AskDong

I’m closing my condo purchase today. I settled on a 15 year 5.375% loan. My total closing costs not including prepaid interest and taxes is about $3,000. I opted against title insurance. I’m not expecting any hidden surprises, and expect the closing to be short and sweet this afternoon.

In the meantime since I locked in my rate about a month ago, mortgage rates have swung to recent lows. Mortgage rates are low enough that I have to seriously consider refinancing. I should be able to easily get a 15 year under 4.875%, and a 30 year at the rate I have my 15 year at. The question of course is when do I refinance? That I don’t know. Rates may head even lower or possibly we saw the bottom yesterday. My crystal ball is broken, but over the next few months I will certainly have to ponder that decision.

I was forwarded this . Rich Dad, Robert Kyosaski, is coming to Boston. He know is if you’ve been naughty or nice. Robert himself has been mostly naughty. He’s not really coming to Boston. Instead one of his flunkies will be coming to Boston to peddle his wares. Robert and his wife, Kim, have gotten rich off the lecture circuit and preying are the get rich quick desires of many Americans. While this particular lecture, “Learn to Be Rich” is billed as free, I’m sure there is angle in it for him to make money.

I’ve registered for a session against my better interest, but if I’m going to criticize I should at least attend a session and give it a chance to convince me otherwise. I’m curious also to see what the mindset of most of participants will be. Are people actually interested in learning real lessons about being financially secure? Or are people more interested in getting rich quick? I fear the latter even as I hope for the former.

I write this on Martin Luther King Jr. day. Before I get into the body of my post, I want to take a moment to reflect on and appreciate the civil rights that leaders such as Martin Luther King Jr. fought for all Americans. We are lucky to be in such a nation, and we should not forget not only the sacrifices made by others but principles that have allowed this country to always strive forward.

I can say with near certainty that U.S. Stock market will not be striving forward today - I’m posting this on the day after MLK day when the markets open once again.  While Wall Street rested, the stock markets of the rest of the world gasped in collective worry.  The world is worried about the U.S. It seems international stock traders haven’t gotten the memo that global economy is much less tied directly to the habits of the U.S. Consumer than in the past. Around the world markets fell anywhere between 3.9 (Japan) to 7.4 percent (India). The U.S. market escaped the carnage by not being open, however S&P futures fell 55 points or around 4 percent.  If the futures are to be believed, it’s going to be ugly.

I agree with the usual advice, “Don’t panic. Don’t do anything rash.” However, not panicking does not mean doing nothing. For those who haven’t been more diligent about rebalancing in the recent past, it’s still not too late to do so. The market is down nearly 10% this year, and is off from it’s highs nearly 17%. Once the market reaches a decline of 20% as it’s likely to do today, we’ll be officially (at least according to some) be in a bear market.  Take the time to evaluate if your portfolio lines up with your goals.  Are you overweighted in some sectors because they’ve been winners, and not because that’s what you want?

I don’t know where the market is going, but declines like we’ve seen in the last month is a gut check. With any gut check, it’s best to check in with the head as well.  This too will pass, but who knows when.

In Late:  The Fed Cuts rate by .75, and the global market fall even further on Tueday 1/22/08 trading

Last week I was looking back at what’s been my career and thinking about where I was. I’m probably mid way through my career. It’s been a good career so far, I like to think. I think I’ve only begun to fathom how different a place I’m at now, nearly 10 years after my first real job. I’m not only older. I also have very different expectations on pay and responsbilities than I did ten years ago. I think in most careers there are basically three stages:

• What You Can Do
• What You Know
• Who You Know

There’s usually a progression from the first stage, “What You Can Do” to “What You know” and finally for some to “Who You know.” Depending on the career these transitions don’t have to take place, but these stages are found in many career trajectories.

What You Can Do
This stage is probably the most obvious. We all have to pass through this stage. When I was hired for my first job, it wasn’t because of industry knowledge. I didn’t know a thing. I had good non specific skills and willingness to work hard. The success of any company and especially consulting companies is built on the foundation of relatively “cheap” labor. When you’re young and just out school, it’s about doing the tasks assigned. Do those tasks well and then some and you will be noticed.

What You Know
Eventually after a couple years, most people transition to a point in their career where they are still “doing,” but their real asset is their experience and knowledge. I’m at this stage in my career. While I still “do” alot, I know in the end the company could easily hire someone younger, cheaper, and with sharper technical skills. Someone with the right educational background could easily handle many aspects of my job, and even do it better. However, the distinction between that young turk and myself is experience. (I really sound like an old fogey these days) Someone out of school who doesn’t have the experience doesn’t know where to begin. My prospective employers don’t look to what skills I have. They may care that I’m good with a spreadsheet, but I’m not hired based on speed with Excel shortcuts at this stage in my career. It’s what I know rather than what I can do that make me attractive to potential employers.

Who You Know
I can argue until I’m blue in my face how it’s always important to know people and have a healthy career network. However, my point here is that for many careers, especially careers dependent on signing deals, the whole reason someone has job is often for the contacts he or she has. These are the rainmakers of the industry. Rainmakers are the people who get the contracts, and often the ones who get paid the biggest bucks. They exist in every industry. They are lawyers, and bankers, but they can be anyone in any industry. They bring in the dollars, and get signatures. I like most people will probably never hit this stage of a career, nor do I necessarily want to.

Politics is politics. Economics is Economics. While too often cross paths, nary do they go in the same direction.  Now that people are speaking of recession in less than hushed terms, politicians of all stripes and colors have raised their no so collective voice in a cacophony of proposals.  I’m personally less than impressed.

We’ll start from the top with Bush proposed tax rebate. While personally I’d welcome a tax rebate, I also question a) how much good it will do the economy and b) how are we paying for it? There’s no question the economy is sputtering. While there’s still debate amongst experts if we’ll hit an actual recession, there’s not no debate in mind.  A recession at this point is inevitable.  I hope it to be mild, and more importantly that Americans will learn some valuable lessons on over consumption and bubbles.  A tax rebate will certainly help prop up consumer spending which is the largest part of the U.S. Economy, and potentially help get the economy sped up again. However, I find the tax rebate to be a short term fix, a short term fix that will not address fundamental problems.  The biggest long term problem is that the U.S. Savings Rate is too low.  Americans spend more than they can, saving much less than they should.  The tax rebate exacerbates the problem because the U.S. Government is one of the more profligate borrower and spenders. The money to fund the refund isn’t appearing from thin air.  The Government will have to borrow to fund those checks.

Hilary Clinton also made some headlines for her proposal to deal with the housing meltdown. The thrust of her proposal are:

• 30 Billion Fund to Help with the Foreclosure Fallout
• 90 day moratorium on foreclosures, and 5 Year rate fix
• 25 Billion Emergency Energy Assistance Fund
• 10 Billion in Extended Unemployment benefits

The majority of the press has been pretty merciless on attacking point 2, the 5 year moratorium on interest rates.  This would effectively be government price fixing. While there are merits to some price control like minimum wage, and caps on interest rates, this would be price fixing after the fact.  The fact is that consumers need be reminded that they should not borrow more than can afford, and banks need to recall that good underwriting means not lending to those who can’t afford to pay the loan back.  The current housing crisis has hit banks and consumers alike, but to reward bad behavior sets a bad precedent that will only lead to more pain the future.