Saturday, January 31, 2009


We think the economic downturn in Hawaii will not be as deep or as last as long as it will in California and other parts of the American mainland. The outcome in Hawaii will be different because of its location, culture and history. Here is our reasoning.

Hawaii has dealt with severe economic downturns in recent times. Hawaii used to have some of the highest priced real estate in the world but housing prices crashed during Japan’s downturn in the 1990’s. The experience is still fresh in the minds of Hawaii’s leaders and it has changed Hawaii’s policies. The State modified the laws to allow foreclosures to take place faster and protect buyers of foreclosed properties. Allowing the prices to be reevaluated swiftly (“Mark to Market”) and attracting buyers at the new price is a key part of a quick recovery.

The banks in Hawaii are healthy. They didn’t consolidate or take part in high risk bank instruments over the past years. They were fierce about real value appraisals and buyer qualification. We experienced this while attempting to buy a condo on the Big Island in 2005 and having the deal fall through over the appraisal. As a result, the majority of the foreclosures we have seen taking place on the Big Island are from lenders in California and Europe.

Hawaii promotes its key industries and monitors their progress. Metrics on Hawaii’s key industries such as tourism and food production are collected quarterly and published. Downturns are often known in advance by metrics such as advanced reservations and orders and measures are taken to support the industries and workers where possible. Hawaii’s location between the American and Asian continents gives it the advantage of looking both places for business and opportunity. And its culture, lifestyle and climate make it attractive to tourists and businesses from both sides of the world. Often when one continent is having a slowdown, the other is not.

Hawaii monitors its business and property tax income so that they can begin budget cuts as soon as a deficit is seen. The process of cutting back is not perfect and it is painful, but it protects Hawaii from creating out of sight debt. During good times, Hawaii is generous in its spending, so there is a lot of margin in the budget. The excess spending can be cut back without resulting in a loss of critical services like fire, police and prisons. This is in contrast to States on the mainland that have created bone crushing debt oblivious of their local economic downturn and are now forced to cut basic services to communities without a clue of how to get back on track.

Hawaii has delayed infrastructure spending on their harbors, airports, bridges, roads and sewer. A great deal of planning and design has taken place, but the projects have not been started. As a result, Hawaii is positioned to take advantage immediately of Obama’s stimulus package. Infrastructure projects can begin quickly employing workers laid off from the tourist industry.

Hawaii has a lot of Federal support; the largest employer in Hawaii is the military. The military has plans to upgrade and build new facilities in Hawaii, another bright spot for the economy.

The slowdown in tourism is impacting the rise in unemployment in Hawaii the most right now. Though tourism may continue to shrink in the near future, ultimately it will do better than most tourist destinations in the world due to demographics. Wealth is highly correlated with age and most wealthy people are over 60. Hawaii has always been an expensive vacation and retirement destination. As the baby boomers age, the percentage of them that can afford to come to Hawaii will grow quickly over next 10 years. Wealthy boomers visiting and retiring to Hawaii will bring in significant income to the Hawaiian economy.

Much of Hawaii’s economy is cash based and people are used to trading and bartering for services and food. So the economy will be less affected by the global credit shortage.

Though Hilo is showing the signs of the downturn with less tourists from America and more shuttered businesses, we feel confident that Hawaii is better positioned to deal with the economic situation than most other places.

Wednesday, January 21, 2009


In the 1970’s I read Norman Vincent Peale’s “The Power of Positive Thinking” and have worked on being a positive thinker ever since. There have been many evolutions and adaptations on positive thinking over the past decades.

In the 1980’s positive thinking was overtaken by “Positive Mental Attitude”, which was largely positive thinking with an emphasis on one’s attitude for the purpose of improving performance.

In the 1990’s it evolved into “positive attitude” which focused entirely on attitude rather than thinking or performance. Considering the possibility of negative outcomes as a part of understanding various courses of actions was branded as “negativity” which was bad because it made it hard to maintain a positive attitude. In corporations, government, and across the globe talking about negative outcomes, downsides, or catastrophes that might happen became unacceptable. Over time nothing depressing or negative, no matter how much evidence might exist to support it, could be mentioned in any forum and those that did were criticized and often removed from their positions.

The positive attitude culture that dominated the early 2000’s has lead to a “positive” view of reality where housing prices always go up, anyone can make a quick $100K by working weekends fixing up and flipping houses, everyone can retire rich without saving, corporations can be successful without being profitable, and the US economy can thrive even with all the jobs going overseas.

This positive attitude delusion lead to the “internet bubble”, the “housing bubble” and what is surely coming next the “bailout bubble”. The internet bubble made us rich by owning stock or options in companies that had no market or income, the housing bubble made us rich by just living in a house owned by the bank, and the bailout bubble will save us from a depression and allow us to continue our collective delusional lifestyle. In every bubble, thinking and work is not required, just the positive attitude that things will somehow magically work out.

I view positive thinking as using your mind to understand the problems in order to come up with the best solution. The positive part is the belief and faith that those problems, however difficult or hopeless they seem, are fixable and there are opportunities that can be discovered in understanding the problems fully. One of the examples of positive thinking in Peale’s book is about an incident while he was in London in the early 1940s while the city was being bombed. He was in a crowd that noticed a young child trapped in a burning building. As the crowd stood staring in horror, Peale scavenged through the wreckage found a long board, carried it up the stairs of a nearby building, put it across to the building that was burning, and convinced the child to crawl across the board to safety. Positive thinking focuses on believing that there is a solution, thinking about what can be done, and carrying it out. I am sure some of those in the crowd had a good attitude but the attitude did not lead to any action that helped the child.

Our “positive attitude” culture has made it easy for mangers and leaders to deceive the world about the results they are producing in return for their multi-million dollar bonuses because the focus is on attitude and feeling rather than objective results. Good attitudes do not empower people or society to understand the problems we face or motivate us to do the hard work to solve them.

