Friday, May 29, 2009

Another Day, Another $280...

The old gal broke down on me again. Just two weeks after my check engine light came on, and I repaired the car to the tune of $400, it came back on last Friday. Last time I felt the car go THUNK. This time, the light came on but the car continued to drive fine. Since I was not in the mood for a visit to the shop just before a long holiday weekend, I decided to risk it and drove straight home rather than going to the mechanic.

This Tuesday I went back to the shop and within 5 minutes we had a diagnosis: a faulty oxygen sensor. The car's computer spat out the answer - I am actually amazed the old gal has a computer. A car that old should probably have an abacus. Be that as it may, the problem was completely different from the cylinder misfire issue I had last time. The mechanic told me that repairs would cost about $250 but that he could clear out the alarm and I could try driving the car for a while longer and maybe I could get a few more months out of the existing sensor.

I decided to bite the bullet and go with the repair, primarily because a faulty oxygen sensor could cause the car to create more pollution, and I don't think that I should inflict any more CO2 and smog forming emissions on the planet than is absolutely necessary. In the end this fun little episode cost me $280 or so.

The car is now fixed. However, after 12 years of faithful and trouble free service we've had a couple of breakdowns in just over two weeks. If this is just a coincidence, I'll keep this car on the road for another 2 or 3 years. However, if this turns into a regular occurrence, there may be no choice but to get a new steed. I am hoping for the former.

One more thing: I told one of my colleagues about this oxygen sensor incident and he told me that the exact same thing happened to his relatively new car last year. He took his car to the dealer and was charged $700 for the same repair... You just gotta love those dealers.

Check out these posts from other bloggers who are trying to live a frugal life:

The Dough Roller recommends some gadgets that can help reduce your energy bill. I am all in favor of both cutting energy bills and cutting emissions.

Wealth Builder offers some common sense advice about saving. The best piece - save BEFORE you buy something. Financing is expensive.

My Two Dollars reviews the Consumer Reports best cars. If I do end up buying a new car, it will be a hybrid. However, I hope to hold out for a few more years and buy a plug-in hybrid. 100 MPG, baby!

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Thursday, May 28, 2009

How to Have a Fun, Cheap Weekend

The family and I got a good deal this long holiday weekend. A friend from my office let us use his mountain cabin for three days, absolutely free. The cabin, located in Gold Country - about a three hour drive east from San Francisco - is bigger and nicer than our house, and is located in the middle of a pine forest. The good life.

We spent the weekend hiking, playing in the snow (there is still some of that on the mountain tops), taking some scenic drives and visiting historic gold rush towns. We ate in, and only spent small amounts of money on park entrance fees and on the odd ice-cream cone. The weather cooperated with sunny skies and temperatures in the mid seventies. It's good to live in California.

All in, the whole three day trip probably cost us no more than about $150 for a family of five. That tally does not include the cost of gas for the trip and the wine and chocolate gifts we left for our gracious hosts.

It's good to have friends with vacation cabins in fun places. Anyone got a cabin in Lake Tahoe or San Diego they want to lend me for a weekend? I promise to write a nice post about you in return...

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Wednesday, May 27, 2009

Shadox: One; Citibank: Idiots

The antics of the credit card companies are well known by now, and periodically I have written posts about the subject as well. However, last week I got a first hand experience in how sleazy, obnoxious, insidious and malicious these card companies can be. My particular incident involved Citibank. Here is the story.

My wife insists on manually paying the credit card bills every month because she "wants to verify all the charges". The fact that we have never found a false charge and that even if we sign-up for automatically paying off our monthly bill we could still check and dispute any charge is not sufficient for her. For some reason, the fact that I download all credit card transactions into Quicken every day, also does not satisfy her. Anyway, our Citibank credit card bill was due on Thursday, May 14. On May 15, Quicken showed me a late charge on the card. My wife forgot to pay the bill. I immediately went online and paid off the card in full, I also initiated automatic bill payment. From now on, the bill will be automatically paid in full every month. However, while I made the full transfer on Friday, the charge could not clear until Monday, due to the weekend.

After the charge cleared, I called Citibank. I explained the situation and also explained that I had signed-up for automatic bill payment. I asked for the late fee and finance charges to be reversed, citing our long history with the bank and our excellent credit rating. Here is where the situation rapidly degenerated into a complete fiasco. The agent was willing to reverse a $39 late fee we were charged, but was not willing to refund a finance charge of $97. I was upset, but not overly so, after all paying late was our own fault and some penalty may have been justified. But then I started to do the math... a $97 finance fee for a 3 day late payment on a balance of $2,600? Something seemed fishy...

I asked the agent what interest rate was applied to our balance. He answered that the rate was 26%. My voice went up two octaves and my volume increased by 20 decibels. 26%? How was that possible? Our card had a rate of 8%... the agent calmly explained that as soon as the payment was late, the interest rate jacked up. I was steaming, but then I did the math and the numbers still didn't work out. How could even 26% yield a $97 finance charge in only three days? The nonplussed agent was glad to explain. In a calm and steady voice he told me that as soon as the payment was late, finance charges immediately begin to accrue on the full amount charged to the card, not only the amount that was late. Since we had charged another $3,800 (or something like that) that would become due on June 14, we were charged interest on that amount as well...

Now that's what I call insane. Here is the way I see it. The $3,800 would become due on June 14. I had paid off the full amount on May 17 - which in my book means that the $3,800 was not paid late, it was paid 27 days EARLY. So in my book Citibank was charging me a huge financing fee on money that was not yet due.

That is when I went berserk. I told the agent, admitedly, using a few unkind words, that I have had enough and that I did not care about the consequences. The account was paid in full and I wanted it closed that instant. In fact, I wanted to close all three Citibank accounts that my wife and I have owned for the past 8 years. I couldn't care less about any damage to our credit score. I could not be bothered to remember that the Citibank Mastercard is the card that we use with all vendors that do not accept American Express. I just wanted out, and I wanted out that instant.

The customer service representative was undaunted. He did not miss a beat and very politely told me to hang on while he transferred me to the appropriate person. The next person who got on the line was a very collected customer retention specialist. He spoke to me like I was a five year old throwing a tantrum - which in many respects was a good description for me at the time - without wasting a second he immediately:

1. Reversed the finance charges;

2. Confirmed the return of the late fee; and

3. Gave me a 1% cash back on all purchases for the next 6 months.

He "asked for my permission" to keep the accounts open and made a very deliberate effort to chat me up. He explained that I was a great customer, with an excellent credit history and that he understood how everyone can make mistakes - himself included. You know how in the movies you see police officers talking would-be jumpers off the ledge? That is pretty much how this guy talked to me. I thought it was condescending, but ultimately it was effective. I got off the ledge and I agreed to take the bribe and keep the accounts open.

