Choice & Responsibility AKA Sue Your Parents.

This post is long, but I've broken it up. I promise I won't write any more about property and what not after this(for at least a month).

A Book on Japan In Japan

In Japan there are a lot of books about Japan, or so I am told in the books in Japan that are in English about the Japanese and the Books they have written.

Anyway, in one of them 'Shutting Out the Sun' an exploration of the Japanese Shut-in generation Hikikimori and Parasite Singles and so fourth, they look at a wonderful man with no qualifications that set up a rehabilitation program for Japan's shut-ins and suicidally depressed youth.

He operated on a simple philosophy, so simple and profound it sticks with me and informs most of my character evaluations these days:

'Choice and Responsibility'

To put it simply, if you make a choice you have to take responsibility.

I don't want to digress into Japan, I'd rather explain from my 'But I Can't Make Them Think...' post the last paragraph where I said I'd get upset at my parents if the housing market crashed (even though I personally have no exposure). Because I feel the choice people are making is distorted, by trusted advice from unqualified sources making them believe their choices are either non-existent or more limited than they actually are. And when you believe garbage because you were taught garbage, it's hard to take responsibility.

A Suspicious Reviewer

I have/had(?!) a friend, for fun let's call him Othello. For more fun, let's say hypothetically he was a devout Zoro-Astrian. Everybody loves(d!?)Othello, he was interesting, charming and engaiging.
I periodically found Othello annoying though in social contexts, one-on-one we could talk about Basketball whatever, in a social context though conversation always turned to the subject of Zoroastroism. And I just got sick of fucking hearing about it.

What was suspicious though was that Othello claimed at some point in his teens he had investigated all the various faiths on offer... presumably Jainism, Bahai, Buddhism, Sikhism, Islam, Judaism, Christianity, Catholicism, perhaps even the mythologies. Presumably he even researched and reviewed athiesm.

Now here we have an impenatrably objective inquiry into 'what I should believe' like Ghandi and various others have done in the past. Fortuitously (and remember objectively) Othello's inquiry led him to conclude that the very religion he had been raised to believe in was in his view the objectively superior one.

This meant little adjustment and so fourth.

Why do I tell this story, and what the fuck does it have to do with sueing your parents? Well I'm a bitter synical twisted man (as anyone who knows me will attest) and I reject that any child raised is capable of objectively assessing and comparing the beliefs and values their parents have foistered (quite innocently) upon them.

What Dawkins' calls the misnomer or error we make in describing a 'muslim child' or 'christian child' when they should respectively be called 'a child of muslim parents' and a 'child of christian parents' to appropriately point out we are not born with an organised religion but educated/conditioned/indoctrinated by our parents often willingly because they were quite often recepients of the same treatment.

Now, enough judging others (for that is what I did, I don't know if I can describe what Othello does or believes from an objective viewpoint) and onto my experience.

For me, in primary school kids either did RE or didn't. Those that didn't faced ridicule, some kid Mathew I think was excused from RE on his parents objections, and when we pressed him to tell us what he got for christmas he told us 'a banana' which retrospectively is quite a witty thing to tell children.

RE was of course, just Christianity though, I hope this kind of practice is illegal in public schools. Some volunteer vacuous bitch would come in and sing songs like 'father abraham had many sons' and what not.

I was impressionable, I had been sent to school to learn, and at school they were teaching me Christian religion. So I believed in this God. (My brother apparantly in his RE sessions got quite distressed and screamed out 'but there isn't any god!') And I remember telling my parents that I believed in God. They just were like 'mmhmm that's nice' adopting a 'wait and hold' policy with me until I guess I chose not to believe in him again some (in hindsight) relatively short time later.

BUT crucially to me, the choice was never between Jainism, Bahai, Buddhism, Sikhism, Islam, Judaism, Christianity, Catholicism and Athiesm. My choice was a dichotomy (a false dichotomy) between Sweet Baby Jesus and Sweet Fuck All. Contrary to Pascal's expectations I chose Sweet Fuck All, even when I thought the choice was as simple as he presented.

By the time I learned that there were other viable things to believe in it was already too late. As somebody (?) said 'once the mind has become enlightened it cannot be darkened again' so for me, once you appreciate the simple elegance of a universe without god, it becomes very very very very very very very very hard to explain how a god(s) could actually exist given that our senses seem to tell us daily they don't.

What indeed is the point of all this? Children trust their parents. As simple as that. Gravity is mysterious, no physicist (at time of writing) really knows what it is or how/why it works. At the very least no physicist has been able to explain it to me yet. And yet, it is there, simple mindless and reinforcing its presence every day.

God is as Woody Allen said 'a remarkable under achiever' thus, his presence is not self reinforcing, as evidence I submit to you the vast amounts of energy and discipline exerted in propegatting the faith, versus the numerous opportunities daily that people's faith is shaken - seeing the rich and evil go unpunished, or downs syndrome, childhood leukemia, juvenile diabetes and what not diminishing the quality of life of innocent children, or earthquakes and tsunamis killing vast swathes of people for no apparant reason at all.

