Advice to Millennials: Don’t Buy a House

Where I live in Australia, most people are obsessive about property investment. There is an assumption that you must buy a house otherwise you will fail financially. As a millennial who doesn’t own a home, people always ask me when I will plan to buy a house or whether I have made any progress in saving up for a deposit on a house. People are either pressuring me to buy a house or to get married.

My response is that I will never ever buy a house. There is simply no need to buy a house when there are investments available that are far better. For example, BetaShares (a brilliant organization, in my opinion) has recently issued the BetaShares Global Banks ETF. This ETF tracks an index that invests in big multinational too-big-to-fail banks. The top 10 holdings are disclosed on the BetaShares website and is reproduced below:

top 10 holdings of BNKS as at 29 July 2016

Investing money in large too-big-to-fail banks, in my opinion, is a wise strategy. For years now, Australians have only had access to Australian banks on the ASX via ETFs such as QFN and MVB. Banks are an excellent investment because typically they pay very high dividends.

The more dividend income you have, the more freedom you have in your life. Dividend income is true passive income because you don’t have to do anything to earn it. Even if you own property and rent it out, you must still find tenants, fix broken showers, and unless you own the property outright you have to slave away at work in order to meet monthly mortgage repayments. Then you pay outrageous taxes such as stamp duty, and every year you must pay bills and council rates, as well as land tax. If you own the BetaShares global bank ETF, you pay virtually nothing other than a minuscule 0.47% management fee. You can literally sit back, relax, do nothing, and watch the dividends enter your bank account.

When you own property, you typically need to borrow money from a bank. If you’re borrowing money from a bank, you’re not generating dividends. Rather, you’re paying for someone else’s dividend income. If you borrow money from a bank, you make the bank rich, which effectively means you’re making bank shareholders rich.

What happens if there is a GFC 2 and bank shares collapse?

This is a fair argument. One could make a strong argument that the financial system is more precarious now than ever. However, even if we are nearing a massive recession (which I suspect we are), I don’t think that is a reason to not invest in bank stocks (or stocks in general) because we don’t know when the bubble will pop, and bubbles can perpetuate for decades or centuries.

When I see a bubble forming, I rush in to buy, adding fuel to the fire. That is not irrational.

~George Soros

Furthermore, if you own a property and the global economy collapses, how will owning a house help you? Property prices can go down just like stock prices can go down.

One of the benefits of owning bank stocks is that, even if these banks fail, many of them are too big to fail. They are so integrated into the economy that in the event of an economic crisis they can hold society as hostage and demand ransom (or bailout money) from the government. The government will typically give money to these banks, either from existing funds or from simply by printing new money to hand to the banks. Once banks receive bailout money, they can use it to repair their balance sheet, and stock prices should go back up again.

Below is a passage from the Financial Systems Inquiry report in Australia:

Global history records governments of all political persuasions using taxpayer funds to support distressed institutions. As undesirable as it may be to put taxpayer funds at risk to support financial institutions, in the midst of a crisis it is often the fastest and most certain option to stabilise the system and avoid widespread economic damage.

Investors can rationally surmise that the government is likely to rescue systemically important institutions if no other options exist, as their collapse would cause the most damage to the financial system and broader economy. This leads to a belief that some institutions are too-big-to-fail — that they receive an implicit government guarantee.

http://fsi.gov.au/publications/interim-report/05-stability/too-big-to-fail/

In a world characterized by wage slavery, big banks are basically the apparatuses of wage slavery. Whips and chains have been replaced with mortgages and credit cards, and banks are the institutions responsible for distributing these instruments of oppression to the masses in order to enslave them.

If the big banks are in trouble, the entire system of wage slavery is under threat, and for this reason I don’t think the government will allow the banks to collapse. They might make one bank fail just to make an example of them (e.g. Bear Stearns) but if you buy a broad-based index fund, you’ll be investing in the entire banking sector, so it’s not a problem.

How can you live without a house?

Of course you need to live somewhere. Shelter is a necessity. However, shelter is not expensive. I currently live with my parents and pay some of their bills. Other people can easily lower costs by sharing a house with others. They can rent (or even buy) a place and then rent out spare rooms. I recommend buying or renting a place far away from the city in order to get the cheapest price or rent possible and then simply use public transport to travel into the city if you need to work.

