is still a requirement for a job search.

Today resumes are put into massive electronic databases where programs search for keywords associated with a desired set of job skills. This first cut sends a finite number of resumes with the largest occurrence of keywords to the interested parties in management. If you are lucky, your resume gets 30 seconds. Unless we are talking entry level positions, management already knows who they want to hire. They go through this song and dance because it is required by legal and personnel regulations. Personal reports on the Internet indicate the old fashioned mass mailings of the past are a waste of time and money.

If you want to target a single company, write a specific resume and cover letter for that particular company. Call or visit the personnel office to express your interest in that company. Get at least one name. Then follow up with the resume and cover letter. In the cover letter state that you will make a follow up phone call at a particular time. Make that call. Then write a simple thank you note addressed to a particular person.

Because a resume will only get 30 seconds, professional resume writing services stress the importance of layout and white space tailored to attract the eyes of the reader to the most important material in your resume.

There seems to be some agreement that resumes should be two pages or less.

Tailor your resume to your target. Word processing software and cheap laser printers have changed the world. Still, it is recommended you use high quality paper. A light cream color or a subtle grey cast is considered better for resume paper than white as it will cause the resume to stand out.

Don’t use the passive voice. Instead say, “I did this.” Be specific, state things like: I used Microsoft Project to develop schedules and budgets for projects in the $200,000 to $650,000 range. I selected personnel for the Acme Roller Skate project that required a major redesign and extensive field testing. I supervised the project. I wrote the report.

If you have specific quantifiable achievements, trumpet your accomplishments. This is not a place to be shy. State, I reduced rejections in the grinding room by 30% over six months by requiring spot inspections during the shift rather than only at the end of the shift.

For heaven’s sake, please have somebody proofread your resume for spelling and grammatical errors. My wife is a very good proofreader. I am not.

Have your friends, supervisors, and mentors review and comment on your resume. Use every connection you can make with anyone who might be in a position to assist you. Always be on the lookout for that one person who might make the difference.

Proverbs 11:14

Where no counsel is, the people fall: but in the multitude of counsellers there is safety.

Proverbs 15:22

Without counsel purposes are disappointed: but in the multitude of counsellers they are established.

Friday, November 25, 2011

Asking the Wrong Questions

I guess this is a pretty appropriate post for Black Friday, the official beginning of the Christmas shopping season. Anytime you find yourself asking, “Can we afford the payments?” you are asking the wrong question. I mean to apply this statement not only to credit cards, car loans, and mortgage payments but also to things like monthly cell phone bills and cable TV.

When you find something that tempts you to enter into a long term commitment to spend your money on a consumable, like cell phone service or become a victim of the power of compound interest remember what Solomon had to say on the subject, “The rich ruleth over the poor, and the borrower is servant to the lender.” You don’t believe me, just ask the Greeks.

Once you have made such a commitment, you are working some portion of your life to bring profits to someone else. Is that what you really want? What if instead of paying $130 a month or more on premium cell phone service you can find a way to live with a more basic $30 a month plan? What if you invested that additional $100 a month in Verizon (VZ)? It is currently paying a 5.5% dividend. In 20 years that would add up $43,563 even if Verizon stock didn’t increase in value by one cent or ever raise its dividend, a very unlikely scenario. Change the way you think. Start collecting things that pay you to own them instead of bills.

When buying a car, unless you are paying cash, ask yourself, “Can I get by with something cheaper?” If you have diligently saved for a luxury, like a new car, go ahead and reward yourself. You deserve it. Otherwise, look for a way to avoid or minimize those monthly car payments.

Even with a house, don’t ask if we can afford the mortgage. Instead, let the primary bread winner or the spouse with the most secure income, ask, “Can I afford this mortgage?” Given the world’s current financial problems, there is no guarantee that neither spouse will lose a job. Children, of course, greatly complicate the one income or two income decision. Finally, Zillow is reporting nearly 30% of U.S. homes are currently underwater. That means, the owner owes more to the bank that the value of the home. If he sells, he must make up the difference in cash.

If I recommend paying cash for cars and buying a house with payments of less than 30% of the primary bread winner’s income, guess what I have to say about going into debt to finance Christmas presents?