To an atheist this is because they happen for no particular reason at all, they are just biproducts of the evolution of the universe with no agent behind them. For a believer these challange the judgement of an omnipotent being.

Yet these challanges are resisted, rejected, the evidence cast out the apologies remain some even with the semblance of sophistication. Why? Because children trust their parents.

Another Book

Children trust their parents. hmm...

At very few occassions in my life have I found just the book I need at just the time I needed to read it. But this is one of those occassions - it's called 'Animal Spirits'.

You see as a student of Economics & Finance I have one huge advantage over my peers. I previously studied marketing and thus it is simply too much of a stretch for me to trust my lecturers authority figures though they are and accept that 'people are rational utility maximisers' which means I reject by and large Economic theory in terms of setting Macroeconomic policy - eg. fiscal or monetary policy decisions, interest rates etc.

But I don't reject generally Economic theory. I believe it does describe accurately how rational behaviour can win. So for an individual investor, it is very useful to use reason when thinking about prices, investments, transactions, earnings, time value of money etc. It is far better to be reasonable and rational than to be emotional - that is indeed how you maximise profits.

Anyway, the Book! the book is called 'Animal Spirits' and it explains succinctly why the first people I will be angry at when the housing market collapses (unfairly) will be my parents. And it is why I say sue your parents (for which I will have to elaborate) here I lift a passage from 'Animal Spirits' by Robert Schiller (and for the record yes, he predicted the GFC in 2006) and George. A Akerlof. (to his detriment perhaps a Nobel Winner).

But if we look up 'confidence' in the dictionary, we see that it is more than a prediction. The dictionary says it means 'trust' or 'full belief'. The word comes from the latin 'fido', meaning 'I trust.' The confidence crisis we are in at the time of this writing is also called a credit crisis. 'credit' derives from the Latin 'credo' meaning 'I believe'.
... Economists have only partly captured what is meant by trust or belief. Their view suggests that confidence is rational... But their is more to the notion of confidence. The very meaning of trust is that we go beyond the rational. Indeed the truly trusting person often discards or discounts certain information. She may not even process the information that is available to her rationally; even if she has processed it rationally, she still may not act on it rationally. She acts according to what she trusts to be true.

Don't ask me why the feminine pronoun. The point being, that Children trust their parents. Even when the children are adults (supposedly).

Parents don't necessarily realise the full implications of the advice they give, nor why they give it.

Just as most parents are not Moral-Philosophers, Biologists and Physicists and thus are not qualified to explain to the children how the world came about, why we are here and how we should act - yet do so anyway (as Darwin and Dawkins have explained, our Morals will be more or less universaly ingrained). So too do parents not realise the implications of the unqualified financial advice they offer are.

I have spent (and still do) the last 4 or so years qualifying statements I've made by offering the information that I am not qualified to give financial advice. Why? I am worried that people will trust me, believe what I say and take my advice - because it is my advice. Why why?

Because of a thing called 'Negligent misstatement' that I learned about either in Commercial Law or Introduction to Financial Planning. Which says you can be found liable for financial damages if the party you offered advice to took you seriously. Even if you are not aware that you are being taken seriously.

Parents don't realise (yet must) how seriously their kids take their advice. Being rich and having money and what not does not a meaningful life make, but money plays a role and thus it is natural that kids will seek the advice of their forebears because they A) know and trust them. and B) seek to benefit from their experiences.

But when parents look to their experiences and how buying a house in the 70s worked out well for them, they don't realise that their children can't go and buy a house in the 70's and that the situations are not the same.

They don't ask rudimentary questions like 'if house prices always go up, why the fuck would anybody sell one?' or anything like that.

Kids do take their parents seriously. So parents should realise that their incessant urging and nagging for their kids first to 'save up' and then 'establish your self in the housing market' is serious financial advice and they are liable for the losses. That's why I say to my peers, IF house prices tumble by 20-40% (or mayhaps even more) don't throw yourselves out the window. Sue your parents for their 'negligent misstatement' they offered you advice on the most significant investment of your life and you took it seriously and it turns out they hadn't checked their facts.

Two Choices

A caveat though, I don't want to call all my peers blind mules that just follow their parents advice (many do, and I presume the proportion increases inversely with affluence, for various reasons). Thus it is entirely possible that you have gone and independently researched the property market and investing and even understand that you can invest/speculate on your own home (ie. owner occupied).
Unfortunately, Border's shelves are full of books that I can't believe are legal that will supply selected 'evidence' to clarify 'myths' like property should be cash flow positive, property is 'crash proof' and so what. These books have carefully worded carefully secreted 'cover-your-arse' language though so a discerning reader should put them down discouraged.
Alas, this is a confirmation bias, where you start with what you believe then go out and seek evidence to confirm it. Like my friend Othello and his search for the true faith which resolved nobly and with minimum fuss.

