“Without the Vancouver housing bubble I would have probably spent 3,500 hours working on building my business instead of getting addicted to learning everything I can about finance and economics.”

“I hate to invest in things I don’t understand, so from the age of 18 to 28 I invested in the thing I understood best: myself. My investment involved spending enormous amounts of time studying computer science, marketing, sales, accounting, the basic skills needed to operate a business, and IT management practices. In the first 3 years after finishing university I had spent $25,000 on computer books (crazy, but true). I am sure some RE bull observers would say that I would have been better off buying a house and watching it appreciate in value but they would be wrong because I loved every minute of reading hundreds of books on all things comp sci, IT management and geo politics. End result I have a consulting business where I am tax optimized, and only work 100 days of the year, generating 140K to 200K of revenue per year while being able to live anywhere in the world, so I effectively own my job.

My obsession with finance and economics was born around 2007 when I decided that I would stay in Vancouver. The plan was to live in Vancouver, enjoy the great outdoors, start a family, buy a house, and put what I learned into hitting a home run with a product based business (still swinging for the home run; have not hit it yet).
What really pissed me off is that, even though I had done something totally crazy [in a good way] compared to the average 28 year old (starting out as an immigrant kid with no connections and no money and lots of student debt), I still could not afford to buy a house in Vancouver. At this point I owned some commercial RE in Ontario and had cash accumulating in the bank at a healthy rate. My definition of affordable is minimum 25% ideally over 50% down payment and prices close to fundamentals.
My obsession with finance and economics became an addiction in 2008 as the world economy was blowing up. As of now I estimate that I have spent over 3,500 hours reading finance and economics books, and blogs. For fun, I wrote the CSI exam to see if I had learned enough, and I had no trouble passing it.
After 3,500 hours of research I have learned how to tell if something is a bad investment. The problem is that I have no idea what the [current] good investments are, other than my business, and myself.
I don’t have enough money to afford the seriously good money managers that know what they are doing and I know that the financial advisers at the banks and insurance companies really don’t know anything that I don’t know and will probably not advise me on anything and just sell me some product from their company.
It also seems to me that the markets are fundamentally corrupt and rigged against those who don’t have servers in the stock exchanges, or friends in government, or 100 million +.
Buying a house and putting all my money into it would have freed me from dilemma of figuring out what to do with my savings because I would have worked to pay off the house in 5 to 8 years and get mortgage free.

Now it seems to me that my options for my money are:
A) Put my money into a grossly overvalued housing and lose lots of it – I have worked too hard to let that happen.
B) Put my money into the fundamentally corrupt politically rigged and manipulated public markets.
C) Keep it in cash and let the bank gamble with it and loan it to fools who buy over valued real estate while my taxes “guarantee” the loans (current strategy)
D) Spend it
E) Try my hand at investing and see if I learn anything useful (I like learning and creating things not buying things in hope of selling them for more not really who I am the game just does not appeal to me but maybe I could grow to like it)
F) Invest it in my business and work to increase my revenue to $300K per year while only working 60 days per year. Use increased time and cash flow to search for business model with a personal 25 million + exit where I bootstrap the business from the ground up.
G) Raise money from investors for a business idea that I have developed business models for, then work 60 hour weeks 50 weeks of the year, be in perpetual raise capital mode, baby sit investors, lose my time to learn and grow, and then maybe exit if my interests are still aligned with the interests of the investors by the time an exit opportunity shows up.
H) Keep learning more and see if I learn anything new to change my mind about what my options are.
I) Leave Vancouver and hope that by doing so I don’t end up being obsessed about finance and economics any more.

Now that I have written this rather long post, it seems to be too personal and revealing to post online. But … I share my story for sake of contributing to this blog’s effort to capture the impact of the housing bubble.
So, without the Vancouver housing bubble I would have probably spent 3,500 hours working on building my business instead of getting addicted to learning everything I can about finance and economics.”

ams at VREAA 5 Aug 2011 4:36pm

Thanks, ‘ams’, for sharing your illustrative story so openly. You are by no means alone, as the pressures applied to you through these profoundly abnormal times have been felt by many of us. And the perversion of behaviour you describe has also affected many; each in their own way. Witness the very existence of this blog as just one small example.
A few thoughts:
1. The speculative mania in housing has distracted many from usual productive activity. This is just one of the many ways in which asset bubbles misallocate resources.
2. Despite ‘austerity’ talk internationally and nationally (BOC Governor Mark Carney, etc), economic pressures continue to punish the prudent. ‘ams’ still feels pressure to use his accumulated wealth in an arguably unwise fashion: to speculate, to buy overvalued assets, or to squander it (spend unnecessarily).
3. The speculative mania in Vancouver RE was very clearly underway by 2007, and it was prudent of ‘ams’ to avoid the market then. Price action in the four years since then has punished him psychologically. This is a common phenomenon in bubbles.

