Thursday, January 31, 2013

The Customer Is Always Right

I have postponed writing this article because I have never suffered unemployment in an economy like this one. Yes, I have seen hard times. I graduated in 1973 just in time for stagflation and the first oil crisis. Good jobs were hard to find. For a few months I packed rolls of cloth in burlap sacks, not exactly what I expected with a college degree in hand. Still, I was able to find a job that paid enough to cover my basic living expenses with enough left over for beer and even some money for savings. In 1982 I lost my job in what was then the worst recession since the great depression. I used the opportunity to go back to school and earn a degree in engineering. I did this on a combination of savings, my wife’s job, and a scholarship. Since then the cost of higher education has increased at 5 times the rate of inflation and student debt has become a national disgrace.

Today, the only meaningful improvement in U-3 unemployment comes from people dropping out of the workforce. Yes, people in the baby boom (like me) are starting to retire. Unfortunately, many of my peers are drawing Social Security simply because they have no options. They can not find full time employment. For generation Y (those born between 1980 and 2000) the U-3 unemployment rate is over 11.5%. Life is on hold for the so called boomerang children. They are locked in a perpetual state of adolescence, living with their parents, postponing marriage, forming a household, and having a family. All the long term issues associated with such a social condition are yet to be discovered, but the experience of countries like Spain where the problem is worse are not good.

I have been studying job search methodology. The more realistic sounding authors call for the job seeker to forget about his or her needs for a moment and consider the needs of their prospective employer. A personnel officer from Chick-Fil-A once observed, “We don’t hire you because you need a job. We hire you because we need you!”

Charles Hugh Smith, an entrepreneur and financial blogger observed, “The only way to understand why employment is dead in the water is to stand in the shoes of a potential employer or entrepreneur. Remarkably, this perspective is unknown to economists and progressive politicians because they have never been an employer.”

An employer will only hire a new employee when he is pretty darn sure that new hire is going to generate some profits. That is a pretty tall order. The typical overhead costs directly associated with an employee run about 50% of gross salary. In addition there is indirect overhead, materials, office space, equipment, and energy for example. This can run as high as 50%. I have seen these kinds of numbers in a variety of sources.

If an employer pays an employee $50,000 a year that employee needs to generate $100,000 in new business or sales just to break even.

Rex Nutting observed, “Real compensation per hour (adjusted for inflation) has risen by less than 1% since 2007, even though the average worker produces 9% more per hour. By any measure, unemployment is a national tragedy and disgrace.” There are two primary reasons our nation faces such a wretched situation, the cost of government (taxes and regulations) and worldwide over-capacity in most industries and businesses. There aren’t many opportunities for existing businesses to grow and/or the cost of any proposed growth is preventively high.

There are two ways to attack this kind of situation. I know a young man who is never unemployed even though he is a full time college student. Ever since his middle teens he has been inventing his own jobs. He has walked dogs, been a house sitter, installed car stereos, set up and ran audiovisual equipment for our church, rock concerts, and the county. He is extremely tech-savy and a born entrepreneur. If a job doesn’t exist he just invents something. He has the best possible mindset for this economy.

However, most of us (including yours truly) have been programmed by parents and life to work for a great corporation or in a government bureaucracy. To find a job in that kind of organization requires a great deal of intelligence (not that kind of intelligence). The smaller the target the better your chances that you can craft an approach that will work; ask what keeps your prospective employer awake at night; ask how can I provide value that is at least twice what I want to be paid. The better answers you can provide to those questions during the employment process the more likely it will be that you will find that dream job. Consider an interview not an interview but a presentation of your business plan for a prospective employer. Consider your prospective employer as a customer and remember, “The customer is always right.”

One more thing: Consider this quote from a speech given by Winston Churchill during the darkest days of World War II, “Never give in. Never give in. Never, never, never, never—in nothing, great or small, large or petty—never give in, except to convictions of honour and good sense. Never yield to force. Never yield to the apparently overwhelming might of the enemy.”

Tuesday, January 29, 2013

When to Buy? When to Sell?

For the first time since October 2008 Main Street America has rediscovered the stock market. Money is flowing into mutual funds at an increasing clip. Usually this is a bad sign. That kind of money tends to show up in the later stages of a bull run. So inquiring minds might ask, “When should I buy and when should I sell?” There are many correct answers and an equal number of wrong answers.

But let’s keep this very simple.

As usual, let me offer a disclaimer. I am an extremely conservative value investor. I own individual stocks, bond funds, CDs, mutual funds, exchange traded funds, precious metal, and keep more cash (bank accounts and money market funds) than I should have because, like Oliver Cromwell I believe the maxim, “Trust in God but keep your powder dry.”

