Wednesday, January 25, 2012

What Do I "Deserve" in Life?

I'm having a hard time writing this morning. I feel like I have griped and complained a lot here lately. I also don't think I've written enough about real estate to even call this a sometimes real estate blog. So, I am going to frame this discussion with a discussion on the real estate "crisis."

Very little in life chaps my hide more than the mentality where someone thinks they are "owed" something simply because they exist. In this blog, I am going to talk about this mentality coupled with the housing crisis. It is a worthwhile discussion and one that can be applied elsewhere.

Adam Smith published "The Wealth of Nations" in 1776. This was a groundbreaking work and discussed pretty much every aspect of an economy. One of the central themes (among many) in the commentary was the idea that, basically, if you take care of yourself, you in turn take care of the nation. If you can support yourself and your family, you are not a drain on anyone. Additionally, you must be contributing something worthwhile because you would not be able to support the family otherwise. In other words, the unintended consequence of taking care of yourself and being as productive as possible is that the entire community around you benefits. It is not a new idea but it does seem that we have departed from this standard. There are an endless array of directions we can go with this discussion but lets instead focus on housing.

Many, many things led to the collapse in the housing market. In my opinion, there were two things that were the overriding ideals that got us there. Number one is greed. Greed from politicians that tried to win votes by framing home ownership as a right and creating an environment for corporations to mask greed in the name of helping everyone attain that right. Number two was the mentality of so many Americans that they deserved the home, no matter their circumstances, no matter the cost, etc.

Let's look at number 1. Everything in our government is linked. Nothing happens in a vacuum. When the president makes a statement that he is going to work toward everyone owning a home, he sets a goal for congress. Congress reacts with a bill, the bill becomes law, someone challenges it, the judiciary confirms or denies it, the people react. Several bills have been passed toward this "goal" of home ownership for everyone since the late 70s. Several different presidents have had a hand in this "goal" as have countless senators and representatives and others. It is definitely not one single person or even party that is responsible here. See past all that label business. Politicians piled onto this "goal" because it made their constituents like them. On the surface it seems like a noble goal--"everyone owns a home because that is the American dream." The problem is that it is completely unattainable and not even a good goal to begin with. First, not everyone wants to own a home. Second, not everyone has the cash to pay for a home outright. Third, not everyone without the cash should be extended credit. Fourth, when the government meddles in this portion of private life, there is no way for them to be unbiased, no way for them to be smart and absolutely no way for them to actually "help" the situation that was fabricated to begin with.

