Just Doesn't Make Sense

Our current bailout strategy doesn't make sense to me, but I didn’t think I was intelligent enough to be the one pointing it out. Well I found someone who is smart enough and eloquent enough to explain why this fundamentally cannot work.

Legendary global investor and chairman of Singapore- based Rogers Holdings, Jim Rogers said the US risks sending the world into a depression as its bailouts of failed companies rob healthy businesses of capital.

Speaking to Bloomberg TV today , Jim Rogers said: “The U.S. is taking assets from competent people and giving them to incompetent people,” said Rogers. “That’s bad economics,” he added.

Rogers argued that American International Group should have been allowed to descend into bankruptcy, and he feels the same about similarly situated businesses. It just doesn't make sense to divert money from healthy, prudently-managed companies and plow it into debt-burdened companies that are being run badly at best and criminally at worst.

Rogers has spent a career being one step ahead of mainstream investment thinking.  Amongst his many accomplishments, Rogers was co-founder with George Soros of Quantum Fund. During his ten years with the fund, the portfolio gained more than 4,000%, while the S&P rose less than 50%

Don't Have Time for the Super Bowl?

Commuting from one appointment to another yesterday I tuned in to the Dan Patrick Show in an attempt to catch some March Madness talk. Roy Williams, head coach of number one seeded North Carolina and one of the all time winningest coaches in NCAA basketball history, was being interviewed.

He was asked the poll question of the day which had something to do with "if you would miss the Super Bowl or not". He answered by saying yes he would, but that it may not mean much coming from him as last year was the first year in many, many years that he has watched the entire game. I was shocked as I thought the Super Bowl was the one sporting event that attracted even non-sports fans.

When pressed by Dan Patrick, Roy Williams explained that four hours is a huge block of time and that he cannot justify spending that much time watching a game when he has so many things he could be doing that time of year.

What became apparent to me is that Roy Williams is so busy pursuing his own dreams and goals, that he doesn’t have time to watch others pursuing theirs. No wonder some people are wildly successful and most aren’t even close.

I was reminded of a quote I keep on my desk:

“To give anything less than your best is to sacrifice the gift.” – Steve Prefontaine 

How will you get it back?

The total net worth of Americans was $51.5 trillion as of 12/31/08, down 18% in the last year, reaching its lowest level since 9/30/05 (source: Federal Reserve). 

Those numbers seem low considering the Case Shiller home price index has dropped 16.7% in the last 12 months and the S & P is down 40.97% over the last year.

Whether it is 18% or more, new action must come from it. Some will live more frugally. Some will delay retirement indefinitely. Some will realize the job they are in simply will not provide them the income they will need to live the life they want and will go out and start new businesses. Some will begin investing in new ways.

What is your plan? How much net worth have you lost? How will you make it up? How much money do you need at retirement to live the life you desire? How about to maintain the current lifestyle you have?

Now is the time to build the strategy. Now is the time to take action. What has worked in the past will not work in the future. Time has elapsed and market dynamics have changed. A new philosophy for wealth accumulation must be built sooner than later.

Attend MIT for Free

Over the last decade or so we have transitioned from a labor based economy (make money by the number of hours that you work and how fast you work them) to a knowledge based economy (where knowledge is the key to the kingdom). By knowledge I do not mean education or understanding. Knowledge is the superior capacity to think and act.

We live at a truly amazing time with the introduction of the computer and internet. Virtually everything you would ever need to make a fortune is free!

I recently ran across a site that MIT has offered called MIT Open CourseWare. On this site you can get access to almost every document, lecture note, presentation, and resource that you would as a student at MIT. It is all absolutely free. Truly unbelievable. They have a great business program along with math and science, etc.

How are you spending your time? By cutting out 1 hour a day of TV watching or Internet surfing you will free up 365 hours a year or 15 full twenty-four hour days or 45 eight hour business days. What could you learn and apply in an extra 45 business days this next year? I know I can learn and accomplish more.

To Me Boxing is Like Ballet

“To me boxing is like a ballet, except there is no music, no choreography and the dancers hit each other.” Jack Handy, Deep Thoughts from SNL

Like the eloquent Jack Handy, I have learned to appreciate brutal spectacles like our current economy. It is like a good economy, except many are losing their jobs, people are hoarding their money and no one is happy.

At the same time, we need to be grateful for the actions it forces upon us. Americans are saving their money like we have not seen in years and years as the personal savings rate climbed to 3.2% in Q4 of ‘08, up from 1.3% in Q3 of ‘o8.