The obvious answer would be to buy in the first quarter of 2009. At that time a blind monkey with a handful of darts could pick winners from a list of stocks. Unfortunately, after a 40% drop in the value of their 401K accounts, mom and pop America were dumping their holdings at just exactly the wrong time. Baron Rothschild observed, “The time to buy is when there is blood in the streets.” Main Street America should have been selling those stocks late in 2007; just exactly the time when they were buying everything is sight.

I can not predict the future. I didn’t know when the stock market would hit bottom. I don’t know when the current bull run will end. However, I do know that we are now closer to a top than we were in March of 2009. Therefore I have more money in cash and bonds than is usual. When nearing a bottom I will, hopefully, have more money in stocks than in cash and bonds. I believe an age appropriate range for someone of my age, 62, should fall between 40% and 55% of my net worth excluding my primary residence in stocks.

Old Conventional Wisdom: Age in bonds and cash. Hence in my case, 62% in bonds and 38% in stocks.

New Conventional Wisdom: Age – 15% in bonds and cash. Hence in my case, 47% in bonds and 53% in stocks.

There is another useful answer, dollar cost averaging, “The technique of buying a fixed dollar amount of a particular investment on a regular schedule, regardless of the share price. More shares are purchased when prices are low, and fewer shares are bought when prices are high.” (Investopedia) Every month, month after month, put the same percentage of your salary in your stocks and bonds. When they get out of balance, move some money from one to the other. Otherwise ignore what the market is doing. If you choose to reinvest your dividends (always think about dividends) compound interest will go to work on your money. If you invest in mutual funds, make certain they are low cost mutual funds. Over the course of 30 years, even if the market goes nowhere (an unlikely scenario given the risk of inflation) you will find that you have accumulated a considerable amount of money.

Oh, when to sell? There are three reasons I sell.

1)I need the money. I am retired now. I just took a partial distribution from an investment so that I can delay Social Security until I reach full retirement age. That decision is a pure actuarial gamble. I am betting I will live past 78. If you think you will die before 78 (or you need the money) take early Social Security.

2)The price of the stock has dropped and I don’t think it going to come back. At some point (usually the best decision is a predetermined decision) cut your losses, take you tax deduction, and move on to something else.

3)The stock has risen so fast that you can no longer sleep at night. Once, early in my adventures in investment, I bought a stock that increased dramatically for no good reason. Given that I wasn’t very well diversified at this point in time, the size of my position in these shares was way out of whack. I actually had a bad dream about the price tanking. I sold the shares for a nice profit. Then they tanked. I don’t recommend buying and selling on the basis of dreams, but I wouldn’t ignore them either.

Monday, January 28, 2013

Networking 103

Just when I thought I had covered this topic, I found a new article from the New York Times, “In Hiring, a Friend in Need Is a Prospect, Indeed” by Nelson Schwartz. It turns out in some companies about 50% of their new hires come from personal recommendations made by their existing employees. This is a growing trend that crosses many types of businesses.

The article starts with the story of a young woman who was not even looking for a job. A friend working at Ernst & Young supplied a copy of her resume with a personal recommendation to the company personnel office. Three weeks later this young woman had a new job! Ernst & Young processes thousands of resumes. Most end up in the circular file or the recycle bin on the computer desktop of some faceless corporate functionary.

Companies are offering iPads, large screen TVs, and cash prizes to employees who recommend new hires. They save time and money bypassing bins filled with shotguned resumes and the services of websites like If you follow this path, “You’re submitting your résumé to a black hole,” said John Sullivan, a human resources consultant for large companies who teaches management at San Francisco State University. “You’re not going to find top performers at a job fair. Whether it’s fair or not, you need to have employees make referrals for you if you want to find a job.”

The article notes that job seekers who follow the traditional path (resumes, internet sites, and job fairs) are called “Homers” by personnel officers. That would refer to Homer Simpson, a lazy donut eating dullard.

Current statistics indicate that job seekers with a referral are twice as likely to get an interview. “At Sodexo, a food service and facilities management company that hires 4,600 managers and executives a year, referred employees are 10 times more likely to be hired than other applicants.”

Companies are looking for quick efficient results. If a high quality ambitious employee is willing to put their reputation on the line by recommending someone in their network, there is a very high probability this person will be a very good employee. “Human resource departments have recognized the same pattern. “Our analysis shows referred hires perform better, stay longer and are quicker to integrate into our teams,” said Mr. Nash of Ernst & Young.”