Choice (and Responsibility) #1:

What I (/all I can) do is offer an alternative narrative, point to ABS statistics that suggest that rather than a housing shortage over building is an issue, other actually qualified financial advisors like Scott Pape who are wary of investing in property (particularly for young people) and Peter Schiff, Robert Schiller and also California that talked the exact same talk that Australia does right up until its property market crashed and crashed spectacularly.
This provides people with an alternative narrative that they can then make an informed choice - they no longer just trust their parents (or mortgage brokers*, or real estate agents, or newspaper commentators). I offer them merely an alternative choice of narrative they can choose to research and weigh up on their own or reject, but from there they must take responsibility for the decision they make. That's all they can do. And whilst if a housing crash does bankrupt several of my peers, I don't intend to laugh at them (though I might, I imagine they will be crazy times should they occur) but I will feel vindicated, and would be angry if they met my vindication with anger.

Choice (and Responsibility) #2:

This is just to illustrate when choice and responsibility are in disequilibrium. Traditionally people love to take responsibility when times are good, (an advisor talking about his ability to accurately pick hot stocks) and shun it when times are bad (an advisor referring to the market and the lack of confidence 'out there').
Your parents are no different. I am of course talking about the aggregate average angst ridden baby-boomer.
The government introduced superannuation to try to mitigate the huge tax burden suffered by the workforce once Baby-boomers hit retirement age. (health care and pension expenditure will skyrocket). Why? the Baby-boomers are numerous, they outnumber their own progeny (Gen Y) and the other generations (Gen X and iGen(?)).
But to work superannuation has to be invested in productive (wealth creating) activities, like companies that do stuff and sell stuff.
Now disagree with me till you are blue in the face, but investing in property is not productive and it never has been. Property earns one form of income - rent, and to pay rent you need to accomodate somebody who earns money.
If the Baby boomers, on mass invest in 'investment property' then their retirement income streams come from rental income, (because you don't sell houses that regularly).
Now NOBODY seems to have pointed out for this scheme to work (en masse) their would need to be more renters than landlords, (or more workers than retirees) otherwise it's just a more indirect tax on the workforce. The workers pay rent to landlords who contribute nothing (just own shit). Rent that is supposed to sustain their lifestyle.
This 'property apartheid' as Ryan Heith has called it leads to rent hikes, making renting less feesable to Gen Y, who is living at home longer than before.
It's like a massive 'my kids will support me swap' and as grossly ineffecient as that actually sounds. Instead of just asking your own kids for money to support you in old age (because the pension they pay taxes for is insufficient) you simply buy the house of your neighbours kid and he buys your kids house and you charge each-others kids rent.
That is literally (if not consciously) the scheme that is doomed to fail (particularly now Rudd has relaxed foreign ownership laws and tightened immigration, thus further increasing the number of landlords whilst reducing the number of potential working rent paying tennants) and thanks to super-choices is actually quite literally a choice willingly made by your parents.
But do they take responsibility for it? No. Just look at Foxtel's current ad 'We thought you moved out in your 30s son.' kids are seen as moronic selfish parasites when in fact the reverse is quite true.

Alas, one last book

Ayn Rand, father of Assholism, in her book 'The Fountainhead' contains a particularly distressing/moving scene. Peater Keating's life was shaped by his mother Mrs. Keating who wisely steered him away from his passion of painting and reapplied his inclination to draw and create to the much more vocational pursuit of Architecture.
Always looking out for her son's best interests she manuevered him into Guy Frankon's company and overseas his assent to the top of the architectural world.
But by the end of the book Keating is a wreck, a shell of his former self destroyed in the long-run by his mother's very designs that were intended to protect him from failure.
When confronted with this brutal reality Mrs. Keating herself becomes a wreck and in short, every body loses.

For me its a poigniant (if indelicate) illustration of the perpetually understated risks of being risk averse. The addage is 'the greatest risk is taking no risk at all' and it bears out. But people don't see this addage when parents bring out 'folk wisdom' like 'you're safe with bricks and mortar' and 'buy land they ain't making any more of it' and 'house prices always go up' and 'you're best off with property in the long run'.
Nor can I say without risk, that house prices won't continue to go up. All I can do is to suggest that it may be (devestatingly) riskier than it appears. You know what, I can't actually be bothered doing the research to even estimate the odds. I'm not concerned with the odds though, or the when, just the consequences.
All I can do is suggest that you spend some time being concerned as I am about consequences before you make the choice. And you better be fucking willing to take responsibility, because we are running out of taxpayers to bail you out.

*mortgage brokers are neither qualified nor required to give you accurate financial advice as to the risks and options of your investment decisions (unless reform has been undertaken that I don't know about, this would not explain the continued exuburence for property in Australia though).