Well, why did I do that? Actually, it's very simple. Even though I was furious, closing the accounts would have been against my self interest. I was perfectly willing to break a few dishes and walk away in my anger, and in my mind I would have been justified in doing so, but I am not out to punish Citibank, nor am I vain enough to imagine that anyone at Citibank actually cares if I stay or go. They care about statistics and big numbers. A single private customer makes no difference to them. Closing the accounts would have left our credit scores in worse shape and would have created a hassle of trying to find a new card in a hurry. There was nothing to gain from walking, and something to gain by staying.

From my perspective, writing this post and helping folks to understand the true nature of Citibank is a better way to deal with these would-be highway robbers than closing my accounts would ever be. In this context, it is interesting to point out that some of the penalties and fees that Citibank charged me would have been illegal under the new Credit Card Bill of Rights that was signed into law just last week. If an MBA personal finance blogger can fall prey to these unconscionable lawful muggers, I am guessing the vast majority of the population is also susceptible.

A final thought on this situation: I find it appalling that such behavior is going on while Citibank and their ilk are relying on public funds and interest free loans from the government to finance their activities. They are in effect taking our money, lending it back to us, and charging us exorbitant fees for the pleasure of doing business with them. Well, Citibank, consider this my one finger salute to you.

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Saturday, May 23, 2009

Why I Blog Anonimously

Blogging is a fun hobby. I get to say whatever I please and some folks find my rants interesting enough to read and comment on. It's a good gig. However, like many other personal finance bloggers I choose to write my posts under a pseudonym: Shadox. I chose to use that specific pseudonym because it was the name I used for one of my characters in a massively multiplayer online game. But never mind that. Let me tell you why I choose to blog anonymously:

Honesty - I am an executive with a high-tech start-up. If I wrote under my own name I would need to seriously watch what it is that I write about. I would also not feel comfortable being completely honest in my blog posts. Hiding behind my nom-de-guerre gives me the freedom to be both honest and to write about any topic which crosses my mind. This, after all, is the only reason writing this blog is worth doing in the first place.

Career - I shudder when I see what some people put on their online profiles. I am extremely careful about how I manage my online persona, knowing full well that any potential employer, business partner or employee could Google my name and find out everything people are saying about me online. No embarrassing pictures of me online (well, to my knowledge, at least). Google is forever... once you put something out there on the net you can never take it back. I am very conscious of this.

Privacy - by its very nature, personal finance is... personal. I would like to have the ability to talk about my personal financial situation without worrying that this information could be used against me.

Those seem like good enough reasons to me. What do you think?

Here are some posts from other PF bloggers who blog anonymously:

Frugal Zeitgeist talks about what happens when school fund raisers go the office. You know, I hate these about as much as I hate signing those stupid birthday cards for everyone in the office. We have 40 people working for our company, so it's about once a week I need to come up with some witty remark. Birthdays should be banned. Incidentally, my birthday is next week.

Silicon Valley Blogger notes that entrepreneurs think differently. Yup. More often than not they have to ignore everyone's advice and start that business anyway. They also pretty much HAVE to be hopelessly optimistic.

Check out these PF blog carnivals in which I particiapted over the past week: Carnival of Personal Finance; Festival of Frugality; and Money Hacks Carnival.

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Thursday, May 21, 2009

Wolfram & Financial Planning

Last week I told you about the future... Wolfram Alpha. Well, the future is here. This past weekend Wolfram went live. I thought I would share with you a little example of what happens when you type two mutual fund or stock ticker symbols into Wolfram.

I picked Vanguard's Total Market Index and Vanguard's Total Bond Index funds and voila... everything you ever wanted to know about these mutual funds and the connection between them (including a correlation matrix and some wierd projections that I wouldn't try to take to the bank). How awesome is that?

Check out the live results and try some of your own inputs here.

Some other bloggers are recommending financial tools that may be interesting for you:

The Dough Roller offers this free debt reduction calculator.

Frugal Zeitgeist has a link to a bunch of different financial calculators, including ones from yours truly.

Money Smart Life has a post about getting your free credit reports. Personally, I only use Annual Credit Report - even though they have made it intentionally difficult to navigate that site.

Finally, Blunt Money explains how to find a mechanic you can trust. It's not exactly a financial calculator or report, but I really could have used this article when my car broke down a couple of weeks ago. I think I still did OK, but who knows?

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Wednesday, May 20, 2009

Critique: Does Long Term Market Timing Really Work?

Yesterday, Rob of A Rich Life wrote a guest post on Money and Such, arguing the case for long term stock market timing. In effect he argues that when stocks are over valued wise investors should reduce their exposure to that asset class. 

Boiled down to their essence, Rob's arguments are based on the assumption of regression to the mean. Regression to the mean is the assumption that given a large enough sample, things tend to average out. Yes, there maybe someone out there who is 7'3", but it is unreasonable to expect the next guy in your sample to be a giant as well. Similarly, the argument goes, if in a given period of time stocks dramatically over perform or under perform, you can expect that over the long term results will shift in the opposite direction such that the average matches to long term trends. A reasonable enough conclusion, and very much in line with common sense.

So where does this argument break down? Well, first of all, I am not sure that it does. Having said this, there seems to be plenty of empirical evidence to suggest that this common sense argument does not translate well into the real world. Here is a good one: take for example so-called balanced funds that have the freedom to follow Rob's proposed strategy by re-allocating investments between different asset classes. I have seen no evidence that these outperform the market over the long term. These fund managers are well paid and the whole idea behind their full time jobs is that they can identify inflection points in the market and shift asset allocation to take advantage of such changes. They are free to follow long term market timing, so why don't they? Or maybe they think that they are doing exactly that but are simply not successful? I don't know the answer, but this should raise some skepticism. 

The trick, as always, seems to be understanding where the inflection points in the market are, or as Rob would put it, understanding when the market is overpriced. Rob's entire strategy seems to rely on his ability to understand when the market is overpriced, and to do so before others detect the same problem and the market self-corrects. If he can suggest a convincing strategy for achieving this goal, there may be something to his arguments. However, I tend to be skeptical of theories that are built on the assumption that everyone else is subject to mass delusion, hypnosis or hysteria, yet we seem to be the only ones retaining our sanity and keeping our wits. It just doesn't feel right.

I will make one more point that is completely irrelevant to the current discussion, but that is important in the context of evaluating evidence. One of the statements Rob made in his recent guest post did not sit right with me: 
"Given that the studies are silent, I believe that we should default to our common-sense take that timing MUST work". 
That line of reasoning does not pass muster. It boils down to: "the other side doesn't have proof, so our position wins by default". Hmmm. That doesn't work. You don't get to claim victory because the other side does not have proof. You have an equal burden of proof. In fact, if you are trying to go against accepted theory, the burden of proof is mostly yours to bear. You know the saying "extraordinary claims require extraordinary evidence". I am sure that Rob did not mean to use the statement in this fashion, but I wanted to make sure that the ground rules are clear.