Having said all this, if one lives through abnormal times, and if one is naturally drawn to examining one’s own behaviour and the behaviour of those around you, isn’t it normal to be fascinated by these massive social forces, to study them, to document them, to discuss them, to attempt to take advantage of them? Isn’t that a particularly human thing to do under the circumstances? – We are all to a certain extent products of our times. The results of ‘ams’s 3,500 hours spent studying ‘finance and economics’ are perhaps as much an important part of who he is as his business career, or the business that he has built, or any other valued aspect of his life.
– vreaa

32 responses to ““Without the Vancouver housing bubble I would have probably spent 3,500 hours working on building my business instead of getting addicted to learning everything I can about finance and economics.”

  1. i stayed in vancouver and spent several thousand hours reading history books

    and skiing

    and getting toasted, nicely toasted

    no regrets except the massive amount of debt

    but then again, i knew hardworking entrepreneurs like you would get screwed – so i had a lot of fun in the meantime.

    “i’m in love with this malicious intent,
    you’ve all been taken but you don’t know it yet”

    lulz all around! 5 minutes to tee time!

  2. That’s a lot of books, ams (and I thought I was a ‘bad boy’)…

    Regardless, in the timeless words of the inimitable English footballer George Best – some investment advice…

    ” I spent a lot of money on booze, birds and fast cars. The rest I just squandered.”

  3. We’re all addicts now.

  4. If this round of deflation is the trigger that knocks down the Vancouver RE market, are renters really going to be ahead? How likely is that your alt investment of choice (cash, equities, bonds, even metals) will outsmart the market? About 0.01% chance of that I would say.

    The USD can’t even rally today. Wish I wouldn’t have sold so much of my metals. Bought some AAPL.

    • are bonds doing well?

      I can’t look today. Waiting for the carnage to end.

      • Yea, don’t look.

        Bonds are up, yields are down. Should mean low to lower rates moving forward.

      • If I knew what banks were doing with my deposits, I would throw up in my mouth.

      • be like me and have no deposits

        in fact, owe them money

      • Your dosh? That’s an easy one Jesse… there were more private jets in full ‘bug out’ mode @ CYYF yesterday than the third act of, “2012”…

        Probably just the ElBerthani’s returning to their tar sands, though – so I wouldn’t be overly concerned. 😉

      • @Nem LOL. When’s a vacation not a vacation? When your cell phone is roaming.

  5. I keep going around the “safe haven for my money” topic over and over in my head. So far, leading two options are

    1) spend on Ducatis and a trans-Canada road trip albeit with wife and kids (Nem would like that!)
    2) Spend on cabin in the woods with guns, ammo, claymores, canned food and raccoon recipes.

    Meanwhile I squander hours that could be invested in myself, researching finance, economics, and real estate.

    decisions, decisions….

  6. don’t worry about the markets, at least you own your home…uh, er, ooops, wrong forum.

    Derp, now you’re getting it buddy. Cash is worthless. I’d rather have a cabbage patch doll collection than have cash right now.

    • Actually, how ‘worthless’ is cash, really?
      Your loonies will get you 23% more of the TSX than they got you in March; and will probably get you even more in 2012 [but will be a volatile ride -ed.]; your USDs will get you twice the house they got you in 2005 or 6 or 7.
      The same amount of cash will now get you 2.5 times the shares of Uranium producing companies that it got you in February.
      That’s what happens when assets deflate.
      At some point in future ‘worthless’ cash will be worth a lot more ‘Vancouver house’ than it is now.

  7. We are living in interesting times. I agree that being fascinated by living in an outlier speaks to who we are – I’ve learned more about economics than I ever considered doing, before the bubble.

    When I started thinking about housing, it was about my own situation and for years, buying has made no sense to my family’s situation: all purchase options are too expensive, too small, and too far away for our family of 4. But I’m still fascinated – watching everyone around me and how they react to this bizarre environment is actually pretty cool, once I decided I’m not playing.

    I still am somewhat frustrated that:
    * all this capital is flowing at houses and not productive economic engines
    * there’s been destabilization of the rental market in flipping and amateurish property management/landlords
    * I know a small number of people who will be hurt by a downturn of more than 25%
    * on a personal level, I’ve had friends and colleagues leave the city

    However, those effects are what they are and they can’t be put back; I’m sort of equally interested in what we’re going to do when the environment changes. How will our city cope? I hope we’ll learn something more as a city than our current dialogue of desperate vanity and boosterism.

  8. Sorry I couldn’t make it through all the boasting to get to the meat of this person’s point. tl;dr.

    • I see your point. $25k in computer books? Even at $100 per book, that’s 250 books. I have a PhD in computer science and even I haven’t read 250 books on computers. Maybe 50.

      Well, I guess he says he spent $25k on computer books, but he doesn’t claim to have read them all.

      • @Anonymous congrats on the Comp Sci PhD I would do that if I won the lottery or when I retire but I like industry way too much. A few observations about the number of books you read in your PhD program.

        You probably read a lot of Comp Sci papers which if you print them all out would probably push you way past 50 books in total number of things read.

        In a PhD program you have an advisor who supposedly saves you from wasting your time and gives you recommendation on what to read. As fresh out of undergrad I had no advisor therefore I have I have to map out the things that I don’t know that I don’t know for myself and that means buying lots of books and figuring out what is worth reading to great depth, what is worth skimming what is worth reading later, and what just is reference that you pull out what you need. So I am guessing I read about 25% of the books I bought in great depth and details from cover to cover, about 25% were total crap which I use as door stopers. 25% I read more than half and 25% I skimmed through and kept for reference.