Thursday, November 24, 2011

Hawaiian Rules

Just to help me keep things in perspective

Never Judge A Day By The Weather

The Best Things In Life Aren't Things

Tell The Truth - There's Less To Remember

Speak Softly And Wear A Loud Shirt

Goals Are Deceptive - The Unaimed Arrow Never Misses

He Who Dies With The Most Toys - Still Dies

Age Is Relative - When You're Over The Hill You Pick Up Speed

There Are 2 Ways To Be Rich - Make More Or Desire Less.

Beauty Is Internal - Looks Mean Nothing

No Rain - No Rainbows

Saturday, November 19, 2011

Last Will and Testament (Part I)

My wife and I do not have a will. This is not a problem if one of us dies, as everything but one of our cars is held in joint tenancy or one of us, as in the case of my life insurance policy, is the clearly named sole beneficiary. This is not wise, particularly if you have minor children. In such a case naming a guardian and providing for their care is of paramount importance. That was never an issue with us, because we do not have any children.

However, what happens if we both die at the same time? We have been blessed with enough wealth that I don’t want the state making those decisions for us. Recently, for the first time we met with an estate planner. Surprisingly, my wife and I were able to construct the basic outline of our plans with a minimum of difficulty. The particular details, such as the exact nature of a proposed charitable trust and the possible conversion of a Thrift Savings Plan (401-K) to an annuity at the time of my death are no where near ready for our signatures.

It is obvious, even after one meeting, that whatever comes out of this process is not going to be a simple document. Who will see to it that the terms of our wills come to pass in this material world? Again if one of us dies it is pretty easy. My wife will be my executrix and I will be the executor of her will if she happens to die first. Since our desires are that the surviving spouse gets everything that will be a pretty simple task.

Naming an executor to close out our affairs after we both die is a serious question and not a small job. Papers must be filed with the appropriate Probate Court and taxes will need to be paid. Since we have no debts beyond a single credit card balance that is paid in full every month executing that responsibility will be a minor task. At this particular moment, planning an estate sale would be a very significant task as it would involve preparing our house for market. Also, it is possible that someone might take exception to the terms of our wills. In such a case, the executor would need to act as a diplomat in our absence or deal with the unlikely possibility of a lawsuit contesting our wills. It seems to me we will need to name a primary executor from our generation and a secondary, younger, executor in case the primary executor dies or becomes incompetent before we pass.

All this is very new to me. I am just beginning to learn about many topics that I would just as soon ignore. As I learn, I will try and share my discoveries with the readers of this blog.

James Chapter 4 (NIV):

13 Now listen, you who say, “Today or tomorrow we will go to this or that city, spend a year there, carry on business and make money.” 14 Why, you do not even know what will happen tomorrow. What is your life? You are a mist that appears for a little while and then vanishes. 15 Instead, you ought to say, “If it is the Lord’s will, we will live and do this or that.”

Friday, November 11, 2011

The Battle Hymn of the Tiger Mother

This one comes from my file of unused good stuff. Laura Rowley was one of my favorite personal finance authors. She is now retired from her career as a journalist and author to be a full time mother for her three daughters. In “Character Traits and Behaviors that Make You Rich,” she explores what actually contributes to successful money management skills, particularly in raising children. Laura begins with a exploration of a book by Yale law professor Amy Chua, “Battle Hymn of the Tiger Mother.” This author recommends pushing children so hard that most of us would consider it child abuse. For example on one occasion Amy Chua would not let her daughter go to the bathroom until she had mastered a particular piano passage. The author justifies her extreme methods by pointing to her success. One of her daughters performed at Carnegie Hall when she was only 14 years old. Both of them are clearly going to Ivy League Universities. This kind of mother is not all that unusual in Asian Culture. In Japan they are called Dragon Mothers. Sometimes, at least in literature or movies, successful Japanese businessmen curse their Dragon Mothers when deeply into their sake.

Laura Rowley then examines some of the traits that might or might not lead to ability to accumulate wealth throughout a lifetime. She notes the propensity to plan leads to the ability to accumulate wealth. There is no correlation between the ability to plan and earnings. However, people who have a high net worth relative to their age and income are inevitably planners. In fact the correlation is so strong John Ameriks, a Vanguard economist states, "Planning behavior and wealth accumulation is a chicken-and-egg problem: Did people have a lot of wealth and therefore do a lot of planning, or did they do a lot of planning and that led to the creation of wealth?"

How about math confidence? We are always hearing that math skills are an important factor in financial success. Surprisingly, researchers could find no correlation between math skills and financial success. Now to be fair, they asked their subjects to respond to the statement, “I am highly confident in my mathematical skills.” They did not give them a math test. This might seem odd, but read on.

