Peter Pays Paul

Do you believe in luck? Are you “unlucky”? Do you miss good opportunities?

Your response to this question may play a role in how “lucky” you are according to What It Takes To Survive from Newsweek. (HT: Get Rich Slowly)

Only 10% of Life is Chance

“Luck is not a magical ability or a gift from the gods,” Wiseman writes. “Instead, it is a state of mind—a way of thinking and behaving.” Above all, he insists that we have far more control over our lives—and our luck—than we realize. Going back to the Italian Renaissance philosopher Niccolò Machiavelli, great thinkers and writers have argued that 50 percent or more of what happens in life is determined entirely by chance (or Fortuna, the Roman goddess of fortune). Wiseman says no way. He believes that only 10 percent of life is purely random. The remaining 90 percent is “actually defined by the way you think.” In other words, your attitude and behavior determine nine tenths of what happens in your life. Wiseman has concluded that there are four reasons why good things happen to certain people. [Emphasis mine.]

If only 10% of life is purely random, it removes a lot of excuses.

Sure we can’t change the family we were born into, but we can choose how to live with them. We can’t choose the boss we work under, but we can choose how we respond to them.

We didn’t choose to get into this economic mess, but we can choose how we will act in spite of it.

Characteristics of the “Lucky”

Prof. Wiseman says the four reasons good thing happen to certain people are:

1. First, lucky people frequently happen upon chance opportunities.
2. Second, lucky people listen to their hunches and make good decisions without really knowing why.
3. Third, lucky people persevere in the face of failure and have an uncanny knack for making their wishes come true.
4. Fourth, lucky people have a special ability to turn bad luck into good fortune.

One of the key factors detailed in the article is that survivors and “lucky” people tend to have a great awareness of what is happening around them.

I can attest to the truth of this statement. I found a $100 bill in the parking lot of a major theme park. Other people had obviously walked past it. However, I reached down and picked it up.

Was I “luckier” than these other people? Probably not, I just had my eyes open.

Making Your Own Luck

Based on Prof. Wiseman’s observations here are a few suggestions for making your own luck.

1. Keep your eyes up and your ears open. Notice what is going on in the world around you. When you walk down the street do you notice differences in the buildings? Would you be likely to spot a friend on the street or would you walk past them?
   Listen to what is being said around you. Ignore the gossip and useless banter of fools. Listen for ideas and opportunities. Listen to learn about new markets or ideas you may have previously missed.
2. Learn to make good decisions. Wisdom does not happen on accident. People are not born wise, they become wise.
   Pick up a book or take a class that will help you to make wise decisions. (The Biblical book of Proverbs is full of wisdom.) Learning from your own mistakes and the mistakes of others plays a major part in wisdom.
3. Don’t let adversity or failure discourage you. Thomas Edison had 10,000 “failures” before he found the right filament to make the light bulb work.
4. Look for opportunities instead of obstacles. If our responses determine 90% of what life is, we have greater control over our lives than we know.

In the words of Dirty Harry, “You’ve got to ask yourself one question: Do I feel lucky? Well, do ya, punk?”

The weather here in Northern California has been wet and overcast for the past few days. But this morning the sun is shining brightly, the hills are green with fresh growth, and the sky is a brilliant dark blue.

I know that in many parts of the country it can be overcast for weeks not days, but in California a few days of clouds is a big deal.

When the clouds are ominous, the lightning is flashing, the rain is beating down, and the wind is howling forgetting about the sun’s warmth, light, and energy is easy to do.

Stormy Financial Times

At the current time we are living in stormy financial times. The stock market is tumbling, companies are filing bankruptcy, unemployment is rising, and fear is on everyone’s minds.

It is easy to forget in times like this that “this too will pass.” The sunny times will return eventually.

Change Is Difficult

The financial system as we know it is undergoing a cataclysmic change.

Personal finance is undergoing a huge change as well. We are changing from a consuming society, to one that saves.

Change is difficult. It takes discipline. We will hit bumps, plateaus, and  valleys.

On the bright side, adversity breeds character. What will it produce in the generation that experiences this?

The Lens of History Gives Perspective

As I read about the economy and some of the foolish policies proposed to solve this problem, it has been easy for me to have a doom and gloom mentality and attitude.

However, looking at history has provided me with a measure of hope. (Not as much hope as this.)

The Great Depression

My grandparents were born, raised, and survived The Great Depression. Do a search for companies started during a recession.

People were resourceful. They found ways to make it. They lived on less. Worked harder and still found ways to save a little money.

The Dark Ages

From my recollection of the era known as The Dark Ages, the life of the common people was none too pleasant. No running water, indoor plumbing was reserved for the richest of the rich if at all, and personal hygiene was yet to be invented.

