As I mentioned in this thread, there are many different interpretations of karma. The kind of mechanistic, “bookkeeping” version that your scenario exemplifies is certainly a common conception but, as you say, it doesn’t hold up well to scrutiny. I can’t speak for the Hindus, but Buddhist texts paint a far more nuanced picture of karma.
First, karma is just one of many forces that shape our experience. Buddhists recognize that sometimes shit just happens. Having your house taken out by a tornado or getting rear-ended by someone yacking on their cell phone may or may not have anything to do with karma. It would be impossible to know, and therefore it’s not worth trying to sort out. Health issues and disabilities too may or may not be related to karma.
Trying to explain one’s fortunes and misfortunes in terms of karma, then, is impossible and ultimately not at all useful. No judgments can be made about someone simply because good or bad things happen to them.
What can be useful is the recognition that by our actions we condition our mind, and that the condition of our mind conditions our experience. This is something that everyone with a decent measure of introspection can attest to, and this is at the heart of the Buddhist conception of karma.
To take a simple example, a single act of selfless giving will produce a slight change in the giver’s attitude. It feels good and right, and will increase the likelihood that this person will give again when the opportunity arises. A chain of transformation is set in motion that, over time will certainly shift the person’s subjective experience of the world (the result of his focus shifting from himself to others) and may alter his objective experience as well (causing others to be more kindly disposed toward such a person, and willing to come to his aid). It’s just as easy to see how a pain-producing chain could be set in motion by solitary actions.
There’s nothing magical about karma when seen in this light.