I did not intend for this to happen, but it did! I’ll give you a little update about what has happened in my life since then, and when I intend to return to my normal posting schedule. I guarantee you that I have been swamped.

Life Events

So, this has been what’s been keeping me away:

1) I was in the process of house hunting and found a house I liked.

I had already got a mortgage pre-approval so I had already shopped rates and fees for the most part. I put an offer in, she countered, I countered, and she accepted. The offer was for about 2% lower than the listing price (which is about where my market is… no real big crash here). It also came with an $8,500 seller’s assist for closing costs based on some work I knew it had to get done. Then, I had to get all of the mortgage stuff finalized. I got a 4.875% interest rate with no points based on a 780 credit score! The fees were low, too, coming in at $750. I sent the good faith estimate to a few lenders and even had one tell me “We can’t do anything to compete. Take it.” That’s one of the perks of having a good credit score! :)

The next step was getting a competent home inspector. When I thought I found one, I told the agent. She referred to him as the “deal killer” because of how often his thoroughness kills deals. I knew I had a winner. His report came back and unearthed a few more issues that I did not know about. We are currently getting estimates for the work needed and the seller is going to cover the major issues (like an old Federal Pacific Stab Lok circuit panel that is known to be a safety issue, so much so that some insurers won’t even insure your house with one! Check yours out, FP installed millions of them in the 70’s before they were caught fudging their numbers. 33% of the breakers are believed to be defective, a major fire hazard). I still have the termite and radon inspections to go through! What a process.

Interestingly enough, Lifehacker linked to my Rent vs Buy article. Obviously, I have come to the point where I decided to buy. Why? As one of the commenters on Lifehacker mentioned, renting out spare bedrooms could make this a more affordable situation for you!

Example: My mortgage payment will be roughly $1,300. I currently pay $515 in rent (my half with my friend). The house is a 4 bedroom. The going rate per bedroom in this area (a heavy renters market) is about $600 per room per month. That means I will be able to rent 2 bedrooms out and pay for the mortgage. Then I will be responsible for homeowners insurance, taxes (about $150 of the mortgage payment figured in), maintenance (estimated at 1% of the value of the house per year), and improvements (estimated at 2% of the value of the house per year). Or, what I will probably do is rent out 3 rooms, which will pay the mortgage and all of the other costs outlined. When you add in what I currently pay for rent, that gives you about $2,900 per month that I could spend on the house with their being no noticeable difference to my budget. The renter’s will literally be paying for not only the house, but the maintenance of it, too. The typical argument for renting goes something like this: “When my hot water heater breaks, I don’t call a plumber, I call my landlord.” The same will be true here, but when they call me, I will take THEIR money and pay for the repairs. Some people can’t deal with roommates, but it would be ideal for me, especially because:

2) I got a new job.

My current job is in the Warehouse/Logistics Management field for a Fortune 100 company. It was fun. Under my management, my location went from the worst rated building on the whole east coast to the #1 location on all of the large KPI’s (key performance indicators). We are now being treated as a pilot site for all of the new initiatives. So, what’s wrong? My company has a terrible HR policy that is geared towards retaining adequate employees and driving away performers. Annual performance raises were all under 2%. There was no distinction between a person who saved $250,000 from their budget in 6 months and someone who overspent their budget by $250,000 in 6 months. Furthermore, the HR powers to be do not realize the importance of process improvement in a manufacturing and warehouse environment. Everything to them is “people management.” That’s great and all, but a huge oversight in my opinion.

So I went interviewing. I found a job that will be much more challenging and give me a breadth of experience. I will now be a Consultant for Strategic Initiatives and Operations Implementation. A Management Consultant, in other words, but a much more specific kind — It will focus on the implementation end a lot more, which is what I am good at. The 1st year I will be making 15% more than I currently make, and if they were honest about the 2nd year trajectories for most people, I will be making 30-40% more than I make now by the 2nd year. Only time will tell. It’s a risk, for sure, but I am young enough to take risks.

This ties into the home buying thing. Why roommates? I will be traveling Sunday Night through Friday Afternoon so it’s not like they will be an annoyance for me. AND the fact that they will be covering my mortgage will put a lot less stress on me in regards to the possibility of not cutting it in a new industry. Without roommates, I would be screwed. With roommates, I would have time to re-align and figure something out if I needed to.

That’s pretty much it.

I’ve been going through both of those things in tandem, so by the time I get home I am exhausted and have something else to do (like creating separate budgets for buying a house with my current job, buying a house with my new job (this was before accepting the offer), buying a house in both of those situations but adding in renters, etc).

I will be back to posting normally hopefully in a week or two.

Thanks for sticking it out!

How times have changed (obviously not referring to the opinions part ;) heh)

I appreciate everyone who has followed my site for the past year. You make it more enjoyable for me to share my opinions and findings a few times per week.