Now for some bad news, “Nearly 4.8 million Americans have been out of work for 27 weeks or more, according to the Labor Department, three times as many as in late 2007. The typical unemployed worker has been jobless for 38 weeks, compared with 17 weeks before the recession.” These people generally don’t have good networks to begin with. The longer they remain unemployed the weaker their network becomes. I also imagine that the longer they remain unemployed the less likely it would be that an existing employee would risk their reputation to provide a recommendation.

Besides the usual exhortation to develop your network the article recommends LinkedIn as a tool used by corporate recruiters to trace connections between potential and existing employees.

As I have said before, my skills and experience in this critical area are 27 years out of date, but even back then who you knew or who knew you was the single most important component in finding a job.

Friday, January 25, 2013

Dream Jobs and The Good Life

“Don’t die with your music still inside you. Listen to your intuitive inner voice and find what passion stirs your soul. Listen to that inner voice, and don’t get to the end of your life and say, ‘What if my whole life has been wrong?”
Ralph Waldo Emerson

The other question that bothers me is, “How does one live a good life?” In the context of this blog the question morphs into one of several related questions.

If I do what I love will the money follow?
How do I find my dream job?
What is the will of God for my life?

In most of the material I have studied the question of living the good life gets hopelessly mashed together with the question of the dream job and material wealth. While a reasonable supply of money is certainly a necessary component of a good life, real wealth is much more than money in the bank.

Real wealth includes things like health, friends, family, the respect of those we love, our faith in God, our service to the Church, personal integrity, and so much more. A good job is in that list. It is important, but a good job isn’t even close to the top.

What if your job satisfaction is not the primary issue? Maybe there are things that are more important, caring for your family, living a life of integrity, serving your God, and extending mercy in a fallen world come to mind.

So what is a dream job and how do I find one?

Dave Ramsey suggests, “Find something that blends your skills, abilities, personality traits, values, dreams, and passions.” What if I can never get there? What if what I love has no commercial potential? If I can never find satisfaction in a job, can I use my job as a platform to find satisfaction and happiness elsewhere in my life? Singing my song does not mean anyone will ever pay me for the music.

There is simply no guarantee that if you do what you love the money will follow.

There seem to be two alternatives to this approach. Some authors are only interested in the facts. They are flinty eyed hard nosed realists who focus on practical necessity and economic realities. They write articles about how average salaries found in different career areas rise and fall with demand. They are not interested in your talents, or dreams.

Some authors recommend splitting the difference between the dreamers and the realists. They suggest finding the least objectionable job that supports your desired lifestyle. This is an unacceptably inadequate solution, believe me I know.

I do not find any of these approaches completely satisfactory.

Perhaps the question needs to be reframed. What is it that you just have to do? What is so important that you just can't stand to live without expressing it in your life?

In teaching basic principles of investment I have learned that a deep understanding of finance is not important. The student does not need to “figure it out.” The student just needs to get off his butt and do it. If he knows enough to keep 3 to 6 months expenses in a federally insured bank account, then put ½ of his surplus into a mix of different kinds of bond funds, and ½ of that surplus into a variety of stock funds (most should pay a dividend) and one mutual fund company name, Vanguard, he will be ahead of 90% of Americans. I can guarantee that he will make mistakes as he practices the art of creating material wealth. Something he will buy will lose money. Deal with it!

Is satisfaction in life the same? I just started giving away silver eagles, writing the blog, and teaching Dave Ramsey at church because I saw a problem that was so great I couldn’t stand not to something about it.

Am I a great money master who knows all and sees all? No. Have I ever failed in my attempts to help others? Yes.

Perhaps the question should be, “Has the song that is my life made this world a better place?”

Wednesday, January 23, 2013

You Gotta Be Hungry!

Today there are two questions concerning subjects I cover in the blog that really bother me. I am not satisfied with the answers I have. I want better answers. One of these questions is, “Why do some people take action to do what they know to do in order to solve a problem they know they have when others do not?” The basic truths of personal finance are not rocket science. They are taught in different cultural and philosophical matrices by different teachers coming from different backgrounds and life experiences but they are all remarkably similar.

Spend less money than you make.
Get out of debt!!!
Save the difference between what you earn and what you spend.
When you have sufficient funds, begin to invest.
When you have sufficient investments, live your dreams!

Different teachers put different spins on these steps. They recommend slight variations in the order and particulars of each step, but that is all there is to achieving financial freedom. This stuff works. It works so well most people wouldn’t believe you if you told them just how well it works.

I think the beginning of the virtuous circle that leads to wealth occurs when desperation meets truth. For some reason some situation in your life becomes so unacceptable that you will take an uncomfortable frightening step to escape that pain.

As far as I can determine, this description of the virtuous circle came from Tony Robbins, but it is pretty common across the Internet.