Home prices are dropping and making homes more affordable. As a real estate investor, even 12 months ago, it was impossible to buy a rental property and get it to cash flow with 20% down. There is a very generic rule of thumb for investing in real estate called the “1% Rule”.

In simple terms the gross monthly rent of a property should be at least 1% of the purchase price. A friend of mine is buying a duplex at around $300,000 and so the rents should be around $3000 a month, which they now are and wouldn’t have been without this market correction.

I love boxing, more than ballet if you can imagine a guy saying that…and I am learning to love corrections too!

Everything's Amazing, Nobody's Happy

A good friend of mine sent me one of the funniest videos I have seen in quite some time. What a difference a slight paradigm shift makes. 

"What we see depends mainly on what we look for." - John Lubbock

Share this with others you know that could use a different perspective.

Thank Your Lucky Stars It Ain't 1950

I ran across a great post by Todd Ballenger of Borrow Smart Retire Rich. His post on Lifestyle Inflation today is very insightful. It breaks down how much we have to work at the average wage to buy typical household goods and compared today’s hours versus 1950’s. Pretty fascinating, check out the chart on the blog. Here is a little of what he said:

“Isn't it amazing, that we feel like we are working so hard for less.  Yet, we've said before that the richest man in the world couldn't afford air conditioning.  Who was that?  It was Getty, and air conditioning wasn't invented in his life time.  We take it for granted now don't we?  It would take us almost 8 months of work to afford the same material goods in 1950, versus less than 2 months today.  You would think we would be awash in 'free time', but our lifestyle inflates to absorb the new efficiencies.”

When things are not going the way we like, it is easy to get caught up in the trap of focusing on what isn’t going well instead of looking for what is going well. We really live at an amazing time in the world’s history and have so much to be grateful for.

“Happiness cannot be traveled to, owned, earned, worn or consumed. Happiness is the spiritual experience of living every minute with love, grace and gratitude.” – Dennis Waitley

“The hardest arithmetic to master is that which enables us to count our blessings.” – Eric Hoffer

Reflecting on many of my failures, often times at the root has been a lack of persistence.

Calvin Coolidge declared, “Nothing in this world can take the place of persistence. Talent will not; nothing is more common than unsuccessful people with talent. Genius will not; unrewarded genius is almost a proverb. Education will not; the world is full of educated derelicts. Persistence and determination alone are omnipotent. The slogan “press on” has solved and always will solve the problems of the human race.”

By understanding this, I still have not acknowledged the elephant in the living room…how do you increase persistence if you are not adequately satisfied with your current “persistence muscle”?

In one of the best all time books on accumulating wealth, Think and Grow Rich, Napoleon Hill states this formula for developing persistence.

How to develop persistence:

1. A definite purpose backed by a burning desire for its fulfillment
2. A definite plan, expressed in continuous action
3. A mind closed tightly against all negative and discouraging influences, including negative suggestions of relatives, friends and acquaintances.
4. A friendly alliance with one or more persons who will encourage one to follow through with both plan and purpose.

How clear is your purpose? Can you visualize it to the point that it appears real? Do you have a plan to achieve it? Is it written down? Is it reviewed daily? What are you watching and listening to? Who are you hanging out with? What are you reading? Who is holding you accountable? Do they believe in you? Will they let you off the hook?

A Japanese proverb states, “Money grows on the tree of persistence.”

Just Give Me the Friggin' Magic Bullet

Over the last few weeks I have been listening to the 4-Hour Workweek by Tim Ferris during my workouts. (In a business course I am in they call that a full move, workout and learn, instead of compartmentalizing the two). I have really enjoyed his perspective on work, not as a “consume your life” activity, but as a “fuel for your life” activity.

While reading the book he pitches a product that he sells called Brain Quicken. It is a speed reading course that he raves about. Disregarding the conflict of interest, it is something I have been intrigued by for some time.

I have a stack of books on my nightstand that I cannot get through quick enough. Feels like too much to learn and too little time…so that led me to the investigation of speed reading. I researched some books and sites, one of the better appears to be mother of speed reading, Evelyn Wood. Lastly, I fortunatlely consulted with a friend who is an avid reader and relentless learner. He is the CEO of DotNetNuke and possibly the best thinker I have ever associated with.

He also was intrigued by the concept, did some research of his own, sent me the link to StraightDope that explains " you get the text's general drift while remaining largely innocent of the details, sometimes embarrassingly so." 