Living with others can be problematic because it can be difficult to get along with other people, but there are easy ways to fix this problem. Try to find people who are kind and who will not cause drama. Also try not to interact with people you live with too much. Personally I am always out of the house, either at work or at the local library. If I am at home I usually stay in my room. I have food cooked for me, but even if there is no food, I have a large supply of Australian Soylent (Aussielent Body) that I can drink should I need to eat. This ensures I never have to bother with cooking or cleaning, and arguments over who should clean the dishes are common when people share accommodation.

Personally, with food technology so advanced nowadays, cooking and cleaning are quaint, archaic and useless activities that must be eliminated from your life. People are always trying to tempt me into a life of slavery by telling me that I must get married because I need a woman to cook for me, but Soylent has now made the housewife’s cooking skills completely redundant.

Conclusion

You don’t have to buy a house. Live with your parents or find good housemates, and then keep interactions with them minimal to prevent drama.

Drug dealers have a saying: “Don’t get high off your own supply.” In other words, drugs dealers make money off their customers’ drug addiction, but if a drug dealer were to consume his own product, it will be to his detriment because the strength of his business depends on the weakness of his customers. The same applies to banking. Everyone in society is addicted to debt. The “drug dealers” who supply this debt to the masses are banks, and anyone smart enough can become a drug dealer by buying bank stocks or bank ETFs, but as a drug dealer you should not “get high off your own supply,” that is, you should be very cautious about going into debt.

The goal of my life is to produce passive income mainly from dividends. This ensures I can obtain income without working, which gives me freedom. I am not dependent on anyone. Even though I live with my mother, I rarely speak to her as I’m out of the house all the time, and even if she wants me out of the house, I can easily rent a small one-bedroom apartment paid for with dividend income. Most people move out of their parents’ home, buy a house, and drown in mortgage debt, which makes them slaves to their managers. Because I live off dividends, I am not dependent on my work. I don’t need a job. If I get fired or even if I dislike my work, I can simply find a different job that I enjoy or I may even fly off to Chiang Mai where US$1000 per month ensures you live like a king, and in Chiang Mai I can spend all my time in coworking spaces where I can work on whatever I want that I am passionate about regardless of whether it makes money or not since I don’t need income to live since I live off dividends. None of this would be possible if I had a massive mortgage over my head that forced me every month to pay a large chunk of my income to the bank so that other people can collect their dividend payments. I’d rather be on the receiving end of a dividend payment.

Typically when someone has a large mortgage over their head, they have more than a mortgage. A house has associated costs such as electricity and gas bills as well as taxes, and people who are desperate to buy a house in order to keep up with the Joneses are usually trying to show off in other ways as well, so they will likely have expensive furniture, massive kitchens, refrigerators, huge couches, and expensive TVs. People always put me down for being a minimalist. Some do it with more subtlety than others, but people always try to put me down for not owning a house or having expensive furniture or having a trophy wife or multiple children in elite private schools. I am usually very honest nowadays. I tell them I am trying to have more freedom in my life so I can do what I want, and I tell them I am trying to build up dividend income. This usually comes as a complete surprise to most people because most people have been conditioned by society to buy things and to go into debt. All the money they earn is eaten up either by debt or by lifestyle expenses whereas all the salary income I earn is invested. My savings rate is 100 percent, and I subsist off dividends of approx $30k per year. I do not live a hand-to-mouth existence. I am not fed with money obtained from my own labor. I am fed with money obtained by other people’s labor. My hands don’t feed me. Other people’s hands feed me.

Living off dividends and escaping slavery is not about showing off, in my opinion. I have no need to show off to people because I am quite detached from people. As such, other people’s opinions don’t matter because I am not close to them. Most people must care about what others think because they’re forced to be around them due to circumstances, and if they’re stuck with these people, they need to get along with them, which means these other people must have a good opinion of you.

But I don’t need to be around anyone. I am not dependent on anyone for anything. I am completely independent. I am not afraid of bullies. Bullies can bully me, but because I live off dividends, I can use dividend income to block them from my life. I don’t need to suck up to anyone because, unlike salary income, dividend income doesn’t impose upon you an obligation to keep someone happy. I am no one’s slave.