While we are talking about investing, here are a few more posts on the subject from other PF bloggers:

My First Million recommends selling your energy stocks... now that sounds like short term market timing to me. He is certainly an aggressive trader. Rob and I are both Index guys. Right Rob?

The Sun's Financial Diary (actually it's a guest writer) is preaching real estate investing. Yeah, I think REITs are good for 5% to 10% of your portfolio, but going gangbusters on the stuff seems like a really bad idea.

Finally, Five Cent Nickel (or is it Fivecentnickel) reviews a new peer-to-peer lending site. You know, I have been meaning to look into p2p lending, but never seem to get around to it. It just seems like a lot of work, for a considerable level of risk and a bit more return. I think the idea has merit in principle, but I think may not quite ready for prime time.

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Tuesday, May 19, 2009

Why Long-Term Timing Works Even Though Short-Term Timing Doesn’t

This is a guest post from Rob of A Rich Life. If you would like to be a guest writer on Money and Such, shoot me an e-mail at shadox1 at the domain name

I wrote an earlier guest blog entry entitled “Passive Investing Is a Strategy for Extremists” that argued that investors should change their stock allocations in response to big shifts in valuations, going with higher-than-normal stock allocations when prices are low and going with lower-than-normal stock allocations when prices are high. Shadox expressed some skepticism in a critique of that blog entry, asking: “Why make the assumption that investors will be better at predicting the long-term peaks and troughs in the market than they are able to predict short-term ones?” This guest blog entry is my response to that question (Shadox and I agree that short-term market timing does not work).

At the top of the huge bull market that ended in January 2000, stocks were priced at three times fair value. That means that for every $300 you put into stocks, you obtained $100 worth of shares in U.S. business enterprises and $200 worth of cotton-candy nothingness. When you buy something that is overvalued, you overpay for the thing purchased. You pay more than that thing is worth. There is no reason to believe that you will obtain an investment return on the amount of the overpayment any more than there is a reason to believe that you obtain a better car than those who pay $20,000 when you pay $60,000 for a car with a fair market value of $20,000.

The average long-term stock return is a bit above 6 percent real. It is realistic to expect to see a return somewhere in that neighborhood. But not on the entire $300 you invested in stocks. You obtain the 6 percent real return only on the $100 that you invested in stocks, not on the $200 invested in nothingness. So your likely long-term return on the entire $300 payment is not something in the neighborhood of 6 percent, but something in the neighborhood of 2 percent. A 6 percent return on $100 is $6. A return of $6 on a payment of $300 is a percentage return of 2 percent.

That is why I believe that investors should be changing their stock allocations in response to big shifts in valuation levels. Common sense tells us that the long-term value proposition of investing in stocks must be better at times of low and moderate prices than it is at times of insanely dangerous prices (I will explain in a follow-up guest blog entry what valuation metric I use to determine when stock prices are “insanely dangerous”). We all consider risk and return when setting our stock allocations. Since our realistic assessments of risk and return must change with big changes in valuations, our stock allocations should change with big changes in valuations as well.

That’s the case for long-term market timing. Nothing fancy. It’s plain old common sense.

The reality, however, is that this common-sense argument is a highly controversial argument today. Millions of smart people, ordinary investors and experts both, strongly believe that market timing is impossible. Can it really be that millions of smart people have become convinced of something that defies common sense?

Yes, that is precisely what I believe to be the case. To understand how this strange state of affairs came to be, you need to consider how our knowledge of how stock investing works has developed over the years.

The common goal of stock investors in the days before the popularity of Passive Investing was to buy low and sell high. That’s market timing. The reason why we have long divided the community of investors into bulls and bears is that for a long time the name of the game was to anticipate in which direction stock prices were headed.

The Passive Investing Revolution brought an end to that for millions of investors and for most investing experts. The Passive Investing advocates told us that it was a mistake to act on the intuitive belief that stocks must offer a better deal at low or moderate prices than they do at sky-high prices. They didn’t put forward this claim as a matter of personal opinion. They backed it up with the hard stuff -- academic research SHOWING (not just claiming) that market timing doesn’t work. 

There are indeed hundreds of well-executed studies showing that timing doesn’t work. It is not hard to understand why many became excited about these breakthrough findings. It is not hard to understand why many became convinced that the best way to invest is not to guess which way prices are headed but to determine the proper stock allocation and then stick with it for the long run.

It turns out that those studies were misinterpreted. I mentioned that there are hundreds of studies showing that timing doesn’t work. Do you know how many of those studies examine whether long-term timing works or not? The answer is -- not one of them. All of the studies showing that timing doesn’t work examine short-term timing; they look at whether changing one’s stock allocation in response to price changes pays off in six months or a year or perhaps two years. These studies are silent on the question of whether long-term timing works (long-term timing is changing your stock allocation in response to big price changes with the understanding that you may not see benefits for doing so for five or perhaps even ten years).

Given that the studies are silent, I believe that we should default to our common-sense take that timing MUST work (for the reasons explained at the top of the blog entry). But we don’t need to base our belief in long-term timing in common sense. There are studies that look into the question of whether long-term timing works (Robert Shiller, author of the book “Irrational Exuberance” is the lead researcher in this area). Do you know what these studies say? They say that long-term timing works. It has always worked. There are no exceptions in the historical record.

Common sense tells us that timing should work. And the research on long-term timing backs up what common sense tells us. The puzzle is not why long-term timing works; common sense explains that. The puzzle is -- why DOESN'T short-term timing work? How can it be that so many well-executed studies show that what common sense tells us should be so is in fact not so?

The puzzle is resolved by reaching an understanding of the difference in the influences on stock prices in the long term and in the short term. In the long term, stock prices are determined by the economic realities. The U.S. economy is sufficiently productive to support a long-term return of a little more than 6 percent real. So long as our economy remains roughly as productive as it has always been before, that number must continue to apply. Long-term stock returns are largely predictable. That’s why long-term timing works. When returns are predictable, timing is an effective strategy.

Timing doesn’t work in the short term because short-term prices are not predictable. Why? Because stock prices are set by humans and humans are emotional creatures. For a time, we can make stock prices whatever we want them to be. Stock prices were insanely high in January 1995. But those who shorted the market got killed. The rest of us reacted with insane emotion to those high prices, pushing prices yet higher and higher and higher for another five years. We have the power!

But not in the long term. In the long term, stock prices must reflect the economic realities or the entire market will collapse. By January 2000, prices had gone so high that all the legitimate economic gains for many years to come were already priced in to the current market price. That ensured that stock investors were going to be disappointed for many years running, eventually becoming disgruntled enough to sell their shares and send prices back to fair value (where they are today).

