What I’m watching

The nightly news is a no go zone in our home.
 
There’s too much blood and guts (and autocue).
 
However, Wednesday was a historic night, so after the kids were in their jim jams, we allowed them (and their teddy bears) to watch a few minutes of the news.
 
Big mistake.
 
The first thing they showed was a highlight reel of the US election campaign.
 
“Dad, why did he get shot?”
 
‘Well … America is a complicated place’.
 
“Do people really eat cats and dogs?”
 
‘No they don’t’.
 
“What is he doing to that microphone?”
 
‘Alright kids, it’s BEDTIME!’
 
Truth-be-told the only news our kids watch is the ABC’s Behind The News (BTN) – a national treasure – and Landline, which gives them an understanding of how the food makes it onto their plate each night.

Yet when I’ve tucked the kids safely in bed, here’s a couple of shows that I’ve been watching lately:
 
Bitconned 
Netflix
 
This documentary follows a 22 year old kid who set up his own crypto coin to get rich quick.
 
The opening line gets to the guts of it:
 
"We lied, we cheated, we made millions of dollars. And now I’m facing over 100 years in prison."
 
There’s a lot of bro-ness: Lambos, drugs, and wads of cash being thrown around. Yet what makes this doco so revolting (and compelling) is that it is not framed as the typical ‘road to redemption’ story, where the lead character works out that stealing hundreds of millions of dollars is bad.

I won’t spoil it for you, but there’s a twist at the very end that will leave you shaking your head.
 
What’s Next? The Future with Bill Gates
Netflix
 
Gates teams up with film maker James Cameron – who created the Terminator – to investigate both the opportunities and threats of Artificial Intelligence (AI).
 
Look, there’s way too much hype and bulldust around AI.
 
And that’s kind of what I liked about Gates’ approach, it’s a nerd’s view of the technology. He explains how it works, with the help of Cameron (who jokes about how writing sci-fi is getting tricky when reality keeps catching up), and none other than the founders of ChatGPT.

This short episode gives you a good overview of where AI is at the moment (the doco was released in late September), and points to where one of the richest men in the world thinks it will head.
 
Oh, and this is just one of five in the series. If you have time you should also watch his episode titled ‘Misinformation’. Bill looks at the spread of false information on the web, and the threat that has to democracy …
 
Tread Your Own Path!

Is My Super Genocidal?

Own up, Barefoot, you support the war machine. I have often wondered why my super investments in a fund like Australian Ethical have not grown as much as others. It’s because people like you (who I respect) tell them to invest in the fund that will make the most money, rather than the fund that will be best for us as people on this planet. Vanguard enables genocide, mate. Find a well-performing alternate super fund that doesn’t decimate entire populations.
 
Sandra
 
Hi Sandra,
 
I presume you are referencing a report from 2017 where activist investors wanted Vanguard (and other index funds) to dump their shares in PetroChina, Asia’s largest oil and gas provider, because of accusations of genocide.
 
Vanguard’s MSCI Index International Shares fund contains 1,439 companies (Apple, Nike, Netflix, etc), yet as of today it does not own shares in PetroChina.But it does raise a good point: an index fund simply owns the largest businesses  – it doesn’t put an ethical lens on them.
 
It’s the investment equivalent of a sausage: when you’re at Bunnings on the weekend you don’t ask if the snags are beef, pork or sawdust, right? (“You get what you get and you don’t get upset”, say my kids, who love a bit of sawdust on a Saturday.)
 
So the solution is ethical investing, right?
Well, that’s like buying an expensive free-range chipotle instead of the humble snag … but you still need to know what goes into it.
 
Case in point:
 
AustralianSuper’s ‘Socially Aware’ investment option was found to have money invested in the coal, oil and gas industries, and to own shares involved in nuclear weapons.
 
Mercer claimed its ethical fund didn’t invest in booze or gambling companies, though it was holding shares in Heineken and Crown Resorts.
 
Thankfully the regulator is trying to enforce the claims made by fund managers: last month Vanguard copped a record multimillion-dollar fine for misleading investors about the green cred of its own ethical funds.
 