At some point you become so desperate you will do something that will trigger a change in your life. If you do a good thing, like spend less than you make. You will get a good result, like paying a credit card down to zero. These results will increase your belief in the efficacy of virtuous action. This belief will lead to an experience based understanding of the potential inherent in these simple truths and in your self. The potential found in these teachings will then be further manifested as you continue to take the appropriate action.

Here is the problem. People are getting some immediate benefit out of their bad actions. If a smoker decides to spend $5.00 on a pack of cigarettes rather than seeing that money as an opportunity to escape debt, he receives a brief but immediate jolt of nicotine and the satisfaction of a ritual he finds comforting. If you begin to follow the simple truths of personal finance that will lead to financial freedom, you won’t see much difference tomorrow except the absence of nicotine in your body and the absence of a smoking break in your busy work schedule.

However, over the course of 30 years at 6.5% interest, an achievable number, your pack of cigarettes will become $165, 961. You will also still be alive and healthy enough to enjoy than money.

If you are not hungry enough to change your life, find other people who are that hungry. Then find people who know more than you know and care enough to spend time to teach you what they know. Don’t be afraid to pay them for their time. Dave Ramsey’s Financial Peace University, a course I teach at our church, will cost you about $100 for materials. Like our friend the smoker, begin to establish rituals that will provide the feedback that will drive the virtuous circle. An example: On the first day of each month calculate your net worth. As the months pass, you will watch your net worth turn positive and start to climb as your debts drop to zero. Then one day you will look around and realize you are free.

Sunday, January 20, 2013

Networking 102

This is not the first time I have used material from Ramit Sethi’s blog. As I have said before, he is young, edgy, and urban. Some of my more gentle readers might be offended by his use of profanity, but his advice to the job seeker and budding entrepreneur is first rate. Here is his Closing the Loop Technique for cementing a chance business or even a casual social encounter into the beginning of a network relationship.

Begin by asking people about themselves and what they are doing. Most people love an opportunity to talk about themselves. Me is my favorite subject. By the way, this works quite well for the college student. Learn about what your professors are doing in the way of research. If you ask informed questions about their interests it will establish that you are a person of value. Be natural. Don’t force it.

If you have a conversation with an important person, say an interview with a prospective employer, immediately follow up that meeting with a thank you note. It doesn’t have to be long. The primary purposes of this note are to thank him for his time and to establish that you have listened to what he said and that you intend to act upon his advice or suggestions. It could be the beginning of a mentor relationship. People enjoy having “disciples” who consider their words more precious than gold.

In a couple of weeks send a second note or email. The purpose of this communication is to let your new contact know that you are in fact exploring his suggestions. If he suggested Company XYZ might be a good fit for your talents, tell him you have researched the company reports and made a few preliminary contacts with people who work for this company. Maybe he gave you that contact information in your interview. This is important! Let him know that note is just for his information. There is no need for a reply. Again be natural. Don’t force it.

Finally, close the loop. If his suggestion pans out, thank him. If you found a job at XYZ, let him know. If you didn’t get a job, thank him anyway. Let him know how much you appreciate his advice. If you haven’t completely given up but plan to try again in six months, let him know. Ask him to keep you in mind if he happens to hear anything promising.

Watch this video. It is powerful.

How to Turn any Meeting into a Lasting Relationship

Saturday, January 19, 2013

Networking 101

We all know that building a network is the critical component in finding a job. Those who have the right connections simply don’t need to worry about unemployment. Do you suppose the great grandchildren of John D. Rockefeller or Joseph Kennedy are going to have any trouble finding a job? Do you think NBC News hired Chelsea Clinton because she was the most qualified applicant?

How about those of us who are not the children of our nation’s royal families? I guess if you were not born with a network, you better start building one. Start with the premise that you just don’t know who is important. Learn to treat everyone in your life as a potentially important strand in your network. While obviously those with the authority to hire or promote are important. Some minor functionary in a vast bureaucracy might hold the key to your future.

Don’t look for an opportunity to take from the nodes in your network. Work on adding value to your network. If you are given an opportunity to do a favor for a friend, just do it. Like giving money to charity, sewing good seed will reap a harvest in the proper season.

Establish yourself as a person of excellence. If you perform at a high level over an extended period of time you will establish yourself as a person of excellence. At my place of employment, the janitorial contractor hired a certain legal immigrant to clean our toilets and vacuum our offices. Unlike the others who held this job, this man looked for extra work. Rather than wasting time with his friends when his job assignments were complete, he began to sweep out the long building where we run tests. This building is over ½ a mile in length. I expect that it had never been cleaned like that in over 60 years. Nobody asked him to do it. He just did it. One of our industrial supervisors was so impressed he made it his business to create an entry level position for an unskilled employee that never existed just so he could hire this guy. Now this man, born in another country, has a permanent Government job in a research and development laboratory. He hasn’t stopped learning. He now knows some basic machinist skills. He has learned how to handle a forklift. He has a crane operator’s license. In a few more years, who knows?

