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dstars

Is Ethical Investment In Housing Possible?

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Lets' get it right posed an off topic question on an interesting thread about Spanish property. My answer/view is too off-topic for that thread but I think it's an interesting point, in light of recent developments: (he asked abut buying as a foreigner but I believe this distinction obfuscates the real issues)

Would you accept that ...

Given that in every country there are planning laws of one sort or another and that, therefore, the supply of property for sale is limited by the law

... buying property, as a foreigner:

  • who never intends to live in it
  • who intends to rent it out either as a holiday rental or to local people
  • whose primary reason for buying it is to benefit from capital appreciation
  • whose actions price local people out of the property market because they do not have access to the same level of capital/borrowing as the foreigner

is immoral?

Investments are neither moral nor immoral; they either make money or they lose money. If we leave out gangsterism, human body parts and human trafficking and other assorted actual nasties we are left with a number of, legal, places to park money.

The recent trend towards do-gooderism in all things is simply used as a way for people to make money with a clear conscience. There is probably not a single product on this planet that can be purchased or consumed that is not tainted at some point in its history with something nasty. That is to say, it is probably impossible to invest 'ethically'; and it is unlikely that one can negatively correlate any investment or purchase with nasties of some sort, be they known or unknown.

In lieu of ethical investment we have the ethical investment industry; which is designed to make people feel good about themselves. Usually, second- or third-generation middle- to upper-middle classes are the target markets. Zac Goldsmith, the Tories' eco-poodle sits atop this conceit of well-larded liberalism and directs greasy Dave's eco spin in his quest for power.

Investing in, selling and renting property is not, of itself, a bad thing.

But if we leave everything to raw market forces we end up with a raw market.

Last night's Panorama was supposed to tell the UK about the baddies and how it's a shame for the imbeciles who cannot add a few triple digit numbers, but it was really the same lame old BBC patronizing and condescending tripe. I grew up with people (Panorams's 'subjects'/victims) like that and I would bet the house (well, their house) that they thought they would make money out of their actions. Many here said it again and again; when servants started buying tulip bulbs that was the end of the game and so it goes for the UK housing market.

People are already drawing all the wrong conclusions to fit into their gripe bags. This is not complex; all we need are proper, enforceable regulations. Large deposits (20% minimum), a complete ban of interest-only and self-cert, proof of income using verifiable tax evidence, taxable profit and a shifting of taxes from inheritance (which must be scrapped) to second-property sales (which must be a strong deterrent to anyone who simply wants to squeeze profit from serfs) and strong tenancy rights must be (re?)established.

We must have a set of rules that allows investors to make reasonable gains but the sector itself must be protected. There is nothing wrong with someone wishing to use their wealth to make reasonable profits whilst providing some kind of service but we will only get that if we write it into workable regulations.

I believe we should write these regulations at the local level. The FSA are a bunch of shysters. The housing market must be protected and nurtured at a local level. We cannot leave it all to pure market forces. The turmoil has hardly started. The geniuses in charge think they've contained it but only because they still do not know what 'it' is.

Michael Coogan of the mortgages council said on Panorama that they started including 'sub-prime' (his words) repossessions in the figures in August. How about that for a coincidence? (And they probably only really did it in front of the TV show). This is a guy who claimed always that there was no such thing as sub-prime in the UK. His mantra used to be 'affordability' which the FSA demand and neither he nor they seem to have problems with insane multiples.

But they're still not getting it. They're blaming the bingo brigade when they should be finding out that 'sub-prime' itself is a 'fuzzy' quality and that quality will become more and more apparent throughout the whole market. By the time this thing blows over, almost everything will seem sub-prime.

The interesting thing is that the people shown in Panorama; the victims; they are the lucky ones. They have a chance to cut their losses. Many people watching that show who think they are immune will be the ones who suffer most, in the fullness of time.

Of course, bank depositors should be 100% protected by decree of the government (and paid by banks) but shareholders and bond holders should not. We must let the banking industry crash and burn. and if we do not the problem will never go away and we will never climb out of the depression into which we seem headed.

