Take Responsibility: Don’t Blame the Banks

Property investors are borrowing money from the bank and then blaming the bank for lending them that money

I have just read Banks Are Loaning Too Much to People Who Can’t Pay it Back on News.com.au. Here are some snippets:

An explosive 60 Minutes investigation, which airs on Channel 9 on Sunday, has discovered banks are irresponsibly loaning large amounts of money to people who just can’t pay it back due to a collapse in the property market.

The 24-year-old, who was an ordinary income earner, was loaned $6.5 million by a bank and encouraged to invest in a “highly volatile” market in the little mining town of Moranbah in Queensland — she bought 10 properties.

She has now obtained documents from the bank that loaned her the money, which show they knew there was a medium to high risk of the values collapsing and her homes being left abandoned by potential renters….

“The investors bought their properties during a peak in the market, some were $600,000 or $700,000 for ordinary buildings, but now some are worth just $100,000.”

Mr Coulthart said people with an average income who wanted to buy an investment property had to borrow 10 and 20 times their gross income.

“That is a preposterous amount of lending,” he said. “Property values in Australia are out of control and the level of mortgage debt in Australia is something like 3.8 times the gross domestic product.”

He questioned why people are being encouraged to borrow 10 to 20 times their gross income.

“It’s an unsustainable level of borrowing,” he said.

The 24-year-old featured in the 60 Minutes report doesn’t entirely blame the bank for the millions she borrowed, admitting to being greedy.

But she said while she didn’t look closely enough at her capacity to repay the loan, she believes the banks also had a duty of care.

“What this has taught her is banks are throwing money at people in the good times and now in the bad times banks will blame the borrower and say it’s their fault for borrowing all this money,” Mr Coulthart said.

“To some degree that’s true, but they should have a duty of care to make sure people have the capacity to repay.”

One of the main businesses banks have is lending money to people who want to borrow.

However, I shake my head in disbelief when people willingly borrow money from the bank, put it in a high-risk investment, lose their money, and then turn around and blame the bank for lending them the money in the first place.

Banks don’t want to lose money. They are a business. As such, it makes no sense for them to lend to someone who will not pay them back. They will try their hardest to filter out bad borrowers, but this is an inexact science. You can look at income statements and check creditworthiness, but with so many borrowers on their books, banks can only do so much, and borrowers need to take responsibility for their own actions.

It may be true that banks are “throwing money at people in the good times and now in the bad times banks will blame the borrower and say it’s their fault for borrowing all this money.” However, it works the other way as well. Borrowers fall over each other trying to borrowing as much money as possible during the good times and now in the bad times they will blame the lender and say it’s their fault for lending all this money.

Debt can be useful if you use the borrowed money to make more money. If you borrow at 4 percent and make 10 percent, you’ve made a good 6 percentage point difference. However, in business and investing, things don’t always go to plan. There is such thing as risk.

This is why debt is like a knife. It can be used for good, but if used poorly it is a dangerous instrument.

A knife can be used to cut vegetables. Eating vegetables is good for your health. However, a knife can be used to cut yourself or cut others. Debt is similar. Debt can help you, but used irresponsibly debt can hurt you.

Suppose I were to buy a knife from a shop. Suppose I then take this knife and stab myself. I go to hospital due to heavy bleeding. Then suppose I blamed the shop for selling me the knife. That is no different to those who borrow from banks and then blame the banks for lending them money when investments turn bad.



How I Was Abused as a Child

Control money or money will control you

When I was a little boy, one experience in life scarred me deeply. When I started school, my parents enrolled me in an expensive private school. I had all the challenges of childhood, such as trying to fit in, but mostly my childhood was innocent and beautiful. Looking back, I enjoyed school camp and I enjoyed the many excursions we took.

However, everything came crashing down when my parents faced financial difficulties. A business they were running was falling into hard times, so suddenly we turned from rich to poor and rather than going to a school that charged $30,000 per year, I was told I’d be moved to a school that charged $6,000 per year.

I protested at first, saying I had made friends at the old school. I had gotten used to life at my school and felt like I belonged there. It was my community. I was very unhappy. I was crying, screaming, and basically carrying on like a child.

It wasn’t until my big sister stepped in that I began to calm down. She told me stories about how difficult things were for my parents. They were working very hard just to put food on the table and I was carrying on like an entitled brat. It was at this point that I started to feel pity for my parents and realized that they were victims like I was. My parents were not invincible. They were not to blame.

I remember when my sister was speaking to me. I was crying because going to a new school was scary. But my sister told me everything would work out fine because I would make new friends. I had hope in what she said, but little did I realize I would be deeply disappointed. I don’t blame my sister. She was just trying to make me feel better. It’s like lying to children about Santa Clause.