MyLifeROI.com in Numbers

Here are some of the statistics from the past year:

1) Visitors

In total, I have had 120,854 visitors to my blog in the past year. That is an average of about 10,000 per month.

As you see, the last two weeks of February ‘09 only saw 161 visitors to my blog. Those were my first 2 weeks. In the first two weeks of February ‘10, I have seen 9,966 visitors. I experienced a lot of growth in the beginning months (before I got so busy with work!). You can actually see where I got promoted in July/August as traffic drops off.

2) Subscribers

As of writing this, I have 438 RSS and email subscribers.

My growth in this arena has been fairly steady, with a slowing down in the past few months. This is one area I want to try and grow a bit more.

3) Comments

A good measure of activity and community on a blog is comments or comments per post.

1,669 comments on 229 posts = 7.2 comments per post. Not great, but not horrible. I figure that number also includes about 400 pings and 400 of my own comments… thus leaving about 4 comments per post from other people. I should try to improve this!

4) Popular Posts

These posts have been pretty popular either through traffic, inbound links, or comments. Check them out if you haven’t before!

• The Three Most Influential Lessons From My Childhood
• How Much Do The Wealthy Really Pay In Taxes?
• Advice For A Recent Graduate Looking For A Job
• Personal Finance Lessons From Some Board Games
• Top Interview Blunders
• Why Government Regulations Sometimes Work (Actually had a professor email me to use this for his class!)
• Utilizing Technology to Slash Your Cable Bill

All of these posts present a different part of my outlook on life and a different part of personal finance. Feel free to comment on them after reading them!

Thanks For Being a Fan, Suggestions?

I know I need to get better at a lot of things, but I appreciate everyone’s support in the PF community! Other bloggers have been great help as have the readers.

If anyone needs anything, don’t hesitate to let me know! If you’d like to see me write more about one thing in particular or do something different, please let me know.

Thanks again everyone!

Now, I am going to run three different rounds in a vacuum. In other words, pretend each round is given as if you have no previous knowledge of the exercise. In round 1, I will give you $200 if you perform well. In round 2, I will give you $2,000 if you perform well. In round 3, I will give you $20,000 if you perform well.

In which round will you perform the best?

Most people would say round 3. After all, higher rewards usually drive better results, right? That is the typical line of thinking and it makes perfect sense. The financial gurus tell us that we need to offer high bonuses to drive desired results.

This all makes this Wired article so timely. More and more studies are confirming that bonuses promote activity, not quality.

What Does That Mean? Bonuses Increase Activity, Not Quality?

Take your typical 9-5 job as an example. Do you neglect your work outright? My personal observations are that most people will not neglect their work. They may not perform at 100%, but they perform well enough. If I came into their office and said “I will give you $100,000 if you produce better results,” I could guarantee a few things:

1. They will act a lot busier,
2. they will be at Facebook.com and ESPN.com a lot less,
3. and they will work more hours.

But, this is an increase in activity, not quality. As I said earlier, most people already perform at sufficient levels. American productivity has increased year after year for good reason. So all of that “effort” put forth is just an increase in working activities. They may work 20% more and see a 2% gain in results.

This is all very dependent on the type of task, though. If you are given a mechanical task such as clapping your hands as fast as possible, bonuses can increase performance. However, if the task is cognitive in nature, such as doing mathematical problems, a bigger bonus can actually lead to worse results.

So, what kinds of studies have they done to prove this?

Experiments on Bonuses

Below are a few separate experiments that were conducted:

Experiment #1

Same as in the opening paragraph, subjects of the experiment were given tasks that required them to assemble puzzles and play memory games while throwing tennis balls at a target. Results?

We promised about a third of them one day’s pay if they performed well. Another third were promised two weeks’ pay. The last third could earn a full five months’ pay. (Before you ask where you can participate in our experiments, I should tell you that we ran this study in India, where the cost of living is relatively low.)

What happened? The low-and medium-bonus groups performed the same. The big-bonus group performed worst of all.

Experiment #2

We replicated these results at Massachusetts Institute of Technology, where under graduate students were offered the chance to earn either $600 or $60 by performing one four-minute task. Some participants were asked to use cognitive skills (adding numbers); others performed only a mechanical task (tapping a key as fast as possible). On the latter, higher bonuses worked. But when tasks included rudimentary cognitive skills, results mirrored the Indian study. Dangling a very big carrot led to poorer performance.

Just thinking out loud here, but I imagine the bigger carrot leading to poorer performance has a lot to do with stress.

Experiment #3

We later looked at another motivator: public scrutiny. We asked participants in a University of Chicago study to solve anagrams, sometimes privately in a cubicle and sometimes in front of the others. We found that the subjects wanted to perform better when they worked in front of others and performed much worse alone. Like money, social pressure motivates people, especially when the tasks require only effort and not skill or thinking. But at some point, too much of it overwhelms the motivating influence.