I don’t see value in wailing about the problems facing me or the world, instead I see great advantage in thinking about the issues in the pursuit of understanding what I and the world are facing so that I can come up with the best solutions possible. Thinking about the economy, retirement, global weather, and other challenges of our day, I am motivated to ask, How can I make things work better?, What better solution is waiting for me to discover?, What difference can I make to my family and community? Though the answers may be slow in coming, the effort of thinking about the questions with the faith that answers will come has added greatly to my life.

Friday, January 16, 2009


It is easy to get discouraged reading the news these days. So we decided to recount the things we love about living in Hilo, Hawaii. We have been living in Hilo for 15 months now and there are some things about the town that we have come to truly cherish.

1) Laid-back Hilo mindset We have relaxed to the point now where we really enjoy the no-worry, no-hurry Hilo mindset. Here we slow down to let other cars maneuver the town’s roads and wait patiently in lines at festivals, performances, and in crowded stores. When the sun shines it just feels right to see the parks filled with people lying on the grass surrounded by family enjoying the gorgeous day and the beauty around them. Long hours of work and getting ahead just aren’t part of the Hilo mentality.

2) Time to Talk Story People in Hilo take time to share their story and listen to ours. We find that people here live in the present and are not preoccupied with the past or future. We have learned so much from people we have met sharing their experiences and taking time to give us advice and suggestions. Our social interactions always leave us feeling good inside and make us strive harder to create and maintain a peaceful existence.

3) Hilo Weather Hilo has a reputation for being very rainy, wet, and moldy. And it is. But somehow, the heavy rain doesn’t make us feel shortchanged on sunlight. There is enough sunshine, even during rainstorms, to warm us up and keep us happy. The rain keeps the weather cool year round so that air conditioning is not needed and the air always feels fresh and clean.

4) Fresh, Healthy Food We think few places in the world can compete with Hilo on the availability of fresh healthy food. Our farmer’s markets daily offer produce from fruit farms in Puna and vegetable farms in Hamakua. Hilo’s Suisan offers the daily fish catch in their retail store and Big Island grass fed beef and local products are available in our KTA grocery stores. We even have banana trees and an endlessly producing lemon tree in our yard.

5) Asian Culture We met in high school in Jakarta, Indonesia so we feel a special happiness being back in an Asian culture. Hilo offers us interactions and food and festivities that add substantially to our life.

6) Cost of Living We are pleased about how much cheaper we are able to live in Hilo as compared to California with a huge improvement in our living conditions. Our analysis of Hilo costs has led us to believe we could cut back even more on our monthly expenses, if and when we need or want to, without impacting our health or safety.

7) Japanese TV There are several channels that carry current Japanese shows with English subtitles allowing us to enjoy our favorite samurai and family shows and get an insight into what is going on in Japan. We also have Korean and Filipino channels with shows we like to watch.

8) Beauty of Hilo The views of the crystal blue bay below us and snow covered mountains above us are maximized by being on a steep volcano. Walking and driving around the picturesque town we daily get to enjoy flowering trees, huge green lawns, stately trees, and of course the beautiful Pacific ocean. It just feels great to be around beauty all the time.

9) Activities in Hilo We have been surprised by the amount of intellectual stimulation and cultural activities available to us in Hilo. In addition to an amazing collection of museums (Lyman, ‘Imiloa Astronomy, Tsunami, NOAA reef, to name a few) each with monthly lectures and programs, the concentration of observatories in Hilo has a stream of extremely interesting Astronomers willing to present their latest findings to the public. There are opportunities to study Hula, Music, Art, and learn Hawaiian from renown Kumus in the Hilo area. And the county of Hawaii has numerous facilities, activities, and classes. There are more things to do than we can possibility take advantage of.

10) University Town Having a University and Community College in our town offers facilities and learning opportunities that we appreciate. The college draws in young people from around the world which we think adds to Hilo town’s vibrancy.

Wednesday, January 7, 2009


As the recession of 2008 rapidly becomes the depression of 2009 and the downside of massive layoffs and bankruptcies are in the news every day, we have been contemplating the upside of this depression. Our purpose is not to downplay the suffering that has been and will be felt as a result of the US economic collapse, but to acknowledge that this past decade of excess and out of sight economic growth also created a great deal of suffering. So here is our list of the upside of this economic depression.

1) The end of liar loans is rapidly reducing housing prices. If you our neighborhood in Hilo (zip code 96720), the prices are dropping sharply on an annualized basis. If it keeps dropping at these rates in a few years housing may yet again be affordable for police, firemen, and medical support people. Assuming that the county’s service and support infrastructure survives this depression, Hilo may once again provide affordable home ownership to all that work here. Not only that, but young people forced to move away due to astronomical housing prices may be able to return, adding more strength to the Hilo community.

2) The depression may end the illusion of credit being equivalent to money so that conservative spenders and savers finally get some respect. Instead of looking down on a family living in a small house - folks may finally make the distinction between a family housed in an ostentatious mansion via a multi-million dollar reverse mortgage versus a family living in a modest house or rental that they can afford.

3) Being unemployed for a long time may give many people a chance to contemplate the spiritual side of life and rediscover what is really important to them. We could end up with a culture focused on what unique skills and services people have to offer rather than how wealthy they are.

4) People and communities may actually begin to think about and care about things other than money. This depression may end our society’s drive to monetarize, depersonalize, and downsize the cost of everything. Having little or no money may allow people to experience the true value of fresh food, clean water, human services, and people’s generosity.

5) The depression of 2009 may create a new ethic that leads to the end of over consuming, overeating, overspending, overworking, and overtaxing our planet in every way.