Life

Momentum

2012-01-28T18:32:00.000-08:00

He woke up in a good mood, ready to attack the day in good spirits. As he rolled over, to sit up on the edge of his bed, he thought of how today would be a new day. Someday, he would do something special with his life.

He got ready as usual, moving quickly through his one bedroom studio. As he went out the door, he glanced at the pile of bills accumulated on the table. He was determined to pay these off, break the chains and make a good life for himself.

He walked to work, often feeling distanced from the remainder of society, most of which had cars. He never understood how they were all able to afford these beautiful cars. He dreamed of the day, he would roll up to a night club in his flashy black camaro, with purple trim and watch as the people stared in amazement, a thought he knew was one of many brainwashed into his mind.

Snapping back to reality, he looked around the neighborhoods he walked through. Cracked pavement and pot holes, a plenty, some of which were quickly fixed with a lightning pattern of black tar. Trash being blown any time the wind picked up. Usually, he didn't notice, but today he took a closer look: a straw, a ticket, some broken glass, a Capri sun... Every step he took, he saw more. The houses weren't in great shape either, paint chipping, damaged shingles. But then again, he would love to have any one of these homes.

He arrived at work and began his shift. Washing dishes wasn't great, but hopefully, this would only be temporary, until he found something better. He was glad to have this job and it had several perks like getting free food or finding extra shifts anytime he needed them. He would enter through the back door. The shift started off smoothly enough. Loud clanging and talking meant a busy restaurant, which meant prosperity for all.

Mid shift, the chef came to the back, angry, ranting and raving. The chef was bald headed, with a thinnly shaved goatee and tatoos along his right arm. The chef started to yell at him and continued to yell for a few minutes straight because he had not stacked the dishes perfectly. The dishes were expensive and if not stacked properly, they would break. The possibility of them breaking, seemed rare, and the chef's reaction made clear his worth in comparison to these dishes. The shift could not end quickly enough.

His body boiled. He could physically feel these emotions spread throughout his body. It was almost as if he was on the outside looking in, with no control. His body was tense and his pace quick. All he wanted to do was get home, the safety of home. His thoughts from the morning about his neighborhood and his debts all seemed to race through his mind, and with the anger, he began to doubt his self worth.

Entering his apartment, he quickly went to his closet, and pulled down a box. He was so angry, he just wanted this feeling to leave, but everything he tried, he could not shake it. He opened the box, and pulled out a 9mm. It felt good in his hands. The cold hard steel, made him feel powerful. A power, completely opposite from the helplessness he had felt the whole day. Perhaps, if he wanted a new life, he needed to take it. With this gun, he could forcefully take what he needed. He could force others to give him what he needed. He sat lonely, frustrated and stuck in an internal battle.

The longer he sat, the more control he seemed to gain over his body. Still angry, but not with the intensity he first felt. Gun still in hand, sitting on the edge of the bed, the voice of his third grade teacher entered his mind. His third grade teacher, was a tall man, with a gentle voice, who always seemed to have full control of any situation, very humble and preacher like. He could hear the teacher explaining why violence wasn't an answer and that each individual truly has the power to choose. At that moment, a glimpse of understanding hit him. He begin to realize that his power was not in the gun he wielded as a lone soldier, but in the pain he felt right then. The pain that would make the masses relate to his suffering, and unite a much more powerful force. It was alone that none of them would have power, but together that they would be unstoppable. As he laid down the gun, he knew in his mind that this force was beyond measure compared to the power he felt holding the gun.

Yet calmer, he laid down and thought. The outside world would continue to try to keep him enslaved, a slave without a master, but a slave still. He would not let them and would model his daily actions after the humility of his third grade teacher. The key to controlling the never ending cycle of anger stirring emotion, would be to realize that such feelings were not permanent. The key would be a somewhat meditated state outside of self would allow adverse feeling to dissapate. He would avoid the self-pity and loneliness that consumed his life.

