Lazy Man and Money

What if History Doesn’t Repeat Itself?

by 14 Comments

Back in 2006, I had a revelation. I was a software engineer and I made decent money. However, there was a lot of talk about off-shoring all kinds of software projects. I looked into it and with companies like Elance, I realized that there could be a major shift coming sooner than I thought. I looked at into my heart and it didn’t take long to realize that software engineering didn’t interest me enough to motivate me to be the expert I would have to become to justify my salary. That’s why I started this site. I needed to find other ways to supplement my income for the day when I would transition out of software engineering. That day happened in October, 2007 and I haven’t looked back. If I could talk to my old manager again, I’d give him a great big hug, say thanks, and ask if he’d do one more impression of the old child molester on Family Guy or sing a Kelly Clarkson song.

What does this have to do with history? The world is changing – extremely fast. Detroit used to be a thriving hotbed of wealth. Now it needs bailouts just to keep afloat for another few months. At last 2007’s American Pharmacists Association, a distinguished speaker said that companies were exploring outsourcing clinical pharmacy studies oversea. Shoot the data over the Internet, have a pharmacist there analyze it and shoot the results back. It’s that simple and a lot cheaper. At some level, either Americans have to start providing more value (how?) or one of two things is going to happen: American wages will drop or other countries’ wages will rise. I imagine it will meet somewhere in the middle.

This has me thinking… for years financial advisers and Money magazine have repeated the 8-10% historic rate of return on stocks. Can we trust this history? What were the factors that contributed to that history? When I was growing up, I remember seeing things that said, Made in USA. I don’t know if I’ve read that phrase in the last ten years. Might that impact the historical rate of return of US stocks? I think it might.

I often read the historical rates of return on real estate. It’s had a big run and it seemed that around 2004 everyone was living by the “it always it goes up” credo. Well today we’ve learned that it’s not entirely true. Perhaps the reason real estate jumped up over the 30 years is due to women getting more lucrative jobs and families finding themselves with more money. If people have more money, they can bid up the price of homes. If that theory is right, the blast of extra income was a one-time event. In the end, real estate prices have to track wages or people will be forced to stop buying.

What I take from this is that you should believe the popular mutual fund disclosure: past performance is no guarantee of future results. I’d take it a step further and say that past performance might not even be a good indicator of future results. Does that mean you should stop investing? I think you should look for opportunities in this changing world. If you think that television is going to go Internet via sites like Hulu and YouTube, perhaps a investing in Internet infrastructure is a good move (Cisco comes to mind). If you think that we are going to be slow to adopt solar technology, perhaps you should invest in oil. If you think that solar technology is going to be big in ten years (a point I wouldn’t argue), perhaps you could invest in Claymore/MAC Global Solar Index or Market Vectors Solar Energy.

Does this mean that everyone in the United States is doomed? No. Now is the time to be proactive and think about the future of your field and your career. It’s time to take a few minutes and not think about what’s for dinner tonight, but what your long term plan is (unless you are already nearing retirement. In that case just carry on :-).

A final thought, this month’s Money magazine points out that Japan has been in a bear market for 19 years – very much a whole generation. I wonder what the Japanese version of Money magazine says about historic rates of return.

Thoughts on Middle Class

by 15 Comments

I came across what’s wrong with being middle class by Mrs. Micah the other day. It’s a simply and beautiful question. Some of my closest friends who are doctors, lawyers, and financial Wall Street somethings or others. (I can never really figure out what the Wall Street guy does, but I think it involves TPS reports and a high degree of education and I expect pay). While they are still a little young side to be in the upper class, I suspect they are in the upper-middle class – and probably will be in the upper class in 5 to 10 years.

I’m not sure we are headed in the same direction simply because I made the choice to skip the big paycheck for two reasons. I wanted a better quality of life. I was not happy with being a software engineer. I think it’s a fine occupation, but it’s very competitive and I’m at the point where there’s more to life than coding a computer. It’s nearly two full-time jobs – one producing code and one learning the latest tools and technologies. It’s extremely difficult to do both and have an outside life for any length of time. I was simply juggling too much at one time.

The second reason is that I wanted to build something sustainable for the long-run. You can call it a rat-race or a treadmill, but unless you love what you do exchanging time for money is a losing proposition. Earlier this week, I was recently reminded that time is our most precious commodity.

There was a time when I had to have every new electronic gadget when it came out. I was one of the earlier adopters of Smartphones, DVRs, home automation equipment (everything that X-10 had to offer), and MP3 players (my first had space for 7-8 songs). Even though I had all this stuff, none of it made me happy. Not only that, but each purchase meant that I had sacrificed precious time for what amounted to very little. It was not until the last few years that I realized that experiences made me happy. I now evaluate purchases by their possibility of providing those experiences. It’s one of the reasons that I recently purchased a Wii. Thought we’ve had it a short time, my wife and I have enjoyed a few hours being active and playing tennis.

So to sum up all these thoughts on what’s wrong with being middle class… there’s nothing wrong with it. I will be happy to trade extravagant meals of caviar for hours of simpler pleasures with the people I love.

Best Buy Extended Warranty

by 9 Comments

About a year and a half ago, my fiancee bought a laptop and decided to protect it with the extended warranty. I know that usually they aren’t good investments, but when I did my research, getting one for a laptop seemed to be the right thing to do. When it failed to work in early September, she was happy she had gotten the protection.

However, since then, it’s been a nightmare. Best Buy sent it out for repairs and four weeks later it returned with a new motherboard that, without the protection, would have cost more than what we paid for the computer. We hadn’t been home for 15 minutes, before the monitor failed, a new side-effect of the fix, I surmise. We brought it back to Best Buy and again they confirmed the problem and sent it out for repairs. Just yesterday, it was ready for the second time. We had it home for about 20 minutes this time before it froze on us… three times. I’m a software engineer, so I know this just isn’t normal. On reboot it gives a blank screen for 10-15 minutes before it decides to get to the initial Windows loading screen. It’s funny because when we took it back to Best Buy that’s about exactly how long it took for the technician to get the manager. Just when the manager shows up it works, go figure.

He wanted to run an overnight diagnostic on it, but at this point, I think it’s time to honor the extended warranty and replace it. Even if he does it get to work at this point, I want them to extend the extended warranty because at this point, I’ve lost a lot of confidence that it’s going to continue working. I expect it’s going to die the day after the warranty is done. The most frustrating part of this is that for 6 weeks now she’s been without her computer. Someone needs to come up with a loaner plan like they do with cars.