Entries Tagged 'Global Economy' ↓

Apparently some of my friends and family were wondering where I was the past couple days. I was not online at all and my phone was out of reach. Well, I was actually at a company sponsored retreat for all of the engineering staff and it was absolutely awesome. We stayed at a camp ground in Pescadero called Costanoa and even though the surroundings were beautiful it was raining the entire time. However, all of our activities were indoors so it didn’t matter. One of my favorite professors from college came to our retreat and gave a week’s worth of lectures from his computer security class and I actually learned a lot. After dinner there were a myriad of fun activities including Scrabble, Belgian beer tasting, a poker tournament, and lots of arm wrestling. (I won the Scrabble and bested a Stanford grad and an MIT grad! Berkeley FTW in Scrabble!) The next day we had a security contest where we were all given an open source project to hack. My team didn’t win but it was still a lot of fun. Amidst all the fun our CTO gave a speech on the economy of all things, and I thought it is interesting enough to share.

Our CTO is a very smart guy that has been around the Valley for many many years (possibly longer than I’ve been alive). He said that he has been through many economic downturns and booms in this crazy place. As he tells it, when he attended college here the semiconductor industry was booming and highway 101 had traffic from 8am to 11pm. Then all those jobs were outsourced and the Valley was quiet once again. Then came the famous dot com bubble and bust. He recounted a conference he attended back in 2002 right after the burst. He and several other people were scheduled to speak to a room full of newly unemployed engineers. The first speaker was a recruiter, and he told the room full of people that there are absolutely no jobs, and advised people not to talk to him to look for positions because there is none. The second speaker was someone who was sort of an expert on real estate and basically told everyone that they will see a housing downturn and lose their homes. The third person was some sort of reporter and also said something depressing. Our CTO was last and he thought to himself, whatever I do I have to say something positive to this crowd of people. So he went up there and asked everyone, “How many of you are unemployed engineers?” Practically everyone raises their hands. Then he asks, “How many of you were doing mundane work like getting data from database and displaying it on a website and got paid obscene amounts of money for it?” A large percentage of the room raised hands. Then he says, “you know what, this is how you can fix our problem. I am sure there is someone smart enough in here to start something truly interesting, and all it takes is one of you to start a company that is amazing and not mundane and the rest of us can work for you.” Supposedly, that is the year our company grew from an idea to a band of the best engineers and researchers. Then he went on about topics such as the mortgage crisis and globalization, and here are my take aways from his talk:

1. Do Not Be Afraid - I came back from the retreat and the stock market was going crazy because of the Fed’s extremely large interest rate cut and various economic problems. The CTO did say that this is going on because of a lot of fear. There is a lot people who are afraid of what is happening to the banks and what is happening to businesses, but in the end things will get better because of innovation and increased productivity. Most of the fear people have is because of uncertainty. There is no clear indicator that everything is alright so there is panic. The right thing to do is to be innovative and try to profit.

2. Economic Downturns Can Be Great Opportunities - The CTO said that the best time to staff up a company and rent office space is in times of economic downturns. If a company has money, then they are getting a bargain because people are more willing to accept lower wages and commercial real estate rents drop drastically. So if you have cash during a downturn, then you are able to snatch up many bargains. As I wrote in a previous article, I will be on the lookout for sales in stocks or real estate.

3. Globalization is Necessary - He said that the world has been changed so much by technology that globalization is no longer an option. Every company and country needs to establish footholds globally to become big. Even though people are always complaining about immigrants in America and jobs being outsourced to India, these things are necessary and probably good for everyone in the long run.

4. Make Yourself Valuable - The CTO asked if we were afraid that we would be outsourced, and only one person raised his hand. He thought that was a good sign because we are a great group of engineers. He further said that if you keep yourself at the top of the pack then you can demand to be paid well and you will not be outsourced. I think that is good advice because there is no need to sell yourself short and if you keep on improving yourself, you should be able to charge a higher price.

5. Surround Yourself with People Smarter Than You - This is  something the executive officers say at almost every speech they do. They always say that they hired people smarter than them to create a great company. I think it is great advice because I learn a lot from those who are smarter than me, and in turn I become smarter. There is also a chance that one of them will start a company one day that is the next Google or the next Microsoft and I can go along for the ride.

Anyway, I thought the CTO’s speech was very motivational and candid. I am sure he can make a living by hosting success seminars, but instead he does funny things like making movies and cheering us on. So once again, do not be afraid and do the best you can this year.