“You have not because you ask not,” is a basic Biblical principle. Do not be afraid to ask your network for help when you need it. Even be willing to ask a friend of a friend, someone outside your immediate network, for help when you need it.

Luke 18:

[1] And he spake a parable unto them to this end, that men ought always to pray, and not to faint;
[2] Saying, There was in a city a judge, which feared not God, neither regarded man:
[3] And there was a widow in that city; and she came unto him, saying, Avenge me of mine adversary.
[4] And he would not for a while: but afterward he said within himself, Though I fear not God, nor regard man;
[5] Yet because this widow troubleth me, I will avenge her, lest by her continual coming she weary me.
[6] And the Lord said, Hear what the unjust judge saith.

Thursday, January 17, 2013

But You Already Know That!

This post started life as an article about “back channel” hiring based on existing relationships or personal knowledge rather than resumes and web generated applications. One of the examples given was the recent hiring of the head football coach at the University of Wisconsin. This opening (no lie) was advertised on the university website. The article notes, “The eventual hire, former Utah State University head coach, Gary Andersen was recruited by the school's athletic director.” I wonder if Gary Anderson even knows his job was advertised on a website. I wonder if anyone was fool enough to apply for that job on the university website. Anybody with a grain of common sense knows that when it comes to finding a job, particularly in a bad economy, who you know or who knows you is more important than any other single factor. In this particular case the athletic director of the University of Wisconsin was well aware of Gary Andersen’s record at Utah State. I also would not be surprised to learn that they might have even met one another at some banquet or a National Collegiate Athletic Association meeting.

So start networking! But you already know this is true. If you want to find a new job why aren’t you using and expanding your network?

Do you want to get out of a really serious debt problem? You know that cutting up your credit cards is the first step to freedom. Then it is necessary to start paying your balances down. But you already know this is true. Why haven’t you chopped up your credit cards?

Do you want to retire with dignity? If you are a reader of this blog you know the basic calculation. If you don’t know here is the link.

Thinking About Retirement?
The bottom line is you need to save more money. But you already know this is true. Why haven’t you bumped your 401-K withholdings from 6% to something higher?

At least part of the problem can be solved by changing your habits and finding a new group of friends and associates. If you want learn more about managing money don’t talk to your friends who don’t know any more than you know. They will tell you there is no hope for the average American. They will drag you down. Find people who know more than you know. Ask questions. Take one of the common sense courses offered by people like Dave Ramsey or Suze Orman. Read the investment classics written by people like Benjamin Graham. The Oracle of Omaha, Warren Buffet considers it is the only book you need to become a great investor.

I would challenge you to put your eyes on the prize, whatever that might be for you. Just for today do one thing, just one thing, that you already know will bring you a step closer to that prize. If you don’t know what to do, ask. Ask God. Ask somebody who knows more than you know. For heaven’s sakes, at least ask GOOGLE. I asked GOOGLE, “How do I get rich?” The question produced 435,000,000 results. Here is one of them from wikihow. Really, it is a pretty good starting point. I only just now found this link with that totally random search query. But I will bet you already know the stuff in this list is true. So why aren’t you doing it, already?

How to Get Rich: 15 Steps
P.S. Excuses will not improve your situation.

Friday, January 11, 2013

If It Sounds too Good to be True......

The subject of Multi Level Marketing (MLM) comes up every now or then. Are these companies pyramid schemes that barely meet the test of legality or are they a legitimate method of direct marketing products through personally developed networks? Lately two hedge funds are locked in a noisy struggle over Herbalife (hlf), a MLM distributor of weight loss products. Bill Ackman is shorting the stock. He claims Herbalife is “an inherently fraudulent company.” Of course if the stock drops he makes money. In the other corner Dan Loeb has bought an 8% stake in the company driving the price higher. In less than a year the price of Herbalife shares rose to $73.00 then dropped to $24.24. Since then they have risen to $39.00.

An outside expert with no dog in the fight, Vitaliy Katsenelson, chief investment officer at Investment Management Associates, concludes that Herbalife is just a lousy company that sells an overpriced product using a bad business model. In an interview broadcast on, Katsenelson reports, “He has been to Herbalife's clubs and came away unimpressed. For one thing, most of the people were there, in his words, "just to sell the product to each other." For another, the product itself seemed overpriced for what you're getting. "Most people get into Herbalife not because they want to consume the product but because they want to sell it to their favorite mother-in-law."