Throughout the weeks, he began to talk to people. More and more, he found the same stories, the same feelings. He knew it all along, he was not alone. He spoke to a woman, an immigrant, who moved herself and her daughter to the states when the daughter was only 14 months old. She moved here because the medical care was better and the american dream inspired her to take action. He learned of the young daughter's dream to become a lawyer, a dream that would be crushed in a few years as she tried to find a university that would take her. A dream that would be crushed with the compromising thoughts that she must have ethical values but at the same time constantly lie to avoid uncovering the truth. But yet, beyond all the odds stacked against her, the daughter dreamed. The key to seeing a dream come true, he thought was to never lose sight of it. A dream by definition would be something improbable, but the very thoughts which created and sustained it meant that it was also possible. He took this story to heart and wanted to one day, make a change that would show the world that the american dream is truly alive, breathing and a beast at that.

He spoke to another man, who had purchased a home but did not understand the terms and conditions, so to speak. The man had given everything to purchase a home which seemed. Only, fifteen years after purchasing the home, the man was almost all but foreclosed on. The man had fell victim to the financial funnel which fueled the motives of our institutions. The man's wife had died from a rare stomach cancer about six months prior. Even when the man's wife was alive, they were in financial turmoil, and now, trying to face the reality of life and the pain of her death, the man was completely lost. Life was a day to day struggle with a guaranteed end to this sad story. The man also explained how the hospitals could not possibly have done everything they could have and his reasoning seemed accurate. The man he spoke to only gave him another reason to continue to fight.

Slowly but surely, he began to push his ideas of prosperty onto others. His thoughts of mind over body and individual strength. The mind has the power to push off the selfish cravings which affect only the present. The mind has the power to make life in general better. And not just for one but for all. He was determined to pay his debts and with each payment he made, he felt more honest and suprisingly, better about himself. He knew he was empowering himself. With each payment, he also began to feel respect, which seemed strange because this was new. It seemed he was even afraid before to feel this, to see his own personal power. He felt like any normal animal would feel when given the opportunity for something better which at the same time was strange. He felt fear.

In the meantime, he attended gatherings with others to face life head on. He learned and found programs to attach to. He also discovered, as he suspected, that he was not the first and would definitely not be the last. He took control.

Fast forward several years, to the present. Many things have changed. He has paid his debts and has helped others find financial advising. He has helped to reverse the brain washing, to show people the reality life should be. He has helped rebuild and restore many homes in the neighborhood. He looked out into the crowd. No longer entering the back door of some restaurant, he was in center view. He walked up to the podium. Thousands were gathered and the day was beautiful. The day felt like a day that would go down in history. The sight of people squished into the streets to support the cause reminded him of Martin Luther King's dream or the freedom of speech movement fought on the steps of UC Berkeley. The memories were of times when people were fighting for the well being of the nation, of other people, and not just themselves.

He began his speech, and continued to recite ideas surrounding the volunteer efforts to support the community which were powered by the individual, education for all and the rebirth of the financial system. No longer would people have to look out and see their neighborhoods rotting. They could empower their futures and break social and class barriers through education. The financial system would no longer guarantee that one's life earnings inevitably ended up where it started or make it probably that people would get trapped beyond help to the point of despiration. As he continued his speech, he paused for just a breif second to recall the moment in his one bedroom apartment, when his third grade teacher's voice had saved his life. An undeniable truth he felt, as he stood, that the pen truly is mightier than the sword.

Closing Down Shop In New Mexico

2012-01-08T19:26:00.000-08:00

So, you'd think since setting up a sole proprietorship or limited liability company (LLC) is pretty easy, closing down would be just as easy. I mean, you just send in one form with a check and boom you're in. However, its just like buying a house, easy to get in, a little more tricky and expensive to get out. By the way, it costs 2.5% to get into a house (loan, title fees, brokers) and 7.5% to get out of the house, so if you plan on making a quick buy and sell, you had better be able to cover at least 10% or know how to reduce the fees people normally pay.

Doing all of this paperwork is always so scary, so I always push it off. Last year, I was fined $1564 by the IRS for submitting the S Corporation election form(2253) late. This is pretty sad since there weren't actually any monies paid directly to the company, although I did advertise it and interview with potential clients, which got me some good side work.

Well, like most people, I struggle with debt and credit cards and picked up this great book by Suze Orman (Dave Ramsey is also a good read). She throws out a great concept, that people are often afraid of money and push off dealing with it. We have this belief that money is the root of all evil and we just hate dealing with the hassles and paperwork. One of her laws is respect for money attracts money and disrespect for money repels money. This is so true. Despite my ability to do paperwork for the IRS, I just put it off because I didn't want to deal with it. Months passed and well, what do you know, I was late and hit with an enormous fee.