Short-term timing does not work. Long-term timing does. The reason why is that prices are set in the short term by investor emotion, which is unpredictable, but in the long term by the economic realities, which can to a large extent be known in advance. Our common sense from the pre-Passive Investing era did not mislead us -- price really does affect long-term returns, just as we long believed it must.

The Passive Investing finding that short-term timing does not work was a breakthrough insight. It changes the history of investing. But for investors to make constructive use of it, we must fix the great mistake that unfortunately was delivered to us in the same package as that insight.  It’s only short-term timing that doesn’t work. Long-term timing always works. Long-term timing is REQUIRED for the investor seeking a realistic chance of achieving long-term investing success.

Rob Bennett writes the “A Rich Life” blog. He has recorded over 100 podcasts explaining what investors need to understand to make the transition from the Passive Investing model of understanding how stock investing works to the new Rational Investing model. 

Editor's note: I will provide a brief critique to Rob's article later this week, but let me steal my own thunder, I think the arguments Rob makes are largely sound, as far as they go.

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Monday, May 18, 2009

Don't be THAT Guy...

There is a very talented guy that works for my company. I will even go as far as saying that this guy is a star performer and that I respect and trust him. However, this gentleman is not invited to meetings, people don't share information with him and some folks joke about him behind his back. This guy is the victim of a self-inflicted wound. He doesn't understand the rules of the game. Here is some advice on how not to become that guy:

It's Not ALL About Business - people come to work not just to make a living. They also want to have fun while they are in the office. They want to enjoy the company of their colleagues, and they want the work environment to be a pleasant one. If people expect a fight every time you enter the room, you are well on your way to becoming THAT guy.

Give Ground - even if you can take the whole pie (so to speak), it is not a good idea to do so. Winning is good, but humiliating the other guy and making him cry uncle is only good if you are trying hard to make enemies. A true master knows how to get everything he needs while letting everyone around the table feel like they have made a contribution and have won some concessions. If folks constantly have to admit that you are smarter and that your proposal is the best one, look in the mirror, you are THAT guy.

Let Others Talk - don't you just hate it when people don't let you finish a sentence? I have to admit, I do that much more than I want to, but I am trying really hard to kick this filthy habit. Raising your voice to drown out the opposition is not a very effective way to get your point across. In this case I have to say that I am a little bit of THAT guy.

Not All Battles Are Worth Fighting - a smooth operator picks his battles. He let's many small things go wrong (at least from his point of view). He let's people make mistakes and he does not insist on getting things just right. However, he fights like a lion (a polite lion) to make sure that no big mistakes are made. If you think that every battle is worth fighting, you are most definitely THAT guy.

We all have some symptoms of the THAT guy syndrome, the question is always a matter of degree. Most of us have only a minor case of THAT guyness, but over the years, I have seen a number of very talented people sabotage their careers by failing to understand the rules of the game and becoming THAT guy in the organization. Once you are THAT guy, it is not always possible to salvage the situation.  

Here are some other job and career related posts that you may like:

Fire Finance got laid-off. There's a lot of that going around these days. Two of my friends also lost their jobs over the past couple of weeks.

This is an older post, but I really liked it: Be Wealthy, Get Happy has a post titled Never Move for Money

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Sunday, May 17, 2009

Career Clinic #2

Here is my roundup of weekly career and job related posts from around the PF blogosphere. I am specifically looking for career and job related posts, so if you publish one let me know and I may include you in the next Clinic:

Consumerism Commentary published a list of well paying jobs and some low paying jobs. Surprisingly, folks in the medical profession top the list. I would have guessed investment banking would take the #1 spot.  

Wise Bread advises his readers on how to find freelance work. It's all good advice, but from my experience, the best source of free lance work is your professional network and in particular, former colleagues. These are people who know you and will be happy to send you some work if the right opportunity comes along.

Free Money Finance published an article about 30 second video resumes that have started airing on his local TV station. His advice, which I fully agree with, is that if you are going to be putting yourself out there you had better be prepared. Don't waste the chance, be concise and talk about accomplishments. I also have to wonder if such gimmicks really get people hired. Another good one from Free Money Finance is a post about how to increase your salary.

Plonkee is talking about how her new job is effecting her business attire. It's always a good idea to dress for success. My philosophy has always been to dress one level more formal than the rest of the guys in my company. It's also a function of my specific position with the company and the fact that much of my work involves meeting people from outside the company.

Finally, Financial Fizzle has a post post about whether it's a good idea for both parents to work. Ultimately, it's a personal choice but I have previously weighed in on the same issue pointing to all the often overlooked costs of staying at home with the kids. Financial Fizzle also offers some job hunting tips for graduates.

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Friday, May 15, 2009

Things to Do at the End of a Recession

I am not saying we are at the end of this recession quite yet, but I think we are getting close - maybe three months away? I can feel it when I talk to fellow executives and business partners. I also hear it in the news and read it in the business papers. And did you notice that the sun was shining and that snow is not falling anymore? Oh wait, I think that has something to do with spring... Anyway, the end of a recession is a particularly tricky time when economic signals are mixed, and while you may be able to find some attractive opportunities, you can also land yourself in some serious trouble by making the wrong move. Here is my list of things to do and to avoid at the end of a recession:

Keep Your Job - while the economy may have bottomed, most economists agree that the job market will continue to get worse for many months to come. It's only natural. Business leaders everywhere still feel like they are treading on thin ice and will delay increasing their spending on labor for as long as possible. There is also the chance that firms that have been able to survive thus far by eating into their reserves will finally be forced into major cost cuts or even fold. So, even if the recession is indeed about to end, the "all clear" has not yet sounded for most employees. My advice on how to keep your job is as valid today as it was a few months ago.

On the flip side, if you own your own business or have the ability to influence hiring decisions in your firm, now may be a great time to do some hiring. Last year my firm struggled to recruit even B players. This year A players are throwing themselves at us. We are taking the opportunity to weed-out under-performers and to substantially strengthen our team. Be on the look-out for signs that this is happening in your own organization.

Make Big Purchases - if you think you will want to make a big purchase in the next few years, say a house or a car, now may be the perfect time to make your move. Demand is still depressed, prices are low and interest rates at rock bottom levels (if you have excellent credit) - talk about a winning combination. Once the economy picks up, and given the accommodating fiscal policy and incredible deficits, I wouldn't be surprised to see inflation rear its ugly head or a more dramatic devaluation of the dollar

Since the stock market has rebounded 30% from its lows and our portfolio with it, and since the economic environment as a whole seems somewhat more stable, I have even begun entertaining the idea of buying our own house. It's not a good investment (I can't believe I wrote this post in early 2007), but it is your very own place to live. Problem is - prices in our area are still too high for us to seriously consider. 

Start a Business - they say that the best time to start a new business is the last day of a recession. You can get everything you need (employees, office space, equipment etc.) for bargain prices, while your potential customers are getting ready to start buying again, i.e. they will be looking for new vendors. If you are thinking about starting a business you may never find a better time to do so.