It turns out math skill doesn’t matter until it is combined with financial literacy. Those two attributes contribute greatly to financial success in life, no matter what the income level. Adding the ability to plan (for things like retirement) to math confidence and financial literacy gives you the kind of child, authors Danko and Stanley term a prodigious accumulator of wealth.

Want to know what kind of behavior to discourage in your children? Cigarette smoking is well up the list. According to Jay Zagorsky, a research scientist at Ohio State University, “A typical non-smoker's net worth is roughly 50 percent higher than that of light smokers and about twice the level of that of heavy smokers.” Unbelievable! But I guess at $5.00 a pack over 50 years smoking adds up to a huge number.

Laura Rowley notes that psychologist have found a high correlation between a sense of powerlessness and low net worth. People who feel powerless are more likely to waste money on high status luxuries. They believe that if they wear the right clothes, drive the right car, or perhaps even smoke the right brand of cigarette they will be perceived as successful and important. I have also noted a strong correlation between a sense of powerlessness and the purchase of lottery tickets. Raise your children to believe in themselves and their ability to control their own destiny through effort and responsible behavior.

In conclusion Laura adds conscientiousness to the stew. It is one of the traits psychologists term the “Big Five” They are extroversion, agreeableness, openness, conscientiousness, and emotional stability. Of the big five, conscientiousness (which includes things like industriousness, dependability, and organizational skills) and emotional stability are most likely to lead to higher lifetime earnings and greater wealth. Obviously, conscientiousness leads to better grades in school and better decision making throughout a lifetime. But where is the balance? Only the Germans could have a single word pfhlichtbewurstrsein that means to be conscious of duty. Too much pfhlichtbewurstrsein in one life can be a heavy load. Just ask an adult child of one of those dragon mothers.

If You Meet the Buddha in the Road Kill Him

Now that I have your attention, let me discuss the difference between a consultant and a subcontractor. When I served as a volunteer math tutor at our local high school, I quickly discovered the students were looking for a subcontractor, someone who would do would do their homework for them. I told them I was offering a consulting service that would aid them in completing their homework assignments on their own.

In the course of our life we need both subcontractors and consultants. Which to use or when is your decision. My mother has always done the family taxes. Back in the days when my father owned a farm and a rental property, the family taxes constituted quite an undertaking requiring considerable research into things like scheduled depreciation. My mother would seek out “consultants” in the course of her studies, but she would never think to subcontract out the effort to a Certified Public Accountant. On the other hand, I put all my tax documents into a grocery sack and carry the entire mess over to my wonderful CPA. She tells me what I forgot to include in the bag and takes over. I want a subcontractor. When I first purchased my house, I leased it back to the previous owner until his new house was finished. When I couldn’t figure out how to account for this on my tax forms, I went to a professional who pointed out I had converted a rental property into real property when I moved into my house and was due a sizable deduction. Since then, I have relied on experts to complete my tax forms.

I absolutely would never trust someone else to make my investment decisions for me. I am not looking subcontract my decision making authority to a mutual fund salesman or a hedge fund manager. If I am going to lose my money, I am not going to pay someone else to do it for me. It will be the result of my own short comings. In this instance, I am constantly on the lookout for good consultants. I read the research provided by my brokerage account, I read articles on reliable Internet sites like The Motley Fool, and Seeking Alpha. I read wild Macroeconomic rants on sites like Mish’s Global Economic Trend Analysis, oftwominds, and Paul Krugman’s Conscience of a Liberal. I even pay for subscription newsletters that reinforce my prejudices in favor of a balanced portfolio of cash, bonds, gold, and dividend paying stocks. I have discovered that I can learn something of value from almost everyone, but on this road I want to take responsibility for my own decisions.

Oh, “If you meet the Buddha in the road kill him,” where did that come from? In Zen Buddhism the master would sometimes present a student with a “thought experiment” called a koan that could not be solved using normal methods of understanding. Either it was a question that could not be answered using logic, "Two hands clap and there is a sound; what is the sound of one hand clapping?" Or it was a statement that the student would find culturally shocking, such as “If you meet the Buddha in the road kill him.” Of course the master is not instructing his student to kill a literal Buddha. The road is the path of understanding and the Buddha represent a great teacher. If the student stops walking the path, believing that he has found own enlightenment in the teachings another he has blown it. The great teacher can be nothing more than a consultant on the student’s personal journey. In this case the student should be looking for consultants not a subcontractor.