After reading her book, I took the opposite route. I found out what I needed to close down shop of our New Mexico businesses, since we have moved to California. Did you know interest piles up on owed tax with no limitation on time?

In case some of you have to do the same, here's what I did. I got up to date on the CRS-1 forms, which have to be filled out if you sell goods at say, a Farmer's market. I calculated the penalties and interest as well for being late.

I filed the business tax registration update with the Taxation and Revenue Department, making each business closed. I filed the Tax Clearance Request as well. I sent the Articles of Dissolution for the LLC elected as an S Corp along with $25 to the Public Regulation commission. Finally, I don't know if I need other things like a "Certificate of No Tax Due", "Certificate of Compliance" or "Letter of Clearance" so I sent out extra letters to the Taxation and Revenue Department, Department of Labor and Public Regulation Commission just to make sure I'm squared away with them.

Come tax time, I will fill out the 1120S along with the K1s to square that away as well. This took me a good 5 hours to do, which isn't all that bad. On the other hand, I feel really good that I got focused and committed to getting these things taken care of.

So here's a summary of the what the digging got me:
I found out my escrow account conveniently holds my money, acruing until it is time to pay taxes and insurance. I'd rather have the money to earn interest on it, so I closed my escrow account: $610.
I found out my insurance policy changes caused an overpaying, which of course they were just letting sit in my account: $315.
I also found out I had paid my flood insurance in addition to the escrow account paying it: $1015.
The call to the IRS above: $1560.
Finally, when I setup my automatic deduction for my mortgage, I double paid that month and the mortgage company would only apply it to principal if I specifically requested it. In other words, I was 1 month ahead every payment for a year. An easier way to explain it is that if you take a mortgage for $100,000 and then pay the company $100,000 the next day, they won't say anything. They will just keep that money, apply the payments and in 10 years or so, say, okay, we've used up all the money to make your payments and you still owe us $50,000. Anyways, found: $830 (called and applied it to the principal).

DMV Trip

2011-10-27T11:32:00.000-07:00

So I recently moved from New Mexico back to California and my faith in the system in restored.

My last experience with the DMV occurred in New Mexico where it took a total of 5 trips to get my vehicle registered. My mistake was trying to go to one of those DMV express locations only to find out they didn't do what I needed. Then of course, the proof of residency, which is always fun, wasn't covered because this months checking statement, which hadn't even arrived yet, wasn't in the pile. Then, there was the required SMOG check which I found out wasn't even required due to the county I lived in. Fun.

This time, I pushed off going to the DMV because I did not have the time to run around like the last time. Eventually, I got a fix it ticket when I was pulled over for going 77 in a 65 zone. This required getting a California driver's license and registering my vehicle in California. Noooo, or so I thought.

I got SMOG checks since I knew California required them. I fixed my insurance so that my vehicles were covered in California and printed temporary insurance cards. I don't have any proof of residency, since I don't have phone or utility bills coming to the house and my checking account statements aren't yet mailed to my house. I also could not find my birth certificate, marriage certificate or car titles. I did have my social security card, passport and car registration.

So this morning, I went to the DMV, bringing my temporary insurance cards, social security card, passport and car registration. I was late for my appointment, forgot my SMOG check forms and of course didn't even have my car title. The person at the information desk told me I would need the title, but allowed me to see someone anyway. Score! That person set me up for $148 to get new plates. I ran out to the car and had to use the plug of a charger to unscrew the old plates off the car. Things looked smooth, got the new plates/stickers, took a photo and then went to take the written test. Uh oh!

Alright, I can do this, I thought. 18 questions since I was renewing the license and I was allowed to miss 3. I passed only missing 3 questions and 2 people signed off on the ticket regarding the 2 violations.

Regarding the test, I was worried about the BAC questions which is .08 in California. I also was mad about the parking on an uphill question, since it was vague. The question was if parking on an uphill road, when parking should you turn your wheels: A) Parallel to the curb, B) Away from the curb or C) Toward the curb. The question should be, if parking on an uphill road, if your wheels are parallel to the curb, should you: A) Leave the wheels as they are, B) Turn your steering wheel counter clockwise, turning the wheels away from the curb or C) Turn your steering wheel clockwise, turning the wheels toward the curb.

