Amiram Hayardeny’s BigMouth

I swear (and I can prove it) that I posted this one almost a year ago.

Nov 4, 2007 5:29 PM
Mortgages, Stocks, Real Estate, Jobs and Risks
from My China Experience by Amiram Hayardeny

I recently met this guy, a young successful professional who just bought a house.  Nothing very exciting about that (no offense of course).  We were talking about the housing market in general, and in California in particular.  I asked the innocent question: “how do young people buy a house these days?  It must be extremely expensive”.  To which he said, to my great surprise: “not at all, I just bought one”.  He went on and described the zero down payment, ten years interest only mortgage loan he found.  Happy person, living in a house in which he will have no equity ten years from now, having paid interest only and putting no down payment on the house.  I pushed on.  What if, I said, what if something goes wrong?  What if you lose your job?  No problem, he said, I’d get another job in no time.  In fact, he said, my expertise is sought throughout California, I would be hired in a matter of minutes.  I didn’t let go.  What if, I said, what if you, God forbid, get sick?  My family will help, he said.  They would probably rather help than see their son or sibling homeless.  My both hands shot up to the air, I surrender, I said, but one more question please.  “Shoot”, he said.  I asked if it didn’t bother him that for ten years he will pay no principal whatsoever, which shall leave him with no equity in his own home after ten years of payment.  At this point he laughed.  He said that it’s nothing short of madness to pay principal, while everyone knows that the money can perform a lot better in the stock market.

So the reasoning is this: take the money that you would have paid in principal, and invest it in the stock market.  After ten years, you should easily be able to pay off the principal, and still have a ton of money leftover - the result of your great profits off the stock market and the constant rise in real estate prices.  Obviously, he said, within ten years, the house will be worth a lot more than it does today, and thus my equity will be worth a lot more, and I’d have a lot of change to spare.  Just before I turned around, I said “and what about the risk?”.  “What risk”, he said.

And after this conversation I realized.  The American real estate, as well as the stock market have come up with the only possible conclusion given the surrounding business reality, the business news, the Federal Reserve, the analysts, the mortgage bankers: “whatever happens, someone is going to save my neck”.  If there’s a “credit crunch”, the Fed will lower the rates, creating more opportunities to take cheaper loans, and kick the economy.  Because no matter what happens around the world, America is driven by its economy, and its economy only.  The legend says that one day after President George W. Bush Sr. had lost the election to Bill Clinton, a big sign showed up just outside the White House saying: “It’s the Economy, Stupid”.  Seems that the message have been read.  The future is not important, in order to survive the present, the economy must do well.  In fact, it must do better than that.  It must show growth, opportunities, it must be outstanding, not just good.  Then again, if a bright young man has no reservations about mortgaging his own future for his present well being, why should a country?

A crazy idea hit me.  Is it really possible that some people think that they can’t lose?  Is it possible that from what they see they concluded that no matter what, the stock market will only go up, and so will the prices of the houses?  And that there’ll always be a great job waiting for them somemwhere?  Is it possible that some people will be driven to take even higher risks as a result of the thought that they can’t lose?  Have we completely forgotten the bubble?  Short reminder: people did buy property only to find that they owe the bank a lot more than the property’s worth, and people did find themselves in the position of foreclosure when they couldn’t pay their monthly payments.  It does happen.

This isn’t about investment tips and ideas.  This is about understanding the difference between economic stability of a country and an individual.  Risk taking for a pension fund which manages many billions of dollars and a household.  Economies rarely collapse.  Individuals often do.  There is a chance that the house in which you live will lose value overtime, and that some of your investments will evaporate.

Years ago, a friend of mine made a bid on a house.  The negotiation process was long and hard, during which a large amount of money was released from some investments.  My friend thought that if he found the right investment, he could make a few bucks until the money is needed for the house (I’m talking about the old days, when people used to put down payments on their houses).  To make a long story short, he used a common friend who worked on Wall Street at the time, and chose a stock on which he put much of the money.  The company went under, the stock lost much of its value.  The house was bought but with a lot less equity, and the friendship disintegrated.

Assuming that the stock market will always go up, that the job market will always be good for you, that your house’s value will only go up, is basically assuming that there’s no risk.  This assumption is wrong, and risky.  As in the world of the Corrida or the bull fighting, the bulls don’t always lose…

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For a few days I’ve been struggling with myself.  The dilemma was whether to write about something that so many are writing about.  Asking myself whether or not I can provide a unique viewpoint, added value, anything.  Then it came to me.  I do live in Beijing, my family and I consume milk products, I read and watch the international media, and I speak to many Beijing resident.  I may have a special viewpoint.  Besides, I wrote about many major events I’ve witnessed while living here.  The Olympic Games would be a good example.  This is, at least in my mind, even bigger than that.

What am I talking about?  The milk crisis.  I call it the milk crisis, because it started a while ago, the efforts to locate the perpetrators and the victims are ongoing, and there’s no end in sight.  Crisis.  Trust is lost, and so are lives.  Young lives.  Thousands of children are affected, hundreds of thousands of worried parents, imports, exports, international relations, media, and anger.  Lots of anger.  Fury may be a better word.

So here’s the story as I understand it from reading and listening.

A few years back, there was a phenomenon called “big head babies”.  The phenomenon was connected to baby formula lacking the essential nutrition for babies to grow normally.  Protein deficiency in particular.  The deficiency was the result of watered down, diluted milk.  In response, the government placed very strict requirements on the quality of milk.  Protein content was now closely controlled.  In response, some milk farmers found melamine.  A toxic chemical used in the production of plastics, that has the side effect of being able to fool the protein measuring sensors into believing that the watered down milk has a higher protein content than it really does.