More importantly, he made an observation that I should have made myself, “We need good research and a very respectable reference before we expend time (forget money) on this.” 

We both realized that we have never met someone who is a great thinker and wildly successful in business, let alone life, that is a speed reader.

Mike Ditka, the head coach of the Super Bowl champion Bears said it best, “If things came easy, then everybody would be great at what they did, let's face it.”

Being a life long learner is not easy and it is that very fact that separates those who are willing to pay the price from the rest of the field. Knowledge wins in this new economy and to gain it takes time, energy, sacrifice and persistence.

The Assault of Sustained Thinking

“No problem can withstand the assault of sustained thinking.” – Voltaire

I have found that critical, deliberate thinking takes great emotional strength and discipline. We have a society that leaves no room for thinking.

With the I-Pod going every spare moment, DVR’d TV programs at your disposal in excess, the internet and radio you could go a whole week without a minute of quiet time to direct your own thoughts.

Creating the space to think and then having the fortitude to intentionally direct your thoughts as opposed to letting them wander is a much more difficult practice than it appears.

I went through a phase, in an attempt to strengthen the power of my mind, where I would pick a topic and try to focus on it for the entire shower each morning. It is amazing the tangents you can get off on. If you don’t believe me, try it tomorrow morning. I would start out with a topic like golf. Next thing I knew my mind had meandered to beautiful scenery to Hawaii to beaches to surfing to sharks and my fear of them. I couldn’t believe that I was able to make that journey in 45 seconds, while consciously trying to focus just on golf.

Voltaire has spoken a profound truth, if we can learn to create some time each day to think and if we can learn to channel our thoughts in a focused direction, there is not a problem in our lives that can withstand the assault of sustained thinking.

Instead we have become lazy in hoping that our problems will resolve themselves without any real thought on our behalf. Critical thinking is key to effective action and satisfying results.

Should I Follow Charlie Brown?

Charlie Brown once declared, “No problem is too big or complicated that it can’t be run away from.”

That certainly seems like the most sensible thing to do right now as the bad news appears to be stalking us in a majority of conversations, radio shows, newspapers, and news programs.

I am afraid we are not fast enough to run, so we might as well stand up and fight. We must look for the silver lining. There is great change in our world today and it is through this change that doors are opened.

It is change that creates the opportunity for new offers of help, new businesses and services.

My brother is in the high-end construction business and you can imagine how lucrative that is right now. Instead of spending all day lamenting over the old business model he had that has so cruelly been jerked out from under him, he started meeting with the influential people he knew to get their interpretation of what is to come. In one of these conversations, he was tipped off to an opportunity coming in the commercial real estate markets. Due to a mass exodus of businesses, shopping malls and office complexes are going to have vacancies like never before. In order to lease the space out again, the landlords gut them out, taking them back down to the shell to make them a blank canvas for the prospective tenants. 

Without the change we are experiencing, that opportunity would not be there. What opportunities are around you that you may not have previously seen?

Trade My Rolls for Your Station Wagon?

Don’t things change quickly? For the last 8-10 years it was the Donald all over TV with the hit Apprentice. The primetime show was laced with images of black jets with TRUMP painted in Gold, sleek helicopters, and fancy cars.

The Donald’s home town now has an emerging trend quite different than what you would expect… frugality. The NY Times reported that a real estate broker, Sharon Baum, is feeling like it is not in her best interest to be sporting a green Rolls Royce around town. She was quoted as saying “But now, with the recession, it’s not an appropriate time — nor do I want to be riding around in a Rolls-Royce.” The car was her trademark since 1996 and now she is concerned about the image she is portraying. Her plan is to garage the car and drive her station wagon around.

Saving is "En Vogue" now, which, based on statistics is a long time coming. In the third quarter of 2008, the personal savings rate was 1.2%. When the government started tracking the savings rate in the first quarter of 1952 it was 8.6% and it was 7.9% just 20 years ago in the third quarter of 1989.

Although, we have quite a hole to dig out of, it is nice to see frugality coming back in style. MSN Money reports a growing trend of second hand shoppers, some 60 million Americans! There was a day a couple of weeks ago where I would have lied to my mother about the fact that I was buying something from a second hand store. The smell alone makes me want to run the other direction. Now it is the cool thing to do.

Both of these examples are extreme and I am sure there is a more palatable middle ground...I will be looking for it. In the meantime, station wagons and second-hand clothes, here we come. I wonder if couches on porches are coming back soon too? 

