TECHNOLOGY
Setting a Standard of Your Career Income
When Geoffry Brown was laid off from a marketing job with a San Jose software company in 2003, he could not know what lay ahead: several years of unemployment, a divorce and, ultimately, a pay cut when he went back to work.
"Nobody wants to hire a 46-, 47-year-old guy. Could I say that being black had anything to do with it? I won't go that far," Brown said. "But I will say I didn't have some of the (employment) networks some people had."
Brown questioned whether he should leave Northern California for a place with cheaper housing and a more vibrant African-American culture. During the tough years after the 2001 tech bust, many blacks in Silicon Valley weighed the same question.
New 2006 data from the U.S. Census Bureau suggest the valley's post-bust economy has been tougher on blacks and Latinos than on other ethnic groups. While the typical white and Asian household in Santa Clara County has nearly recovered to the same income it had before the crash, the typical African-American household is earning about three-quarters of what it earned in 1999.
Over that time, hundreds of blacks have left the valley, although their reasons for moving, many say, are frequently more complicated than simple economics.
San Jose has about one-quarter fewer black children and teenagers than in 2000 -- the result of an aging population with fewer children and fewer young adults in their child-bearing years, and of the fact that people have moved away.
"The last time we had a large number of young African Americans moving to California was many, many decades ago," said Hans Johnson, a demographer with the Public Policy Institute of California.
Feelings of isolation
Johnson said there has been a steady flow of blacks out of big California cities -- including San Francisco, Oakland, Los Angeles and San Jose -- to inland suburbs with cheaper housing such as Elk Grove, outside Sacramento; the Inland Empire of Southern California; and cities like Atlanta, Las Vegas and Phoenix.
San Jose's black population fell by about 11 percent from 2000 to 2006, to about 27,000, even though the city's total population is growing. In San Francisco, where the African-American population is down more than 15 percent since 2000, Mayor Gavin Newsom has called for the creation of a task force to try to stabilize the city's black population.
Some black engineers, executives and managers at Silicon Valley tech companies say that while their numbers have never been large, the dwindling population can add to a feeling of isolation, both in and outside the office.
There's a shorter supply of people who can serve as mentors or champions when companies start deciding whom to lay off.
"You are happy to see another African American when you see them because it's so rare," said Pamela Jackson, director of product marketing for Symantec, the Cupertino software maker that is headed by one of the most prominent black chief executives in the valley, John Thompson. "But you become very accustomed to being the only one in a meeting. It doesn't mean you ever like it, or anything like that."
In small or midsize companies "you almost expect to be the only one, or one of a few," said David Lewis, a veteran of four Silicon Valley startups.
And compared with the 1980s and 1990s, many black professionals say there are fewer black nightclubs or entertainment choices, and a bigger chance that sons or daughters might be the only black child in their classroom -- or even their school. Nor does Santa Clara County, unlike neighboring San Mateo and Alameda counties, have a place that could be considered a traditional black neighborhood.
"The only way you can relate to the African-American community is on Sunday in church," said Rick Callender, president of San Jose Silicon Valley NAACP. "That makes it a hard place to live."
Moving on
Jackson and Lewis, Bay Area natives with a network of family and friends, never thought of leaving. But Ian Laing did. The former CEO of a telecommunications company that had trouble after 2001 finding venture capital funding to develop its voice-over-Internet-protocol technology, Laing and his family sold their Almaden Valley house in 2004 and moved to an Atlanta suburb, where he's a vice president of sales with Nokia.
"It was just a good time to reposition the family," Laing said. "It's a bigger, more vital African-American community. It's just a much higher quality of life for the same amount of money. All of those things kind of weighed in."
Some say the valley's tech companies don't have a strong enough commitment to having a work force that includes blacks and Latinos.
"There's much more focus on making money," said Ken Coleman, the African-American chairman of software maker Accelrys and a veteran of more than 30 years in Silicon Valley as a manager and executive with Hewlett-Packard and Silicon Graphics. "I don't see a company or a leader kind of taking that on and having a significant impact in the diversity area."
Laing and Coleman said Silicon Valley companies pride themselves on being meritocracies. "They are not proactively looking for strong AfricanAmerican and Latino talent that is probably not as easy to come by," Laing said.
To be sure, some African Americans are flourishing in the valley's tech industry. The number of black households in Santa Clara County with incomes of more than $150,000 a year increased substantially from 1999 to 2006, to about 1,200 households -- a 29 percent increase.
Gap widening
The real decline has been among middle-class households: black families earning $50,000 to $150,000. Their numbers have declined by about 1,700 households, or about 20percent, since 2000. Meanwhile, the number of black households with incomes less than $25,000 is up.
"We just do not embrace mathematics, science like we should," said Lewis, the multiple startup veteran. "Mainstream America does not understand how far the gap is becoming, especially with black males. It is scary out there."
Lewis had a rough six months in 2001 when the optical networking startup he was working for closed. But with the help of the extensive professional and personal network he had built since graduating from San Jose State University in 1991, he quickly found another job.