One of the ways the government helped create the mess was to push guidelines for Fannie Mae and Freddie Mac. It may be good at this point to give a brief synopsis of these two Government Sponsored Enterprises (GSEs). Then we will see how this all happened from the top down.
What GSEs do? Basically, they buy mortgages from private lenders. If a bank or mortgage company writes a loan to someone that "conforms" to a certain set of guidelines, then Fannie or Freddie will buy that loan. They will keep some of the loans as investments but the majority are then packaged up and sold as securities to investors.
What does the government have to do with it? When these loans are sold off, it is implied that they are guaranteed by the agency and backed by the government. Both GSEs have a line of credit with the Treasury. The GSEs also do not have to hold the cash reserves that other banks do. Instead, they borrow from the treasury and repay with the revenue they get by selling the securities at a higher price than what they bought them.
What did this have to do with the crisis? This is where you have to stick with me... Government sets the goal to get more people in homes. The government holds the purse strings of the treasury that is the life support of the GSE. The government tells the GSE to get more people into homes. The GSE loosens the criteria to make a loan "conforming". For the private lenders, this creates a FIELD DAY. They can now loan to more and more people with the guarantee that the GSE is going to buy the loan. It's a no brainer for the lender. More loans+no risk (they are selling the loans as soon as they make them)=pure profit. This initial feeding frenzy starts up some other secondary market companies (Fannie and Freddie started the "secondary mortgage market--they buy the mortgage after it has been written, they don't actually lend money to the consumer) that are not GSEs but can get in on the fun. They use the same pool of investors, promise a higher return because the risk is a little greater and start encouraging lenders to make riskier loans because they will buy the loan at a premium.
Why are they riskier loans?  Lots of reasons--lower credit scores, less job history, "stated income" instead of verified income, second homes, investment property, over inflated values, no down payments, cashing out equity that is not even there yet (110% loans), interest only payments counting on the increase of the market to grow equity, the list is endless.
So what happened? They failed to recognize one key, central element in all economies--they are cyclical. Sometimes they are up, sometimes they are down. NO economy will rise indefinitely. It can't. It has to have some down times. When it came down, it came down hard. First you saw the riskiest loans start to go sour, investors panicked a little. Then you saw the GSE loans start to go south. Investors panicked a lot. This caused a major retraction of investor money. With no one to sell to, Fannie and Freddie (and all those other secondary market companies) had no way to unload the loans they promised to buy. They had a real problem. It only got worse when the low standards of lending came to roost and people defaulted on their mortgages. Interest rates adjusted up in order to cover the problem--this put even more people in bad situations. This flooded the market with properties. When you oversupply, the price has to drop. Couple this with some other bad market conditions (companies closing, people losing jobs, etc.) and you compound the issue. When the prices drop, all those people who were counting on the increase in value to supply their equity get burned. There is no equity anymore. In fact, they are all upside down. If you are upside down, your interest rate has adjusted up because you did an interest only ARM, and you lose your job--you lose your home. More people do this and the prices drop even more because there are even more distressed homes. It really was the perfect storm of bad banking practices, corporate greed, politicians buying votes by flexing control over the lenders, some natural slumps in employment and the second issue--the people buying into the "I deserve it" mentality.

I am guilty here. I catch myself frequently justifying purchases because I deserve something. I work hard and thus I deserve that new ____________ or whatever. We have a lot of help in programming this mentality into ourselves. And honestly, its not that hard to believe it.

We live in such a wealthy nation it is easy to see the success of others and to hear the stories of people starting from nothing and going to millionaires (or more). The sad part is, we only hear those stories AFTER they have made it. We don't get to see, really see all the work that goes into getting them there. When we see that success we get inspired to be millionaires also. The problem is, we don't (usually) get inspired to make the sacrifices and work toward that goal. Instead we frequently adopt the "if ___________ is that rich or has that _______, I should too." Jealousy creeps in. Politicians love to use this in their quest to keep power. If we throw the plebes a bone, they will love us for it. Thus, we have the situation I outlined above. And we, as a society, play right into their hands. A lot of the people that were involved in the housing bubble knew that what they were doing didn't make sense. These were not stupid people. They got caught up in the moment. When they laid down their heads though, they knew that it was not going to last and it was not a good idea. It doesn't make any sense to borrow more than what a house is worth using that house as collateral. It doesn't make any sense to pay interest only on a tremendous debt in order to be able to afford MORE DEBT. But we, as a society, did it. Why? Because we could. It allowed us to be that much closer to "the haves". We deserve it. We work hard and the government says everyone should own a home. The banks agree and they are nice enough to give us our dream even though we are uneasy about the payment and the possibility of future payments being higher. Think about it.

If we had been a society that inherently delays pleasure and rejects jealousy and truly understands that we deserve only what we work for, we would have NEVER been in this situation. We would have rejected the notion that everyone deserves a home and replaced it with "everyone that deserves a home has worked to earn it." Think about that.

I work and save, work and save, work and save. I pay all my debts on time because I don't take out debts that I cannot repay. I live within my means. I work hard at my job and earn a salary commiserate with what I contribute to the company. I do what is best for my family and I buy within my means. I earn a home because I planned to get it, worked toward it and secured the way toward it. I didn't wake up one morning and decide it was my right even though I spend everything I have and never work toward a plan and always live outside my means.