One more thing before you go, “Let’s be careful out there.”

Saturday, November 5, 2011

The Rule of 72 and You

The Rule of 72 is a handy little tool for evaluating risk. If you want to know how long it will take to double your money at some given interest rate, just divide that rate into 72. For example a 2% interest rate takes 72/2=36 years to double your investment. With a 5% rate it only takes 72/5=14.4 years to double your money.

Right now the Federal Reserve Bank has driven the interest rate on bonds and savings accounts down to nearly zero. They are punishing savers in an attempt to get them to do something more risky with their money in hope of juicing the economy and lowering unemployment, especially in the building trades. The Federal Reserve also hopes with interest rates at historic lows, you will not only spend your savings but borrow some 30 year mortgage money at the unheard of rate of 4.74%.

Unfortunately, the Federal Reserve Bank also likes controlled inflation in the 2%-3% range. The Rule of 72 also applies to that side of the problem. If inflation runs at 2% in 72/2=36 years, it will cut the value of your money in half. If 3%, it only takes 72/3=24 years to cut the value of your money in half. In the 1970s inflation was running at 10%. At that rate it only takes 7 years to cut the purchasing power of a dollar to 50 cents.

I wondered what applying the Rule of 72 to one of my more unusual, perhaps riskier, investments might tell me. Back in May of 2007, I purchased 650 shares of GE Capital Corporation 6.45% notes, ticker symbol (GER), with the sole intent of generating $1,000 of annual income, actually $1,048.12. GER is an example of a preferred stock, sometimes called preferred shares. It is neither this nor that. It is not a bond which is essentially a loan with a fixed principal and interest rate. It is not a share of common stock that represents a small portion of ownership in a great corporation. It is something in between. It has no inherent value beyond the interest it generates. If the company goes belly up or even just suspends the dividend payment on a preferred share, its value rapidly drops to zero. Companies issue these things when they need some quick cash and they are pretty certain they can beat the interest rate they are paying the investor. In this case the money was probably used in their credit card program or some similarly lucrative activity. Following the crash of 2008, Warren Buffet bought $3 Billion of GE Preferred. He got a better deal than I did, 10%. Of course I only had $17,000 to help bail out GE Capital. Preferred shares have an expiration date, at which time the company will return the initial value of the shares to the owner and call it quits. The company also has the option of redeeming the shares whenever they think they can get a better deal. Recently GE redeemed Warren Buffet’s $3 Billion special issue shares. Mine are good to 2046 or when GE gets tired of me, which ever comes first.

Given the Rule of 72, my shares pay a current rate of 6.28%. Over the years the share price has dropped a miniscule amount so the actual interest rate is actually closer to 6.25%. Lets apply the Rule of 72. 72/6.25=11.5 years. I have held these shares for 4.5 years, so only 7 years to go before all my initial investment is off the table. I think I can live with that risk. I don’t think GE is going out of business any time soon. The real calculation is more complicated than I want to fiddle around with. It involves logarithms and calculations based on what I actually did with dividends (that went into other investments because I can’t use my favored Dividend Reinvestment Plan with a preferred stock). I am content that this is a pretty good guess. I offer it to the reader as one of many such tools to help quantify risk.

Now, Let’s be careful out there.


Martin Lindstrom, the author of “Brandwashed” went to visit the Whole Foods grocery store located on Columbus Circle in New York City. Whole Foods is a high end grocery chain that promotes itself as selling, “The highest quality, freshest, and most environmentally sound produce.” How companies present themselves is a meticulously studied problem. Everything you see in a successful store, like Whole Foods, is the result of careful planning and sound psychological research designed to part you from your money.

The first thing that greets a shopper at Whole Foods is freshly cut flowers. Lindstrom notes, “These are what advertisers call "symbolics"--unconscious suggestions.” Nothing in the world is fresher than a freshly cut flower, planting the seed in your mind that nothing is fresher than anything you buy at Whole Foods. Lindstrom asks, “Consider the opposite--what if we entered the store and were greeted with stacks of canned tuna and plastic flowers?” Guess he doesn’t do much grocery shopping at Walmart.