But from my position of freedom, I am a witness to all the manipulation, deceit, propaganda, slavery, and oppression in this world, and I personally cannot be willfully ignorant of it. I cannot close my eyes and pretend that atrocity does not exist in this world.

Doing something about it is the difference I can make. I can spread the word and help vulnerable beings escape from oppression. That is my purpose in life: to be free myself and to help others be free as well.

Can we change the world? No, but hell, we can all try.

~Rupert Murdoch

There is nothing in life more important than freedom. Even if you don’t want freedom, being free will give you the freedom to not be free. Better to be free and have the choice of being a slave or not rather than be a slave and have no freedom to be free.

 

 

 

The “Real Man” Trap

I was speaking to a woman the other day. She was asking me why I wasn’t married. I told her I didn’t want to marry because I didn’t see the point of it. How was it going to benefit me?

She then spoke about how “real men dominate women and marry them.” This is something I hear many women say. Make no mistake, most women I meet are not feminists. Most women (or perhaps all) want a dominant strong and wealthy man who will protect them and shower them with cash. I don’t blame them. Why not? Who wouldn’t want to have a bodyguard and millions of dollars to spend as you please?

I then challenged this woman on her assertion. She was suggesting that I wasn’t a real man, but anatomically I have the Y chromosome. I am a man. I could get a doctor to certify it. She then spoke about how I didn’t act like a man. I asked her who decides what constituted masculine behaviour.

Anyway, long story cut short, I learned an important lessons, which is that when people say that a “real man” does this or that, they are simply trying to push their values on you. This woman clearly values marriage, and she tried to push marriage on me by telling me that I am not a real man unless I get married.

When someone says “be a man” then they are not really telling you to be a man because anatomically you already are. What they really mean is “do what I say” or “be my slave.”

This is the “real man” trap, and it seems to be used often because men are very insecure about not being manly enough, so anyone who is trying to push an agenda on you or is trying to sell something will likely appeal to these insecurities.

The next time someone tells you to be a man, you must resist. Tell them that you don’t simply conform to other people’s definitions of what masculinity is. You do what you want to do.

It is important that you don’t try to act masculine just to please women, other men, or society. Just be you.

Whether You Are a Slave or Not Depends on the Direction of Your Future Cash Flow

 

I couldn’t help think today about how great it is to work. I love working now, but that was not always the case. Only a few months ago I was dreading work. I hated it. I am happy now because I was able to transfer to a different area, and I did this simply by asking someone.

I now work because I want to work. I don’t have to work because I earn dividend income that covers my living expenses. I earn around $25k to $30k per year and I spend around $15 to $20k per year. But I like to work not only because I like my job at the moment but also because I like to grow my dividend income. This means I can improve my standard of living. When I am getting a coffee with my work colleagues, I notice that many of them buy the cheapest option, which is a small coffee with dairy milk whereas I always buy the biggest latte with soy milk or almond milk. Personal finance guru David Bach is anti-coffee (see latte factor) but I am a big believer in small expenses spread over time that make you happy. Getting a coffee is more than a coffee. Some people only care about the caffeine and are willing to stay at their desks and take caffeine pills. For me, getting a coffee allows me to get out of the office, get fresh air and sunlight, get some exercise by walking, and I can chat to my coworkers and even the barista girl who is serving or making my coffee. Then I can slowly sip the warm and smooth coffee when I’m back, which calms me. At any time, I can stop buying coffee. It’s not like a huge debt or a long-term contract. I’m free to walk away. 

For me, small expenses such as a coffee are not a problem. The main problem comes from large expenses, especially those that we put off to the future (i.e. debt). I will explain this in further detail later in this post.

Back to my job…I think I love my work right now because I don’t need to work. I’m happy to put in extra work after hours and over the weekend. I am not a manager or an executive or anything. I am still quite junior. If suddenly things go wrong and I end up with a bad manager, I am confident I can transfer to another area. If things really go bad and I cannot transfer for whatever reason, I can just quit and do something else. I plan to just pack up and go to Chiang Mai and become a freelance web developer. Even if I am not successful, it doesn’t matter because I live off dividends, but it would be nice to work on my own terms.