        Also a PhD is pretty focused on a single problem for a few years. In industry to became successful at what I am good at right now, I need to be able to work across the silos of large enterprises, that means I need to be effective with lots of specialized people to be be able to connect the dots that they can’t because they too specialized at what they do. This means lots of breadth, a few things with great depth, i am what Scott Ambler would describe as a “Generalizing Specialist”.

  9. As if reading books can make you a good investor. Until you put your OWN real $ in the market you know nothing of your risk tolerance.

    • agreed I don’t feel that books makes me a good investor. But when you want to follow the conversations in the papers or in the news about the economy or talk to financial advisors and hear their recommendations and judge the quality of their recommendation for yourself you need to understand economics. I think reading books can teach how to tell if something is bad especially economic history, geopolitics, history and culture books.

      Problem is nowadays you can find financial advisors who promote everything and give advice that is contradictory. Therefore if I don’t have the ability to follow the quality of the arguments made by advisors I am no better off than guess by reading free advice in the papers. My experience with people that claim to be financial advisors has been that they just dress nice look pretty and seem too confident about what they know.

      All the examples of Fraud committed by advisors from Maddoff to lesser fraudesters, the rating agencies, the big investment banks that supposedly know what they doing taught me the lesson that those who claim to be professionals can be cheats and liar or just simply fools who have won noble prizes and don’t know shit about history or have the wrong models (see LTCM for proof). The problem with financial advisors is that they are not using their own money, and those who are don’t want you as a client.

      So now I think I am able to work with people who claim to be advisors and can make decisions based on their recommendations.

  10. midnite toker

    Ams – want to hire me for your consulting business? I’m getting tired of working for ” the man ” and have plenty of experience cleaning up after other companies contracters and consultants.

  11. A few comments here struck me, as well as editor notes.

    Since the market crash in 2008 I, too, have become addicted to economics and the markets and investing and trying to predict where we’ll go next. Granted my husband watching BNN every minute of every day for the last eight years had to start sinking in at some point, but 2008 was really the turning point for me where I started to look beyond bank mutual funds and savings and learn about ETFs v. mutual funds, the different markets, and stop losses, et cetera.

    “The speculative mania in housing has distracted many from usual productive activity. ”
    Show of hands on that one? Right here. Obsessed. Trolling blogs and news and MLS for my neighbourhood, gaining a lot of anecdotal evidence but not a lot of productive knowledge.

    “You are by no means alone, as the pressures applied to you through these profoundly abnormal times have been felt by many of us.”
    Tired of feeling like the last renter on earth, show of hands? Right here! And feeling like an idiot for saving and investing and not squandering credit on furniture and vacations. In my 30s I have furniture roughly equivalent to what my middle class parents have in their 60s, which is pretty much the same stuff they had in their 30s, yet my friends have houses and cars and furniture as nice or nicer than their parents have in their 60s and probably nicer than I’ll ever have. I chalk this up to cheap credit and nonexistent savings. Our parents saved, we didn’t. Or did they save? My parents are just ahead of the Boomers, the generation that supposedly spent everything they made. So why is it that I don’t see people in their 60s with stuff as nice as my friends’? Maybe they did save. Or they spent it on drugs and booze and have nothing to show for it.

    And yet again, an example of a mind preoccupied with abnormal behaviour and abnormal times, trying to make sense of it all through anecdotes and rules of thumb but with no concrete evidence or numbers. Worth nothing really, because it’s just what one person thinks.

    • Compare Canadian historical inflation rates
      to Canadian historical interest rates

      Other than a few brief spikes here and there, interest rates were pretty much always higher than inflation rates. Savers were rewarded. From 2000-2008 we’ve had roughly interest equal to inflation, and since 2008 we’ve had interest much less than inflation. Savers are being punished through inflation eroding the value of their savings.

      The message is: your government wants you to consume, not to save.

      • Interesting charts. If you look at the 1935 to 1975 chart interest rates stayed at 1 to 2.5% for 20 years! I know nothing of those times and the fundamentals involved, but it’s interesting they stayed so low for so long after the Great Depression. I wonder why. Could they stay low for that long now?

        “Government wants you to consume.” So true.

    • I’m a cheap homeowner, so I can relate. Leave my equity in the house and rent the basement even though I don’t need to. No getting around it, RE is expensive in Vancouver. And people are over extended.

      If you aren’t ‘obsessed’ with economics at this point, you aren’t paying attention. Taxpayers are pawns. We are being manipulated.

      The government does want you to consume, or at the very least to risk your savings. Ignore this at your peril.

  12. 23% more in TSX? so everyone else has been down a chunk of money and you have not? brilliant !!! i guess you foresaw gold at this level and you bought ton of them then. bunch of bs.

    • Fred -> Perhaps you should read the discussion more carefully.
      Rusty claimed cash was “worthless”, and the point made is that, when asset prices drop, cash is far from “worthless”. Not sure where you see the “bs” in that observation.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s