Energy Politics

You might think that I’m going to blog today about the fact that oil prices are at a six-week low. But no, I wanted to address something that offended me instead. It seems that one of the homes built on the reality show “Extreme Makeover: Home Edition” is being foreclosed on because the owners rather stupidly borrowed a loan against it.

The home, valued at approximately $450,000 and provided to the family for free, is now another victim of bad loans in this economy. Now, you might be wondering why I’m talking about this here, but the thing that forced my hand is that I think it reflects one of the basic flaws of our society: we encourage dangerous investment habits and try to reward short-sightedness for being “bold” and “exciting.”

Case in point: part of the reason why we have such a wishy-washy economy at the moment is because all these subprime loans are coming back to haunt us. People getting involved in high-risk investments and acting like they could treat them with disdain.

Now, you would think the people in this Extreme Makeover would have learned their lesson. These are people who had just won the cosmic lottery: a brand-new house with all bills paid, plus bonus goodies like college funds for their kids and a maintenance fund.

So they take out a loan against their house to start a construction business. Which is already a high-risk industry to begin with, but come on, these people just got greedy. Who needs $450,000 for a small start-up business? These people were greedy and wanted something successful right out of the starting gate. The problem is you don’t always get to make a profit immediately. It takes years to build a business, forge relationships, drum up sales.

Some people might show sympathy for the poor Harpers. Not me. As far as I’m concerned, it’s their own fault for not leaving themselves an out. And I think Lake City mayor Willie Oswalt, who helped construct part of the house, said it best:

“It’s aggravating. It just makes you mad. You do that much work, and they just squander it.”

So  what’s the moral to all of this? I think it’s a few things.

1. If you get some major windfall, BE GRATEFUL FOR IT FOR THE REST OF YOUR LIFE. Don’t treat any major obstacles in your life as just some temporary setback that you can forget once you overcome them. It’s called experience people, use it.

2. Some people don’t appreciate a free gift. This Harper family got such a gift, and they ruined it. A free house and enough money to pay the taxes on it for 25 years. What do they do? Take out a very risky loan against the house. Bad financial planning is what got them into their old, bad house to begin with. Coming from the Brooklyn projects, they moved into a house outside Atlanta with a bunch of problems. They seriously should have learned from that experience not to rush into things and think things through before they act. But once they had a house, they treated it with disdain. That’s like being a smoker and getting a lung transplant, and then returning to smoking once afterward.

3. You can be good people and still make dumb decisions. The Harpers had a sympathetic story where their two-year-old son died because an ambulance didn’t reach the house in time. They worked hard to make enough money to move out of their home. Okay, fair enough. But they bought a house where the septic tank overflowed and flooded the house with fecal matter. Things got worse, until Extreme Makeovers came to the rescue! And the rest is history. Look, I’m sure they had rough lives. But that doesn’t excuse bad planning.

I end this blog with another bit of bad news: Bennigan’s, one of my favorite casual dining food chains, has declare bankruptcy. Why? Because they insisted on cutting corners in food quality while trying to stick it to their customers and raise prices. They got greedy, and now they’re going to be out of business. I mention this not just because I love their chicken fingers and fries, but because it ties in not just with the Harper’s story but with one of my country’s core problems. Making stupid business decisions without thinking through the long-term ramifications of such.

Adjustable rate home loans? Sure! The interest rate is never going to go up! Subprime buyers are a great untapped market, and people are entitled to their own homes! A construction business? Yes! It’s like printing our own money! We’ll just use the house as collateral! We didn’t pay for the thing in the first place, so who cares?

–Stephen Payne, Editor, Oil and Gas Investor This Week; www.OilandGasInvestor.com; spayne@hartenergy.com

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