This makes sense, too. You’re sitting at the chalkboard and the professor asks you to draw as many X’s as you can on the chalkboard. Then he has you do it again in front of a classroom full of people. You will probably draw more X’s in front of a group of people because it serves as motivation to perform better. However, if it has to do with solving very complex calculus problems, you can only speed up your thinking so much.

Conclusions

So, despite what seems logical, there is a lot of research being done to show that bonuses do not drive results! If you are in finance, block this article from all of your work computers and try to get the story buried – I don’t want to get rid of your bonus!

When you step back and think about it, though, these studies do make sense. Of course money can motivate people to perform better on a mechanical function. But once we get to cognitive abilities, you can only drive yourself so far. You can only be so creative. You can only utilize your brain to a certain extent.

So why are bonuses thrown out there so much as an end all be all to get better results?

What Do You Think?

If you haven’t seen these kinds of studies circulating, what do you think? Do you think the studies may be overlooking an important variable? Or do you think they are stressing the obvious?

If these studies were to gain more popularity, could you foresee a decrease in bonuses?

“Really, we can’t just fix it? It’s only 2 years old!”

Have you ever had that conversation before? It’s pretty common at retail establishments like Best Buy. Sure, they sell services. And services are pretty high margin. But if they can convince you to get a new computer with a monster surge protector, anti-virus installation, customization, and a service plan – that’s a much better sale for them!

How can you avoid that situation altogether? I will go over how to diagnose both software and hardware issues.

Software

I would argue that most issues with peoples computers that I fix are software related. A Geek Squad employee may tell you that your hard drive is shot if you have so many virii (yeah, that’s the plural of virus!) that he doesn’t feel like dealing with it, but that is still a software issue.

Malware

If someone who uses your computer frequently has the urge to click on random links, or if you click on random links, you’ll most likely find your computer inundated with random malware. This leaves you in a not so fun position.

I happen to be the "go to" computer geek in the family, so I have a flash drive with a bunch of utilities that do an excellent job of cleaning up a computer.

• Malwarebytes Anti-Malware – Free. Simplicity. Sometimes the only thing I am missing is that it makes it TOO easy. You won’t get detailed explanations, but it will do a good job at getting rid of adware, spyware, virii, and rogue security programs (ever have what looks like an antivirus program lock down your computer and demand payment?).
• Avast! Antivirus- Free. Effective. When presented with an "in the wild" virus, Avast has proven to be one of the best programs at identifying the unknown threat. This is known as heuristics, the ability to learn and discover based on experience. This offers real time scanning, scheduled scans, and on demand scans. Also, Avast is more effective at root kit removal than MBAM.
• Spybot Search & Destroy – Also free. A great tool to remove spyware. Comes with a tool that runs in the background to alert you when anything tries to change your settings (like add a startup program or your default homepage).
• HijackThis - Scans your computer and gives you a detailed report of all of the programs running, programs set to run on startup, browser helper objects (BHOs) installed, etc. If you have no idea what you are looking at, copy the log file here to get an explanation of what’s good and bad.

All of these programs should be run from safe mode for maximum effectiveness.

How about the smart virus that makes it impossible for you to install one of the aforementioned programs or even run the program if it’s already installed?

I like to go the route of a Live CD. A Live CD is a CD that boots into it’s own operating system (OS) with pre-installed applications to fight malware. It can connect to the Internet in order to update its virus detection abilities. Two that I suggest:

• The Ultimate Boot CD 4 Windows – If you have your original Windows Installation CD’s, UBCD4 will create a bootable version of Windows for you. Your computer will boot to a clean version of Windows running off of the CD with a bunch of utilities to clean up your Windows installation on your hard drive.
• BitDefender Rescue CD – Will automatically update virus definitions if you are connected to the Internet. Comes with BitDefender’s virus scanner and a root kit checker. Bored while waiting? Firefox comes installed so you can browse the web while waiting!

The combination of the options above should be able to solve any software issues you have.

Error Codes

Ever get a BSOD? Or, what is known as a blue screen of death? It’s that frightening screen that alerts you that you just lost everything you are working on and your computer will (hopefully) be restarting.

They typically will display an error code.

Example:

STOP 0×000000ED (0xaaaaaaaa,0xbbbbbbbb,0xcccccccc,0xdddddddd)

UNMOUNTABLE_BOOT_VOLUME

A quick Google brings you to Microsoft’s Knowledge Base giving you information on the symptoms and resolutions. Most people don’t realize how helpful those error codes can be for them!

Just Google any error code you get and you will either get a fix from Microsoft or from a random forum where someone posted the problem and had people help fix it.

System recovery

If this option isn’t turned on, turn it on.

XP: How-to

Vista: How-to

This way if anything goes so wrong that you can’t fix it, you can just restore your computer back to a previous state.