Rebalance Your Portfolio - stare fear straight in the eye and buy some stocks! OK, maybe that was overstating the case, but after the drubbing we have all taken over the past couple of years, it's probably safe to assume that your asset allocation has shifted dramatically in the direction of more conservative investment. Maybe it's because you fled the market when things got bad or, if you are like me, you kept your positions but your stocks got decimated while your bonds did their thing and mostly held up. Anyway, if there was ever a time that shouts "rebalance your portfolio!" this is it. Of course, there's the next point...

Be Honest About Investing - you have to look yourself in the mirror and tell yourself the truth. Are you really cut-out for risky assets? Were you able to sleep at night when the stock markets melted? Did you require a coronary bypass when the markets hit their bottoms in March? Did you raise a white flag and flee stocks when it seemed like the bottom was simply not there? If so, maybe you shouldn't rebalance. Maybe being conservative is the right choice for you. In spite of what others would have you believe, this is a very valid and legitimate choice.

Here are a couple of other personal finance posts that discuss the economy:

Really funny comics about the economy from Spilling Buckets.

Weakonomics interprets the results of the bank stress tests and their connection to... family guy.

Also check out the Carnival of Personal Finance at Earn What You Spend for as many PF posts as you can handle.

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Thursday, May 14, 2009

Car Trouble, Still Worth it

If you have been following my Twitter posts - and why on earth would you want to do that? - you may know that last Friday, on my rushed way to the Supermarket to get my lunch between two meetings, my good ol' Geo Prizm 1997 decided to die on me. Well, die is a little bit of an over statement, as you will see, but as I was standing at a light I felt a sudden "THUNK" (yes, it really was a "THUNK") and the check engine light came on.

Of course, I immediately thought the gal was finally dead, and pulled over to the side. I called one of my colleagues who knows about these things and he recommended I drive the car a few hundred yards to his mechanic. While I waited for him to come pick me up and show me the way, I called my wife and immediately threatened that if this was a big bill fix-up I was going to donate the thing to NPR (I have been meaning to pledge forever and one of these days I am sure to get a call from Ira Glass). Being the voice of reason that she is, she basically told me to shut up and see what the mechanic had to say.

Ten minutes later I was in the shop, and 20 minutes after that I had the diagnosis. Basically, I needed a big tune-up. One of the cylinders was misfiring. That and a few other fixes for a grand total of $400 (it's California) and by the end of the day the junker was running as good as old again. I have no complaints. I drive exactly 12 miles a day. Seems like a waste to buy a new car for that. That doesn't mean I am not going to complain about my jalopy every once in a while. As the owner of a crappy old car, I feel that this is my god given right!

Moolanomy recently wrote a post about preparing for and dealing with a car breakdown. For me, it's all about having a cell phone and the number for AAA. And if you car really sucks, the number for AA.

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Wednesday, May 13, 2009

I Have Seen the Future...

I have seen the future and it is WolframAlpha. I am not going to waste your time with unworthy explanations - check out this demo for yourself. This company has the potential to be the next Google or Microsoft (or to be acquired by one of them for insane amounts of money), if it even comes close to achieving the performance shown in that demo.

If I did not have a family to support, I would quit my job and go look for any job, paid or unpaid that I could find with that company. Yeah, I am sort of blown away. This is the same way I felt about Google when I first saw it.

The site should be going live in just a few days...

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Issue Bonds with No Tax Increase? Dream On...

Next week we will be headed to the polls here in California, and radio listeners and TV viewers around here are being inundated with commercials urging folks to vote "yes" on this or that bond measure. Many of those commercials claim that the bonds they support can achieve some noble goal without "new taxes" or "without raising taxes". Without taking a position for or against any of the bond measures on the ballot, such arguments are misleading and dishonest.

Let's talk about the basics for a moment. Bonds are a form of IOU, in this specific case an IOU issued by a state or local agency. This agency raises money from the public now, and pays it back over time, with interest. This is not a bad thing, it is a way for governments to finance large upfront capital investments and spread the cost over time. Bonds are particularly useful in financing large infrastructure projects - e.g. highways, ports and power plants - which cost a lot upfront but that generate a return down the road. 

What some folks don't understand or choose to overlook is that bonds are not free. Unless the interest on the bonds can be re-paid using funds generated by the project itself, such as from tolls raised on a new freeway, the interest must be paid from tax revenue. When bond supporters claim that their bonds will not require new taxes, they are, in fact, lying or intentionally misleading the public. It may be that no new taxes will be imposed, but tax revenue will be used in repaying the bonds. Such revenue could be used for other purposes or returned to the public through lower tax rates. Of course, telling the public that "you'll be paying for this project through the nose" is somewhat less palatable than the lie of a free lunch, so promoters of bond measures go with the happy fairy tale instead.

Don't get me wrong. I am not against all bond measures. Bonds are a very acceptable method of financing vital or productive public projects. So are taxes. What I am against is intentional disinformation of voters. Another favorite trick: (read with pathos, and a single tear in the corner of your left eye):

"It's for the kids...."

I am not even going to go down THAT road...

For extra credit: add a police officer, firefighter, nurse or teacher to your commercial. That's gotta be worth a few more votes. Psychology of the masses. You gotta love it... 

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Monday, May 11, 2009

Slumdog Millionaire & Investment Strategy

This weekend my wife and I watched Slumdog Millionaire on DVD (it's a good movie), and personal finance geek that I am, I started thinking about why contestants on game shows keep playing for ever-more money instead of locking-in what in, many cases, are life changing prizes. Is it greed? Is it stupidity? Is it the belief that some supreme force will intervene on their part? I simply don't get it. Here is the way that I think about these situations and what it means for our personal investment strategy:

Let's take a specific example to make things more tangible. Say I am on "Who Wants to be a Millionaire", and I just answered correctly the $100K question. Now $100K does not make you rich, but for most people (myself included), this is a huge amount of money to win. The next question is worth $250K, and let's say I narrowed down the field to two possible answers, but have no more lifelines and now have to choose between those two. Do I go for it or take the money and run? If I take the gamble, 50% of the time I will get the answer right and 50% of the time I will lose. If I win, I will have $250K. If I lose, I will be left with $16K (those are the rules, I guess). My expected payoff is therefore $133K (the average of those two prizes). If I walk away, I will have a guaranteed $100K.

Now, the seemingly rational choice is to go for it i.e. guess the right answer.  This is the rational choice because the statistically expected payout is $33K higher when taking a guess than it is when taking the money and walking away. Yet, I would never take the gamble. The main reason for this is the diminishing return I would get from the larger prize, compared to the guaranteed but smaller prize. $100K in the bank means a lot to me. $133K is better, but the variability (or risk) of $250K vs. $16K is just not worth it. My answer would probably be different if I stood to win a MUCH larger prize by taking the gamble. Say, if the expected value of the gamble was more like $1 million. That much larger prize would be life changing, and I would probably be willing to risk the loss of my guaranteed prize.

