Pete Wargent blogspot

Co-founder & CEO of AllenWargent property advisory, offices in Brisbane (Riverside) & Sydney (Martin Place) - clients include hedge funds, resi funds, & private investors.

4 x finance/investment author - 'Get a Financial Grip: a simple plan for financial freedom’ (2012) rated Top 10 finance books by Money Magazine & Dymocks.

"Unfortunately so much commentary is self-serving or sensationalist. Pete Wargent shines through with his clear, sober & dispassionate analysis of the housing market, which is so valuable. Pete drills into the facts & unlocks the details that others gloss over in their rush to get a headline. On housing Pete is a must read, must follow - he is one of the better property analysts in Australia" - Stephen Koukoulas, MD of Market Economics, former Senior Economics Adviser to Prime Minister Gillard.

"Pete Wargent is one of Australia's brightest financial minds - a must-follow for articulate, accurate & in-depth analysis." - David Scutt, Business Insider, leading Australian market analyst.

"I've been investing for over 40 years & read nearly every investment book ever written yet I still learned new concepts in his books. Pete Wargent is one of Australia's finest young financial commentators." - Michael Yardney, Australia's leading property expert, Amazon #1 best-selling author.

"The most knowledgeable person on Aussie real estate markets - Pete's work is great, loads of good data and charts, the most comprehensive analyst I follow in Australia. If you follow Australia, follow Pete Wargent" - Jonathan Tepper, Variant Perception, Global Macroeconomic Research, and author of the New York Times bestsellers 'End Game' and 'Code Red'.

"Pete's daily analysis is unputdownable" - Dr. Chris Caton, Chief Economist, BT Financial.

Invest in Sydney/Brisbane property markets, or for media/public speaking requests, email pete@allenwargent.com

Thursday, 17 January 2013

The pursuit of happiness and what investors can learn from it

In 1776 Thomas Jefferson laid down that “the pursuit of happiness” should be an entitlement, and given the wealth and ‘progress’ that has been made since that time, the developed world should be a very happy place indeed.

It doesn’t really seem to have worked out that way though, does it?

It’s quite annoying and a major cliché when people tell you that in less well-off countries the average person is happier than you are. Having lived in East Timor in 2011 and 2012, and being about to live there in 2013, I feel almost duty-bound to make such a clichéd statement, so…

People in less well-off countries are often happier than you are. There, I said it!

Of course, such sweeping generalisations can’t be completely accurate and in the world’s poorest countries, such as East Timor, there are countless thousands who are severely infirm, have been abused, have lost family members to starvation, or live below the poverty line and in abject misery.

Yet once people move above the poverty line, human nature dictates that most seem to be more content with their lives (insofar as that can be measured) than in so-called more developed countries.

Traditional economics suggests that the wealthier we are, the happier we should be, yet that theory simply doesn’t seem to hold up.

Billionaire John Paul Getty once said that he would give up all of his wealth for one happy marriage, which is a fairly telling statement.

The Wealth of Nations

For decades - indeed since the days of Adam Smith and his famous work - it has been assumed that where a country has an increasing GDP and low unemployment, it should, on average have much happier people.

But traditional economics seems to fail here and provides no satisfactory answer.

Australia has not had a recession for more than two decades now. Our GDP has been fairly powering along powered by resources and other industries and, unlike in many other parts of the world, our unemployment is low.

So, we should be much happier in 2013 than we were in 1993. Is it just me or do people today seem more stressed, more worried about money and status and far less content than they were in the 1990s?

Over the last couple of years I’ve been lucky enough to visit Britain, where the economy has been savaged and unemployment has been far higher.

Yet, perversely, people seem to be far more accepting of their financial crisis and, in general at least, they strangely seem to be more content than they were when the economy was booming along.

What on earth gives?

Could it be that when countries are expanding their wealth people tend to focus on the successes of others and what they do not have? Yet when times are tough expectations are immediately lowered and people become more thankful for what they do have.

In the 1980s it was all about the greedy brokers in London flashing their cash around, now Brits look at Greece and think: “at least we aren’t them.”

I have heard it said that in Indian culture it is common to look at the castes below and be thankful that you are in a higher rung of society. In western culture it is too common for the populace to look at those “better off” than us such as celebrities and envy their lavish lifestyles.

Food for thought!

The hedonic cycle

In fact, more recent economic studies have shown that while happiness tends to increase as we move above and away from the poverty line, happiness and contentedness tails off surprisingly quickly as income rises.

Richard Easterlin coined the phrase “the hedonic cycle” – once you become richer you very quickly grow accustomed to the improved lifestyle and standard of living and expect more from life!

That is to say, that once we have become able to fulfil our basic requirements (remember Maslow’s hierarchy of needs which include breathing, food, sleep, shelter and sex?) we then move on to needs of belonging and esteem. We instead begin to focus instead of comparing the quality of our life with that of others, which invariably leads to a less content outlook.

Gross National Happiness!

In the small kingdom of Bhutan in the 1970s, the king announced that instead of the traditional measures of Gross Domestic Product (GDP) and unemployment the country was going to focus on how happy people were. A novel idea!

A number of measures were taken, including maintaining a high degree of green space so that people could enjoy the great outdoors and limiting tourism which was thought to cause agitation amongst inhabitants of Bhutan.

As the decades progressed, the experiment seemed to work. While it is almost impossibly difficult to measure how “happy” people are, surveys showed a remarkably high level of contentedness, certainly as compared to preceding years.

So should we follow Bhutan’s example of happiness at all costs? Well, probably not to the same degree (although there is definitely something to be said for the idea) as Bhutan also expelled some ethnic groups from the country in order to ‘improve’ its happiness. People may have been happier, but the kingdom’s human rights record is less than spotless as a result.

What can investors learn from this?

There are a few things to learn from this.

One is that the cliché is clearly true: money isn’t everything.

Investors should remember to enjoy the process of investing. If you create wealth for yourself but stress and unhappiness on the way, what is the point?

If you don’t believe that you will be reincarnated as a tree or a dog (or other), then you might as well resolve to make the most of your three score years and ten on planet earth.

Thus, find an asset class that interests you, resolve to become a specialist and enjoy the process of becoming an expert in your field.

Indeed to achieve fulfilment, refer back to Maslow’s pyramid of needs. There is much more to life and happiness than money, though money can sometimes help.