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2012 December 22 Saturday
Fitch Threatens US Credit Downgrade On Fiscal Cliff

No more triple A. Will Fitch go thru with it? That would be cool.

Here's how you have to look at folly: Can you make money off it? It isn't possible to prevent most folly. America's political class has been making big bad decisions (immigration, deficit spending, ridiculous military adventures, rewarding the irresponsible, political correctness) for decades. These decisions are having cumulative damaging effects. Even if they stopped making major bad decisions tomorrow (a fantasy) the effects of past decisions will cost us for decades to come.

So here's how I see the fiscal cliff: If we fall off into a recession then great news! Markets always overreact to good and bad news. A recession is just what we need in order to lower the prices of stocks to get good deals for our retirement portfolios. We need cheap stocks for our retirements because most of us won't get defined benefits pensions and the governments will need to cut back old age entitlements.

Of course you might lose your job in the next recession. Hey, as I keep telling my regular readers: You need to raise your game and make yourself more productive and employable.

A tip on how to become more productive: read books on willpower and try out their techniques. Find out ways to manage yourself more effectively. Roy Baumeister and John Tierney's Willpower book is a good place to start. Charles Duhigg's Power Of Habit is another good one. Learn how to manage yourself better.

You and I can't fix the macro level. But most of us can compensate for the macro problems by making changes in how we conduct our personal lives. Recognize the need to change. Get thru the 5 stages of grief and adapt to what the world is becoming.

Share |      By Randall Parker at 2012 December 22 09:53 AM 


Comments
James Bowery said at December 22, 2012 11:02 AM:

From John Robb's Resilient Communities blog:

So, what happens when the global system resets? Nobody really knows, but….

One good bet: if it resets quickly, as David predicts in his report, government bureaucracies will step in to keep things going.

How? They will nationalize large sections of economy and determine what is produced and what isn’t.

What will it feel like? Think in terms of how the US and European economies mobilized for world war 2, but without the war.

JR thinks the answer is relocalization aka building "resilient communities":

By building resilient, dynamic local economies that thrive as the global system sputters. Communities that have learned to produce food, energy, water, products, and incomes locally.

NOTE: Fortunately, nearly all of the technology trends are helping us on this. It’s getting easier and easier to produce everything we need locally, every day.

These re-localized economies will interconnect with others globally. They will prosper together.

Following Randall's advice, one might want to enhance one's "employability" as a government bureaucrat.

Personally, I see the emergence of sortocracy.

Tom said at December 22, 2012 11:47 AM:

"A recession is just what we need in order to lower the prices of stocks to get good deals for our retirement portfolios. We need cheap stocks for our retirements because most of us won't get defined benefits pensions and the governments will need to cut back old age entitlements."

Stock holdings provide little to no income. So the whole point of trying to benefit from cheap stocks would be to try to gain a redistributive wealth effect, a zero-sum transfer from non-stock holders to stock holders. If everyone buys the cheap stocks in proportion to their means and the stocks go up, it's a wash and there is no gain to anyone.

Randall Parker said at December 22, 2012 12:09 PM:

James,

I think the relocalizers are fantasizing in terms of wanting to develop a local economy now. You can get far more leverage out of your skills by working at things that have wider impact. Unless you think world trade is going to become blocked and the internet is going down then you should do work that has impact on a larger scale with markets far larger than your local community.

If you work at a larger scale now you can accumulate the assets to prepare yourself for hard times. For example, need a bug-out place? Then you need the money to buy it, to build hiding places for your stuff, and then more money to buy the stuff you'll need. Think you'll need to do self defense? You need the money for guns and bullets and physical barriers.

The only way I can see localization as the way to go is if we get hit by some of really large scale physical or biological disaster. An EMP could make economies scale way down. A huge killer plague would make economies and populations shrink.

The different financial, physical, and biological disaster scenarios require different forms of preparation. You have to decide what you want to prepare for. If you think hyperinflation is coming then get into assets which will retain their value. If you think the power grid will collapse then that requires a different set of preparation steps.

James, what do you see coming and what do you think you should do to prepare for it? I ask this seriously. I'm not now taking steps to buy stuff against disaster. I'm currently focused on making more money and saving more money.

James Bowery said at December 22, 2012 1:53 PM:

Relocalizaton might work in time with county-backed currency (backed by accepting it in payment of taxes) so that some real estate interest payments can be kept local. I've been trying to convince folks to pursue that but of course, getting people motivated to pursue prep work, other than modest degrees of "self-sufficiency", is a challenge.