Infinite Self-Discipline?

Ever feel like you got the short end of the stick when it comes to self-discipline or will power?

I ran across a series of experiments that indicate we have a finite self-discipline reservoir, not an infinite amount of self-discipline as we would like to think.

In one experiment, two groups were asked to come in to solve a puzzle. What they did not know was that the puzzle was insoluble. While in separate waiting rooms, a plate of fresh, warm cookies directly out of the oven was brought in and placed on the table in front of the group. They were informed that the cookies were not for them but for the next group, and to please refrain from eating them. A similar thing happened to the second group, except they were brought a tray of sliced cucumbers. After a number of minutes, the groups were ushered into another room to begin the puzzle. The experiment was designed to determine how long each group would persist on the puzzle before giving up. As you probably suspected, the group that had to withstand the temptation of the cookies lasted far less time on the puzzle than the cucumber temptation group.

In another experiment, one group of subjects was asked to hold their hands under ice water for a specified period of time. They performed significantly worse on a series of subsequent proofreading tasks than a group that had not been subjected to the ice water challenge.

These, as well as other experiments, illustrate convincingly that we all have less self-discipline than we realize and therefore we must call upon it selectively. Even small acts of self-control use up this limited reservoir of energy, leaving us less energy for the next task.

It does not mean that we are doomed to a life of mediocrity, it does mean that we must create habits. Once established, habits no longer require energy or self-discipline to perform. They actually take energy to break. The key is to methodically build a life of productive habits…one at a time. The temptation will be to start a number at once, like New Years resolutions. Use your precious, limited energy to build successful habits, one by one.

What if you established one new habit each quarter this year? Imagine the different results you would see in life.

The gates of history swing on small hinges.

Is It Coincidental

My wife and I just moved out of our condo and as we made one last trip down the hallway I was reminded of an observation I had made many mornings.

Of the 10 or so units on our floor, six or seven received the New York Times, three received the Wall Street Journal, and only one received the local Oregonian newspaper. In the two other buildings we had lived in the only paper I had ever seen was the Oregonian.

The difference became apparent that in our most recent condo we lived on the top floor and the median income was significantly higher than the other two buildings where we did not live on the top floor.

I have since began paying closer attention to what different income classes read and it varies greatly, one class from another. Yet within the income class, birds of a feather flock together.

What are you reading? Does it even matter? 

I am certainly not suggesting that reading the right newspaper is the sure path to riches...

For a great Japanese proverb states, "If you believe everything you read, better not read."

The important questions is, "what else do “they” do differently?"

Do What the Billionaire Does

In December Billionaire Phil Ruffin Sr. bought MGM’s Treasure Island Casino in Las Vegas for $775 million, reported the Wall Street Journal.

“I knew to build a 3,000 room hotel today would cost $3 billion,” Mr. Ruffin told the Wall Street Journal. “I think it is a good value.”

Lesson 1 – Know Your Numbers

Mr. Ruffin, who made his first fortune leasing gas stations and convenience stores, was one of only a handful of potential buyers who had the cash on hand to complete a purchase.

Lesson 2 – Cash is King…”No man's credit is as good as his money.”  ~E.W. Howe

Mr. Ruffin is buying back into Vegas after having sold his previous venture at the height of the city’s real-estate boom.

His Las Vegas record has so far been a lesson in restraint, and impeccable timing. In 1998 he bought his first Las Vegas casino, the New Frontier – a low rent property mired in a six-year union strike – for $165 million. Less than a decade later, he sold it for $1.24 billion at the height of a Las Vegas land-buying frenzy.

Lesson 3 – Buy When No One is Buying and Sell When No One is Selling

Years earlier, while other Las Vegas operators took on billions in easy debt to outdo one another with ever-more extravagant gambling palaces, Mr. Ruffin cancelled his own $2.7 billion plan to tear down the New Frontier and build a new resort in its place. “It wasn’t a difficult decision because the numbers didn’t work,” he said in a phone interview. “I’m pretty good at math.”

Lesson 4 – If the Numbers Don’t Work, Don’t Do It

When asked about the recent email promotion Treasure Island recently sent out for $49-a-night rooms he laughed and said, “We know it is going to be soft for a couple of years. That’s OK. We won’t have any debt, so we’ll be OK. That’s what gets everyone in trouble, they pile on that debt.”

Lesson 5 – Debt Closes the Doors of Opportunity