Recently UberEATS has opened up in my area. I thought about signing up for it and working on the weekend, but I have decided against that because I actually want to use the weekend to focus on learning how to code so that I can be a remote coder or a digital nomad. Today at the library I spent about an hour on Codecademy. I wish I spend my university days studying computer science or software engineering, but my major was in economics, which wasn’t that bad, but if I had to choose again I wouldn’t major in economics. Instead I’d study a tech degree instead. Luckily, many tech workers learn a lot of what they learn online, and they are self-taught, so that gives me hope that I can change careers.

Freedom is the purpose of my life. Freedom gives me happiness. Freedom gives me the option to experiment with and pursue what makes me happy rather than hope that whatever circumstance I am in makes me happy. It was Robert Kiyosaki who introduced me to the importance of cash flow, and I think freedom and slavery can be thought of in terms of cash flow. As much as possible, you want to increase passive income and decrease future obligations. Future obligations are expectations (including the risk) that in the future money will flow away from you. If you take on debt (e.g. a car loan and even a home loan) then in the future some debt collector will take money from you, which forces you to work. Anything that forces you to do something means that you have fewer choices, and so your freedom goes down and your level of slavery increases. Most people think this only applies to monetary debt, which is obvious because it is written down and it’s clear, but even e.g. having children creates future obligations that tie you down. The more you avoid debt, obligation, and commitment, then you increase freedom and reduce slavery. The words “commitment” and “responsibility” or even “duty” are just euphemisms for debt and slavery. If you tell a slave that he must clean a toilet because he is a slave, he will likely try to revolt or may reluctantly clean the toilet and will probably do a bad job at it because his heart is not in it. However, if you reframe and tell the slave that he must clean the toilet because it is his duty or responsibility, he will likely clean the toilet with pride and enthusiasm. So it is that many men proudly work 60+ hours per week at a job they hate just to fund the mortgage on the mansion, the children’s private school fees, the loan for the luxury car, and maybe even a stay-at-home wife as well. If they shirk these obligations, they are told that they are not “responsible” or that they are not fulfilling their “duty” and that they need to “man up” and get back to wage slavery.

In all these situations (car loan, home loan, credit card debt, children, school fees, etc), there is an expectation that money will flow away from you in the future.

Alternatively, if you create passive income from dividend income or even e-book royalties, Adsense revenue, Amazon affiliate revenue, etc, then there is an expectation that money will flow towards you in the future. You then have a choice of what to do with this money. This gives you freedom. It gives you more options rather than reducing your options. It results in less slavery and more freedom.

As much as possible, make money flow towards you in the future rather than away from you. In practice, this means getting rid of all debt, commitment, obligations while simultaneously increasing passive income, mainly from savings, investments, and building businesses.

My Thoughts on “The Big Short”

Yesterday I was watching a movie called The Big Short and it’s an awesome movie about the GFC. The movie makes me wonder about whether we are in for another financial crash. Stock and property markets went down about 50% in America and most countries around the world, but since then central bank injections of cash seem to have restored everything.

This movie blames the property crash on subprime loans, but at the end of the day subprime lending popped the entire American housing bubble. The bubble was there in the first place, and the bubble was in property, not just subprime property but also prime property, which is why property prices in the US fell across the board.

This movie also really exposed how corrupt and fraudulent the financial system is. The biggest injustice of all, in my opinion, is that investment banks created these toxic assets (CDOs, etc) and then when they were worthless they simply did a deal with the government to unload it onto the government in return for printed money (or bailout money). This pretty much means the banks can do whatever they want knowing that if things go wrong they can simply get the government to bail them out. If you or I started a cafe and the business failed, the government will not bail us out. However, this does not apply to bankers, the holders of capital. Capitalism, therefore, does not apply to capitalists. Bankers can create bubbles, create bad assets, and then sell these assets, and if everything goes wrong they can just tell the government to take it off their hands. There should be no bailout, and those who held CDOs should have been left to learn the errors of their ways. By bailing them out, you only reward bad behavior.

Looking at it this way, the banking industry is simply an arm of the government. Banks are simply government business enterprises.

The original view was that if the government prints money to buy these toxic assets off bankers, this would cause inflation, but these toxic assets are usually highly leveraged, and more debt actually increases the amount of the money in circulation, which is inflationary. As debt prices go down (e.g. there is a debt bubble that pops) then this means the expectation is that loans will not get paid, and the amount of money in circulation goes down, which is deflationary. The government printing money simply restores the money supply back to original levels. 