Now let me explain how this answer effects our personal investment strategy. When investing our portfolio I am not necessarily going after the highest possible payoff. The highest possible payoff is typically associated with the highest possible degree of risk. When investing our cash,  our objective is to guarantee ourselves a certain level of security and a degree of financial comfort. We are NOT trying to be as wealthy as possible, we are trying to maximize our wealth given a certain degree of risk which we are willing to accept. Maybe we could make more money by being more aggressive, but it's simply not worth it, even if the expected payoff is higher.

I am sure that some people are willing to make such bets with their savings or with their retirement funds. Maybe those are the ones that keep playing in those game shows. Or maybe they're just stupid. I don't have the answer to that question. You decide.

Here are some other investment related posts you may find interesting:

The Dough Roller has no problem with Suze Orman investing her money in bonds while advising others to go for stocks. I don't share his opinion, and I left a comment on his post, saying just that. Maybe I'll write a post on the subject to clarify my position.

My Wealth Builder calls bull**** on the stock market rally. Yeah, I don't know. I think it's for real, but if it turns euphoric, as the post says, I too hope to have the presence of mind to cash out before it goes boom.

Boston Gal comments on women's investing strategy vs. men's. It's true that there are academic studies that show that women typically get better returns... it's usually ascribed to lower trading costs.

Finally, take a look at this post from Investoralist which talks about topics relevant to those of this post: how loss aversion can "help" you make bad financial decisions.

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Sunday, May 10, 2009

Career Clinic #1

Your career is your most important financial asset - that is, unless you are one of those lucky few who do not need to work for a living. Yet, somehow, us personal finance bloggers typically focus on what to do with your money once you have earned it, how to invest it and how to spend less of it. Well, my thinking is that building your career is at least as important if you are trying to achieve financial security. So, with that in mind, I have decided to scour the PF blog community and promote those posts that offer sound career advice. Here are the ones that I liked:

Spilling Buckets has a post about going for Grad School rather than trying to find a job in a recession. That's a common tactic these days, but I am not certain that it's a good career strategy.

Free Money Finance talks about his networking plan. Networking is one of the key aspects of career development, yet most folks never bother with it until they are looking for a job. Big mistake. Just as importantly, networking doesn't have to be a pain - read the article for some fun AND useful suggestions.

The Simple Dollar talks about salary negotiations when receiving a new job offer - this is the one time in the employer / employee relationship when negotiations are expected and the power rests with the employee. You MUST take advantage of this opportunity.

Saving Advice talks about freelancing as a source of income. For some folks, that's a very valid career move. I think that my wife may be headed in that direction, but we'll see.

The Smarter Wallet recommends companies that are less likely to let you go, recession or not. I am not sure that this is the number one criterion most people should consider when looking for a job, but job security is certainly a good thing, especially in the current economic conditions.

New Grad Handbook makes a very valid point: not all promotions are good promotions... the most important thing to consider is how a career move will position you in the long run. It's a good article.

Job and Career Advice talks about how to conduct yourself in an interview.

Finally, check out my own post about building work place alliances as a way to improve your chances for success.

I hope you find these useful.

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Thursday, May 07, 2009

How's that Money Market Fund Working for You?

It's not often that this happens, but it looks like I made a really good call... on March 3rd, just 3 or 4 days before the S&P reached its most recent low, I published a post urging folks not to give up on the stock market. Boy, was that a good call or what?! In the same post I wrote about one of my colleagues who was so stressed about the market collapse that he decided to put all his new 401K contributions into a stable value fund. So here's what happened: not only did his 401K get decimated in the stock market collapse, his decision to "play it safe" caused him to miss out on the dramatic rally of the past couple of months. Talk about a double whammy...

As I said in my previous post, if you are so stressed about the market that you can't sleep at night, it doesn't matter whether you win or lose, you need to get out of the market. Peace of mind and sanity are more important than money. More than anything this is an indication that your asset allocation does not match your risk tolerance. Remember that next time you feel like jumping into the market. However, if you are not down in the dumps when the market heads south and don't dance with euphoria when the stock market goes on a bull run, your asset allocation probably matches your risk tolerance. Good for you. Your rewards will come in time (possibly in a LOT of time). 

As long as we are on the subject of the stock market, let me risk another call. I think that the stock market rally is for real. Although we may see a  correction in the near term (10% to 15%), I don't think we will be seeing anything like the lows we saw in early March. I think that the economy is on the mend, or more accurately, I think that the worst case economic scenario that people were bracing for is no longer very likely. Things are going to get better over the next year. I just hope we don't get hit with a dollar devaluation and / or a nasty case of inflation in the next 3 to 4 years.

More about investing and the economy from other bloggers:

Dividend's Value gives advice on how to select dividend paying stocks. I don't subscribe to this notion, but you might.

Some advice from Spiffy Links on how to detect investment fraud.

Back to basics, Invest Wisdom explains the concept of a P/E ratio.

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Wednesday, May 06, 2009

Passive Investing is for Extremists: The Critique

Yesterday Rob of a Rich Life posted what I thought was a thoughtful and well written guest post on this blog, making the point that passive investing is a fool's game. I would like make a few comments regarding this post and its underlying assumptions. 

First, it's important note that the term "passive investing" can be defined in a number of different ways. I think of passive investing as investment in Index funds vs. stock picking or investments in actively managed funds. I have written numerous articles on the subject and academic studies indicate that for the vast majority of investors, and over the long run, index investing yields much better returns than do the actively managed alternatives. However, Rob is not differentiating between these different stock investment strateiges. His main claim relates no so much to how you invest in stocks, but rather to the percentage of your portfolio that is invested in this asset class, regardless of which stocks or stock funds you put your money into. I think that it is more correct to say that Rob is against passive asset allocation, than he is against passive investing as I understand it.

With that in mind, let's discuss the main point. The underlying assumption of Rob's post is that when stocks are overpriced, investors are better off aggressively under weighting stocks in their portfolio, and supposedly the opposite is true when stocks are under-priced. Essentially Rob is advocating a form of long-term market timing. While this may make sense in theory, I am not clear that it can be accomplished in practice. For one thing, short term market timing is notoriously difficult to get right. In fact, my post tomorrow will deal with exactly that issue. Why make the assumption that investors will be better at predicting the long term peaks and troughs in the market than they are able to predict short term ones?

Another important question that needs answering is what metric is used to determine whether stocks are overpriced or whether they offer good values. The price to earnings ratio is commonly used for this purpose, however that indicator is far from straight forward. For example, at the peak of the economic cycle, just as stocks are getting set-up for a fall, earnings are often at their highest levels, sometimes making stocks appear modestly priced. The reverse is true at the bottom of a cycle when earnings can be dismal. Valuing stocks by more complex models (cash flows, CAPM, or whatever else you may favor) adds layers of complexity and murkiness to the analysis - not to mention making it inaccessible to most of the population.