I quickly learned that I was fed a lie when things turned rough at my new school. The kids there were just not very friendly and I had a hard time making friends. I missed my old friends so much but because I didn’t go to the same school as them, when I tried to spend time with them on weekends it felt awkward, so we drifted apart.

I became anti-social and I became a loner. I was also bullied at school. I didn’t say a word to my parents or to my sister, and I don’t think they cared at all. They were engrossed by their own financial problems.

In a way, this hardship I face taught me many lessons. I learned that you cannot rely on anyone to help you. You must help yourself. Everyone is out for themselves.

I also learned that you must control money otherwise money will control you.

If you don’t make enough money to be able to get what you want, money will force you to face circumstances you do not want.

I believe my experiences growing up made me desperate from an early age to be financially independent. It is what pushed me in the direction to become a freedom extremist. It allowed me to experience and see the power that money has to enslave us. I watched my parents become completely enslaved by money. They worked long hours to not only raise children but to also pay off debts.

Then I watched my parents separate and divorce. My father was cheating on my mother.

Everything came crashing down. Too much debt, too much obligation, too much trust in others.

From all this I have learned to be self-reliant, to help myself rather than rely on others. I have learned to stay away from debt and obligation, to be a proud commitment phobe rather than accept the mainstream view that it is a psychological disorder. The word “commitment” is emotive and sounds beautiful, but when a husband you’ve been fully committed and loyal to suddenly cheats on you with a younger girl, you quickly realize the true value of commitment phobia.

I don’t want to be dependent on anyone. I don’t want to be dependent on my parents, my government, my spouse, and especially not my employer.

My parents worked because they had to. They hated their jobs but they were forced because they conformed to the consumerist idea that they had to buy a house, get married, have children, and drive a nice car. They thought they were reaching for their dreams when in reality they were enslaved by their delusions.

If you have no debt, no obligations, and no commitment to anything, and if you have sufficient passive income, then you don’t need to work. You don’t need to do anything, which means you are free to do anything you want.

Why I’m Bullish on the American Tech Sector

Now is a great time to invest in the American technology sectors, for example, investing in companies like Apple, Google, and Microsoft.

The internet is the next frontier. It is highly disruptive and will grow strongly in the future at the expense of many traditional industries. For example, the rise of the internet has destroyed traditional print news and media.

Are we in a bubble?

The price earnings ratio of the tech sector is very favourable.


What if there is a crash?

There is a possibility that we are about to face GFC 2. However, there is quantitative easing available for the government to correct for any downturn.

Convention economic theory states that printing money makes no difference for an economy because it is offset by inflation. However, I believe this is not the case.

As the government prints money, it uses printed money to buy up bonds and effectively lower interest rates. As interest rates go down, businesses borrow more, expand, and produce more. This higher output should push prices down.

Even if there is inflation as a result of money printing, this is not necessarily harmful for the economy. Inflation will push up the price of shares, bonds, and property, which will increase wealth.

Higher inflation will also encourage hard work. If the price of food were to double, wouldn’t you work harder just to survive?

How to invest in the American tech sector

Americans can buy shares directly in, say, Apple or Google. There are also ETFs available that invest in the entire sector.

For Australians, buying American shares directly is difficult and costly, so ETFs are the best option. An ETF I use is the Betashares Nasdaq 100 ETF that trades on the ASX under ticker symbol NDX.

Why People Hate Charity Workers

After finishing work today, I went to the gym, spending approximately one hour on cardio and weights. While walking to the train station, I saw a young man smiling at me. He had a World Vision tag around his neck, so he was clearly working for the charity and was asking for money.

This young charity worker was smiling and he was saying friendly things. He noticed I wore a blue shirt, so he made a comment about it.

I smiled at him and walked off. Most people didn’t smile. They ignored the charity worker and pretended he wasn’t there.

On the train, I wonder to myself why charities bother with this method of collecting money. I understand these workers work on commission and only get paid if they raise money, but charity organizations need to understand these hustlers do great damage to the reputation of the charity and the brand. These workers are not genuine. They greet you will false smiles and fake friendliness, and this does not work on a population that is already very cynical, a population desperate for authenticity.

The lesson from all this is to be genuine. Be yourself. Express your true colours. Don’t try to hard to fit the mould. People are not that dumb. They can often detect fakeness. There is so much fakeness in this world now that, owing to scarcity, authenticity is highly valued.

Ambition vs Contentment

According many, you must constantly strive to better yourself. Always be ambitious.

You must increase your income, increase your wealth, increase your muscle mass, burn more fat, date younger and more attractive women.

It doesn’t matter what the goal is. The point is that you must always be better. You must always work at improving yourself.