In Whole Foods stores the price for all fruits and vegetables appears to be hand written on artfully broken pieces of black slate, “A tradition of outdoor European marketplaces,” just as though the display was set up by a farmer who had just unloaded his locally grown produce. Ha! Like every other grocery chain, Whole Foods buys its produce in huge quantities from wholesalers, distributes it to the individual stores and sets the price at its corporate headquarters in Texas. Lindstrom notes, “Not only do the prices stay fixed, but what might look like chalk on the board is actually indelible; the signs have been mass-produced in a factory.”

Grocery stores put ice everywhere, not because it is necessary, at least not in every case but to convince you they are making superhuman efforts to preserve the freshness of your food experience. Another marketing ploy is spraying the produce with a mister. Research in Demark determined, we perceive fruits and vegetables covered with drops of water as fresher and purer than a dry product. Lindstrom observes, “Ironically, that same dewy mist makes the vegetables rot more quickly than they would otherwise. So much for perception versus reality.”

One of the problems I have with one of my local grocery store is green bananas. I don’t want green bananas. I want to buy yellow bananas. Dole and the other producers of bananas know this and have raised “banana perception” to a science. They have even issued banana color guides to retailers so that they will know when to put the bananas on sale, really! Lindstrom’s comment, “Each color represents the sales potential for the banana in question. For example, sales records show that bananas with Pantone color 13-0858 (otherwise known as Vibrant Yellow) are less likely to sell than bananas with Pantone color 12-0752 (also called Buttercup), which is one grade warmer, visually, and seems to imply a riper, fresher fruit.” Dole even selects locations with soil and growing conditions most likely to produce the right color bananas.

Everything, and I do mean everything you experience in a well run retail store is carefully designed by experts to seduce you into spending your money on their product. They are masters at their craft. That is why they are so successful when in many cases their competitors are selling the exact same products. Be aware of your own vulnerabilities and be skeptical, very skeptical, anytime anyone tries to separate you from your money.

Friday, November 4, 2011

Hard Words from Seth

I really enjoy Seth Godin’s blog. I have even purchased one of his books, Tribes. By the way, that book is well worth reading. Occasionally he writes on how to find a job in this wretched economy. When he does, I almost always don’t like what he has to say, probably because it is true. Generally, his pitch runs along the lines of, you are not entitled to a job or anything else in this world, get up, do something to differentiate yourself in this new high tech universe, and go out and make it happen—yourself. This is the kind of advice one would expect from a self made Internet millionaire, published author, and marketing guru. However, it doesn’t make us 20th century industrial men all that comfortable. I was conditioned and educated to go out and find a good job with a big company that made widgets in a factory. Unfortunately, those jobs are gone and unlikely to ever return.

In “How to Get a Job With a Small Company,” Seth suggests, become a salesman. He contends we are all salesmen all the time anyway so; just do it. I not only feel as though I a not a salesman but I find the stereotype of a salesman kind of creepy. Seth points out that salesmen are the only kind of employee that by definition is not a liability. Since he is only paid when he makes a sale, there is no risk to the employer. Secondly, Seth recommends that his readers learn how to write. Learning to write ad copy, marketing brochures, and other types of similar business correspondence is almost as valuable as learning how to sell. Finally, Seth suggests that the reader learn how to make amazing video, multimedia presentations, and web sites.

All these skills can be practiced and learned for free or for a very small financial investment. However, they all require a very large investment in time and emotional energy. It isn’t easy to become artistic as well as sufficiently computer literate enough to create amazing marketing presentations. How many times can the neophyte salesman hear, “NO! Go Away!” before giving up?

Seth suggests offering the small businessman something for nothing. Remember, he isn’t looking to hire anyone. That constitutes a major risk. A $40,000 a year employee costs a small businessman on the order of $75,000 a year. If the employee does not add more than that to the bottom line, he is a loss. Find out what the small businessman is up to and make him an offer he can’t refuse. Learn how to create a website. Then if a local business wants to promote their weekly specials, offer to set up a web page for free. If the businessman wants to pitch a new account but doesn’t have the time, offer to do it on your own time. Maybe, just make up some add copy on your own and give it to the guy, for free.

Seth contends that if you prove your value the only thing left to establish is how much you will be paid. He ends his article by stating, “This is probably far more uncertainty and personal branding than most job seekers are comfortable with. Which is precisely why it works.”

By the way, in 20th century big company supervisory training we were taught not to take something for nothing from prospective employees, as this could lead to lawsuits under the fair labor standards act. I am afraid that my world is rapidly crumbling into dust.