If your last restore point is 1 week ago and you haven’t saved anything important to your computer since then, I would even suggest just doing a restore before going through the hassle of running virus scans to make things easier and quicker.

Hardware

In the chance that it is a hardware issue, here are a few things to think about to figure out which part is causing the problem.

Recent changes?

The first question you should always ask if you start experiencing hardware issues is: Have I changed anything lately?

If the answer is no, then you can skip to the next step.

If the answer is yes, does undoing that change fix the problem? For example, if you just installed a new DVD burner and now your computer is frequently shutting off randomly, does uninstalling the DVD burner fix the issue? If yes, the hardware itself could be faulty or maybe the drivers are causing conflicts with your setup. If no, skip to the next step.

Drivers

In order for your hardware to work on your computer, there is something called a driver. The driver acts as a way for your computer software to understand how to communicate with the hardware.

Sometimes the drivers won’t be tested well enough or won’t be tested in conjunction with other drivers and they will create problems.

If you recently updated a driver, roll back to an older version. If the only thing that has changed is a new piece of hardware, make sure all of your drivers are up to date.

Use Google to see if anyone else has had any issues.

Failure testing

Check out this good article on failure testing using multimeters, cable testers, POST cards, error messages, and the beeping sound the computer makes on startup.

Depending on when the beeps occur and how many there are, you can isolate where the failure is happening.

Good Luck

Hopefully, trying out all of the above steps will ensure you don’t have to make the dreaded trip to a retail computer repair spot (Geek Squad?!).

This could save you anywhere from $100, which seems to be the usual minimum charge for basic repairs, to $1,000+ if they convince you to get another computer.

By taking ownership of your property and knowing what to look for, you can save yourself money for years to come!

Good luck, please don’t hesitate to give comments, suggestions, or questions!

Last week, I went over how to manage your online reputation (including using a service to do it for you). I wanted to go over a few more ways to really tweak your resume. My last post on resume tweaking went over things like putting quantifiable results instead of qualitative results and using more precise language. This post will be a little more general, figuring you are about to apply for a job.

Get Your Resume the Attention It Deserves

I used to review resumes on a daily basis at one of my old jobs. I was directly in charge of hiring candidates for a supervisory role in a sales and operations position.

1) Format is everything.

The first thing a hiring manager sees before they even have a chance to learn about your qualifications is the format of your resume. Is it cramped? Does it utilize white space? Is the font incredibly tiny?

If I can’t read through your resume easily and quickly, I’m not wasting my time. It needs to be reader-friendly and attention grabbing.

2) Utilize keywords.

The number one rule of retail is location. The number one rule of internet search is keyword optimization.

Most resumes are added to a candidate database once they are submitted that allow a hiring manager to run searches and queries. If you submit your resume to a popular job board like Monster or LinkedIn, the same holds true.

Make sure to utilize keywords that are relevant to your work experience, accomplishments, and goals. So, Self-motivator would not be a powerful keyword to use, but Union Contract Negotiation would be very strong.

3) Tell me your core knowledge.

This is the perfect way to maximize what I said above in regards to keywords.

Have a small section dedicated to your core knowledge and key skills. This is the perfect way to drop a lot of industry keywords. Then, when you disperse the same keywords randomly throughout the resume, your keyword density increases and heightens your chances of being displayed in a search.

4) Introduce Yourself With Pizzazz!

Whether you have an introductory statement/objective, a cover letter, or an email with a resume attached, you need to create a lasting impact from the first second.

Your statement needs to be tailored to the job you are applying for, it needs to sell your best attributes, and needs to create an OOMPH!

If all of that is done well, I will read your resume. ;)

5) Tailor Your Resume

If you submit the same resume to every position you apply to, the hiring manager can tell. The resume should be a perfect fit for the job you are applying to.

List your duties at your previous job that are MOST applicable to the job you are applying for. Choose the accomplishments that are most suited for the job. Ignore the white noise.

6) Accomplishments and Contributions

When I said list the duties that are most applicable above, that should be if you have nothing else to say.

Ideally, you should list accomplishments and contributions. Business is about what you can do for me. What value would you add to my organization?

Pretend you are applying to my company to be a salesman. Knowing that you made sales calls is meh. But knowing that you made cold calls with a 25% close rate for an average sale of $3,400 is a whole other picture. The latter can be easily translatable to what you could do for me.

Which person sounds more hirable? The person who made sales calls or the person who closed on 25% of their customers for an average of $3,400 each? I think the choice is obvious!

7) Market Impactful Items Towards the Top

I read from top to bottom. Most people do. If you put the most powerful parts of your resume towards the bottom, you are lessening the chance of the hiring manager getting to that point.

You want to put your knowledge, skills, and abilities as close to the top as possible. Creating a powerful career summary and/or a core strengths section is a great way to grab someone’s attention using as little space as possible.

Marketing is Everything

If it isn’t obvious, a lot of this has to do with marketing. A person can submit two resumes with the same exact experience and one of them can go right to the garbage while the other goes to the top of the pile.