Total "self-sufficiency" is pretty impractical for those of us now multiple generations off the pioneer homestead. From the limited self-sufficiency/bug-out place angle I've acted preemptively: Summer of 2008, when I saw the coming financial meltdown, I, in late July, relocated from the Pacific NW to small town (5k) rural Iowa an hour and a half from any large metro areas. Working remote over the internet doesn't pay well (competing with the Asian hoards) but with lowered expenses and a safe environment, I have less need for money. Summer of 2010 I moved to an old farm house near the river (water table is accessible) at the end of a dead end gravel road but still walking distance to town, even in snow shoes. Surrounded by corn and soybean fields I've been evolving a mix of heritage breed chickens with studied neglect but selective incubation, so they'll go out into the adjacent winter corn and soybean fields to forage for food left from the harvest and also find their own shelter. Also, I've kept the population a little heavy on the roosters so birds of prey aren't a problem. The first 2 years (now on fourth generation) had a high mortality rate but this kind of notch evolution works fast They're doing pretty well this winter. My 2 cattle dogs do night patrol and have cleared predators out for a quarter mile around. The big problems with the chickens are dog food and getting the right nesting boxes so the eggs aren't hidden off somewhere. Also its taken me 3 years to get to the point that I know what I'm doing with the large (20kft^2) garden area.

The biggest problem is energy.

But I am looking for ways to make more money and there is a possibility I may give up this situation for a CO2-to-algal protein system I've been working on with one of the founders of the DoE. The computer field is dead for baby boomers.

Randall Parker said at December 22, 2012 3:41 PM:

James,

The best paid software devs I know all work in Silicon Valley. I do not think anyone I know in Silicon Valley makes less than $100k per year. $200k is attainable. Even higher. I know others in a SoCal market who make about $120k-$130k per year. Location matters greatly. I wonder what salaries are like in Austin. The whole "death of software dev" due to Asia is not my experience.

Remote work: A friend works remotely from a farm in a permanent job and gets paid a 6 figure salary. The key is to develop the reputation that would allow you to work remotely rather than try to win jobs from the remote location. Another friend tried to live very remotely and do software dev without good enough contacts. That did not work well and he moved back into a more densely populated area.

Chickens: I used to raise them. Had covered place with small door they went into at night. Feeding them near and into it near sundown will help get them to it. Water next to it will help too.

My take on the remote living idea: Better to make a lot of money elsewhere and when you finally go remote set yourself up well capitalized rather than poor. Also, develop lots of contacts before going remote. I don't really want to live remote unless civilization collapses.

James Bowery said at December 23, 2012 10:09 AM:

Saying the computer field is dead for baby boomers is different from saying the computer field is dead. Although it hasn't been rigorously studied to the best of my knowledge, age discrimination is real and to some extent justified in the computer field. Of all of the guys who built the PLATO system back in the 1970s I worked with only a very few are making ends meet in the computer field and those few exceptions include guys, like Ray Ozzie who made it big well before the dot-con bubble burst -- an event in which those without substantial wealth or ethnic nepotism networks they could lash themselves to for subsistence positions, were blown away in the storm surge. That resulted in an age and ethnicity purge of the industry from which it has not and will not recover. A career interruption like that, even for a couple of years, can and does spell career termination for the vast majority of computer technologists over the age of 40. You just can't get onto a management track after that and the An additional "feature" that has been added since that purge has been the credit check as part of the qualification for employment. Again, if you had an ethnic nepotism network to give you a lowered-wage position to weather the storm surge, you didn't suffer a substantial loss of credit rating. Its a way to have "disparate impact" and I have little doubt that the credit-rating as hiring criterion policy was put in place at least in part for that very purpose.

BTW: Don't try to bullshit me about ethnic nepotism not being a major feature of Asian insurgency into the Fortune 1000 IT departments. I have way to much eye witness testimony from Silicon Valley during this period from places like Sun and HP -- not minor players at all and demonstrating the "benefits" to the shareholders of such insurgencies.

Now having said that, its true that younger guys who are just now graduating from college in the computer area do have an obligation to themselves to head toward the highest wage metro areas, if for no other reason than that their enormous student loan debts cannot be discharged in bankruptcy -- and even though many won't have ethnic nepotism working for them, ethnic nepotism has become less a factor since around 2004 or 2005 when employment in the field started recovering. For boomers who have had their careers terminated, its a huge risk to relocate to such an area even for one year of six figure employment. The costs have to include the risk of another purge like that which happened circa 2000 to 2004 -- a purge in which it is all to easy to spend all one's capital trying in vain to find subsistence employment rather than "bugging out". I made that mistake and will never make it again.