The sooner our sub-prime monster, Gordon-I'll never-give-up-power-Brown sees that, the sooner we can get our economy going again (bearing in mind that it has not yet crashed).

Edited by dstars

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It is probably a naive concept, but I just wish we could stop seeing houses as investments, and start seeing them as places to live. I couldn't care less what my flat is 'worth' and don't see it as a money making tool.

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what does that mean, praytell?

I shall ask three questions in the hope of you understanding.

One is -

Who produces the currency?

The second is -

Who collects taxation?

Thirdly -

Why do they do this?

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what does that mean, praytell?

Now you've done it! :lol:

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What was a shame for the people in those programmes was that most of them would have been better off walking away from their debts. Why the labourer guy thought it was worth trying to pay more than double what he thought he'd have to through chest pains and all, when the council just rehomed them in an indentical place down the road, I have no idea.

Likewise the disabled couple. The fact is that most sub primers have invested nothing whatsoever of their own money in their investment and apart from a dodgy credit rating, which they presumably already had, theyve lost nothing. Once they start realising that then there could be mass defaults.

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It is probably a naive concept, but I just wish we could stop seeing houses as investments, and start seeing them as places to live. I couldn't care less what my flat is 'worth' and don't see it as a money making tool.

It used to be cheaper to buy than to rent. That is probably what starts the property bubble each time.

There is a lot of history of people making gains on property in the longer term (as with shares) that I don't thinkn it will completely die as an investment vehicle, but now is not the right time.

dstars great post as usual.

I wouldn't ban self cert altogether, for self employed people it is valuable, but I would (as I have said many times here) legislate LTV and Income multiples. You could also ban the old Mortgage Indemnity Insurance, and make the lender take a hit if the property goes down in value when the lender goes over the LTV/Income multiples.

You can't do it until after the crash though, cos otherwise whoever enacts this would get the blame for the crash and would probably hasten it as well.

ruggedtoast:

Was I the only one on the Panorama program who noticed the sub prime couple had a Sky Plus remote on their sofa and drove away in a not too shabby ford fiesta.

"Don't know where the money went"? Yeah, well I do.

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What was a shame for the people in those programmes was that most of them would have been better off walking away from their debts. Why the labourer guy thought it was worth trying to pay more than double what he thought he'd have to through chest pains and all, when the council just rehomed them in an indentical place down the road, I have no idea.

Likewise the disabled couple. The fact is that most sub primers have invested nothing whatsoever of their own money in their investment and apart from a dodgy credit rating, which they presumably already had, theyve lost nothing. Once they start realising that then there could be mass defaults.

Which is exactly what is going to happen and is already happening in the US. But we have armies of publicy-funded do-gooders telling people how to 'handle' their debt after they've ammassed it.

What the guy should really do (and it would help to flush the system properly) is borrow as much as he can from credit cards... then apply for bankruptcy.

Bankruptcy is one of those anomalies that we suffer for we are told it is good for us. The argument goes as follows: We need bankruptcy laws to grease the wheels of entrepreneurship. If we actually made people liable for the money they borrow we would deter business from taking risk.

But with bankruptcy laws there is no need to take any risk. It's like when we are told that we must protect the banking system. They think they're talking to 'servants' who do not understand high finance. But we did not protect the shipbuilding industry nor the motor bike and auto industries or any number of other industries.

But we tax people for television so that public shool kids who do not want to take up their alloted place in the city or publishing can work in the creative arts. We tax people to pay for 'artists' in the form of the arts council.

And now we are taxing people to pay for Northern Rock with the assertion that if we let it fail the whole system will fail. (Notwithstanding claims here from experts that such actions cost us nothing due to the BOE MEW).

The whole system will not fail. Bad businesses will fail and if we refuse to face systemic failure, by propping-up the chaps, we will bring about systemic failure.

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It used to be cheaper to buy than to rent. That is probably what starts the property bubble each time.

It is also tied in with lack of confidence in pensions - many are holding onto property as an alternative to sorting out a pension. I can't see this changing as the population gets older, and pension pots fail to cover everyone's pension.

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ruggedtoast:

Was I the only one on the Panorama program who noticed the sub prime couple had a Sky Plus remote on their sofa and drove away in a not too shabby ford fiesta.