Here is the bottom line and how it all relates back. When you start to think that it is unfair that so and so has whatever, look in the mirror and ask yourself, "what did I do to earn that?" Sometimes you do experience setbacks that may not even be your fault. Sometimes you make a mistake due to inexperience or trusting the wrong person. That happens. Sometimes people are very fortunate and maybe even dishonest and get stuff they don't earn. That happens too. But, at the end of the day, if we are truly honest with ourselves, sloppy management, poor planning, laziness, ignorance, lack of research, naivity, jealousy and greed (all of which we can control for ourselves) are going to be the root of your money and housing problems 99% of the time. I know they have been the cause of all of my money problems in life.

The answer to my initial question, "What do I deserve in life?" is pretty easy to figure out. What I have worked for, no more, no less. If you feel that you deserve more compensation out of your job, quit, learn a more valuable skill or demand a raise. If you feel that you deserve more for your money, negotiate sales or clip coupons or whatever. DO something about it instead of relying on the government to TELL you what you deserve.

On a COMPLETELY different note, the college ministry that I work with has started a new prayer ministry. It is pretty cool. Basically it works like this, if you need prayers or know someone that does, you text your request to 61JESUS4U2 (615-378-7482). You can be completely anonymous or give all the details you want. We will not keep your number, solicit money, sell your info or anything else. We will not even contact you back unless you want us to. All we will do is pray for your request. So far we have about 20 signed up to pray. I suspect in the next few weeks we will have over 100 on the chain praying.

Wednesday, January 18, 2012

A Confession

I have a hard time with depression. I am not depressed myself, I have a hard time understanding the ailment. I have a hard time calling it a disease. I have a hard time dealing with people that cope with it. For the longest time I did not even really think it was "real." I believed that people suffering from depression were weak and just needed to snap out of it. "Toughen up cupcake!"

I know now that I am wrong.

This epiphany did not come overnight. I have several close friends and relatives that cope with this issue and over the past 10 years or so I have come to understand that it is, in fact, a real disorder. There is actually something chemically "off" when you struggle with depression. Medicine is actually needed and those people are not just being weak. Just because I don't struggle with depression does not make me "stronger" than someone who does. I am just blessed not to have that particular chemical imbalance.

Why am I writing about this? I'm not really sure. Sometimes I sit down and just start putting things out there. I guess the take away from this is that you can't really understand something like depression unless you have coped with it. Even then, I doubt you really "understand" it. Also, the human body amazes me. A system of chemicals working together to create a living, breathing, thinking, feeling, emotional being. There's no way it was all accidental.

Have a great week.

Friday, January 13, 2012

The Lie: The First Ammendment Entitles You to Say Whatever You Want With No Consequence

"Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof; or abridging the freedom of speech, or of the press; or the right of the people peaceably to assemble, and to petition the Government for a redress of grievances."

Words are very powerful tools. In a lot of ways more powerful than guns and bombs. Words plant ideas. Words cause harm. Words leave scars. Words can build people up and tear them down. Words can erase pain and cause it. Words cannot be taken back. Always keep that in mind when you use words. Always make sure you have thought through the gravity of your words.

My favorite college class session of all time was my very first one. I had Dr. Larry Burriss for an honors section of Intro to Mass Communication. By all accounts it appeared to be a dull class. Then he opens up with the question, "What does the First Amendment mean?" Everyone kind of looked at each other and one brave soul says, "Freedom of speech." He says, "Ok, what does THAT mean." Someone else chimes in with, "You can say whatever you want." This is exactly what he was waiting to hear. For the next 5 minutes he goes on a tirade of separating the class by every racial slur, offensive name calling, and rude category of person you can think of (and some you can't). At the end he says, "If I didn't touch on your particular group, don't worry, I will get you next class. I am an equal opportunity offender." We of course just stare at him with huge eyes and mouths agape. Perfectly executed. Complete silence. Then Dr. Burriss says, "so, do you still think you can say whatever you want?"

What followed was an incredibly thoughtful, well mediated discussion on the First Amendment and what it really means to have "freedom of speech." I never looked at it the same again.