Many of the peasants in Europe were serfs and had no ownership rights to the property on which they lived. They were at the whim and mercy of their lord. They worked hard on the land, but the landowner received a portion of all they produced.

Yet, for all this hardship modern Europe still exists. It is not a vast wasteland with few inhabitants.

History provides example after of example of  human ability to creatively adapt to situations and to survive.

The Sun Will Rise …

The current financial turmoil is not permanent. At some point in the future the financial sun will rise again.

A state of normalcy and predictability will again settle on the markets. Industries will begin to grow. That growth will create jobs and wealth.

The storm raging around us is beyond our control. Focusing on the storm raging around us will distract us from the items that need to be accomplished today.

We can control our actions to today. Besides “Each day has enough trouble of its own.”

Photo Credit: phatman

What was your favorite subject in school?

I have a natural proclivity towards math. I enjoyed algebra and solving a challenging problem was always fun. (I didn’t like calculus or trigonometry, too theoretical.)

Writing for me was always more difficult. Whether it was a research report or a story I always had a hard time getting to the minimum word limit. English was not my favorite subject. (Now I can’t shut up.)

It Comes Naturally

Talents and Skills

Each of us has natural talent that makes some tasks easier than others. Solving a complex finance problem is easier for me than for some. Some men are gifted with their hands and can build almost anything. Other men have the ability to design beautiful buildings. Some women are naturally creative and can sculpt or paint beautiful works of art. Other women have an attention to detail that makes them incredible administrators.

Our natural talents often lead us to industries where we will be maximally productive.

Personality Traits

Like natural talents, many of us have personality traits or characteristics that have been present from birth. One child is more gregarious, while the next is more reserved. Some people like their privacy and others will share almost anything with you.

Often time these personality traits determine how we act in our careers, how we relate to others, and our personal lives as well.

The woman with a driven personality may pursue her career at the expense of friends or family. The quiet teenager is less likely to take a sales role. The shy man is more likely to avoid speaking in public. The intellectual college student is more likely to pursue a career in academics.

Determined to Fail

Humans are naturally lazy (myself included). We like to follow the path of least resistance.

Frequently, our pre-determined character traits are the path of least resistance.  We follow them because they make us feel comfortable, we don’t have to change, and it is what we know.

Unfortunately, our determined character traits may cause us to avoid actions that may lead to greater success and a more fulfilling life. Have you ever heard:

“I can’t cold call, I’m not made that way.”

“I’ll never be able to do that. I was never good at …”

“I could never do that. It is beyond me.”

Self-Imposed Limits

These statements, and others like them, limit our inclination to change. We are limiting ourselves to what comes naturally and what is easy.

“No pain, no gain” is the colloquial saying. It is true. Without discomfort we will not change from our current status.

In essence we are saying that we are determined to fail because of our natural characteristics. We are admitting that our given character traits are too powerful for us to over come.

Breaking the Cycle of Failure

We can loose the chains of our natural tendencies and change how we act. We no longer have to be a slave to our predispositions.

It starts with a choice to act in a way that is consistent with what we want to achieve or to become, no matter how uncomfortable we feel. Over time the action will become more and more natural.

It is a bit like breaking in a new pair of shoes. The first time you wear them they may be uncomfortable for a bit, but as the leather stretches and becomes pliable they begin to form to your foot, and in two years’ time you may be sad to have to replace them.

In Your Personal Life

If you are shy, choose to talk to a stranger. If your natural tendency is to follow, find a role to be a leader. If you are timid, develop courage. Take a class to develop a skill or hobby. Read a book that stretches your mind and soul.

Your life won’t improve on accident. It takes discipline and dedication. But it can be done.

At Work

Choose to pick up the telephone and make those cold calls. Choose to give the presentation to the group of strangers, but potential clients. Choose to take a difficult course that will allow you to better serve your clients. Develop new habits that will bring value to your employer.

Choose to do what does not come naturally, but will be profitable for your work goals.

Today Is the Day

Make the choice today. Otherwise, you may be determined to fail.

Photo Credit: Akash K

Mike Shedlock from Mish’s Global Economic Trend Analysis has a great article about the potential for municipalities across the nation to file Chapter 9 bankruptcy.

Mish’s Global Economic Trend Analysis: Massive Surge In Municipal Bankruptcies Coming.

John Moorlach, the accountant who predicted the 1994 Orange County bankruptcy sees Up to 10 Municipal Bankruptcies in Coming Year

Even more infuriating than the policy makers inability to demonstrate fiscal responsibility is their willing to stick both of their hands in the dole. Mike quotes the St. Petersburg Times article Double dipping rises despite outrage.

This year some of Florida’s public officials are giving a whole new meaning to the phrase “home for the holidays.”

It’s a new crop of double dippers, taking advantage of a loophole in state law that allows them to “retire” by taking 30 days off and return to work in their old jobs with a salary and a pension. Many also collect a lump-sum “retirement” payment that can reach hundreds of thousands of dollars.

It is sad that we live in an entitlement culture. Everyone thinks that society owes them something.

As Margaret Thatcher said of “society”,

There is no such thing! There are individual men and women and there are families and no government can do anything except through people…”

Politicians and people that demand something for nothing are holding back the more productive members of our society.

Merry Christmas to All!

Wishing you a joyous holiday with friends and family.

California’s cities may be some of the biggest casualties of the real estate bubble:

RIO VISTA, Calif. — California may soon have more bankrupt towns on its hands.

The city of Vallejo, Calif., gained national attention earlier this year by filing for Chapter 9 bankruptcy protection. Now, two neighbors are fighting to avoid the same fate, as the state’s economic crisis spreads.

More California Towns Face Bankruptcy

City Income

Many of the cities and towns in California derived a major portion of their income through two sources.

First, fees paid by developers to expand the city and tap into existing services. As the housing market took off developers could afford higher fees. Cities realized this and decided to charge higher fees.

The second major source of income is property taxes. Since the passage of Proposition 13, California homeowners only experience a significant bump in tax revenue when a home sells or when additions are made to it.

During the wild and woolly days of the housing bubble, houses were selling fast and property values were skyrocketing. Cities saw their incomes increase as they collected more and more property taxes.

Political Wisdom

As a model to other Americans, the city politicians realized that a greater income should not go to waste. “We have more revenue therefore we should spend more money. And we should project to spend more money each year into the future,” these wise politicians said.

The wily politicians noted that to fuel demand for housing, their public services should be top notch. In order to attract the best and the brightest police force and firefighters the politicians decided to promise them the moon.

City Expenses

So the police and firefighters received great salaries and great benefits. Some of the cities could not afford their own pension plan, so in order to attract qualified public servants they joined up with the California Public Employees’ Retirement System (CalPERS). The city’s cost of joining CalPERS was less than the cost of offering a similar retirement guaranty independently.

Municipal police and firefighters often have contracts with guaranteed pay increases.

Now that the housing madness has cooled, city revenue has not grown. However, city expenses, related to salaries, are increasing. [Begin Sidenote: Sounds like the auto industry. End Sidenote] In many cases city revenue may actually fall. As housing prices fall, tax payers can ask for a reassessment of their taxes which may lower their tax burden.

This powerful combination of flat or falling revenue and increasing expenses is forcing some cities, like Vallejo, to file chapter 9 bankruptcy.

Insult to Injury

Let’s return to CalPERS:

Pacific Grove, a coastal town south of San Francisco, already faces a budget crisis. Now losses by California’s giant pension fund could make the pain worse.

“Calpers could bankrupt us faster than anything else,” says Mayor Dan Cort. City officials say other towns face financial stress unless the California Public Employees’ Retirement System is able to quickly recover from its investment losses.

Calpers Losses Add to a City’s Stress – WSJ.com.

Since July CalPERS has lost almost 25% of its value. This marked loss limits its ability to pay current and future employee retirement guarantees. In order to make up for the short fall, CalPERS may charge cities more in the future in order to recoup and adjust for the losses.

Coming Full Circle

CalPERS has been in the news lately for losing tremendously on investments in, wait for it. You guessed it residential real estate. Ouch!

The cities and CalPERS made bets that real estate would continue to go up. Now they are paying the price for foolish planning.

California’s budget crisis is in a fervor.

Bloomberg.com: Worldwide.

Politicians need to learn that you can’t spend what you don’t have. Unfortunately, too many politicians were “writing checks [their] body can’t cash”. They promised everyone the world, but didn’t think of how they were going to pay for it.

Gov. Arnold Schwarzenegger declared a fiscal emergency Monday and called lawmakers into a special session to address California’s $11.2 billion deficit.

The state’s revenue gap is expected to hit $28 billion over the next 19 months without bold action.

Schwarzenegger declares fiscal emergency in Calif.: Financial News – Yahoo! Finance.

Forbes.com is reporting that JPMorgan will be keeping WaMu’s employees in the mortgage centers in CA. It looks like the bulk of the job cuts will occur in WaMu’s Seattle headquarters.

JPMorgan Plans To Ax The WaMu Suits – Forbes.com.

Happy Thanksgiving! I hope you are able to enjoy some time with your family and friends.