"Don't know where the money went"? Yeah, well I do.

Yes, I noticed the dish. (And those scooters are pretty cool. Maybe I can take up smoking again, get all wheezy and they'll give me one? Or am I too nasty?)

What the hell is public money doing funding the property purchases of world-class nitwits? These people have television: "They told us it would never go above 400!" Well, you're a fcking half-wit for thinking that then. It's not like you just moved from the fcking Amazon delta.

There was also a woman who claimed she paid more in charges than the actual mortgage; which was such a bald-faced lie one might have hoped a BBC producer could have left the statement out or proved it by showing us the statements.

The show was useful in that it at least got a mortgage booster to admit that sub-prime existed and it embarrassed the FSA for not taking part (what the hell are they supposed to be anyway?) but it did the usual upper-calss chirping about the baddies taking advantage of the poor thick people who are lost as soon as they leave the bingo hall.

Where, for example, was the evidence that someone 'came to their door'? This was not investigative journalism it was the usual BBC tripe. And the guy in the flats who earned 25-30 grand had a 300 grand mortgage said it was difficult. Difficult? How about impossible? Where was the evidence for all of this?

It's not as if there is not a gargantuan problem waiting to be revealed to the great unwashed. Why didn't they do some proper research?

Panorama would spend its time better producing a show about how this huge organization extorts over a hundred quid from every household in the country so that its employees can shove themselves down our throats until we think they're doing a good job. The BBC should be cut loose.

(But there's a discount for the blind.)

(Self-cert is, as you say, okay, if it is actually certified by someone else. Therefore, it is no longer self-cert. It should be certified by a third-party (chartered accountant, tax man etc.))

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Guest anorthosite

Read any survival book and it'll tell you four most important things are food, water, fire and shelter. I would suggest that making any of these unaffordable due to speculation would be unethical.

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It is also tied in with lack of confidence in pensions - many are holding onto property as an alternative to sorting out a pension. I can't see this changing as the population gets older, and pension pots fail to cover everyone's pension.

It'll change just as soon as they see that their property value is not coming back in time for their dottage. Some will hold for a long time but prices will not bungee jump back and anyone who believes that it will will lose money. Prices will keel over slowly and a great weight of supply will creak and moan under the collective desire to sell for last year's prices.

Then prices will crash to levels that will seem impossibly low. Predators will jump in from time to time but finding the bottom in any crash is too hard for anyone but extreme long-termers. People in property all believe themselves to be such long-termers so another factor will enter the mix: reality.

Smart money will not enter this crash. Early defaulters will turn out to be the lucky ones for this crash will be quite special and the turn will not happen until everyone and their dog knows that property is positively the worst investment in the world. This crash will be fierce and long and hard and there will be many 'victims'.

Panorama think they've exposed sub-prime. They have only shown that they do not even understand how to define it for sub-prime will be different according to the point where it is measured and the criteria used to measure it.

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Good post dstars.

Both the Panarama programme and your post illuminate for me a marker of this particular housing bubble.

An inevitable by-product of the so-called 'classless society' is that everybody is constantly told that they can 'make it' and indeed, they have a right to 'make it'. Salespeople use this pitch all this time and it creates unreasonable expectations. In the world of work, nobody want to clean the public toilets and sweep the streets, they think it's beneath them.

Connected to this, but in the wider culture, we have the craving to be a celebrity. Everybody wants to be a celebrity but there is no chance everybody can be a celebrity. If we were all celebrities, who would gawp at the gossip mags?

In the case of property, there are clearly some people that will always struggle to pay a mortgage, yet they have been sold the lie that they too can have the house of their dreams (or at least, the council house that would be cheaper to rent)

In typing this I am not saying that we should go back to the 'know yer place' society, but a bit of realism would be nice!

As dstars says, we need to flush the cr@p out of the system and hopefully come back with a new and improved model.

Edited by Starcrossed

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Some think:

It's only moral if you live in it, or it loses money.

People who think that way deserve to live in a communist country, where free enterprise

is unknown

I am not sure there is a morality issue with the individual act of owning a second home, however with most things it comes down to numbers.