How to invest

My investing strategy is pretty simple. I’ve been focusing mainly on dividends and looking at funds that provide low volatility. The perfect ETF on the ASX, in my opinion, is Betashares’s HVST, which has a double-digit yield and pays monthly. It also uses derivatives to lower volatility by selling futures when volatility is high. If the market crashes, I’m sure this fund will go down, but it won’t go down that much, and while everything is rosy, this fund will produce great dividends, which is awesome.

If there is a GFC 2, I expect to take a hit. My net worth will go down, but I have been loading my portfolio up with funds that are designed to be low volatility (such as HVST) as well as other defensive investments like gold mining ETFs (ASX: GDX) as well as bond funds, and so if my net worth goes down, it won’t go down much, and when the market bottoms, I will definitely be plowing as much money as possible into leveraged ETFs expecting the government to print money to restore the economy. While the market is likely in bubble territory now, it’s also a good idea to keep debt levels low because a major risk when there is a market crash is that a margin call will be triggered. Keeping debt low reduces the risk of this happening. Furthermore, as the market bottoms, if your debt levels are low, you have more ability to take on more debt to invest when the market bottoms, which means you can leverage into leveraged ETFs and achieve “double leverage” to magnify your returns once central bankers start firing up the printing presses.

Bottom line is that at this stage you should load up your portfolio with defensive assets, e.g. cash, bonds, gold, as well as “smart beta” low-volatility ETFs, but don’t go all into these defensive assets because it’s almost impossible to determine when a bubble will pop. As they say, a market can stay irrational longer than you can stay solvent, so often when a bubble is formed, it’s often best to simply ride the bubble and make money, but always have a plan to protect yourself if the bubble bursts. There must be a plan B.

 

Rational Misanthropy

It’s a Saturday morning now. I woke up at nine, drank a protein shake, and prepared a cup of tea. I’m writing this now on my laptop in a small room at the back of the house (see Why I Still Live with My Mother). I feel comfortable now but mainly because I am by myself. I’ve learned over time that not only am I an introvert who has difficulty being with other people but I am also a misanthrope who dislikes humanity. Google defines a misanthrope as “a person who dislikes humankind and avoids human society.”

Especially since I’ve gone mostly vegan I’ve just noticed that people are really cruel and evil, and this applies to just about everyone, even family members and friends. I pretty much limit my human interaction to the minimum nowadays. Rather than try to get along with others and improve my interpersonal skills, I’ve simply given up on people.

I know these are extreme thoughts, but I’ve had these thoughts for a long time. I keep thinking about this too often, and there’s nothing I can do about it. One option is to conform to society, that is, I can just be “normal,” be like everyone else and eat meat, get married, go into debt to buy a luxury car, and so forth, but this cannot be the answer. If I do what other people want me to do, I’m not doing what I want, and I can never be happy following the path other people have laid for me. The only solution then is to do the opposite. Rather than conform and go into society, I become a nonconformist and get out of the society.

I have recently purchased a book on Kindle called Gorilla Mindset, which I hope can help me with how I think about things in my life. Rather than be filled with negativity, I can replace negative thoughts with better thoughts, but I don’t want to replace negative thoughts with wildly optimistic thoughts either because this can be harmful. Rather, I should simply have factual thoughts.

I currently live off dividends, so strictly speaking I don’t need to work, so I don’t need to go to work and be exposed to annoying people. But my dividends are not that high, and I feel like I should be able to earn an online income before I go off and become a digital nomad.

When I’m a digital nomad, I imagine I will be a freelancer. I will base myself in Australia and I will be an Australian for tax purposes, but I will fly to other places for long periods of time, say, three months. This means I don’t need to worry too much about applying for long-term visas. My aim is pretty much to get away from people and do my own thing, and I think travelling achieves this. I can stay at home with my mother, but if she annoys me or if my friends or relatives here keep bothering me, I can just try off to Chiang Mai where I can be by myself.

When I am a digital nomad, I will pretty much be semi-retired. I will have enough dividends to support myself and live a luxurious lifestyle, but I will keep myself busy I will do freelance work via, say, Upwork. I am not too picky about what kind of remote work I do so long as it is remote and allows me to work by myself. Freelance work requires you to deal with clients, so of course that might be difficult, but at least I get to pick the clients I work with. If there is a skill I don’t have, I can easily learn it online.