Of course, I was thinking turn your steering wheel counter clockwise, turning the wheels toward the curb, since I imaging the car rolling backwards and want to make sure the wheels are toward the curb, so the car stops.

All in all the trip took 1:45 which I was completely happy with, since I got everything taken car of!

Izu's Bath and Body Company - All Products

2011-07-24T17:02:00.000-07:00

Izu's Bath and Body Company - All Products

Our first online order! Thanks Alisa!

Tidbits For Entrepreneurs

2011-07-04T10:23:00.000-07:00

Just wanted to throw an update on my business ventures for anyone interested in starting home based businesses. My approach is to grow from the basement with little investment. Since most businesses fail, I would rather make money from the get go and end up ahead if things die out.

The book I will highlight in this blog actually is a people book. In order to succeed in business, I believe you have to understand people and find out what they need. This is something I have been very interested in and has helped my own personal growth.

First of all, I have a full time job that pays the bills. Last year, I went to the Small Business Development Center (SBDC). This is helpful for getting free advice and support from people who understand the system. They helped me to register my business. I wrote my articles of organization, paid $50 to the state to register an LLC (Limited Liability Company) and had my business. Sounded scary until I went through the process. "The best way to learn business is to start a business." When tax time rolled around, I elected my LLC as an S Corporation by filling out some IRS form. I also filled out some K1s which are like W2s for distributing profits and losses.

I took a $29 course at the SBDC, held by PTAP to learn about how to get a contract. I will get a CRC and DUNNS number. So far, no profit here. This business was registered in Nov, 2010. I did however get a little under $10,000 in part time work, by letting people know I do automated testing.

My next business involves my real estate investments. I covered the numbers in an earlier blog post. Right now, I have a $300.19 mortgage and rent for $750 dollars. This is a potential $5400 in cash flow. However, we were hit hard by Steinborn Property Management with a $1700 in initial fees for cleaning the outside of the house, cleaning the inside of the house, doing maintainence on the swamp cooler and replacing the busted water heater. We also pay 10% which means $80 per month or $960 per year. Already that leaves $2740 for the year (which would be great as an almost 14% return, but I imagine more expenses will pop up). These unexpected expenses are exactly why the numbers need to be really good in the first place! We have $20,000 down on a $80,000 property that rents for $750. The rent to value ratio is .9375%.

The nice thing about the property management is that I don't have to spend my time. However, I am spending my money. My philosophy is that if you want to get rich, you need to learn how to utilize other people's time and money. If I can get a 5-10% return this year, without spending much of my own time, I am happy. The get rich slow method. I would like to find some investors to use their money. Notice, they get the same benefit I do, as far as me using my time to find the investment properties and make regular investment decisions. The more value you can add, the more money you can make.

The final business I will discuss is my wife's soap making business. She started making soaps in the garage and sells them at the local farmer's market. She started in July 2010. Earlier this year, we asked the woman who gives me haircuts to stock our soaps in her store. The original agreement was $20 a month plus $1 for each soap sold. She didn't accept the $20 a month (and hasn't yet, which was very good of her) and we've only sold 4 soaps in the store over about 3 months. We have several ideas about doing larger gift items and setting up web traffic.

Luckily, for my original consulting business, I had a domain registered through IX Web Hosting. This is about $40 per year. You can always host your website for free by downloading Adobe Apache Server software and leaving your home computer as a Server. You will still have to pay $20 or so to register your domain name (ie www.mypage.com) I grabbed some free templates off the web. We will slowly modify the templates to avoid any copyright issues.

So this is the basic layout of a webpage. You have the header, basically a large background image that serves as a background, the right margin, the left margin, and a footer. In between you have the menus and content. I am doing the html myself and will be adding the following: online payment (using Paypal's easy to used Merchant Services) to quickly buy featured items, links to Etsy's online store (costs approximately $.20 per four months for each item posted), a blog allowing customers to follow us, links to facebook/twitter/linkedin/.

As you can see, I am a do it yourself type of guy, but I also like to utilize work from others whenever I can. In one sense, you have to do it yourself to get things cheap and save money. In another sense, you have to use others who can do things better to save time.