I first ran into MLMs back in the late 70s. A few of my friends became involved in Amway and some of their early competitors. Some of these people were just looking for a way to make an extra few bucks on the side. Some of them had dreams of a vast downstream sales force generating so much money they would never need to work a day for the rest of their lives. All of them dropped out of these businesses because they either didn’t make any money or could earn more extra money with a couple of hours of overtime than peddling soap door to door.

After watching this fad come and go, I concluded that MLM schemes had a fatal flaw. I termed it the Amway fallacy. At the end of the day if anybody in the pyramid is going to make any money, somebody has to sell soap, door to door, and that is hard work. I have since learned the mathematics of the MLM pitch are impossible. Robert Patrick, a consumer advocate, observes that if one distributor signs up 5 new distributors, then each of those people sign up five more, within 13 iterations there are more salespeople in the pyramid than live on the planet Earth.

None of this would much matter but innocent people are losing large amounts of money chasing impossible dreams. All the commotion in the stock market has triggered some investigative journalism. It appears that Herbalife may be awfully close to the charges leveled by Bill Ackman. The real test that separates a pyramid scheme from a legitimate marketing organization is the importance of product. If the commissions are structured so that most of the distributor’s income is generated by the sale of a product, it is a legitimate company. For years Avon was the gold standard of this kind of marketing. Now it appears they may be drifting away from their foundational ethics. A quick check indicated that Mary Kay Cosmetics and Tupperware are still generally considered ethical organizations. Undercover cameras at Herbalife recruiting seminars record a sales pitch as well as a commission structure that emphasizes building a sales pyramid over selling a product. If the product is an “incidental” part of the business model then legally that company is considered a fraudulent pyramid scheme. Needless to say, proving this definition of fraud in a court of law is currently a very difficult challenge.

Understand that 99% of the people who get involved in any of these schemes lose money. That figure comes from a number of consumer advocates who are calling for more Government oversight. Your odds at generating a net profit in a MLM business are not much better than playing the slot machines in Las Vegas. There are people who make money in these businesses, but they are very rare.

Often these companies are not only selling their legitimate product to their distributors, but they are also selling, sales leads, brochures, training courses, motivational lectures, and conventions to their distributors. These meetings seem to have taken a page from tent evangelism. The participants sing songs and chant slogans worshipping the golden dreams promoted by their company. Successful salespeople give their testimonials of BMWs in the driveways of their mansions. Then the featured sales evangelist works the audience into a state of feverish excitement.

If you get involved in one of these schemes, do not do it with borrowed money. Many of the sad stories found in Herbalife Under Fire: Clubs, Hopes and Losses by Herb Greenberg were complicated by credit card debt. Distributors desperate to reach some kind of reward became what is termed, “garage qualified.” They borrowed money and bought a garage full of product in order to meet their sales quota.

If it sounds too good to be true, it probably is too good to be true.

The following link is for the trailer of Change Your Life a comedy satirizing the weird world of MLM organizations.

Change Your Life (official trailer)

Wednesday, January 9, 2013

In Your Heart You Know

A long time ago my parents asked for my opinion as to when my father should retire. I suggested, “As long as you are having fun, keep doing it. If it isn’t fun anymore and you can retire, retire.” In a little over a week I will be taking my own advice. This raised a serious question in my mind. When is it time to quit your job? I found more articles and quizzes on this subject than I believed possible, but I think in your heart you know when it is time to find a new path for your life.

Some of the reasons for leaving your job include:

The Boss from Hell: If your boss is an evil little tyrannical bully or a dishonest lying creep who takes credit for your work, consider looking for a new job.

A Company that Asks You to Compromise Your Ethics: As you know I believe Christianity to be a religion of freedom and grace. I will not tell you what is ethical. That is the Holy Spirit’s job. However, if your job constantly grieves your conscience, it might be time to move on.

You are Consistently Bored: If your job is an endless boring torment without anything that you find interesting or intellectually challenging, why waste your life in a state of existential angst?

You are Not Rewarded for what You Do: If you are consistently performing at a level that is out of whack with the pay and benefits you receive from your job, you can probably do better.

Your Life Situation is Different: Perhaps you have a new baby. All of a sudden a job that requires a lot of travel that was once glamorous and exciting is no longer appropriate for your new situation.

Your Company is in a Death Spiral: Watch the quality of your coworkers and especially the quality of your managers. The smartest most aggressive rats will be first to leave a sinking ship. The slothful and the dullards are there to close the doors following bankruptcy. If you find yourself in a dying industry don’t be the last to leave.