I have no idea what the pay will be like. It might be lower, but it won’t matter that much because I will already have dividend income I can live off. This is just something I can do to keep myself busy.

The digital nomad dream within me has been strong at times, and there are times when the dream dies. For example, when I went to Bali by myself a few months ago I realized how uncomfortable and lonely it was being there. I have also felt more comfortable in my job lately because I have changed teams and I am working among better coworkers. But there are times when I am around very difficult people at work and it bothers me so much that the digital nomad dream is rekindled.

A few days ago, I met up with some old colleagues who now work in a different areas in the organisation. I mostly don’t see them much, but every now and then when I’m in the lifts, I bump into them, so I meet up with them every few months. I cannot be rude to these people because they technically work in the same organisation as me, but they are often rude to me, so I am thinking of deliberately being rude to them so they start to hate me and get away from me. This is what I hate about work. You have to be so fake. You cannot offend the wrong person and you cannot burn bridges with people, even those people you really don’t like.

I am also tired of friends and relatives who try to get me to marry. I am a male in my early thirties now. Everyone tells me to get married. They will me that a man in his early thirties should not be single and that they are happy to “set me up.” Many people say that this is how Asian culture is so I should just go along with it to appease my parents. But I feel like I should not do that! I should do what I want to do. I am quite tired of tolerating this nonsense. I feel like I need to rebel now. I need to muster enough courage to go on massive MGTOW rants at weddings so that people will get the message and leave me in peace.

Something else I hate about work is how everyone always brags about how important they are. There is so much namedropping and humblebrags. Then there’s all the gossip. Everyone gossips as if they’re in high school. Often when I go have lunch with people or go on a coffee run with them, they’re gossiping about this person or that person. I just find it annoying. I hate the 9 to 5 but I endure it because I need to increase my dividend income. 

Why I Still Live With My Mother

It happens a lot. I am talking to people and tell me to move out of the family home. Sometimes it’s more subtle. They’d ask questions like, “Are you still living with your mother?” and the question is more a put-down rather than an actual question. I don’t know why it bothers me. On one hand I think maybe I care about other people’s opinions too much, and I shouldn’t care about what other people think.

Most people who don’t know me too well assume that I live with my mother because I am poor and therefore I cannot afford a house. They would say something like, “Houses are so expensive nowadays!” But I earn a six-figure income, and I could easily afford to buy a house. I wouldn’t even need to borrow money from the bank to afford a house. But I choose not to. If I move out and rent a place on my own, I waste money on rent. If I move out and live in a house I buy, I waste money paying interest on the mortgage (see Don’t Aspire to Buy and Live in Your Own Home). If you want to invest in property, you can still invest in property and live with your parents. Furthermore, if you take this route, you’re able to rent out your property and earn rental income, which you would not get if you lived in your home. Regardless of whether your rent or buy, you lose money. Either you pay and waste rent or you forego rent by living in a house that you would have been able to rent out. In the latter situation, this is known in economics as opportunity cost.

In my opinion, there is an even better strategy than buying an investment property and living with your parents so you can rent out your property to tenants. That strategy is to simply invest in real-estate investment trusts (REITs), which you can buy off the stock exchange via a discount online broker. If you live in Australia, all you need to do is sign up to an online broker such as CommSec and then buy REIT ETFs. All this can be done online in the comfort of your own home. REITs invest mostly in commercial real estate such as shopping malls, offices, and industrial real estate.

There is definitely a social stigma that comes with not owning property and living with your mother, but it is one that I accept. Most people are conformists. They follow what society sets out for them. I am trying hard to combat stereotypes. I try hard to urge people to think for themselves, to explain in detail how not paying rent or mortgage interest can help them, but it’s very difficult. Often you need to stop trying to change people and just be the change you want to see, to live the life you want to live and show people that, by living with your parents, you actually increase your independence by reducing your debt, increasing your net worth, and therefore increase your freedom. Most people just go along with society, buy a house, go on many expensive holidays, buy a car on finance, and then find themselves so deep in debt that they must work forever to pay it off.

The only difference between a developed democratic society and a third-world dictatorship is that the tools of slavery in a developed economy are more efficient. There is still oppression. There is still slavery. But debt and obligation is used rather than whips and chains.