To start off with, he has no real idea that John sees himself as being backed into a corner fighting for his life against an evil enemy that wants to destroy adult authority and so on and so forth because he sees the panicky imbecile who's still thinking like some jackass kid in fear of being displaced as the apex bully as an unyielding authority figure. Similarly, he has no idea that Elly isn't talking about how life is passing her by as a stealth means of saying that she wishes he was never born any more than he can understand that Lizzie isn't conspiring to get him kicked out so he can starve and suffer and freeze and everyone can laugh at him as he's dying miserably for daring to want to be happy because no one loves him or can love him because he's basically an insecure little jerk with a persecution complex and an aversion to sharing.
The odd thing about his reading everyone around him all wrong is that he can correctly identify the relationship dynamics of strangers and casual acquaintances and behave correctly when dealing with people he doesn't know especially well. This is because of an annoying habit he and the other Pattersons share. Simply put, the further away a person is in a Patterson's sphere of influence, the better the chance is that he or she will have of being thought of as who he or she actually is. The nearer a person is, the better the chance is that he or she will be thought of as whatever stereotype occurs to the Foob in question when they first meet. Simply put, Lizzie will always be a sitcom monster child trying to chase Mike out of his home because he watched too much television.