Enjoy the sausage sizzle!

Scott.

Have I Been Doing It Wrong All This Time?

Dear Scott, 
 
Years ago I set up the Barefoot Bucket system and found it hugely successful, despite the ups and downs of my income. I religiously put money into my ‘Splurge’ and ‘Smile’ buckets, but I wanted to check with you that I’m using the ‘Fire Extinguisher’ bucket for the right reason – I actually use it to put 20% of my income towards regular bills (insurance, utilities, rates, body corp fees, etc). I suspect that isn’t right  – can you confirm if I’ve been doing it all wrong all this time?
 
Lauren
 
Hi Lauren
 
Yes, I can confirm you’ve been doing it wrong all this time.
 
And your penalty has been … you’ve been ‘hugely successful’ despite a variable income?!
 
That doesn’t seem so bad to me.
 
The idea behind putting 20% of your income into the ‘Fire Extinguisher’ bucket is so you can use it to fight financial fires that keep you up at night.
 
Which (for me) means:

First, direct it to paying off any personal debts (other than HECS-HELP).
 
Then, direct it to saving up a house deposit.
 
Now once you’ve bought your home, you then direct it to building up three months’ living expenses in your Mojo savings (or offset) account.
 
After that, direct it to getting the banker off your back – paying off your home early.
 
Finally, use the Fire Extinguisher to nail your retirement, which you can do with both barrels because, if you’ve followed the steps, you won’t have personal debts or a mortgage repayment!

Scott.

Should I Call Off My Wedding?

Hi Scott,
 
I’m blindsided but I am in love. I’ve just discovered my fiancé has $9,000 of debt he accrued overspending on Afterpay and Uber Eats over a two-year period. He consolidated this debt into a loan (at 17.5% interest!) and I only found out when I opened a piece of mail from a bank neither of us use (or so I thought). I’m not sure what to do. I’m not going ahead with the wedding now, so we’ve likely lost $10,000 in deposits, and we have $14,000 in savings. For context, we live in a three-bedroom townhouse that I own. I don’t know whether to try and make it work or cut my losses and run. Please help!

Renata
 
Hi Renata
 
I know your type.
 
You really value financial security.
 
That’s why you own your home. That’s why you’ve already calculated how much backing out of the wedding will cost you. And it’s also why you’re asking me – a finance dude with no shoes – if you should call off your wedding, rather than, say, a relationship counsellor.
 
However, I don’t know your fiancé’s type … but you love him, so I’m willing to cut him some slack. After all, maybe he racked up the Afterpay and Uber Eats debts wining and dining you?
 
Like you, perhaps he’s also blindsided by love, but he just so happens to be clueless about money (which would make him a card-carrying Aussie).
 
My view?
 
Let’s give love a chance.
 
If you haven’t done it already, I’d sit down and paint him a picture of what your ‘happily ever after’ looks like. Go into all the scary details: a paid-off home, a million-dollar super fund, private schools for the kids.
 
And then smash him with the following line:
 
“I do not want to marry you if we’re not on the same page financially.”
 
Of course, there’s every chance this poor shell-shocked bastard will agree to whatever you say.
 
So, it’s then that I’d bust out my book and ask him to read it. If he takes it on board, sets up the Barefoot Date Nights, and starts aggressively paying down his debts, you’ll know your financial values are aligned.

 But what if he doesn’t do the work? Well, he’s shown you what he values, and you can both move on and find people who are your types.

Scott.

I don’t want this to happen to you

The stock market is flirting with all-time-record highs …
 
… and that’s my cue to cock my leg and pee all over your portfolio.
 
You see, I still have PTSD from the GFC, when retirees would write to me in tears as they watched their super balance crater. They had no idea how much risk they were taking in their super fund ... until it was too late.
 
I don’t want that to happen to you.
 
Here’s the problem: while the best-performing super funds label their default flagship funds as ‘balanced’ options, the reality is that they’re often quite unbalanced. They have a large portion of their funds devoted to shares and other growth investments … which juices their returns and helps them win awards.
 