There is a tipping point where second home ownership starts to impinge on the surrounding community and after this point, any future investment in property in a given area will have moral consequence.

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I think there is a very clear moral argument that on a planet of limited resources, individual ownership of more resources than you "need" to live a perfectly happy and sustainable life is immoral.

In terms of housing in the UK, I would say it is therefore immoral to artificially constrain the availability of land for building homes and also immoral to allow existing homes to remain empty or for use as holiday homes.

Houses are expensive because building land is restricted, and builders are allowed to hold landbanks to artificially keep prices high. Tax them and they will desist.

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Read any survival book and it'll tell you four most important things are food, water, fire and shelter. I would suggest that making any of these unaffordable due to speculation would be unethical.

If I live in the jungle and the bananas are way up high in the tree; so high that I might die if I try to reach them; is the tree being unethical?

Speculation is not a person that we can spank when he's naughty. Speculation is what humans do every day. We could have a set of rules that ensured that madness did not enter the equation and I would agree with you and go further and say that an evolved society should provide free health care and a number of other services. (But ensuring such things are not abused is too difficult for our leaders, for they themselves are at the very epicentre of that abuse.)

Unfortunately, our society is headed the other way. We have a number of 'hidden' problems that will appear as this disaster unfolds. Our unemplyoment numbers are much higher when we include actual unemployed people. Our rate of inflation is much higher when we actually measure real inflation. There are other things as well but they are all of the type that do not matter much in a bubble society (they are invisible) but important when the shit flies. There is about to be too much pressure on the working stiff. Too much tax. Too many people to support (the man and woman in the middle support too many at the top and the bottom). Our politicians do not really believe in capitalism at all; otherwise we might actually see lower taxes, but tax is ratcheted up in great lumps and if it ever comes down at all, it is only by incremental amounts. This stifles capitalism. But Nulabour has made grave mistakes that we (well, not me; you, cause I'm offski) will pay for this for decades.

(I would have thought, by the way, that water came first. Fire, one can live without; but life would indeed be shit without fire, and cable television, I agree.)

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Investments are neither moral nor immoral; they either make money or they lose money. If we leave out gangsterism, human body parts and human trafficking and other assorted actual nasties we are left with a number of, legal, places to park money.

The recent trend towards do-gooderism in all things is simply used as a way for people to make money with a clear conscience. There is probably not a single product on this planet that can be purchased or consumed that is not tainted at some point in its history with something nasty. That is to say, it is probably impossible to invest 'ethically'; and it is unlikely that one can negatively correlate any investment or purchase with nasties of some sort, be they known or unknown.

Its not clear to me why 'ethical investments' have to be attacked as a branch of do-gooderism. Of course any investor has to operate within the present capital system, but deriding attempts to sponsor 'less damaging' projects as opposed to the one which returns the most is just unhelpful cynicism. That attitude where altruism or philanthropy have no place becomes corrosive, and I prefer to think some people will make investments not simply driven by greed, but the wish to do something productive with their wealth.

To say we can make no distinction between one investment and another because they're all interconnected is just a lazy cop-out; fund managers can find out where the worst excesses (logging, exploitative mining, child labour, loan sharking etc) are going on and exclude those from the portfolio. Of course all funds/investments will remain tinged with grey, but not to even want or try to make the world a better place for the less fortunate seems to be a manifesto of despair.

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twaddle

Fiat currency is backed by threats and coercion.

Explain (use diagrams if you think it will help) how using a substance that only has value due to threats, kidnap, theft etc is ethical.

Thanks!

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Guest anorthosite
(I would have thought, by the way, that water came first. Fire, one can live without; but life would indeed be shit without fire, and cable television, I agree.)

They're in no particular order, but every survival book I've read, and the survival expert who's a close family member (hence I've read quote a few survival books ;) ), tell me those four things, even fire, are the cornerstone of survival. Fire's good for protection from animals, cooking food and warmth. You won't last long in many survival scenarios without it.