Somebody Screwed Up: It happens. Sometimes it was your fault. Sometimes it wasn’t. If your work relationships are a hopeless irreparable mess, consider something new. Examples include; you’re part of a major failure, a disastrous romantic relationship with a coworker, or an irredeemable relationship with your supervisor.

Your Job Just Isn’t Fun Anymore: Time changes everything. It changes job requirements. It changes your coworkers. It changes corporate structures. It even changes you. Sometimes, you just know. In your heart you know. It is time to move on.

Making The Decision That It Is Time To Find A New Job Can Not Be Taken Lightly In An Economy With 8% Structural Unemployment!

Plan and prepare for your move in a rational and responsible manner. Consider the story of the Count of Monte Cristo. Edmund Dantes was unfairly and illegally condemned to life imprisonment in an island fortress. Escape was impossible, but Dantes befriended Abbe Faria, a fellow prisoner known as the Mad Priest. For 14 years they dug a tunnel, hoping to escape. During this time Dantes receives a fine education from Abbe Faria. When the priest knows he is near death, he gives Dantes the secret location of a great treasure on the isle of Monte Cristo. Then he dies. Dantes escapes but not through a tunnel. He sews himself into his friend’s body bag. His jailers toss him into the ocean. Then he cuts his way out. Dantes is rescued by passing smugglers. Once again he needs to escape his saviors before he can claim the treasure. Finally, he succeeds. With his new fortune he buys the island and the title of Count of Monte Cristo from the Tuscan government.

Work can be an uplifting experience. Your work can make you and the world a better place. I hope it doesn’t take 14 years to escape from a dead end job, but it might take several years. If you are 5 years from a full pension, I would not recommend planning for an immediate escape. For my younger readers, a full 6-8 month emergency fund can give you and your family flexibility in uncertain situations. If you aren’t there yet, keep working on your finances. Like Dantes, keep digging. Adding a few spoonfuls to your liquidity every day will ultimately lead to freedom. Like Dantes, make yourself a more valuable employee. Education in a classroom or on the job development of new skills will make you a more desirable commodity. Network! The connections you make in the world you want to inhabit will ultimately make good your escape. Do your research on companies and locations that will better your life. Who are the major employers in your dream city? What are your dream companies? Where are they located? Did you know Apple is building a new plant in South Carolina? Don’t assume you know everything about a company. Send out your resumes. Do the hard repetitive work that will lead to your freedom.

Take a page from the Godfather. Hold your friends close. Hold your enemies closer. While you are planning your move, work to become a better employee. Try even harder to please your boss. If possible, make yourself irreplaceable. You want your organization to be shocked when you announce your departure. There are several reasons this is a good idea. If you redouble your effort to be a valuable employee, you might become one. Then your organization might be more inclined to make you an offer you can’t refuse. It is possible that kind of effort might change your own heart towards your job. That is another solution. Not the one you expected but a very good outcome. Of course, it is always better not to burn your bridges. If you can repair or retain good relationships with your former managers and coworkers, the day may come when they will be in a position to do you a favor.

I believe that as you work to escape an insufferable job situation, the universe will conspire to help you reach your goals. Do the right things with a good attitude and persistent effort over time and opportunities you can’t imagine will present themselves. You might call it coincidence when it happens to someone else. The famous psychiatrist, Carl Jung called it Synchronicity, “The experience of two or more events that are apparently causally unrelated or unlikely to occur together by chance, yet are experienced as occurring together in a meaningful manner.” (wikipedia) Who could have imagined that Dantes’s jailers would ultimately be responsible for his escape? The Roman pagans believed fortune favored the brave.

A Christian will tell you God answers prayer.

From a bit of fiction written by yours truly. Sometimes you know. In your heart you just know.

“Another Monday morning pressed in on Daniel O'Toole. The dread he felt was almost palpable, "Another day," he thought feeling the hard rapid beat of his heart as he lay alone in his bed, wondering if there was some way he could shut off the panic rising from his gut. "There is no cure for me," the words almost forming in his dry mouth as he pushed himself up into a sitting position. Daniel squinted at the alarm clock resting on an old cheap chest of drawers that matched his unshared bed. He noted it was 4:30. He hadn't slept well that night. Daniel breathed deeply and regularly, forcing the rising nameless horror back into the pit of his stomach, wishing himself as far away from his own company as the stars that still flickered above the damp early morning fog outside his bedroom window.”

