31 January 2010

Australia's Subprime Borrowers

I am not sure what the definition of "mortgage stress" or "severe mortgage stress" is, but 45% of first-home buyers are now going through mortgage stress, according to Aussies Struggle to Foot Mortgage Bill.

We know that the residential real estate crash in America was triggered by subprime borrowers, that is, home buyers who purchased houses they could not afford. The article above seems to suggest that many Australian borrowers are also in the same boat. They purchased too much house and, as interest rates rise, they will struggle more and more.

One hope is that incomes rises enough so that these borrowers can continue to afford their mortgages.

17 January 2010

Achieving James Bond Productivity

Yesterday was Saturday. I don't normally do work at home but next week I have some work that I need to get done, so I this weekend I had to do some work at home. Working at home is not ideal but the reality is that you are paid for the work you do, not the number of hours you are in the office.

Being a procrastinator, yesterday I didn't do any work at all. I was watching the James Bond film Quantum of Solace on my computer. While watching, I was surprised at how productive James Bond the character was compared to me. He had extremely difficult tasks to complete and every fifteen minutes a pack of bad guys come and try to kill him but using his fighting skills he manages to handle everything that gets in the way of him achieving his goals.

Even though most people's work is not as exciting as James Bond's work, there certainly are parallels. Most people are given projects by their managers and in order to achieve these projects there are obstacles and distractions. The worker needs to overcome these obstacles, ignore the distractions, and move forward bit-by-bit till the objectives are fulfilled.

Usually at work I am distracted by all sorts of things like non-work email. If I can simply try to be like Bond and destroy any obstacles or distractions in the same way the secret agents does it, I could be as productive as he is. For example, if I receive a non-work email I can simply opt to read it after I finish my work as oppose to halting my work to read the email. Whenever I am distracted while in work mode, I plan to simply freeze and think carefully about whether the distraction is urgent or work related. If it is neither urgent nor work related, I should push it aside and do it later or never do it at all.

I also notice while watching Quantum of Solace that Bond usually goes around and does little bits of work at a time. He collects small clues here and there, slowly revealing the big picture of the task he needs to fulfill. This is similar to many of the big projects that people receive. The project is so large that they don't really know where to start and don't know what to do. I find that simply just jumping in and doing something is better than doing nothing, even if what you are doing is small.

16 January 2010

Doing Wall Push-Ups in Your Bathroom

I don't know why but I find it embarrassing to exercise in front of my parents. This is one of the downsides of living with your parents. I could easily lock my bedroom door and proceeding to exercise in my bedroom but the problem with this is that my parents often want to go into my bedroom, e.g. to give me clean underwear or to remind me that dinner is ready. If I have locked my doors, they won't be able to get in and they will wonder if I am doing anything illegitimate in my room.

I could always go to a gym or move out of my parents home, but both these options are expensive. Thrift is a virtue!

After some thinking, I have realized that the answer to this problem is to do wall push-ups in the toilet. When I am in the toilet I can lock the door and do wall push-ups. If my parents try to get into the toilet, the door will be locked, and locking the toilet door is understandable because my parents would just assume that I am expelling feces, which is a normal and legitimate thing.

10 January 2010

Gold Mining Stocks vs Physical Gold

Many Americans have been talking about how gold prices have gone up so much. In US dollars, certainly gold has gone up a lot, but that is only because the US dollar has weakened considerably in the last year. If you look at gold prices in Australian dollars (see the red line in the chart above) you will notice that gold prices have been going down.

The price of gold in Australian dollars has gone down in the last year and this seems to coincide with the Australian (and global) stock market rally that began in March 2009. As stocks move up, gold moves down. The green line in the chart above shows Australia's All Ordinaries index.

The blue line shows the stock prices of Newcrest Mining (NCM), which is a gold mining company listed on the ASX. What is interesting is that the stock prices of NCM seems to be influenced by both gold prices and the stock market. It seems to be more or less an averaging out of gold prices and broad stock prices.

09 January 2010

Used Armoured Cars

At work I spoke to a young friend about the housing affordability crisis (HAC) in Australia. He lamented that buying a house now would cost about $500,000. My young friend is absolutely crazy because there are plenty of houses much cheaper than $500,000. For example, you can buy a house in Melton for about $250,000. However, he then said that he didn't want to buy a cheap house because "it's poor for a reason." He claimed that cheap houses were normally in bad neighbourhoods where there is a lot of crime.

I don't actually know what the crime rate is in Melton, but assuming that high-crime suburbs have lower price, I started wondering if it is worth it paying a vey high premium in house prices (or rent) just so you can the chances of being a victim of crime when there are other perhaps cheaper ways of reducing your chances of being a victim of crime. For example, perhaps it would be cheaper overall to buy a house in a cheap suburb but then protect yourself by putting a concrete wall around your house to keep you safe. To protect yourself when you go in and out of the house you will need a strong automatic garage door as well as an armoured car.

My friend scoffed at the idea, saying that an armoured car is extremely expensive. I didn't know whether this was true or not, but I checked the internet and have found a site (in America) that sells used armoured cars, and there are some used armoured cars there for only US$25,000, so that is pretty cheap.

For me, safety comes first, so I think maybe it might be a good idea to buy an armoured car. Many people tell me that if I live in a good neighbourhood then I will be fine, but I think that crime doesn't disappear just because the net worth of the people around you rises. It's better to be safe. There's no harm in being prepared.

02 January 2010

How Survivor is Like Real Life

This blog post may contain spoilers.