"The circle I run with has fared just as well as any other group" after the 2001 crash, he said. "But I think it's because they are over that $150,000 range."
Lewis said he also knows many friends who were hired when big valley companies were in desperate need of workers during the late 1990s, but who quickly lost their jobs when the layoffs started.
"They all got caught up in that first wave of people getting let go," he said. Other black professionals have similar stories.
Brown believes his four years of limited employment after his layoff from Cadence Design Systems contributed to his divorce. He temporarily moved to Washington, D.C., but he always felt he was going to come back.
"Once you've worked in high tech in Silicon Valley, there's not many places you can work where people will recognize your value," he said.
In February, he landed a job with a Sunnyvale software start-up, FastScale Technology. He makes 35 percent less than he did with Cadence, but there's a silver lining -- something far more precious than silver, actually. During two years as a stay-at-home dad, Brown's relationship with his young son deepened. Now his 6-year- old, Geoffry, lives with him.
Did the travails of the past four years make Brown a stronger, better person?
"I know that's a popular thing to say," he said. "But I don't know if I want to do something like that again."
INVESTMENT
Secure Your Portfolio against Rising Prices
By Donald Jay Korn
Each year it seems you need more money to pay for the same things, whether it's a slice of pizza or bottle of aspirin. If your investments are going to help you achieve your financial goals, they have to beat inflation, the steady increase in the cost of everything.
Oil prices are down and interest rates remain low, but inflation is by no means conquered. The consumer price index (used to measure inflation), including food and energy, has risen 2.1% in the past 12 months, according to the Bureau of Labor Statistics. Has your investment portfolio kept pace? If the answer is no, then you might want to include these inflation hedges to your investment mix:
oooCommodities These include food, grains, and metals, which are interchangeable with another product of the same type, and which investors buy or sell, usually through futures contracts (an agreement to buy or sell a particular commodity on a predetermined date). The price of the commodity is subject to supply and demand. Rising inflation often goes hand in hand with higher prices for oil and natural gas. Farm products and industrial metals can also shoot up in price. Try investing in a mutual fund or exchange-traded fund (ETF) that follows an index of commodity prices.
According to Lee Baker, who heads Apex Financial Services in Tucker, Georgia, Oppenheimer Real Asset [QRAAX] is a solid fund. This mutual fund is designed to track the Goldman Sachs Commodity Index of wheat, metals, hogs, etc., and especially energy products. If commodity prices rise, so will the Index and investments in this fund. In November, Oppenheimer Real Asset had a five-year annualized return of 14.80%, which was 8.25 percentage points higher than the 6.55% return of the S&P 500.
Real estate Real estate is a proven long-term inflation hedge. "In addition to direct property investments," Baker says, "our firm recommends American Century Real Estate Fund [REACX], which invests in commercial properties. If inflation picks up, those properties are likely to get rising rents from their tenants, which can be passed through to investors." Again, real estate funds have been winners lately. The American Century entry has returned close to 25% a year for the past five years.
Inflation-indexed bonds TIPS (Treasury Inflation-Protected Securities) are designed to protect investors from inflation, says Kathy Williams, who has a financial services firm in Oklahoma City. "We include TIPS in our bond market allocations. These are Treasury bonds, so they have the federal government's backing against any default." The return comes in two flavors: a fixed interest rate set when TIPS are issued and a variable interest rate that tracks inflation. Say you invest in five-year TIPS when the fixed yield is 2.5%. If inflation stays around 3% a year for the next five years, your total return will be 5.5%: 2.5% plus 3%. But if inflation takes off and averages, say, 9% a year for those five years, your TIPS will provide a total return of 11.5% per year. You can buy TIPS from the Treasury Department at www.treasurydirect.gov, avoiding virtually all fees. Williams suggest funds such as Fidelity Inflation-Protected Bond Fund [FINPX].
Stock funds If prices rise, corporations will be on the receiving end of those extra dollars, so you should own corporate shares. Stock funds can give you broad exposure to the U.S. market (see "Course Correction," October 2006). If you hold fund costs down, more of your returns will find their way into your own pocket. Morningstar reports that as of fall 2006, the average domestic stock fund will charge you about 1.45% of your investment each year. Look for funds with costs below that norm to maximize your chances for above-average returns.
REAL ESTATE
Successful Browsing for Housing /
(Investor Report) Traditional Credit Sources Squeeaing Pipeline
Successful Browsing for Housing
by Broderick Perkins
It's no secret in the world of residential real estate that well-informed home buyers who are also quick on their feet get the best pole position.
And there's nothing like browsing for housing online to bring knowledge and speed to the home-buying contest.
"More informed buyers, improve the transaction process," says Douglas de Jager, co-founder of DotHomes.com, the latest home listing portal on the block.
"There is so much more information made available to us online, when you go to the actual home, it's just a validation process for what you've seen online," he added.
But transforming digital digs into a real home of your dreams isn't just about bandwidth and content.