Using a format that is high impact, utilizing keywords and content positioning, and tailoring your resume can make all the difference.

If you have any suggestions or questions, please feel free to post a comment!

When you combine this fact with the state of the economy, it should be no surprise that scam artists are alive and well. Whether they are advertising to you on the Internet to buy a Google advertising cash kit or conning your grandparents into paying $2500 to get rid of their mortgage debt, a bad economy means good business.

Sniff This Out

Here are some of the most common promises a money scam will use to try and bait you.

Work From Home

I will hire my first reader that contacts me to answer my e-mails and respond to comments on my blog.

Before I get inundated with e-mail requests from people looking for a quick buck, this is not a real offer. However, I’m going to walk you through this article using this as an example.

When you read about an opportunity to work at home, you need to be cautious. REAL opportunities to work at home are few and far between. And in the few instances where you can work at home, you will usually be receiving a salary from the company you work for. This is referred to as telecommuting.

The phrase work from home is usually used as a hook to capture people’s attention. Do not fall for the bait. But looking back at my first sentence it’s pretty easy to see how people get caught up in the hype.

Make Substantially More Than The Job is Worth

To sweeten the original offer, I will pay my first reader that contacts me $3000 per week to answer my e-mails and respond to comments on my blog.

Oftentimes, a money scam will not only promise you the ability to work from home, but it will promise you a much more substantial income than what seems reasonable.

Before you get excited, you must ask yourself how they would be able to afford to pay you so much when much larger and more legitimate companies only pay a fraction of the amount.

Quick & Easy / No Work

To clarify your job responsibilities, you will be solely responsible for answering all of my e-mails and responding to all of my blog comments. I get about six comments per day and about 25 e-mails per day on average.

Whoa whoa whoa!! This job just keeps getting sweeter and sweeter. At this point you can see how this scam develops to carefully hook you line by line. The job goes from feasible to unfeasible pretty quickly.

The promise of a quick and easy job where you make a substantial amount of money working from home is all too common. This should be a big red flag.

Operates on a Tier System

The best part about the job is that you get to try your hand in the sales aspect of my company. My company is one of the strongest brands in selling virtual assistants. You will have the opportunity to earn a large amount of money selling the services. I will train and mentor you all along the way.

Ah-ha, so now you see that a large part of your pay, if not all of it, will be based on a tiered sales pyramid. I’m not really hiring you to be my virtual assistant, I am just trying to get you to buy into the program so that I can get a commission. By doing so, I will increase my earnings and thus will increase the person above me’s earnings.

By definition, a tiered system operates on the premise that the base feeds the top. The later you get in, the higher probability you will lose.

Have to Pay to Get Hired

Oh, by the way… In order to be considered for this job you must send me $29.95 to cover the application and processing fees. If chosen, you need to Western Union me $99.95 for a secretarial package to get you started.

Usually this part is saved for last. In all of your excitement that you are about to get a job that pays thousands per week, you don’t think twice about paying a measly hundred bucks here and there. However, when is the last time you applied for a job with a Fortune 500 company and had to bring them a check to cover their expenses of the job hiring process. Never.

Unless you are 100% certain, a job that asks you pay to get the job should be a signal to run the opposite direction.

Stay On Guard

Part of smelling a money scam is remaining rational in the midst of what seems to be a great deal. Your greatest advocate is yourself and thus you must remain vigilant at all times.

Just take a step back and think rationally: Can MLR really afford to pay me $3,000 per week to be his assistant? And are virtual assistants really that profitable? Can I find any information on his company? Maybe even through the BBB?

People in the know call this “Brand Management.” With the proliferation of technology, the brand being sold is YOU. Your online reputation needs to be modeled and crafted exactly as you would like others to see you.

That’s right, you can’t expect to just perfect your resume in order to get hired quickly, you need to take it a step further and be more proactive.

Creating the Right Image

You are the keeper of your online reputation. As a job seeker, you must maintain a certain level of decency and a certain image throughout the whole process.

Utilize Professional Networks

I’ve previously written about different networking methods, and I mentioned both Facebook and Linkedin.

I would argue that Facebook is used more for “due diligence” to see what kind of antics people are up to. Make sure to turn on your privacy settings for anything you don’t want seen by a potential employer.

Linkedin is a more traditional professional network. The sole purpose of the site is to create a network of trusted contacts who you can interact with professionally. Your profile is essentially an online resume, allowing other site members find you to network, offer a job, offer a testimonial, etc, all which can lead to a potential job. You should definitely create a profile and connect with people. Having a LinkedIn profile as the first result when your name is Google’d lets you control the exact image you are portraying.

Maximize Your Online Exposure

I can’t just write posts and hope to be found. I need to utilize something called search engine optimization.