I am a huge fan of Survivor. In Survivor Samoa, a contestant named Jaison claimed that Survivor is much like real life. When you go to work, you work in teams on projects to try to win individual distinction so you can get a promotion. Similarly, in Survivor you are grouped into teams and the project you have are the challenges. The power the constestants on Survivor have to vote people off is similar to real life in that in real life those people who network with others and form alliance end up stronger than those who are isolated. The immunity idol represents power and attaining the immunity idol requires work because players must either win challenges or find the idol based on clues given. Idols can be won either for yourself (individual immunity) or for the team (team immunity). This mirrors real life in that in real life you work for power both for yourself and your team, and this power protects you. Watching Survivor often I believe gives you the best education you can have on real life.

Let me give some concrete examples of lessons we can learn from Survivor. In Survivor Panama, contestants were initially divided into four teams. One team consisted only of old women. One of these women was a lumberjack and was relatively strong and hence very useful for the team. However, this woman criticized all the other team members, telling them they were lazy. The other team members did not like being put down like this so they voted the lumberjack woman off, even though she was the most useful. The lesson here to apply to real life is not to insult people. This I think is really obvious but it amazes me how often I see friends, co-workers, and family insult others and then excuse it by saying that they are "speaking their mind."

Another common theme in Survivor is that in the beginning of the game when winning challenges is important, those who are voted out are the weaker players who have little to contribute to the team. Toward the end of the game when the two tribes are merged and each players plays for himself, the stronger players tend to get voted off because they are viewed as threats. In real life, this teaches you that it is important to be useful in some way (e.g. have an education) so you can contribute to a team. However, it is important not to be too successful or at least look too successful because doing so will put a target on your back. For example, if you real life you flash your wealth by driving around in luxury cars and wearing gold wristwatches, you present to criminals significant incentives to rob you, for example, by simply attacking you on the streets or even by stealing from you using blackmail or extortion.

Survivor is like real life because in real life we are free to interact with others how we please but there are rules (legislative and social) that put limitations on what we can do. In real life, alliance brings power and team effort often brings reward. For example, one man cannot deliver oil to the world. Rather, a whole company that draws upon the skills of truck drivers, explorers, engineers, and so on are needed to work together to supply oil to consumers in order for profit to be made. The same applies in Survivor. Players are free to interact but there are limits on their freedom that come from the rules of the game and the social values imposed. Just like in real life, in Survivor alliance gives you power over others and team effort definitely pays, not in profit but in rewards you can get when the team wins challenges.

The Slippery Slope of Spending

At work I often spend $5 to $10 eating out during lunch. One day while I was walking around the city with a friend, we walked by a store that sold business shirts. He recommended to me that I buy what he thought was a good-looking business shirt. I told him I didn't want to buy the business shirt. He said, "You spend money on eating out, so why not spend money on business shirts?"

The problem with this argument is that it can lead to a slippery slope that can result in your savings rate dropping to zero. If you spend money on business shirts, why not spend money on shoes? If you spend money on shoes, why not spend money on wine? If you spend money on wine, why not spend money on gambling? By following this line of reasoning, you lead to a situation where you end up buying everything and therefore end up saving nothing.

Whenever a friend tempts you into spending money on something, just tell them honestly that you have a savings goal and that you cannot use the slippery slope argument.

01 January 2010

Survivor Samoa

Warning: This post contains spoilers. Do not read if you haven't watched Survivor Samoa yet but plan to watch it later.

I have just finished watching Survivor Samoa. I watched on TV all the way up to episode seven, which was supposed to show last Tuesday, but on that day I had an appointment to go bowling and have dinner with friends, so I had to set the VCR to tape the show. Unfortunately, the VCR stuffed up and I was not able to watch it.

I went to the internet and tried hard to find where I could buy DVDs or at least watch the episode online. Unfortauntely I could find nothing! All the sites that allow you to watch Survivor episodes online do not let you watch the show from outside the US! That is so horrible! Being a Survivor addict, I was willing to pay money to watch the show but found that I could not.

Luckily for me, I was able to find Survivor Samoa on Youtube. I then spent heaps of time in my bedroom watching the rest of the season.

To summarize, a contestant named Natalie won. A player by the name of Russell was a very devious, conniving player who offended many people. At the end of the show the jury was so annoyed with Russell that they voted against him. It was clear that Russell was very angry at not winning and I later learned that Russell has many fans who believe that he should have won.

I do not understand how Russell and his fans can claim that he is the rightful winner. The fact that he didn't win proves that he didn't win (obviously). But what Russell and his fans claim is that he played better and that because of that he deserved to win. That is simply not true. Being a good Survivor player means you have to bring to the end contestants who you think the jury will not pick. I think Russell was crazy to bring Natalie along because she is clearly a very likeable girl. He should have brought Mick and Shambo along.

I have heard one of Russell's fans say that the jury did not show good sportsmanship in voting against Russell, but this makes no sense because nobody in his right might would think Russell displayed sportsmanship in the game. The fact that he calls female contestants "dumbass blond girls" and the fact that he sabotaged his own team by emptying their water bottles and burning socks disproves the idea that he displayed sportsmanship.

Anyway, Samoa was one of the best seasons of Survivor I have watched. I have only seen about 20 per cent of all Survivors so I am looking forward to finding other seasons either on DVD or online.

Further Reading:

'Survivor' Crowns A Winner, Offending Many Who Do Not Understand 'Survivor' (NPR)