Balancing Stocks

2010-08-29T09:37:00.000-07:00

Assuming you have a nice company that you are buying stocks for, I would suggest investing enough that you can balance your holdings in the stock. I am not a stock person, but I would suggest something like the following. Place 40-60% in stock positions and leave the other in savings. If you have only $10,000 (or less), I would say only invest maybe $4,000 of it. Anyways, if you have $100,000, you can invest $60,000 possibly buying 6 different stocks each position being $10,000. The reason you want to have cash on hand is to balance the stock.

For these calculations, I will use .3 and 1/(1-.3)=1.4285

Lets say one of your $10,000 positions was bought at $1 per stock. This means you have spent $10,000 to own 10,000 stocks worth $10,000. Say the stock drops 30% to $.7 per stock. This means you have spent $10,000 to own 10,000 stocks worth $7000. Try to maintain a worth of $10,000 by making up the $3000 loss by buying 4285.7142=$3,000/$.7 stocks. This means you have spent $13,000 to own 14285.7142 stocks worth $10,000. Say the price jumps .4285% to $1 per stock. This means you have spent $13,000 to own 14,285.7142 stocks worth $14,285. Try to maintain a worth of $10,000 by making up the $4,285 gain by selling 4,285=$4,285/$1 stocks. This means you have spent $8,715 to own 10,000 stocks worth $10,000.

Of course, if you are targeting 30% changes, you will not gain as much if the prices increase very quickly. With this strategy you are assuming several ups and downs (market trends) before a long term benefit.

Lets say one of your $10,000 positions was bought at $1 per stock. This means you have spent $10,000 to own 10,000 stocks worth $10,000. Say the stock jumps .4285% to $1.4285 per stock per stock. This means you have spent $10,000 to own 10,000 stocks worth $14,285. Try to maintain a worth of $10,000 by making up the $4,285 gain by selling 3000=$4,285/$1.4285 stocks. This means you have spent $5,715 to own 7000 stocks worth $10,000. Say the price drops 30% to $1 per stock. This means you have spent $5,715 to own 7000 stocks worth $7,000. Try to maintain a worth of $10,000 by making up the $3000 loss by buying 3000=$3000/$1 stocks. This means you have spent $8,715 to own 10,000 stocks worth $10,000.

If the stock drops and then increases, it is the same as if the stock increases and then drops.

Now there are two problems to consider. The first is that the position needs to be large enough that the alert values (.3, .42) allow to offset the cost of commissions, meaning you need a lot of money. The other problem is that this strategy assumes you have money to buy when drops occur, meaning you need a lot of money. If I had a huge amount of money and the companies had a huge amount of stock I would probably just day trade with several stable companies using small alert values (.003, .0042).

Business, Business, Business

2010-08-12T21:34:00.000-07:00

So, I decided to finally try to purchase a rental to start trying to build up some cash reserves. So, I've read some books on the subject and the main thing people say is to make money using other people's money. They want you to get private lender or hard money loans to make your downpayments and pay little down.

Now lets talk about this a little. So, obviously if you pay zero down, your loan will be larger and your monthly payments will be larger. Oh, by the way, they say you should always look for seller financing because you can work out arrangements. Anyway, if your monthly payments are larger, there is a higher probably that you will default on your loan.

On the other hand, if you pay all cash for a property, there is virtually no risk, unless you can't pay the taxes or you let the property go to ruin. This is because you don't owe any money and there is no way to default.

So, what is the happy medium here. Well, as an investor you want to maximize your rate of return on investment. So here are the numbers with the property I am purchasing. I hope to buy a $55,000 property, and pay $11,000 to avoid mortgage insurance. I want to have less risk since this is a first property. I shoot for a R/V ratio of 1%, meaning I want to rent for $550 per month. Most real estate people say to estimate 2 months of vacancy per year, meaning I will be renting the property for 1/100 of the value. If the mortgage payment on my $44,000 loan is $325, that leave $225 per month or $2250 per year of cash flow. Placing $250 into the home might leave a $2000 return on my $11,000 investment which is 18%.

In another situation, if I paid $55,000 cash, I would have $5500 per year minus $250 or $5250 return on my $55,000 investment which is 9.54% return.