Oh, and one more thing. There is an entire industry of investment advisors out there that use sophisticated (and presumably meaningful) quantitative tools to make investment decisions. These professionals can move assets between stocks, bonds and often other asset classes. Some of them can even bet against the stock market by taking short positions. Do these guys do any better than the rest of the investment community? Nope. The fact that you have a quantitative model doesn't mean that it has any predictive power. Ask some of the hedge fund managers who got crushed in the recent meltdown.

I am not ruling out Rob's theory, although I think that he has a heavy burden of proof to overcome. I think that there are clearly very appealing aspects to his theory. However, I am not convinced that this theory can be put into profitable practice when everything is taken into consideration: transaction costs, potentially increased tax burdens, and most importantly the ability to correctly gauge whether the market is correctly valued. At the end of the day, investing in stocks over the truly long-haul will get you about a 6% premium above what you can get for putting your money into treasuries.Maybe you can come up with a better theory that will yield higher returns, but I am betting it's unlikely. I'll be glad to be proven wrong.

Here are a few other investment related posts I found around the PF community:

All Financial Matters is commenting on the performance of target date funds in light of a new SEC investigation. GenX Finance also looks at target date funds and shows off some numbers (Yikes).

My First Million is betting that the stock market rally will stall, he says "sell".

Weakonomics tells his readers to ignore the financial media and uses the current rally as an example. Also on Weakonomics, catch the latest Carnival of Personal Finance.

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Tuesday, May 05, 2009

Passive Investing Is a Strategy for Extremists

This is a guest post by Rob Bennett, of a Rich Life. You may also be interested in my detailed critique to this post. If you are interested in publishing a guest post on Money and Such, please contact me at shadox1 at the domain name

By temperament, I’m not an extremist. I like to work hard and I like to take vacations. I’m a saver, but I don’t entirely deny myself the pleasures of modern-day middle-class life. I enjoy it when I can fit in regular exercise. But I’ve never been willing to push it hard enough to finish first in a race. I usually am happy finding my way to the moderate middle.

When it comes to investing, however, I have been called an extremist on more than one or two or three occasions. Is it something I said?

I think that it might be.

I have said that Passive Investing (sticking with the same stock allocation at all price levels) is “reckless.” I have said that Passive Investing “can never work in the real world.” I have said that Passive Investing (but not the many smart people who follow it) is “insane.” Yikes! I do sound a bit over the top, don’t I?

Maybe I should take it back.

But --

I can't.

It’s certainly true that in a relative sense my views on Passive Investing are “extreme.” I hate Passive Investing. I believe that the popularity of Passive Investing is the primary cause of the economic crisis we are living through today. I think it would be fair to describe me as the most severe critic of the Passive Investing model alive today. However, in an objective sense, I don’t believe that my views are extreme at all.

My take is that it is Passive Investing that is extreme. It is because I dislike extremism that my distaste for Passive Investing is so strong.

Passive Investing advocates tell us that it is not necessary to make any changes in our stock allocations in response to big price changes. Stocks were selling at three times fair value at the top of the bubble. Even at those prices Passive Investing advocates were telling us that it made sense to put a big percentage of our retirement money into stocks.


That makes no sense to me.

I have looked at the historical data to determine how much investors should be lowering their stock allocations when prices go as high as they went from 1995 through the first part of 2008. The data shows that prices had gone roughly that high on three earlier occasions in U.S. history. The average price drop in the following years on those three occasions was 68 percent. I cannot afford to lose two-thirds of my retirement money in a price crash. So the idea of having a high percentage of my retirement money in stocks at a time when such a price crash is all but inevitable makes no sense to me.

I can see an argument for having 20 percent or 30 percent of your money in stocks even when they are selling at such high prices. Short-term performance of the stock market is unpredictable. So, even when stocks are selling at insane prices, there might be upswings that you would want to participate in. However, I can’t see putting more than 30 percent of your money at risk of the huge price crashes that always occur from those price levels.

Is that thought the thought of an extremist? Or is that the thought of a moderate?

I say that it is the voice of a moderate. I say that it is the idea that we should not even consider the idea of making allocation changes in response to big price changes that is extremist. We all should have been debating the different possible options all along. Some might have argued for zero percent stock allocations at those price levels, others for 25 percent stock allocations, others for 50 percent stock allocations. That would have been healthy. That way we all could have heard the arguments for all the possible viewpoints and decided for ourselves what stock allocation made sense for us.

That debate never took place. The popularity of Passive Investing took the idea off the table. Most “experts” said that no allocation change at all was needed and most otherwise moderate middle-class investors went along.

Taking the most important strategic question off the table before discussions over it began was a bad idea. 

The word “passive” sounds neutral. It sounds moderate. I don’t think the investing philosophy is that at all. The investing philosophy argues for taking no action whatsoever when the risk of holding stocks increases dramatically. I suppose it’s fair to say that that’s one point of view re how investors should respond to price changes. I don’t think it’s fair to call that particular point of view a moderate one. Making no allocation change at all at all price levels is extreme.

It’s like with the people who say they love everybody except for the people who hate everybody. I favor moderation in all things except for investing philosophies that are anything but moderate. Passive Investing strikes me as the most extremist investing philosophy around. I hate it.

Rob Bennett writes the “A Rich Life” blog. His “The Investment Strategy Tester” shows investors how they can recover all of their recent stock losses by converting from the Passive Investing strategy to a valuation-informed strategy.

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Monday, May 04, 2009

Building Workplace Alliances

They say that "no man is an island", and that statement is just as valid in the corporate world as it is in the rest of the world. In fact, no matter how talented you are as an employee, a professional or an executive, you cannot be successful unless you learn to build the relationships, alliances and the coalitions that will help you to achieve the results you need. 

Understanding the Machinery - to build and manage effective coalitions, you first need to understand how your organization works. Who makes the decisions? Who delivers the data? Who influences the decision makers? How does information flow? If you have been with the organization for a while, chances are that you have a good sense this structure. If you are the new guy on the block, make learning the machinery of your organization your number one priority.

First, Do No Harm - the first step in getting someone to join your cause is to ensure that this person does not consider you a pain. If you think that someone's support, approval or even mere consent is critical to what you are trying to achieve, make sure that you are not standing in their way, and that you are not causing them a headache. As a simple example, if you think you need support from some of the guys at accounting for a project you are working on, don't be the guy who they think of as a pain in the neck for failing to submit his expense reports on time. It's as basic as that. Similarly, if you are known as the guy who vocally criticises any proposal that is brought up by someone else, folks will be practically chomping at the bit to kill your own initiatives.