Friday, January 4, 2013

What You Believe

“Jack (Uldrich) believes that the greatest barrier to change today is people's unwillingness to unlearn many of the things they think they know. Without an openness to unlearning, people don't even think they might need to change in the face of accelerating change.” From Imagine A Better Future by Liz Ann Sonders, Senior Vice President, Chief Investment Strategist, Charles Schwab & Co., Inc.

Each and every one of us has certain limiting beliefs. We have been taught to believe and behave by parents, the culture, friends, and personal experience. Our brains are lazy. Rather than looking deeply into a problem we react subconsciously to stimuli just like rats trained to run a maze. This truth applies to financial matters.

Most middle class Americans believe a car payment is a fact of life. It isn’t. There is no reason you need to be saddled with a car payment. You can drive a $3,000 car for a few years until you can afford something better. A determined teenager can save $3,000 in less than a year by cutting grass in his neighborhood. If you then pay yourself the equivalent of a car payment every month for three or four years, you will have enough money to buy a $14,000 car. $14,000 will buy you a really nice car that ought to last for eight to ten years. By that time you will have enough money to pay cash for a new car if that is what you really want.

I want to find smart people who know a lot more about managing money than I know. I want to learn from them then apply what I have learned to my life and my problems. What I believe can stand in the way of accomplishing this goal. Consider, I have spent a fair amount of effort learning and applying the basic principles of value investing to building my retirement accounts. Now, to some degree, my brain is on autopilot. I maintain a conservative age appropriate balance between cash, bonds, dividend paying stocks, gold, and mutual funds. I read and believe the contents of articles, newsletters, and books written by authors who support my prejudices. I try to read material by knowledgeable people who disagree with my basic assumptions, but this is hard work. Our brains don’t like hard work. I also don’t like to admit I could be wrong. Studies indicate that great ideas arise when disparate minds come in contact with one another. Solomon observed, “As iron sharpens iron, so one person sharpens another.”

My ability to concentrate on solving a problem can limit the number of possible solutions. Consider, I am focused on finding stocks that meet certain criteria including a dividend, a low P/E ratio, and good cash flow. What if the next big thing does not meet those criteria? I will never see that opportunity unless I am actively investigating the claims of people who disagree with my assumptions. What if something unpleasant is just beyond the horizon, waiting to take down one of my investments? Could Mayor Bloomberg’s idiotic and hopefully illegal ban on the sale of sodas larger than 16 ounces by restaurants and concession stands have implications for the future of Coca Cola (KO), one of my happy stories, or will it have no more effect on the profitability of that product than cigarette taxes and age restrictions have had on the profitability of the Altria Group (MO)?

Finally, your memory is selective. You do not remember everything about a particular event. In fact we tend to drop some of the facts and replace them with imagined details. Because I have had good success using the value model for investing in individual stocks, I tend to forget the times this style did not work. I lost money on Merck & Company (MER) even though that stock met all my criteria for a good investment. I tend to believe that most technology stocks will prove to be death traps. This is based on two experiences, one a disappointing gain, Cisco Systems (CSCO) and a loss with Corning (GLW). I still love Corning technology. They have the coolest stuff. I believe their fiber optic technology is the future of high speed networks. Their third generation Gorilla Glass should be on every smart phone sold. They just don’t seem to be able to run a profitable business. Should my prejudices eliminate any future investments in technology stocks? That would be pretty stupid.

Start by picturing your desired outcome. Then begin to analyze how your assumptions limit or support your goals. Your mind, as well as my mind is filled with fiction, wishful thinking, prejudice, and propaganda. Take some time to shake up your rigid patterns of thought.

Ask the question, “What works?” If some part of your financial life is less than you want it to be, go out there and find some better ideas.

This post was inspired by an excerpt from an unpublished book: "NLP: The Essential Guide" by Tom Hoobyar, Tom Dotz, and Susan Sanders

Tuesday, January 1, 2013

A Meditation for a New Year

Every day God gives us a chance to make things a little better for ourselves and for others. I try to help in the realm where finance and faith touch. You have been given a place in this universe to defend, a place where your heart will make a better world for yourself and others. Find it in this New Year.

Understand, what I offer you in this blog is conceptually very simple. If you spend less than you make over time, you will have money left over to bless yourself, your children, your world.

Before you can walk this path there are three secrets you need to believe in your heart.

1) Debt is a curse, not a blessing
2) It is better to own something that pays you than something you must pay to own (think cell phones Vs AT&T stock)
3) God is no respecter of persons. “If any of you lacks wisdom, he should ask God, who gives generously to all without finding fault, and it will be given to him.”

I wish I could convince each and every one of you just how well these little basic truths will work in your life. With patient and persistent effort over extended periods of time not only will you escape the slavery of debt, but you will accumulate more than you can believe possible.