Now, these calculations lead me to understand how much a house should be valued at. Based on the paying all cash, you would see that a 5% or 10% return is reasonable, meaning you should pay between 100 to 200 times the amount you would rent a house for.

So, here are some quick rules of thumb.

1. Paying 20% down is the standard way to balance risk versus reward.
2. An investment rental should be purchased at a R/V ratio of 1%.
3. A home has intrinsic value of about 100 times monthly rents.
4. An ideal sale would be at a R/V ratio of .5% (200 times monthly).
5. Placing 20% down on a R/V ratio of 1% should earn about 18%.

Here are some other interesting tips.

1. Purchase cheaper homes that allow multiple people to afford rent.
2. Purchase multiple unit properties (easy to obtain R/V of 1%).
3. Purchase during down cycles (1%), sell during up cycles (.5%).
4. Make money based on R/V.
5. Don't purchase assuming an appreciation, let that be an added benefit.

Investing - Poker versus Stocks

2010-08-08T07:44:00.000-07:00

So, in 1999, when I was a waiter at Spago's, I took my lunch break reading about stocks and investing. Even though I had read a ton, I still had no clue what a good investment strategy was. I saved up $10,000 to invest and thought I would test the waters. I met a broker at Wells Fargo and listened to his pitch, investing $1000. After about 2 or 3 months, that $1000 had doubled with my investment. No, kidding, I was going money eyed, like Scrooge McDuck. So what did I do, I invested the rest of the $10,000. Later, this amount dropped to $7000 or so, and I decided to let the money sit. After he realized I had no more money, he transfered my account to an online brokerage. About 2 years, later, the fund was stagnant and Wells Fargo online changed their policy and I was chared $200 in brokerage fees.

I sold the Mutual Fund, placed an automatic trade ($25) every quarter to avoid fees and decided to try to pick some stocks and sit with them. Over about 10 years, I can say that I've lost about $7500. I now sit with a low fee, passive index fund, that tries to hold the top 500 stocks from the S & P. Of course I have my 401K in a 50% 50% split between bonds and a mid cap fund.

What are my mistakes?

1. Well, first of all, I thought a broker at Wells Fargo, would have any clue what he was talking about. The goal for any bank is to give their pitch and make sure a trade occurs. They make their money off of transactions. Even reading this blog, you will probably go out and buy some stocks, even though I am telling you I lost $7500. That is the purpose of CNN, the stock tickers, the shows on TV, the millions of ways to invest money, etc. And trust my, you will invest your money in these at one point or another.

2. Not having a clue what I was investing in. Just trusting someone else to make money, without even knowing the fees involved in the transaction.

3. Picking a stock because I thought the company looked good and made a good product. Even with my index fund, which is supposedly safe, I really have no clue why the fund is doing what it is doing. Picking stocks the way I have is like throwing a dart at a dart board. Without a lot of valid research, this really is just gambling. Buffet, a great value investor, once said he will only find 1 or 2 stocks the whole year. Researching the whole year to find a stock. We will definitely know when we want to buy, spend maybe 2 days at most, thinking about whether we want to buy and buy.

4. Playing into the Ponzi scheme. I invested my $1000 had it doubled and immediately, put a bunch more money in. That is exactly what a Ponzi scheme expects.

Now, let me give you a flip side. In 2005, I started playing poker. Basically, my strategy was an aggressive style and I attempted to be patient and go all in when I had an excellent hand. This is called hard ball poker. My first tournament, I bought in for $35 or so, with 5 or 6 tables and won the whole thing! I got $535, which I tipped $35 off of. I played $8-$16 that night and lost it all. My family was not with me, as I had to get a summer job in a separate city and I had a week to start work. I managed my money great, and moved down to lower limits, learning anything I could. I was up about $700 after that first week (not counting gas, food). I remember many hands from that first week. The first was a flush versus flush, which had happened several times, but it was hard for me to read the hands as fast as the dealer was dealing. I had seen several pot splits and I protested that we both had flushes so we should split the pot. Luckily, it was limit since my strategy was to bet my shirt on any flush or full house. Another protest was when I had 2 pair and another person had 3 of a kind. I had been playing my 3 of a kinds weak, previous to that hand, thinking it was not that great. The final hand, was when I had 4 of a kind. I had four 4s and there were 2 sevens and 2 fours on the board, meaning the other guy could have a 7 for a full house or two sevens for four of a kind. I sat thinking and thinking about whether to raise or just call. Finally, I decided to raise. Basically, we had capped all betting on all rounds. Four of a kind, and I was thinking.