The same goes for your social networking profiles. They aren’t guaranteed to be found just because you created them. You need to practice keyword placement and links to get a high search engine ranking. This makes more sense for a personal website or smaller social networking site… sites like Facebook and LinkedIn will automatically rank high in most instances.

Create an Online Resume

In some fields, you would call this a portfolio. The point is to showcase your resume and other career-related information like projects you have been successful on.

The goal is that if an employer is at the stage where they are looking into you, you want to manage and control every piece of information they find on you. This is a perfect opportunity to expand upon some of your achievements and showcase your hard work. If you can just shove a project that you were successful on in their face, that is a win in my book!

Be Professional

As I mentioned in my networking methods post, you need to avoid unprofessional content and pictures. Do not treat networks like LinkedIn as you would treat Myspace. A picture of you beer bonging should not find its place here :).

This means you also need to pay attention to tagged photos and content that you didn’t necessarily post, but your friends did.

Being conservative is not a bad idea.

Your Job, and Your Job Alone

Managing your online reputation is your responsibility. No one else can be blamed for how you are perceived when your future employer Google’s you.

I didn’t realize this until a friend alerted me to this… but there are actually services that will help you monitor your online reputation. For example, there is a service called My Reputation from Reputation Defender (the link I used has a 15% coupon code attached for annual plans!). How do they sell their service?

53% of American adults use search engines to find information about each other. 77% of executive recruiters use search engines to research applicants. 26% of college admissions officers use search engines to research candidates

That’s how.

Even if you don’t pay for a service to monitor your online reputation… you should monitor it on your own as best as you can. That’s what I do. It all depends on how much time you want to put into it!

If you take one thing away from this post, take this: Hiring decisions are made on a lot more than interviews alone.

Good luck!

However, it’s easy to say these sorts of things AFTER the fact. As obvious as it may seem, it isn’t. As they say, history repeats itself… and for good reason!

Bubbles are Bound to Burst

Time and time again throughout history, bubbles form and bubbles burst. What have some of the big investment/speculation mistakes been?

Dutch Tulips, 1634-1638

Tulips were a hot commodity in the Netherlands when they were first introduced during the Dutch Golden Age. So much so that families would invest their life savings into tulips. At the peak, tulip contracts were   actually selling for 10x the annual income of a skilled craftsman.

People were paying as much for flowers as they would for a home!

Key takeaway: Intrinsic values. A bubble only exists if the selling price drastically fluctuates from the intrinsic value.

South Sea Co, 1720

Has an investor (or speculator, if you will) ever told you that they need some money from you for a “sure thing” that is about to happen?

You’re not alone. In the 18th century, British bankers and government officials pushed shares of South Seas as a sure thing in order to wipe out past debts. Profits never came. Investors scrambled. South Seas’ officials went to jail.

Key takeaway: Do your research, there is no such thing as a sure thing.

California Gold Rush, 1848-1855

As soon as Gold was discovered, California’s population quickly blew up, going from 15,000 to 300,000 in a matter of years. 150,000 came over land and the other 150,000 came via ship through San Francisco and other port cities.

Something about this shiny object makes people do the craziest things, eh?

Key takeaway: If something looks like a great deal, there are plenty of other people thinking the same thing.

Railroads, 1860-1873

After the Civil War, government land grants and railroad subsidies were a dime a dozen.

When something becomes the “new” thing, hype drives investment. This did not change for railroads. Railroad stocks made up 40% of the NYSE capitalization at one point.

In 1873, this ceased to be when a financial panic called the Long Depression led to 89 of the 364 railroad lines went bankrupt.

Key takeaway: Combining the proliferation of a new technology with other factors probably isn’t sustainable in the long run.

Bicycles, 1890-1905

In the 1890’s, there was a rush to corner the bicycle market. Over 300 manufacturers were in the race. This was considered the Golden Age of Bicycles and was aided by the invention of the pneumatic tire, the rear freewheel (allowing riders to coast!), coaster brakes, and cable-pull brakes.

Then a new technology was born: the car. By 1905, 12 manufacturers were left dueling for the bicycle market.

Key takeaway: Technology is fluid. Any given product is one generation from obsolescence.

Radios, 1920’s

Radio technology, and hence Radio Corporation of America (RCA), was a huge boon to the economy. Looking at the history of RCA’s stock is reminiscent of the dot com bubble.

RCA’s stock went from $1 in 1921, which was just a few years after the company formed, to $573 in 1929. With the stock market crash came a 95% decrease in RCA’s value. And now? RCA no longer exists as a company.

Key takeaway: Wartime can create opportunity in the private market, but that isn’t necessary sustainable.

Another Gold Rush, 1974-1980

This marked an inflationary period for America. Following the Nixon Shock in 1971, U.S. citizens were also allowed to directly invest in gold for the first time since The Great Depression.

Prices were $100 per ounce in 1974 and skyrocketed to $850 per ounce by 1980. And now that the prices are even higher, then that means the prices just increased since then, right? No, gold prices dropped for the next quarter-century.