Then there are those who are happy with what they have. According to them, you must be grateful and content with what you have. Many religions promote this view. For example, the Bible teaches that you are not to grumble. Philippians 2:14 says the following: “Do all things without grumbling or questioning.”

So what should you do?

As with many things in life, the answer is in the middle.

If you are ambitious and if you always try to make more money or buy a bigger house, you may never be satisfied with what you have, and the stress and anxiety of not having enough can damage you.

That being said, if you are completely content, you are idle, and you do nothing. This is the fastest route to depression.

The solution that works for me is to always be working at improving yourself but to work slowly. Take your time and learn to enjoy the work you do.

Even if you retire by age forty, chances are you will discover that sitting by the couch doing nothing is no way to live. You need something to keep you occupied.

The best analogy is driving. There are times when you need to get somewhere by a certain time. You are stressed, you drive quickly. Chances are you scream and become frustrated with slow drivers. Compare this to driving on a weekend, say, to visit a relative. You have all the time in the world. You can relax, drive safety, and enjoy the song on the radio.

That is how life should be. Relax, go slow, and enjoy the journey.

What To Do If You Hate Your Boss

I don’t like my job, but I think this is due to the fact that I don’t like my manager. He always complains and sighs loudly. Our team has been busy lately. It is clear that he hates his job and doesn’t want to be there. He has a mortgage, a stay-at-home wife, and a child. Whenever I go to his desk to talk to him (e.g. about work that he gave me) he would often just brush me away, telling me he is too busy to talk. I find this annoying. He also seems to give me the silent treatment sometimes. I’d say something and he would just stare blankly at the computer screen. I’m not sure if he heard me or not. All this reminds me of a bad relationship.

Usually when my manager is upset, I’d think carefully and try to figure out why he was so unhappy. I’d ask myself whether I was to blame. Did I do something wrong? Am I not working hard enough?

Lately I have come up with a hypothesis that my manager is just naturally unhappy. It’s just the way he is. To be honest, I have no idea why he is not happy. I imagine he just hates his job and he is trapped.

I then asked myself why I should care if my manager is unhappy. Is it my problem if my manager is unhappy? Some people might say the following: “It’s important to make your manager happy. If you’re manager is happy with you, he will promote you. If you’re manager is not happy with you, he will fire you.”

This may be true, but given there is so much stress in my job, I am not sure if I want to be promoted. If I get promoted, I’ll get more money, but I will also get significantly more stress, so I don’t know if it’s worth it. Furthermore, as you earn more, you get taxed more, so as you get promoted, your growth in salary is quite low compared to your growth in stress, and my overall gross income is almost six figures, so I’m getting taxed quite a bit.

It just seems so much easier to earn money by saving up and investing in dividend-paying stocks rather than pleasing and sucking up to my manager just to get a promotion. Pleasing my manager seems so hard and so stressful. I also feel like a prostitute.

It’s not that I hate the job I have now. I don’t mind it that much. I just hate the people I work with. If I had a new job, e.g. if I were a teacher, I may love the job but I could also be working with bad people. There may be a bad principal at the school or maybe the students are monsters.

At the end of the day, no matter where I go, something is not going to be right. We don’t live in a perfect world, so I need to change my mindset. Happiness is a choice. If you choose to be happy, you will be happy.

I remember when I was in university applying for jobs and going to interviews. I was in so much pain because I really hated looking for a job. I hated interviews. I hated rejection letters. It was so painful. But after a few job interviews, I became numb. I started to see job hunting as a job in itself. It was just a matter of looking online for jobs, applying for them, practicing at home for an interview, showing up at an interview, and that’s that. The more I looked at it as a set of actions that I just needed to do, I became like a machine. It’s like the movie The Terminator. In this movie, the Terminator had a job. He had to protect someone (or, in Terminator 2, kill someone) and he would just do it because he was a machine who did what he was programmed to do. Likewise, the more I looked at myself as some machine that just did was I needed to do, emotion just washed away. I felt nothing. I already knew that I needed to look for a job, and through experience I learned what the process was: look for jobs online, apply, practice, and show up at the interview. If I failed, ask for feedback and learn your lesson next time. The process was easy. All I needed was action. I simply do what I need to do. Worry, anxiety, or any other emotions were irrelevant and useless. What matters is action.

This is how I should view my current situation. Sure my manager is acting like a child. Sure he is ranting and raving about how busy he is. Sure he is unfriendly and grumpy. But who cares? How does that affect me? How does that impact on what I need to do, which is to do whatever work I need to do? My job is simple: I show up at work, I receive work, and I go through the to do list and do the work. Emotion means nothing. Action is everything.