Anyways, I kept playing on and off and reading many many books and trying different things. I learned about how to small ball, which meant to risk very little. The basic strategy here is to win lots of little pots by constantly raising pre-flop, in position to minimize the field to 2 or 3 players. Then, bet out a lot after the flop. You lose several medium pots, by controlling the pot size and checking with things like top pair on the turn, possibly inducing a bluff on the river or getting away cheap against a strong hand. You win a few large pots because of all your aggression, people just don't believe it when you have an awesome hand. They walk away saying, man this guy is terrible, always putting his money at risk and he still gets lucky.

Out of 10 players, I might only be better than 1 or 2 at the table. However, that is all I needed. If I ever tried to take on everyone, I would lose my shirt.

Over the long haul, I was at about $8,100. BTW, I recently quit playing, due to the time and effort I was using and taking away from family. The best book I ever read was Ace on the River by Barry Greenstein. If you want me to sum it up, he dropped out of his PhD, lost his family and became a millionaire. Somehow, subconsciously, my ordering represents my actual priorities.

I've never lived near a Casino (good thing), so most of the year, I would not play, except possibly online. Literally, at a Friday night home game with some friends, I would feel bad winning and move all in pre-flop with 97 off to try not to take their money. Here, there may be 10 players and maybe 2 or 3 could match up to me (or better). Remember, having 2 worse in this crowd is enough to make money.
I wish I had exact numbers, but about a year before I finished my PhD, I lost my excel spread sheets as my hard drive crashed. Luckily, I just had to retype a bunch of stuff, since I had been e-mailing my advisor my work. Back to the story. Now wait a minute, how does this guy invest in stocks and lose $7500, yet gamble and win $8100? What is the point of this story?

1. One major difference is that I was highly educated in poker, yet had just a brief education in stocks. For me, the gamble was the stocks and the poker was skillful.

2. I managed my money well. With stocks, balancing is an important part of the investment game and managing money is very important. With poker, I would drop limits to limits I could beat. Anytime I went up limits, I always dropped limits before I lost whatever I won.

So after all that, what did I learn. I learned that poker is not gambling in the short term, but requires full attention and thousands of housrs to master. Even at a masters level (okay ignore extreme cases), one can only make about $50,000 a year, grinding 80 hours a week. Do yourself a favor, get an education and make twice that.

Stocks, also require a smart investment strategy. If you are not willing to put 100s of hours in to learn, you are just gambling. Don't listen to advice people give you, learn for yourself. People make money in the stock market by making the right decision against popular belief. In fact, it is better to think of the stock market as a gamble between two people, since there is always someone on the other end of the stock, losing money.

Our Mortgage Crisis

2010-08-06T07:21:00.000-07:00

So, these past few years, I have seen friends all around me buying up houses, with little down and huge monthly payments. I stood by and said, no to a new house. I stuck with my $80,000 house which is only 936 square feet. Why did I do that? Because, I believe growing up in Silicon Valley, that we have definitely lost our business sense. My uncles and grandfather, grew their business as farmers, the old school way, by borrowing money from people you knew. That way, if you were to ever try to screw people out of their money, they would be there to haunt you. I'll leave the discovery of how to do business in the internet age for later.

Anyways, there are time tested hard and fast rules for buying a house. Put 20% down and don't pay more than 3 times your annual salary. I bought my house with 4 kids during graduate school, putting $20,000 down. I always worked through school, but not many people I know bought a house during school.

So, as the years past, and I looked at my friends buying the houses, unfortunately many of them lost their houses. Sometimes multiple. Now lets dig in a little deeper as to what is happening.

A bank, offers a loan to a poor person, who can't afford the payments. The loan is tricky, with hidden fees and variables. The bank is almost positive the person will default, but still takes the risk. If you ever noticed, banks are funny this way. They don't want to deal only with people with great credit. They need people to default. No one defaulting, means no one paying the expensive penalties. Everyone defaulting means they have no cash flow.