Many of you may have seen the discussion on my Facebook page on Sunday. That incident is the catalyst for this blog post. Here's the gist of what happened. After Church I got home and logged into Facebook. Jonas was in the room right next to me. As soon as I logged in, the second post in my "newsfeed" was a JPEG image of text. The text was supposed to be some "instructions" to men on how to properly satisfy their women. It was incredibly vulgar with a plethora of "F words" and some other vulgarities. Normally, I just ignore those types of posts (though I have never seen one on FB that was that vulgar). For whatever reason though, I started to read the comments. First, the post I was reading was actually a "share" that my friend had done from one of his friend's pages. The very first comment was basically saying that the post was way over the line. What ensued was a barrage of "freedom of speech!", "if you don't like it don't read it!", etc. Though I normally agree with those sentiments, I take exception to public forums. In other words, if I am walking in a park and someone with a bull horn is shouting those types of things, I would get riled up. In that setting, I do not have the option to "not listen". Same goes for Facebook in a lot of ways. It is an online public park with everyone shouting whatever is going on in their little corner of the universe. It also happens to be one where the more attention you get, the longer that shout stays in front of everyone. It also happens to be one where the only way you ignore something is after you have already taken it in. THIS is what motivated me to very nicely explain that freedom of speech isn't as cut and dry as the commenters were trying to make it. Then it got out of hand.

I am typically a pretty savvy guy when it comes to technology. That said, Facebook is constantly evolving, constantly changing the way you interact. If you don't truly stay on top of every little change, the technology can easily get away from you. This is what happened to me on Sunday. My comment, though trying to be a lesson in civility and trying to help a young man better understand good taste, tact and community, ended up splashing the offensive "picture" on all of my friends' (over 1000) news feed. Thankfully, Stephanie Wright alerted me to this incredible lapse of knowledge and I started damage control. My wife finished the damage control by making my comment go away but not before numerous people saw it and commented on my apology post. I am sure that many others saw it and did not comment. I was, and still am, very embarrassed to have shared that with so many others. That said, it did give me the inspiration for this particular blog (that is two days late because of all the stuff I wanted to include).

The First Amendment DOES NOT Mean You Can Say Whatever You Want With No Consequence

Many, many people have a misconception about what the First Amendment does and does not do. It only says that (and I am paraphrasing) Congress shall not abridge the freedom of speech. This simply means that the government, specifically Congress cannot pass laws making it illegal for you to say what you want to say. There is no constitutional protection from your peers, from other authorities, from the general public, etc. Let's talk about some examples.

Let's pretend you go into a movie theater for the premiere of the next great movie and it is totally packed. You take a seat at the back of the theater and you take out your camera phone because you want to capture the next viral video. As everyone sits, you yell, "FIRE!!! SOMEONE SET THE CURTAIN ON FIRE!! (when in fact it is not)" Mass hysteria breaks out and everyone starts running for the door. Will you get in trouble? Yes probably. In Brandenburg v. Ohio in 1969 the commentary (the actual cliche comes from 1917 case) the rule is that the first amendment does not protect speech that is meant to and likely will incite imminent lawless action (riots) or that is reasonably believed to cause malicious actions (like stampeding out of the theater).

Let's pretend now that you are on Facebook or in front of a group of people or you tweet that you have devised a plan to kill the president and will begin execution of said plan in 48 hours. What do you think will happen? At the very least you will get a visit from the Secret Service. There is ample evidence that you will get quite a bit more depending on the veracity of your claim and the way you deliver it. It could be as much as 3 years in jail and a $250,000 fine (its true, look it up).

But I though we had free speech? I was only joking when I said I wanted to assassinate the president. I was making a documentary when I yelled fire in that theater. The law does not protect all speech. And we didn't even look at censorship--truly limiting the speech to certain audiences.
Let's look now at some other ways free speech is not as free as you might think. Society is not bound by the same rules the government is. In other words, our culture at large can be very, very judgemental and even cruel. Three great examples come to mind immediately. Don Imus, Hank Williams Jr. and the Dixie Chicks were publicly berated because of stupid comments they made. They were not arrested, not jailed, not fined by the government. They probably didn't get visits from the Secret Service but man did the public rake them over the coals. Of course various people called for punishments and various others said it was "free speech". In fact, both sides are wrong. The only punishment that is due someone in those situations is exactly the punishment they got--public reaction. Don Imus still has a radio show because enough people are entertained (or shocked) by his venom. Hank Jr. lost his job because the TV station was too afraid of the public backlash against his dumb comment. The Dixie Chicks were greatly harmed financially by that one stupid comment--but they weren't arrested. My point is this, we have freedom to say most things without oppression from the government. We do not have free reign to say whatever we want with absolutely no repercussions. Think about that the next time you are so quick to shout, "free speech, free speech"!!!!!