Randall Parker said at December 23, 2012 11:35 AM:

James,

I know a guy with a terrible credit record who is over the age of 40 who got hired for a high salary writing software in Silicon Valley after a multi-year gap in his work history. I realize these factors are problems. I realize different ages are treated differently. I'm not young either. But I'm working and have friends working who are across a wide range of ages and I know that highly talented people with problematic factors can get hired.

A year for six figures: I guess it depends on your moving costs. If you don't need to move with a lot of stuff you can go work for a year and then move on. I know guys who worked that way as contractors, especially back when I worked in aerospace. They chose to be itinerant workers. They were lining up new work before finishing with their current job.

I know a clock is ticking on my career. I work long hours and try harder because of that. I can tell you that in Santa Barbara the talent level wasn't so high and we had to use people who weren't so good because it was hard to find great people. The talent level is much higher in Silicon Valley. I think it would be easier to find work in SoCal or maybe a place like Kansas City or Omaha. Not going to go to those places any time soon. But could be worth trolling them via craigslist and other job sites.

Mthson said at December 23, 2012 3:46 PM:

I think this article is right that, although age bias is definitely a factor, it can sometimes be at least partially managed: Silicon Valley's dirty secret: Age bias.

Randy Adams, 60... got turned down from position after position that he thought he was going to nail -- only to see much younger, less-experienced men win out. Finally, before heading into his next interview, he shaved off his gray hair and traded in his loafers for a pair of Converse sneakers. The board hired him. "I don't think I would have been able to get this... job if I hadn't shaved my head." ... In person, older job applicants should carry a backpack, not a briefcase, he says... Above all, steer clear of wristwatches, which most younger people have replaced with the clocks on their phones.


I think Steven Sinofsky at Microsoft, for example, was smart to adopt younger attire than we're used to seeing from Ballmer and Gates compared with Apple, Google, and Facebook. (But it depends on the job.)

James Bowery said at December 25, 2012 11:51 PM:

“If all of those bells are ringing, somebody must be winning!”

But to be fair to the hope-springs-eternal crowd, one thing has changed that is significant:

Mobile apps.

The business model for writing and selling mobile apps renders it far plausible for talent, even aging talent that is disconnected from ethnic or other employment networks, to make at least a some money filing a niche market -- especially if it is developed on a cross-platform system like PhoneGap.

I am not testifying that I've done it, I have only recently started, but if we're going to pay attention to the clanging bells and flashing lights of the casinos, this is a casino where it doesn't appear to be as sick to lay out your last quarter.

Matt said at December 27, 2012 3:21 AM:

James,

Are you sure about mobile apps? This article suggests it's like a casino - even those who have managed to succeed admit as much:

http://www.nytimes.com/2012/11/18/business/as-boom-lures-app-creators-tough-part-is-making-a-living.html


"Shawn and Stephanie Grimes spent much of the last two years pursuing their dream of doing research and development for Apple, the world’s most successful corporation.

But they did not actually have jobs at Apple. It was freelance work that came with nothing in the way of a regular income, health insurance or retirement plan. Instead, the Grimeses tried to prepare by willingly, even eagerly, throwing overboard just about everything they could.

They sold one of their cars, gave some possessions to relatives and sold others in a yard sale, rented out their six-bedroom house and stayed with family for a while. They even cashed in Mr. Grimes’s 401(k).

“We didn’t lose any sleep over it,” said Mr. Grimes, 32. “I’ll retire when I die.”

The couple’s chosen field is so new it did not even exist a few years ago: writing software applications for mobile devices like the iPhone or iPad. Even as unemployment remained stubbornly high and the economy struggled to emerge from the recession’s shadow, the ranks of computer software engineers, including app writers, increased nearly 8 percent in 2010 to more than a million, according to the latest available government data for that category. These software engineers now outnumber farmers and have almost caught up with lawyers."

.....

"Despite the rumors of hordes of hip programmers starting million-dollar businesses from their kitchen tables, only a small minority of developers actually make a living by creating their own apps, according to surveys and experts. The Grimeses began their venture with high hopes, but their apps, most of them for toddlers, did not come quickly enough or sell fast enough."

.....

"One success story is Ethan Nicholas, who earned more than $1 million in 2009 after writing a game for the iPhone. But he says the app writing world has experienced tectonic shifts since then.

“Can someone drop everything and start writing apps? Sure,” said Mr. Nicholas, 34, who quit his job to write apps after iShoot, an artillery game, became a sensation. “Can they start writing good apps? Not often, no. I got lucky with iShoot, because back then a decent app could still be successful. But competition is fierce nowadays, and decent isn’t good enough.”"


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