Key takeaway: Just like with the tulips, gold lost its intrinsic value once the gold standard was gotten rid of.

Japanese Assets, 1985-1990

Japan suffered what is called “Twin Bubbles.” There was a drastic increase in both their real estate and their equity prices. Japanese stocks actually quadrupled in value in that short time-frame.

In 1990, the prices dropped drastically and continued to do so until 2003. They have reached a new low with the recent downturn. When people talk about “The Lost Decade,” this is the bubble they are referring to.

And Here We Are…

And after tracing these large-scale bubbles from the past few centuries, we are brought back to the bubbles that are still fresh in our memory: The dot-com bubble and the real estate bubble. What do you think the key takeaways are?

Dot-Com Bubble, 1997-2000

Tech stocks that had never seen a profit, and some that were still pretty much in the concept stage, were seeing huge valuations. Price to earnings multiples were much higher than people were used to seeing. But the company was a .com, so it was new-age and the “rules were changing!”

Once the market collapsed, tech stocks lost 80% of their value, bringing them in line with more realistic prices.

Real Estate, 2003-2007

Our homes, which are typically conservative investments, were also wildly speculated during the past decade. With the recent collapse of these inflated home values we have seen finance firms both large and small get impacted.

Three years after the collapse and some markets are still seeing market corrections of around 10%.

More Bubbles to Come…

More bubbles are inevitable. Obviously, we do not learn from our past. In some cases, it is difficult. Quite frankly, the game sometimes changes and is hard to compare to the past.

Take right now, for example. We are potentially experiencing quite another Gold Rush! At more than $1,100 an ounce – and the obvious affirmation that the world is not ending – the question is simple: When was the right exit point for gold? Are people still buying with a potential upside? Or did the smart people already dump the investment?

Just take a look to the right. The second gold rush I mentioned in the late 70s is obvious based on the peak and bust. Are we watching a new bubble form to the right of the graph?

I also like to compare those graphs that expose an obvious awkward pricing dynamic to that of what is considered a more safe investment like Fortune 500 stocks (Example: Pepsi for the same time period).

Whatever the case may be, we are bound to see more bubbles. Hopefully, taking a look at the frequency of bubbles on a variety of different items will help you look at the market more critically.

After ignoring the real estate market for a few months, I  want to take a look at it and see how the market is doing. Are things getting better? Worse?

Volume, Contracts Signed Decreases

So, in November (data released in December), people signed 16% fewer contracts than in October. This was the first decrease after 9 months of constant gains. This was unexpected – a decrease of 2% was forecasted.

Why do people think there was a decrease?

"People took a breather," said David Crowe, chief economist for the National Association of Home Builders.

NAR chief economist Lawrence Yun blamed the fall on the scheduled end of the first-time homebuyers tax credit, which refunded up to $8,000 in income taxes for qualified homebuyers. The credit initially was to lapse on Dec. 1, but Congress extended it through the end of June.

This makes perfect sense. People scrambled to sign their contracts as quick as possible towards the end of summer. Thinking that the credit ended on December 1st, most people who were in the market to buy a house had already closed on their home mortgage before November.

During November, there were still house sales, of course, but not as many as before. Not many people were trying to procrastinate with $8,000 on the line.

Compared with a year ago, sales are still up about 15%, though.

Home Prices Heading South

Interestingly enough, as demand for housing falls, so do the prices. (Typically a supply-demand graph would show the demand increasing as prices fall, unless we are still watching a market correction, at which point demand won’t pick up until the prices fall enough)

Since May, prices have increased 3%. But most forecasts have prices falling in 2010.

Fiserv Lending Solutions, a financial analytics firm, forecasts that prices will fall in all but 39 of the 381 markets it covers, with an average drop of 11.3%.

Why do the forecasts predict this?

Foreclosures On the Way

Moody’s thinks a lot more foreclosures are in the pipeline due to the shortcomings of the mortgage modification programs. Trial modifications aren’t being made permanent and a lot of the completed modifications are re-defaulting at high rates.

The price drop due to foreclosures should be no more than 8% according to Moody’s and of that decline, most will be in states with high foreclosure rates like California, Arizona, Nevada, and Florida.

Aside from the people already facing issues, a lot of the people who purchased with an ARM (adjustable rate mortgage) are going to see their payments increasing in the near future. They may be fine now, but once the payment increases, we may see more people in trouble.

Then there are the people who deliberately walk away. They are the people who look at their house as an investment, see that they are $100,000 under water, and decide they would be better off filing for bankruptcy.

Interest Rate Increases

Currently, interest rates are incredibly low. However, some analysts such as Pat Newport of IHS Global Research think that rates for a 30 year mortgage will pass 6% as the government pulls back support for the housing market.