Who won?  There are no winners here.  Losers only.

Melamine was supposed to be familiar to pet owners in the US.  In 2007, thousands of cats and dogs died as a result of exposure to melamine in imported pet food.  The imports were from China.  But I’m embarrassed to say, since I was not an American pet owner in 2007, the name melamine meant absolutely nothing to me.  Apparently, many others were not familiar with that name, and with the practice of “enriching” nutrition-less food with melamine.

The way from pet food to milk is short.

There’s something I must say though.  The story so far happened in many countries, Israel included.  Precisely 5 years ago, one of Israel’s top brand name baby formulas was found deadly to babies.  By error, vitamin B1 was not added to the formula, and the deficiency caused several babies to die, and others to be seriously ill.  The brand name lost its entire market share, and coincidentally, ceased to exist last week.  On another widely reported incident, silicon compounds were found in UHT milk.  The public uproar was loud and clear.  Action was quick and swift.

What was observed here though is different.  I’ve read about adding water to food to make it weigh more, using more pesticides, fertilizers to yield larger crops.  I have never read about adding poison to babies’ food.  On purpose.

I simply can’t let go of the following sentence: “Babies began dying as early as May 1. It took until September 11 for Sanlu, the giant Chinese dairy company at the centre of the initial investigation, to admit problems.  Now it appears the Olympic Games may have been the reason for this fatal delay in taking action to save babies’ lives”.  (Entire story)

Is this true?  I don’t know.  But as a father to four, the youngest at the age of five, I am concerned, I am alarmed, and I am very upset.  My children love yogurt.  Corn flakes and milk.  Healthy food.  Is it?

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It’s that time of year, as the leaves are about to fall off the trees, the temperatures are cooling down (at least in our hemisphere), the days are getting shorter, and the nights and sleeves get longer.  Fall is coming, and with it, the end of the year.  The Jewish calendar year that is.  And inevitably, right after that, the beginning of the new year.  And as one year comes to an end, and a new one begins, it is only natural to assess, to evaluate, to reflect, to enjoy the accomplishments, learn from the failures, prepare for the future.

Last year looked promising, it carried the signs of growth, of success.  In some ways it was.  In others it wasn’t.  It is up to every single one of us to do his own individual accounting with themselves and come to a conclusion: did I have a good year?  Or did I not.

As I said, reflection is individual, personal, and confidential.  But according to Judaism, some tasks are to be done out in the open.  According to Jewish tradition, the High Holidays: Rosh Hashana - The Holiday of the New Year, and Yom Kippur, the Day of Atonement, are days of reflection.  They are also days of asking, receiving, and granting forgiveness.  During those Holidays, people are to spend time in reflection and in prayer.  But prayers, and fasting, and charity giving only cover the relationship between a person and his or her God.  Forgiveness is asked, and given, by the Lord, for deeds who hurt nobody but the Lord himself.  The Holidays do not cover wrongdoing done between people.  To accomplish that, one must ask explicit forgiveness from the individuals they may have hurt.  Knowingly or unknowingly.  Intentionally or not.  Forgiveness must be asked, and received.

I know I may have hurt some people last year.  I know that it was never intentional, it was never malicious, it was never purposeful.  Nonetheless, if in any way, shape or form, I have hurt your feelings, I sincerely apologize.  While there’s no excuse for it, I never meant to.  By the same token, I hereby grant forgiveness to anyone who hurt my feelings.  My assumption is that it was never intentional or malicious.  My assumption is that those who hurt me would like to be forgiven.  Well, there you have it.  No hard feelings.  Moving on.

As fall comes, the leaves are falling off the trees, and the days gets shorter, one must remember, that new green leaves will grow again and the days will get longer in the spring.  This year will be better than the last one.  I wish you forget what the word “Doctor” means.  I wish you greener leaves and longer days.  Wider smiles and bigger hearts.  I wish you tons of joy, and bunches of accomplishments.  I wish you health, happiness and success.

I wish you a happy new year.

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What a wonderful coincidence.  Two of my favorite women in the world have consecutive birthdays…

She is my firstborn, she was the prettiest baby in the New York Hospital nursery with no competition.  She grew up to be beautiful, curious, inquisitive and bilingual.  By the time she was six she could easily detect and associate people and languages, and speak both English and Hebrew fluently without a shred of an accent.  I wish I had spent more time with her in the last twelve years, but circumstances allowed us summer and winter vacations only and the occasional airport connection time together.  Karen will turn eighteen tomorrow.

Happy birthday Karen, you’re beautiful, clever, ambitious, knowledgeable and opinionated.  Your mother seems to have done a great job.  I can’t believe it’s been eighteen years.  From the entire family in Beijing - we love you and miss you.  Wish you were here.  See you soon!

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I know it’s her when the phone rings.  She opens her mouth, and the words come out of mine.  I think of something, and she spells it out.  We independently shop and end up selecting the same items.  We like the same music, the same food, the same recreational activities.  We’re both family people, our best time is spent with the children, second best with each other.  she gets along with my mother (which could win her a Nobel Peace Prize).  She reads me like an open book.  I could survive without her for days at best, but I’d much rather be with her as much as I can.  She’s my best friend, consultant, confidant and my life partner.  She’s the best.

She will be celebrating her birthday tomorrow.  And I can only pray and ask that she never changes.  I wish that we stay the way we are.  I hope that we grow old together, to see our children to a happy and successful adulthood.

Happy birthday Dorit.  You’re one in a billion.  Lucky for me I didn’t have to date them all.  Lucky for me, I found you pretty quickly.  Jacob labored seven years for Rachel, but the years seemed like only a few days to him because he loved her.  From December of 1989 to December of 1996 was seven years, almost to the day.  Seemed like a few days.

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