Anyways, so the bank gives out a loan to a poor person. In the event of default, that poor person's money is taken. The bank gets the cash flow and turns around and sells the loan (through bonds, etc) to a middle class investor. The middle class investor has no clue about investing, but walks into the bank one day, to see people all dressed nicely in business attire and believes the broker, when the broker talks the middle class person out of buying a CD and buying this bond which involves higher interest mortgages backed by real estate. Wow, the bank just eliminated their risk of default. In the case of a default, the investor loses all their money too. The bank has the cash flow (from the investor's initial purchase and the poor person's monthly payments). The whole scheme blows up one year, all these funds get placed to the side, CEO walks out with 4 million dollars and the poor person and bank file bankruptcy. Whew, good thing the middle class investor didn't put all the chips in one basket.

The big short gives many details of the sub prime mortgage crisis.

Next time the bank offers you a great no down offer, just think about the guy on the other end, cause I can guarantee its not the bank taking the risk. Speaking of which, who's fault is this? I would say all three parties.

Take this interesting example. Three guys live in a village. One guy has a house, another wants to buy it and the third has $100,000. The third provides interest and is trusted to hold money. He loans the money to the guy wanting to buy the house, who trades if for the house. The guy who sold the house, then gives back the money, to make interest. The third guy was very smart. He still has the $100,000, and now has extra since he is making profit on the loan he just gave as well as the up front fee to handle the transaction that just occurred.

Interviewing for Technical Positions

2010-08-05T22:00:00.000-07:00

So I interviewed for a technical position which is always funny. I interview people at my company and really there is no way to know whether someone is good or not, just from talking with them over the phone or having them take a test . It takes about 6 months to find out if someone is really good or not.

Anyways, I do C++, Java, Matlab, Perl, HTML, etc. I get on the phone and the guy asks me a bunch of stuff. Do I know the difference between an inner join and an outer join in SQL? Yes, I did know what that was when I needed it, but unfortunately every 2 weeks I forget, because I am dealing with all this other, how do I say it... More difficult stuff. Apologize to those who can't get SQL, with its 8 commands. I was honest and told him, I would just google it. I swear, I would be no where without google. He didn't much like that answer, so I told him, basically, if you joined two tables, the number of resulting rows would be different based on if the data was in the first, second or both tables.

He even asked what SQL stands for. I knew the answer, but I can guarantee there are some great database programmers out there who could care less what SQL stands for.

He asked what a Cursor was and I said, I basically just use rs.next() so I wasn't sure. He told me, sounding very technical that you use it with stored procedures for a database. Uh, I looked it up and its just an internal row pointer. In fact, the rs.next() uses the Cursor to track what I had read and what I hadn't.

He asked what the Singleton design pattern (if you want to know more about design patterns, Head First puts out some decent books) was and a bunch of Scrum stuff. Most of that stuff I knew, cause I am a big fan of Agile programming.

He asked about CSS (style sheets), thinking Semantic Markup, was such a big deal. I had no clue what he was talking about and then he told me it was used to keep content separate from style. Oh, that made sense. Kinda like N-Tier design. I have definitely done this type of thing, just naturally, and sorry, I couldn't tell you what the technical terms are. I mean, after changing content several times and weeding through tons of style code, eventually, you learn to just do something to keep these different anyhow. In fact, I built an automated test to run through the directions of a User's Guide. The test, generates screen captures automatically, which are included in a Word document. This way, as our application changes, all the screen shots are still valid (or easily generated), since we require the automated test to run before updating the application with new code. I have no clue what this is called, but yes I do it.

He talked about Adobe strut, which I hadn't heard of. I like getting these CS guys on the other side of the interview table. They know all the terms, but when it comes down to managing multiple threads or designing a logical flow to the application, they run in circles. Don't worry, its not just CS guys that do the jargon talk. But to backup my reasoning for laughing at these guys, when I first started, I took several C++ classes and told a seasoned veteran that I wanted to become a Software Programmer. He asked me what the different types of for loops are (uh, an infinite loop) and a bunch of other stuff, that I probably still don't know today. He told me I could never make it.

Sorry, I don't know the different types of for loops but when you need someone to write a test bed, which has built in utilities to guarantee the Event Queue is empty and threads are idle to avoid deadlock I'm your man. And I won't even know what to call it.