In other words, if your super fund is consistently one of the top performers, it’s likely they’re taking more risks than the funds they’re competing against.
 
Now, taking on more risk is great for an 18-year-old dish pig with 50 years of work ahead of him, but it’s potentially disastrous for a 63-year-old executive chef who’s about to light the flame on his last flambé.
 
Bottom line: Australia’s biggest super funds use an aggressive ‘one-size-fits-all’ strategy which might not work if you’re nearing retirement.
 
Yet there is an alternative. They’re called ‘target-date funds’ (or ‘lifestyle funds,’ same thing), and they’re becoming more popular, with a large amount of funds offering one.
 
Here’s the gist:
 
You pick a target date fund based on your age, and it automatically adjusts your investments as you approach retirement. So, when you’re younger, it invests heavily into growth investments like shares (because you have plenty of time to ride out the ups and downs). As you age, it gradually shifts you into more conservative stuff, like cash and fixed interest.
These funds are a great hands-off option, especially if they’re built with ultra-low-cost index funds.
 
My advice?
 
Call your super fund and speak to one of their financial advisors (your first appointment should be fee-free and obligation-free). Ask them to review the asset mix you’re invested in, and have them compare it to the asset mix of an index target-date super fund for your age. Then ask them what they’d recommend, and why.
 
Tread Your Own Path!

Cowabunga, Dude

Hi Scott,
 
Over three years ago you answered a question about my daughters following your ‘Jam Jars’ method. Well, I have a family update for you ... we are still going strong with the jars, and both girls have just saved over $100 for their own skateboards. Cowabunga!
 
Jo 

Hi Jo,
 
I love these photos – you can tell how proud they are of what they’re achieved.
 
Here’s the other thing you’ll notice: they’ll look after those skateboards a lot better than they would if Santa had pulled them out of his sack.
 
You’re building strong, capable women right there.

Scott.

Unplug Social Media

Hi Scott,

I live in constant fear that my 13-year-old son is being exposed to bad things on his phone. Last semester one of his friends was dacked at school and someone took a photo, and it worked its way around the school. He’s having severe mental health problems as a result, and the police have been contacted because the photo could end up in the wrong hands. I’m trying to teach him the dangers of social media, but I feel like a hypocrite as I’m constantly glued to my mobile phone, setting a very bad example for him. I really hate myself.
 
Leonie
 
Hey Leonie
 
You’re not alone. Everyone is dealing with this. Earlier this year I wrote about Wayne, who tragically lost his son Mac to a scumbag extorter on social media. It was the saddest column I’ve ever written.
 
To mark the first anniversary of Mac’s passing, Wayne has created a grassroots campaign that he’s calling Unplug24. On the 24th of October (this coming Thursday), he’s encouraging people to disconnect from their social media for 24 hours to raise awareness of the harm social media can cause.

So, will staying off social media for 24 hours change anything?
 
Well, that depends on you.
 
Personally, I unplugged from social media a few years ago – fully intending to get back into it (after all, I was told that to be successful I needed to be posting multiple times a day). However, I forgot to plug back in: I liked the freedom so much that I never went back.
 
And you know what?
 
I can tell you that I am genuinely happier for it … and so are my kids.

Scott.

The Guilty Golden Girl

Hi Barefoot,
 
I’m torn. My mum has been recently diagnosed with pancreatic cancer at age 66. She would like to set up a share portfolio for my four-month-old baby girl (her only grandchild). This is incredibly thoughtful. I’d like to accept wholeheartedly, but I know I’ll have to keep the account in my name and manage it for at least 21 years, and deal with the tax implications. What steps should I take to honour Mum’s wishes and set my daughter up while minimising my own personal admin and guilt?
 
Louise
 
Hi Louise
 
I’m sorry to hear about your mum.
 
But what she’s about to do for your daughter is going to create a lasting legacy for her.

I suggest your mum look into opening what’s known as a ‘children’s investment bond’:
 
The investment bond can be kicked off with a thousand bucks. