Today’s Jobs and Economy – Part 5 – Financial Investor

This blog looks at the career option of being a Financial Investor … earning a living from your own financial portfolio.

The initial question is what do you need to make a living as an investor? Short answer … money. If you don’t have a lot of money it’s going to be very difficult to earn a living from the return on your investments … especially if you try to be somewhat conservative to reduce the risk of loss.

But for the sake of this blog let’s say you do have enough money. What’s the key requirement you need in order to be a successful investor? You need to have a great deal of knowledge about the financial markets, how they work, and the skill to work them effectively and efficiently … as well as patience and discipline. I believe most of us have known some people that we felt were skillful real estate investors over the years. But when things changed significantly starting in 2008 in the real estate market their skill couldn’t help them. Many, if not most, lost big time.

The past few years if you wanted to invest in someone’s traditional small business you weren’t considered an investor, you were actually more of a contributor to a losing cause or maybe just being philanthropic. I don’t mean to be negative here, but since late 2008 through 2012 this category was hit hard and harder. Commercial institutions wouldn’t even participate in this category even though they had plenty of cash on hand.

How about the stock market? People do great there, don’t they? A few do, at least from time to time. But I know more people who have lost than won big, especially in the last decade. It’s almost impossible to have guaranteed returns when you’re not in control. And believe me, as an investor you are not in control … neither is your paid financial adviser. Anything can happen. And it can happen quickly … sometimes overnight.

While I know this is going to make this blog longer than I want, I think it would be wise if I share with you a story to illustrate my point. A good friend of mine was living large. They had sold a company and were working as a highly paid consultant. They received an offer from a large client of about 180,000 shares of stock in the company they were consulting for at the time. It was publicly traded on the NASDAQ and was selling for about $46 a share, which meant their value of the stock was over $8-million. They now had a big income and a great portfolio. Life was going great.

They used part of the stock to secure a loan to build a $1.85-million dream house along with all the accouterments that go along with that type purchase. They didn’t sell off any of the stock and diversity because they knew the company was doing great, was in great shape, had a good product, and a strong sales organization. Then something happened … something that was out of their control. Almost overnight the stock went to $36 a share. Turns out a group of investors targeted the company and shorted the stock. In other words, the lower the stock price went, the more money they would make. They thought this was ridiculous because they knew the company was in good shape … so they bought some more shares at $36, using their existing stock as collateral … sure the price would go back up. It went to $31. They bought more shares. It went to $25.50. All of a sudden my friend started getting margin calls, which means that if they didn’t pay immediately, they were going to start selling their shares to cover their losses … which they didn’t have to send.

Unfortunately, the stock continued to go down … all the way to $9 a share … and my friend’s $8.2-million was gone. Zap! All in about ninety days. As I understand it, the stock did eventually come back and the company was taken private for about $65 a share. But my friend wasn’t able to capitalize on it. They were wiped out financially. Kaput!

Could they have been smarter? Absolutely. Did they make mistakes? You bet. But here’s the lesson: If you’re going to be an investor, you have to accept that things may be taken out of your control from time to time. You have to be disciplined enough to set funds aside plus diversify your investments. The set-aside funds should be separate from investments – non-touchable dollars – that are safe from those in the market. And then when that expensive lesson happens you are ready with a safety net.

Just know that earning a living as your own investor with your money is not a good career choice for most of us. Be very careful, know your limitations, and be in control as much as possible.

Next: Creative’s

What are your thoughts or comments on making a living as an investor of your own money?

© Phil Hoffman 2013. All rights reserved

Today’s Jobs and Economy – Part 4 – Private Business Ownership

This blog touches on the option of starting your own business. Now you’ve got the chance to call the shots … be your own boss. Kind of an exciting idea isn’t it? I’ve learned a lot from others and from my own experience in this area and believe it’s best if I break this into a few different perspectives.

First, in the traditional business ownership scenario, they usually use their own money … life savings, take on debt, and many either borrow money from friends and family or include them as partners in order to get started.

Second, in many instances they take on additional debt through signing leases (offices, buildings, trucks/cars, etc.) and giving personal guarantees.

Third, once they get up and running they find themselves focusing on a myriad of matters of importance instead of focusing on what they have been good at (such as sales or operations) … all of a sudden they have to be all things to all people. They have to address local issues, legal matters, accountants for financial matters, negotiator for purchasing matters (or at least approve all transactions), serve as babysitter for some employee matters, and a collection agency for your accounts receivable matters. Sometimes you will find you are carrying out the garbage, cleaning areas, etc. Seems as if they find themselves doing everything except what they were good at in the first place.

Fourth … all of a sudden they realize they’re in a struggle. Instead of owning the business it seems like the business owns them … 24/7. They have to follow up on everything … be the first in and the last to leave. Then after everyone is paid they are wondering if there is going to be enough money left to pay their own bills, let alone reduce the debts they have incurred to start the business.

Finally, they either succeed or fail over a period of time. The bank, who was willing to be so helpful at the start is suddenly having to deal with “new issues” that have come up due to the economy (or their new policies or ownership, etc.) since you submitted your business plan and worked out your agreements. All of a sudden, what was agreed upfront doesn’t matter … they need to “re-evaluate” everything, and even though you may be meeting the agreed terms and governances. This means based on their input … not your input or experience. If you are being successful and don’t need their money or have other options for money this won’t be a problem. But if not, your position of negotiation has changed and they begin mentioning people whom you have never met before who seem to have more power and authority than you. In essence at some point in this journey the business is either successful, or they fail … many times forcing them to file for bankruptcy and falling back to a corporate or sales job.

Whoa … that doesn’t sound to romantic does it? My suggestion is that if you haven’t started your own business before, ask several friends who have … and be sure and talk to someone who has failed and listen to their input carefully … this is real life stuff. I promise you they didn’t start out thinking there was any chance of failure or they wouldn’t have done it. I believe you will find this description is more accurate than you may imagine. Many people who start their own business aren’t worried about getting a good return on their investment … all of a sudden they just want a return OF their investment … or even to get out whole. The last five years the economy has taken a hard and severe blow on many businesses … and not all are startups. Just be sure you go in with your eyes wide open, that you have done thorough reseach, and you have plenty of cash available.

Next: Financial Investor … earn a living from your investments.

What are your thoughts and comments on owning your own company?

© Phil Hoffman 2013. All rights reserved

Part 2 – Today’s Jobs and Economy

In my last blog I started an eight part series concerning “Today’s Jobs and Economy” which was a brief outline of what I intended to accomplish with this series. I noted that I would breakdown today’s business jobs into six basic categories and give a brief explanation of each.

In this Part 2, I am covering Blue Collar Career/Jobs and White Collar Careers/Jobs in their simplest forms.

Blue Collar Career/Jobs

I started out by going to Wikipedia and seeing their definition of the blue-collar worker. Here’s what they say:

A blue-collar worker is a working class person who performs manual labor. Blue-collar work may involve skilled or unskilled, manufacturing, mining, oil field, construction, mechanical, maintenance, technical installation and many other types of physical work. Often something is physically being built or maintained.

To paraphrase in my own words … someone who labors to fix, build, clean, make, or service something.

And I might add, that anyone who has ever done blue collar work knows there is a certain pride or satisfaction in a job well done.

Note: Today there is a trend toward skilled labors that are highly trained to operate large efficient machinery that does the work of many workers. Based on the necessary training and efficiency requirements it is hard to classify these as blue-collar workers … but we tend to think that way for some reason. This is an example of the changing ways toward the new economy.

White Collar Career/Job

Next, I went to Wikipedia to see their definition of the White Collar Career/Job. Here’s what they say:

The term white-collar worker refers to a person who performs professional, managerial, or administrative work. Typically, white collar work is performed in an office or cubicle..

To paraphrase in my own words … someone who is employed by someone else to do work other than manual labor or sales.

It seems that many people choose a white collar career, as it is one of the most socially acceptable occupations available. Many consider it to be a safe and secure option, which in my opinion has changed the last several years. For years, there was an implied unwritten contract that, if you were loyal to the company, the company would be loyal to you. And this contract is gone now. In my experience, there are two types of people who do this type work … Doers/Fixers and Stealth-workers.

Doers/Fixers are the people who want to do their job at a high level. They are energetic, motivated, and ambitious. They offer up ideas or solutions with the goal of moving up the corporate ladder. But there seems to be a downside for the Doer/Fixer. Once it is known that a person is a Doer/Fixer, they become a target of others. Their boss or other higher ranking individuals see them as threatening to their jobs, so they start coming up with ways to hold them back, or begin to take pot shots at their reputation. Then their peers see them as someone who will either embarrass them or keep them from getting a promotion … so they start to do what they can to undermine their accomplishments. Therefore, in order to remain a Doer/Fixer and survive in this hostile environment, a person must become good at something that has nothing to do with their work … and that is learn corporate or office politics. They have to learn how to navigate the “politics” by outwitting their enemies and strengthening their relationship with powerful people above them within the organization. In fact, it seems that some of the most successful people in the business world are not Doers/Fixers at all … they are pure politicians. Therefore, if you decide to work in the business or corporate world and want to be a Doer/Fixer, you need to realize that you must become a good politician also.

Now let’s address the Stealth worker. These are the people who HATE office politics and just can’t play that game … but they need a job. They learn not to be the ambitious Doer/Fixer. They don’t stand out … they don’t speak up in meetings … they don’t submit new ideas … they are almost invisible. They keep their heads down and do as they are told … no more, no less. They do just enough so that they aren’t talked about negatively. They simply want to survive. Moreover, this has worked for many years. But in today’s New Economy, it’s becoming much more difficult to be invisible.

Next Post:  Sales

What are your thoughts on the blue collar and white collar workers?  

© Phil Hoffman 2013. All rights reserved

Today’s Jobs and Economy – Part 1 of 8

This is an introduction to a new eight part blog series on Today’s Business Jobs. Here’s what I plan to touch on in this series.

1. What are Today’s Jobs. After this introduction, I will break today’s business jobs into six basic categories and give a brief explanation of what each of the six categories consist of today. I believe this is an important topic as we experience the constant changes of the economy, the leadership or lack of leadership of our government, the tepid but strategic efforts of big businesses, the slow growth of our gross domestic product, and the constant struggle and demand for more efficiency with less labor.
2. After this introduction and reviewing the six jobs categories, I will touch on the evolving New Economy. What are some of the possible momentum areas for the middle class that will enable us to succeed in this changing economy and what might be coming of age after slugging our way through the recession.

My goal in this blog series is to provoke some personal analysis of what is going on around us that is going to affect us all over the next three … five … ten years. I hope you will follow along on this blog series and share your thoughts and comments along the way.

© Phil Hoffman 2013. All rights reserved

Did You Realize Congress is Trying to Opt-Out of ObamaCare?

I try to avoid political issues in my blogging. And it is not my intent in this blog either. However, I do want to be sure we are all aware of something that is afoot in Congress that we should all be aware of in the interest of fairness … not politics.

With two months left before ObamaCare takes effect, it has quietly become evident that the House and Senate members and staffers are scrambling to come up with some way of opting out of the mandatory insurance coverage in ObamaCare. They are currently covered by the Federal Employees Health Plan, which pays for all their medical care. However, as part of the final negotiations the Republicans put an amendment into the ObamaCare bill requiring all members and Congressional staff to enroll in the insurance exchanges for their coverage.

That means that Senators, Congressmen, and staff will have to pay the premiums themselves (about $5,000 for an individual and $15,000 for a family) like all of us. They would be eligible for subsidies but only if they make less than $80,000 (and most don’t make less) and only after they pay 10% of their total income for health insurance.

Now they are squawking about having to follow the same rules the rest of us will have to follow because of the bill they passed!

It might also be noted that Congressional staffers already get their student loans paid as part of the perks of the job.

Please let your Senators and Congressmen know your position on this important and fair matter. If they think its good enough for us, then it’s good enough for them too! Whether they are Democrat or Republican.

Comments are welcome.

© Phil Hoffman 2013. All rights reserved

What do the Numbers Tell Us

This bullish stock market is exciting as heck. Since late November 2012 the DOW continues to rise … going from 12,500 to over 15,000 … and hovering at 15,500 as I write this blog. According to the official numbers, the Great Recession was officially over in the summer of 2009. However, it doesn’t seem so robust for the average American. When one looks at the statistical facts that are public information, you understand why we still feel things aren’t as robust as they seem from the stock market numbers. This month the U. S. Department of Labor reported employers added 195,000 jobs to their payrolls … which beat the estimate of 165,000. Payrolls for April and May were revised higher, to reflect an additional 70,000 jobs. While these numbers look good, the employment situation in America continues to have several perturbations. Let’s look at some key statistical areas and see if we can gain some insights from this public information. (NOTE: All statistics come from the U. S. Department of Labor Statistics)

1. Unemployment  in the general overview, the unemployment rate remained unchanged at 7.6% even with exceeding the estimated job increases in June (165,000). Granted that is below the peak rate of 10% in 2009, but the unemployment rate has now remained over 7% for 55 consecutive months.
2. Manufacturing – in the U S continues to take its hits. While manufacturing use to be the foundation for the U S economy, that is no longer the case. Over the past ten years, more than 2.6 million manufacturing jobs have been eliminated in the U S, with most going overseas. And the June statistics show that manufacturing lost 6,000 jobs, which represent the fourth consecutive month for reduction this year. It may surprise many to learn that the number of employees in manufacturing is near its lowest point since 1946. Will it continue to go down?
3. Part Time Workers – the number of people employed part time due to the economy and not being able to find full time employment increased by another 322,000 in June to 8.2 million … the most ever in this segment in history. Many of these are individuals who have had their hours cut back and were unable to find a full time job. They are also the reason for the large reduction in the unemployment rate the past several months.  And these are generally not good paying jobs.
4. Percentage of Working Age Americans with a Job – is under 59%, its lowest since 1983. (Think about that statistic) This ratio most likely will not improve for many years. The adult population grows at about 200,000 people per month, which is about the same as the jobs being created each month to date in 2013. (Remember – last month’s numbers show increase jobs of 195,000 on an estimated 165,000)
5. Quality of Jobs versus Quantity Jobs – there seems to be a realization of more analysts and economists (and we assume our government leaders) that there is a quality issue with the jobs being created. Leisure and hospitality employment increased by 75,000 jobs in June, 60,000 in May. Retail jobs added 37,000 jobs in June. These are not normally quality well paying jobs … the vast majority are basically minimum wage and part time jobs.

What insights do you glean from these public statistics?

Are you happy with your outlook the next six months … two years?

Will things be better or worse by January 2014?

As a business leader what actions will you take based on these statistics?

What other statistics can you think of that might improve or offset these?

© Phil Hoffman 2013. All rights reserved

So You Think the Outlook is Good

As much as I don’t like to be a non-positive person, my pragmatic sense tells me to look at the reality of things. At this time, I think the media and our esteemed economic forecasters are determined to make stargazers and weather people look brilliant. There’s a media and political buzz of “Look at the Bull Market! Did you see home prices! Consumer confidence is UP!”

I’ll agree this is a complex matter for many but the reality is that it’s not rocket science or advanced mathematics.

Can We Trust These Forecasts

Granted things have been very tough since 2008 and that’s a long time … so any sign of improvement is encouraging. Add to this the distinguished economists who want to embellish the uptick because they contend that if everyday consumers and small to mid size businesses think the future is great, then they will buy and invest more … which will lead to their forecasts being self-fulfilling … and them being considered geniuses.

But this just doesn’t seem accurate or possible to a well-informed businessperson and they aren’t sure they can trust this hyperbole.

Some Facts

The reality is we’re still in the muck, and if one looks at the most recent data with a clear focus it gives one cause for serious concern.

The facts are that almost all the forward movement in the economy is now coming from consumers – whose spending is 70 percent of the economic activity. Wages have gone nowhere and are going nowhere for the foreseeable future, which means consumer spending will slow because consumers just don’t have the money to spend.

The end of last week the Commerce Department advised that consumer spending rose 3.4 percent in the first quarter of this year, which is a good thing. On the other hand, personal savings dropped to 2.3 percent from 5.3 percent in the fourth quarter of 2012. That’s the lowest level of savings since before the Great Recession, which is not a good thing. You don’t have to be a master financial adviser in economics to see this can’t go on very much longer.

Granted home prices are up. The problem is they’re beginning to rise above their long-run historical average. (Before the housing crash, they were significantly higher …  way above the long-run average.) So you need to be mindful and watch your money. We’ve been here before – the Fed is keeping interest rates and inflation artificially low, allowing consumers to get low home-equity loans and to borrow against the rising values of their homes. Needless to say, this trend, too, is unsustainable. And while mortgage loans are up, most have been for refi’s instead of new mortgages.

What about the stock market?

Many wrongly assume that a rising stock market leads to widespread prosperity. Over 90 percent of the value of the stock market — including 401Ks and IRAs — is held by the wealthiest  … the top 10 percent of the population

Moreover, the main reason stock prices have risen is corporate profits have soared and companies are buying their own stock in order to keep the false assumption there is demand for the supply. Some believe that profits are mainly up because corporations have slashed their payrolls (and job creation) and are keeping wages low. This brings us back full circle, back to the fundamental fact that wages are going nowhere for most people.

What About Profits? The Sequester?

Not even fat corporate profits are sustainable if American consumers don’t have enough money in their pockets. Exports can’t make up for the shortfall, given the terrible shape Europe is in and the slowdown in Asia.

So don’t expect those profits to continue. In fact, the new Commerce Department report shows that corporate profits shrank in the first quarter, reversing some of the gains in the second half of 2012.

And, keep in mind, the full effect of the cuts in government spending hasn’t even been felt yet. The sequester is going to be a huge fiscal drag starting in August, if not July.

My goal is not to be a naysayer. But if this was a weather forecast, I believe the weather person would be warning you to get an umbrella and look for that raincoat … or maybe to buy a storm shelter …  you may need them sooner than you think.

© Phil Hoffman 2013. All rights reserved