If you want to keep up to date with current mortgage rates, Quicken Loans has an easy to use layout. I like it because I can search by state and it will give me more local results with tax and insurance estimates factored in.

March will mark the end of the Federal Reserve purchasing government-backed securities, which will add to the upward pressure on rates.

End of the Tax Credit

Just as the tax credit affected the volume of sales, it also has an affect on the pricing.

Because of the fact that the credit acts as a dollar for dollar credit, there is a huge incentive to buy a house if it’s on your to-do list. If the credit has the (predictable) affect of pushing sales up by a few months, then demand will decrease substantially once the credit ends.

This decrease in demand will then lead to decreased pricing.

Tough Times Ahead, Or a Rising Market?

Is the market recovering? Is it going further down into the rough?

Only time can tell. I think the biggest mistake you can make, though, is treating your HOME like an investment. You wouldn’t gamble with your kid’s college education, don’t risk the house you live in.

If you’re in the market, now may be the best time to buy. Or your house could possibly go down in value further. But at least you’d be in a better situation than if you had purchased a year or two ago!

With a lot of recent buzz about executive compensation because of the bailouts, the fact that this issue came to the forefront is not surprising. What does surprise me, though, is the fact that the major shareholders of said companies didn’t (and probably still don’t) understand the risk they forced on these executives. Trying to curtail these “incentives” does nothing to stop them from forcing future executives from taking equally ridiculous risks. The devil is in the details, right?

Middle-Class Over-Compensated?

The above mentions how the uber-rich were chastised for accepting bonuses. But as I mentioned, the risks they took were a function of the rewards their shareholders demanded.

What happens when we take a look at the average worker in the United States. Surely, once you take out the million dollar bonuses, the average employee is rightly compensated…… right?

The Average US Worker – Overpaid

When you take a step down the hierarchy and instead look at the average worker, the picture doesn’t improve. American workers are vastly overcompensated compared to their global counterparts. If America wants to (and I think this is pretty logical) regain its competitive edge, there will have to be some sort of downward valuation on compensation and benefits packages.

One chilling snippit from the article:

Global wage convergence is great for the poor (MLR edit: China, Moldova, etc) but tough on the overpaid rich (MLR edit: USA, UK, etc). It’s possible to run the numbers to show that U.S. manufacturing workers should take average real wage cuts of as much as 20% to get into global balance.

The required cut may be smaller. But if U.S. wages get stuck above global market-clearing levels, as in the 1930s, the result could well be something approaching 1930s levels of unemployment.

“But MLR, wages (when adjusted for inflation) haven’t budged in nearly the past decade for middle-class workers, anyways!” This is true, and the focus of the disparity seems to be amongst the top-income earners. However, in a global context, no one cares about whether or not we are making more money than last year except for us.

Illusions of Grandeur

And discussing this topic without also mentioning the fact that the situation was exasperated by the illusion of a rising standard of living would be missing an opportunity to have a wholesome conversation. Why do I say illusion of an increasing standard of living? To some, they may look around their house and exclaim “How can you tell me that what I see and experience is fake, MLR? How is my house and car an illusion?” I say this because the standard of living increases depended on debt creation and sequential asset bubbles (stocks, real estate).

To put this more bluntly, and some would say cynically, there hasn’t been economic progress for some segments of the US population for literally decades.

How did we let this happen?

The US has made, and continues to make, massive investments of both manpower and capital into things that haven’t produced any real return. This could be compared to selling our economic soul to the devil in exchange for cheap trinkets.

And how did that happen?

This seems like a pretty big systemic problem at this point, right? The mechanics behind this prolonged misallocation of resources was fueled by the government overspending, government spending on useless projects, and consumer/business spending fueled by debt rather than real value creation.

What does this mean?

In the long-run? People need to move out of bubble professions (looking at all of the newly licensed real estate agents, here) and into real value and foreign exchange producing roles.

Preparing for Pay Cuts

In our lifetimes, it is increasingly likely that our nominal incomes could actually decrease.

The LA Times wrote a pretty good article, which states in closing:

A slow way to achieve that reduction would be to allow the dollar’s value to continue to slide against other currencies, a trend that has been underway since 2001.

The fast way — sudden and steep pay cuts across much of the economy — is a chilling concept. It would risk a deflationary spiral of falling incomes leading to falling prices for goods and services as workers have less to spend — exactly the spiral that the Federal Reserve is so intent on stopping before it can get any momentum.

If the pay cuts occur because of currency devaluation, you may not notice the differences as much – it’ll be more subtle if handled correctly. If some businesses decide to go the second route, we may have a dark road in front of us as we see salaries getting slashed.

With a high domestic unemployment rate and a high global unemployment rate willing to work for less, this isn’t out of the realm of possibility.

To prepare, focus on making yourself more competitive by making your resume more competitive, getting an in demand college degree, learning from other people who got hired quickly, honing your interview skills, and focusing on networking.