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They're in no particular order, but every survival book I've read, and the survival expert who's a close family member (hence I've read quote a few survival books ;) ), tell me those four things, even fire, are the cornerstone of survival. Fire's good for protection from animals, cooking food and warmth. You won't last long in many survival scenarios without it.

So what did we do before fire? (And cable television ;) )

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Fiat currency is backed by threats and coercion.

Explain (use diagrams if you think it will help) how using a substance that only has value due to threats, kidnap, theft etc is ethical.

Thanks!

If we can only discuss investments provided we first have a philosophical defence on the historical development of cash nexus this thread's screwed... :blink:

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If we can only discuss investments provided we first have a philosophical defence on the historical development of cash nexus this thread's screwed... :blink:

This is a discussion of ethical investment.

We could start with what ethics are, but I am sure we all know that already.......

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Its not clear to me why 'ethical investments' have to be attacked as a branch of do-gooderism. Of course any investor has to operate within the present capital system, but deriding attempts to sponsor 'less damaging' projects as opposed to the one which returns the most is just unhelpful cynicism. That attitude where altruism or philanthropy have no place becomes corrosive, and I prefer to think some people will make investments not simply driven by greed, but the wish to do something productive with their wealth.

To say we can make no distinction between one investment and another because they're all interconnected is just a lazy cop-out; fund managers can find out where the worst excesses (logging, exploitative mining, child labour, loan sharking etc) are going on and exclude those from the portfolio. Of course all funds/investments will remain tinged with grey, but not to even want or try to make the world a better place for the less fortunate seems to be a manifesto of despair.

Yes, you're right. But ethical investments are not a branch of do-gooderism, they pray on the duplicity of do-gooders who, when 'trying' to invest 'ethically' can easily turn a blind eye to reality.

I don't think cynicism is unhelpful in this respect. I think ethical investing needs more cynicism.

I do not believe that altruism exists; furthermore I believe that acknowledging that altruism does not exist is the start of what you might describe as ethical investment.

I believe capitalist societies have to make a distinction between 'charity' and investment.

But you cite fund managers and they are the reason I have my opinions. Let's look at your examples of where I might be 'copping out lazily':

Child labour: Have you ever bought any clothes by any chance? Or perhaps your conscience is clean on that score?

Logging: Any furniture at your place?

Exploitative mining: Is there any other kind?

Loan sharking: Well, bugger me if we ain't headed for a crash caused by loan sharking.

Of course, it's your money, you can back a twelve-year old transvestite to set up in Amsterdam if you like but my cynicism takes me no closer to or further from ethical investments just for saying so.

If I want to help the world; this is what I do. I keep my earning bits and bobs away from my do-goodery stuff. And when I want to feel the warm glow of do-goodery I send money to actual people that I have met in my life and they can spend it or invest it or wipe their arrses with it. Of course, I know that they educate and feed their children with it and my greatest hope is that they might even treat themselves once in a while: I do not try to profit from them.

My duty as an investor is to maximize my profit. That doesn't mean I have to kill anyone (I have a government I pay to do that) or hurt anyone (ditto) and I certainly would not invest in the trafficking of human body parts (unless it were properly regulated for some people have a kidney sitting in their bellies when what they really need is a feed) or child labour (unless it meant the child lived rather than died) or prosititution (for it is illegal in the UK and should not be for if it were regulated we could eliminate the violence and disease). But it is the mealy-mouthed idea that we can somehow do both (make money by doing good; whilst, I believe we might be able to do good by making money which is the antithesis of ethical investment and is generally known as: Capitalism) that causes me to wretch just a little. If one does do good whilst making money that kind of thing should simply be enjoyed silently as happenstance; for we cannot know the mind of God; should such a thing exist).

Fund managers can find ethical investments? Indeed, that must be what they do. I would describe them as performing the same function as psychoanalysts but worse; at least one knows where one is when one purchases a friend for an hour.

This is what we do when we have too much money: "Hey, money isn't everything. I don't need to earn a fortune, just... enough." Meanwhile we jump on India and China and tell them they don't get to rape the planet like we did cause we're too nice now and they should be too.

Cynicism is exactly what should be applied to the ethical investment industry.

Edited by dstars

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