Wednesday, January 4, 2012

The Lie: Marriage and Family is Not Terribly Valuable

SOOO much pop culture attacks the traditional family. Songs decry living at home and celebrate dysfunction. Modern sitcoms celebrate philandering and the lack of stable relationships. I can't think of one show that I have seen in the past 4-5 years that portrays a traditional nuclear family with a man and woman that have been married to each other only and have children that are biologically both of theirs. I do understand that this "Leave it to Beaver" family is quickly dying and being replaced with steps and halves and other arrangements. TV merely reflects the society to which it is selling. I wonder, though, if the cause and effect is the other way around. How much of the erosion of the family is because of the media?
Before you get bent out of shape, I am NOT saying that the non-traditional family is wrong. I am simply saying that 50 years ago, the traditional family was a man and woman getting married to each other for the first time and staying together and having some kids. Thats how it became the "traditional family". I do see value in this situation. I do think that if it is possible, it is healthier and definitely simpler to have the "traditional family." I know it cuts down on drama!

My question is, why do people stray from, destroy, mess up, choose otherwise from the tradition? One possible answer is that they see the traditional family life as boring and unfulfilling--they are told by society, media, etc. that there is more--more excitement, more "life to live", more partners to have, more places to go, etc. than a traditional family can afford you. This is a lie.

I also know there is an all out assault on anything that even resembles a "normal" family in the media. Shows like Seinfeld, How I Met Your Mother, Friends and Two and a Half Men glorify the single, philandering life and even put down the family life.  These characters are viewed daily as having such a cool life with a new conquest every episode and all manner of dysfunction. Teenagers see these and long for the same. There is no balance in the media either. Even the shows that have two parents frequently make the male character into a doofus. There are virtually no male "father" characters in shows that are intelligent, strong and good fathers. Why? Why do we allow this? Why do we support this? Why is this entertaining?

I don't have the answer. I just have some suggestions.
  1. Value the family yourself. It is noble, fulfilling and even fun
  2. Value the moments your family gives you. I am guilty here. I get wrapped up in work and ignore my family from time to time. I do this with the excuse that I am earning a living for them. Its just an excuse. Jonas will only be 5 for 365 days. I need to treasure those days. 
  3. This one is hard. TRY to choose your mate wisely. DON'T select them based on superficial things. Really consider that person as your partner for the REST of your life.
  4. WORK on your relationship. There is no such thing as a fairytale relationship that magically happens one day and is happily ever after for all of eternity with no real effort. If you think you are the exception to the above statement, you are wrong. ALL marriages, ALL relationships need effort and willingness to work together on the problems that arise. If your partner disagrees, you should not choose that person. No life time successful marriage "just happens." They all require maintenance.
  5. If you do choose poorly and you know it, don't have kids with that person!
Seriously, put value on stability. Have fun with your family. Show your kids that the family life is good. Reject the idea that marriage is casual and fluid. Build marriages that last forever and teach your kids that those relationsips are precious and good and worth the effort. If you find yourself in a "non-traditional" situation, still teach your kids that marriage is good and should be one time in your life with one person. Be open about the mistakes that led to your situation (when appropriate, of course). Finally, men, be strong, loving fathers. Don't be the doofi (Latin plural for doofus) that the media portrays and most importantly, BE PRESENT.

I know this blog has potential to stir up some conversation. I welcome that. Please do recognize that I speak in generalities and I know that every single situation is unique. I am not pointing fingers, I am just sharing my ideals.