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When I first moved to the United States in 1992 the country was recovering from a widespread recession and I was totally unaware of it since I was only nine years old. Then ten years later another recession occurred and I was attending college and once again lived through it without caring too much. Today there is a lot of talk about the coming of the next recession and I am sure it will happen again since the economy is cyclical. We are already seeing a slow down in employment and massive losses in the financial industry and the stock market has come down about 10 to 11% since the October high. So what will I do in this coming recession?

1. Stay Invested — I am not going to sell all my investments just because it is going down right now. Panicking and selling long term investments is probably not the best thing to do since I really don’t need the money right now. I will also continue to contribute to my 401k despite the volatile market. The reason for this is that eventually a recession ends and the market goes up again. Selling a stock or fund at a low is never really a good strategy.

2. Look for Bargains — I will be looking for cheap investments to buy if there is a recession. There are many great companies that will survive through a recession but their prices may be depressed by the general mood of investors. So I am sure there will be bargains. Additionally the real estate market is falling almost everyday and if there is a reasonable bargain I may purchase real estate. Basically, I will keep an eye out for things on sale.

3. Be Indispensable at My Job — The general consensus is that the tech industry is still fairly strong, but a recession could change the outlook rapidly and there may be a great Silicon Valley Job Massacre again. I think the key to keeping your job is to be good at it, and I will try my best to be “unfirable”.

4. Formulate a Backup Plan — Sometimes being a great employee is not enough and people still get axed because the horrendous economic situation of their company just can’t be salvaged. This is why I think everyone should have a backup plan to survive. I’m not sure what I would do yet, but I imagine I could be a consultant or just blog full time. I also have a pretty big emergency fund that could help through a period of unemployment.

5. Stay Debt Free — When times are lean, it’s even more important to be debt free because it may be harder to reduce debt with less income. I will make sure I don’t take on any debts I can’t pay back.

6. Cut Expenses — If our income falls drastically we may need to cut expenses. There are many areas where we can be more frugal right now, but since we’re doing fairly well in savings we’re not living an extremely cheap lifestyle. For example, we could move to a smaller apartment, but it would be less comfortable. However, if we really had to downsize we would be fine with a smaller and cheaper apartment. I think many people live in houses that are way too big for them and if times are lean that’s where they can save the most. They can rent out part of their home or just move to a smaller apartment.

7. Continue to Donate — I read an article some time ago that said charitable organizations receive less donations in recessions. This is understandable because if a lot of people lose their jobs they would be unable to donate. I will try my best to maintain my donations.

Anyway, my outlook for the next recession is that it probably will not affect me and the hubby very much and I probably do not have to change much of my lifestyle. If we both happen to lose our jobs I think we are still fairly well prepared to live through it. What are your plans for the coming recession?

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Well, it’s been two weeks since the last update and in the last fourteen days about 305 homes in San Mateo County were listed on Redfin. This time 59 homes qualified as home sellers in trouble. This is nearly 20% of all the new listings in San Mateo! Quite a few of these homes are marked as lender owned. Here are some highlights.

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If I had a nickel for everytime I heard the phrase “if we go IPO…”, I could probably buy a nice video game. I have been working in private companies since I graduated college and everywhere I go engineers are dreaming of their companies going IPO and becoming the next Google. I am sorry to be a party pooper but the fact is that very few companies become public, and even if they do it’s very unlikely that rank and file workerbees like me would become fabulously rich. These are the lessons I have learned about stock options and I would like to list the reasons why most people don’t become rich off them.

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Even though I have never been to Cleveland I feel like I have some kind of strange connection to it through a few friends. One of my super geeky friends likes to say three things to indicate that something is cool. Those three words are “orange, ninja, and Cleveland”. I guess he got it from the opening song of Drew Carey where they yell “CLEVELAND ROCKS! CLEVELAND ROCKS!”. So sometimes he says “I’m in Cleveland” to mean that he’s awesome. Anyway, two of my other friends from high school are also connected to Cleveland. One of them is actually attending Case Western’s medical school, and the other one grew up in Cleveland. The three of us had a sort of “big head club”, because we all have quite large heads. So imagine my surprise when I read that most of the foreclosures in the Cleveland we love is now owned by Deutsche Bank. The BBC has also provided a lovely graphic to pinpoint all the German-owned properties:

I am at a loss for words. Though one thing that is clear is that the foreclosure situation in America affects financial institutions all around the world. It makes you wonder, how many other cities are getting owned by foreign banks?

P.S. Cleveland still rocks, because Ohio is going to start teaching mandatory personal finance classes in high school. Californian public schools are in desperate need of such courses too.

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