DotHomes.com offers these little-reported tips to help you get the most out of your online home shopping experience.
Leverage the broker. Capitalize on the fact that brokers and real estate agents are the "matchmakers" in the residential real estate world. They use local expertise to connect buyers and sellers. Research, browse and focus your search online with tools they provide. They generally are tools that put you quickly in contact with all of the information and resources the listing agent or broker has to offer. Broker blogs, market reports, how-tos and other information can give you the foundation for an informed online home search.
Search in real-time. First come, first served takes on new meaning with property listings and other information electronically "fed" to you via RSS (really simple syndication) feeds, email alerts and Web updates. When fresh inventory is tough to find, alerts will keep you abreast of the newest listings and eliminate the need to manually check the Web again and again for updates. When you are on the go, you can tune into alerts via your Blackberry, iPhone or other device and stay up even as you drive from open house to open house.
"It's the difference between push and pull. You pull in information rather than going out a looking for the specific information you need to come to you," said de Jager.
Zero-in. With so many listings on the market, quickly navigating them all is a chore. Use online tools that allow you to refine your property search. If you are looking for a house on a particular street, search the street. If you need a pet friendly condo, ask. Whether you know exactly what you want or are just starting to figure it out, be specific with search terms like "new roof," "three-car garage," "established landscaping," "new kitchen appliances," etc. to find the property with the features you need.
"With so much inventory, rather than 20 to 30 pages of results, you can refine your search and get down to precisely those things you want," de Jager said.
Search "fresh." Avoid Web sites that don't update frequently and are far removed from the original online broker listing. If you don't, you'll miss out on listing changes and updates like new pricing information, new photos, open house dates and the like. Web sites that don't link to the original listing, lock you away from updates. Nothing is more frustrating than to find online what you consider your dream home only to soon discover that the listing was sold, removed from the market or otherwise changed beyond your requirements.
"It's much the same way when you put a listing in a monthly magazine. Don't expect that it's just come on the market. If there is no link between the advertisement and the original listing there could be a serious disconnect," de Jager said.
He also said local multiple listing services (MLS) that offer public access are among the best places to search on line because they use standard formatting and strict guidelines about adding and removing listings in a timely manner.
Screen home movies. Most MLS systems, however, can't hold a candle to professionally produced virtual staging jobs completed with interactive video tours.
"If a picture is worth a thousand words, a video is worth a million," de Jager says.
Videos can give a much better sense of the proportions and the feel of a property. They can also play the starring role -- as a sort of 24-hour open house -- on a Web site or blog dedicated to the listing.
"A good video can often be as good as an open house visit," de Jager said.
And, if you buy a home with its own Web site, you can ask the seller to gift the Web site or blog to you!
"Videos have really taken off with the big brokers and high-end niche brokers. When you can find them they are valuable," de Jager added.
Investor Report: Traditional Credit Sources Squeezing Pipeline
by Kenneth R. Harney
Investors who got used to easy money during the boom years - helped along by Wall Street, Freddie Mac, Fannie Mae and private mortgage insurers - need to adjust to some sobering new realities: Their traditional sources of credit are squeezing the pipeline.
For example, Freddie Mac recently told lenders that as of August 8th, it plans to clamp down on rental home investor loans.
Currently Freddie is relatively friendly to small scale investors who have multiple rental units. With good credit and appraisals, it will finance rental unit mortgages for investors who own or co-own up to 10 properties carrying mortgages.
As of August 8th, however, the limit on multiple units for investors will drop to just four. And that includes the unit to be financed by the new loan application. So the limit is actually three existing investment units plus a new one.
Freddie also plans to get stricter on cash-out refinancings. As of August 8, if a loan on a house was refinanced with cash out of the transaction, it will be subject to higher pricing if the property is refinanced again within six months. During that time period, refi applications will be treated as cash-outs, even if the latest refinancing involves no cash out.
Freddie Mac says the tougher standards “reflect the risk” of these mortgages in light of declining property values and higher default rates in many parts of the country.
Private mortgage insurers - who cover losses for lenders on loans with 20 percent or lower downpayments - are jumping in with new cutbacks of their own on investor mortgages.
PMI Group, one of the largest insurers, announced that it won't touch any rental property or investor loan applications from dozens of what it calls “distressed” or “declining” markets.
Nor will it consider cash-out refis or limited documentation applications from investors.
Even in healthy, non-distressed markets, PMI is banning cash-out refinancings on rental houses and second homes, as well as interest-only mortgages on investment real estate, and all properties containing three to four units.
MGIC, the largest mortgage insurer, says it too is eliminating coverage on investor loans with temporary rate buydowns, along with cash-out refis that have less than full documentation.
With all these new restrictions, where can small investors turn? Try shopping aggressively through mortgage brokers. Some of them have relationships with banks and deep-pocket private investors who still welcome investor loans in their portfolios - provided, of course, that they come with higher rates, solid credit and appraisals that can stand up to rigorous review.