Reciprocity is the Key to Success - expanding on the previous point, people will be much more inclined to help you if you have already shown a willingness to help them. For example, I have recently turned down an offer of additional resources from my CEO to help support one of my projects, in favor of those resources being directed to a key project run by our VP of Operations. Last week, when I pitched a new project to my CFO in a staff meeting, the VP of Operations spoke up in support of this plan, without my having to request this.

Building Support in Advance - here is the cardinal rule of alliance building: 

Do not surprise your allies and supporters. 

If you want someone's assistance in a key task or you need their support for a major initiative, prepare them in advance. Don't spring this request on them in a crowded room... you might not like the answer you receive and the dynamic that develops might turn against you. This is why God invented the pre-meeting... arrange pre-meetings with key potential supporters and rivals in a 1:1 setting prior to pitching your initiative to the full group. Get their opinions, hear their objections, listen to their criticism. Worst case, you will know what to expect. Best case you will have assured yourself of support even before your idea has been formally introduced. The main meeting should be nothing more than a rubber stamp. The real work should be done in advance and behind the scenes.

Start Early - people find it much harder to object to programs which they have had a hand in developing. For this reason, involve as many people as you can in the early decision making process (preferably in a 1:1 setting, again). Make a conscious effort to accept as many of their suggestions as you can, while still ensuring that your underlying goal remains intact.

Acknowledge Success and Give Credit - nothing creates more good will than giving credit where credit is due, and sharing praise where praise is deserved. Last week, our engineering team delivered an impressive and successful demo - a major milestone for our company. My CEO was not present at this demo, so during our executive staff meeting later that week I made it a point to congratulate the VP of Engineering on his team's impressive success, in front of our CEO. I was not being hypocritical and I was not kissing up. I was speaking my honest opinion, and I was doing it in a setting that placed the credit exactly where it was due, and gave a fellow executive an important win in front of his boss. Presto, good will created.

If you are able to design and build the right coalitions for each of your initiatives and major projects, you will find that your wins are much easier to come by and that your victories happen more frequently. That can only be a good thing for your career.

Here are a few more career related posts from around the PF community:

Frugal Zeitgeist - my good blogger friend - has continued and extended the discussion I started regarding a sense of entitlement in the work place. Did I already mention that Frugal Zeitgeist is a blog I read daily?

Dana of Investoralist also picked up on the same topic, and shares some opinions about Gen Y in the work place and in life.

Finance your life was working this weekend in hopes of a promotion later this year.

Money Smart Life offers some good advice on preparing for a pink slip.

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Sunday, May 03, 2009

Career Clinic: Posts & Questions Please

I have come to the dismal conclusion that PF bloggers don't write enough about career development. This is a shame, since for most people their career is their biggest financial asset and most important source of income.

So, with that in mind, I am happy to announce the Money and Such Career Clinic. 


I will add a link on Money and Such to any career related post that I can find or that is sent to me by any PF blogger.

I will answer career related questions that I receive from my readers or from anyone else that cares to send me one (I don't know how many I will receive, but will at the very least respond by e-mail with an answer to anyone who sends in a question). Some of the good questions and answers will be posted on Money and Such (together with any relevant links).

You can contact me by sending an e-mail to shadox1 at the domain name


Monday, May 11th. Please send me any submissions by Sunday afternoon (Pacific Time). 


I don't have a lot of reach, so I am asking my blogger friends to help me drum up some posts and questions. Come on, write one post about career development, work place dilemmas, finding a new job, dealing with a bad boss, or any other career related item that comes to mind.

All submissions welcome, but I would like to specifically encourage some of my regular readers and blogger friends to contribute, including Digerati Life, Frugal Zeitgeist, Investoralist, Plonkee Money (would be nice if you could help me get some other folks to write some posts as well).

Let's see if this is of interest to anyone...

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Friday, May 01, 2009

Career Ending E-Mails

E-mail is the bane and the savior of the modern office worker. On the one hand, we are inundated by an endless stream of seemingly useless messages that we really don't want or need. On the other hand there has never been a faster or more efficient way to exchange information quickly and interactively between large groups of people. This post is about how to use corporate e-mail in a way that will help, not hurt, you in the office.

On the Record - whatever you say in an e-mail is there forever. It is recorded by your company servers and can be pulled back at will, whether or not you try to delete it. This means that e-mail is not a form of communication you should be using if you have a problem with any third parties being able to view your message at some point in the future. For example, anything that could jeopardize your organization's business positions or cast it in a bad light simply should not be communicated through e-mail.

E-Mail Makes the Rounds - Last week my CEO forwarded me an e-mail thread, in which older messages included some highly sensitive information that was clearly not meant for me to see. In that specific case, the information did not concern me and I will be keeping it in close confidence, however, be aware that people hit the "reply all" and "forward" button all too easily and something that you meant only a friend or specific colleague to see is now plastered across the entire e-mail system. Watch what you say. 

Along the same lines, when you refer to someone in an e-mail use respectful terms. Don't call someone a jerk in an e-mail, even if you think they fit the bill. All too often that written record will find its way to the wrong hands. Treat e-mail exactly like you would a post on your open corporate website. 

Don't Be a Corporate Spammer - one of my direct reports in my last company used to account for 30% of my e-mail traffic. He used to cc me on EVERYTHING. If he was trying to schedule a meeting with someone, I would get copied on the entire thread, including all the time changes and discussions of where to meet. I guess he was trying to make me see that he was working hard. Instead he made me think that he was a semi-competent waste of my time.

Seriously, before you hit the cc button or reply to all button, think. Does everyone really need to see this e-mail? If you want your e-mails to make an impact, reduce their number.

Joke Forwarding - it's OK to forward the occasional joke or funny site. Just keep it in proportion, don't over load people's inboxes with junk and certainly make sure whatever you forward is appropriate for your work environment.

Understand the Medium - people often fail to realize that e-mail does not communicate tone very well. Consequently, something that would sound very innocent and non-confrontational given the right tone in a face to face conversation, can sound like a full frontal assault when written in an e-mail. Before you hit that send button, re-read your e-mail and make sure that your intention comes through even when the reader has a different mindset from your own. I frequently end up re-writing an e-mail to avoid possible misinterpretation after I re-read it. You know what, sometimes even that isn't enough. By the way, NEVER, ever send an e-mail when you are upset.

Here are a few other career related posts from around the PF blogosphere:

The Simple Dollar has a post about how work and personal life balance and what frugality has to do with it all.

The Smarter Wallet has a proposal for folks who have recently lost their jobs: start a business.

Squawkfox has a series of posts about resume writing, the latest of which talks about three popular formats.

Boston Gal has a post about different ways of handling unemployment. Well, actually it's a Boston Globe story, but it's still worth reading.

Digerati Life has a post about how to use social networks for career development.

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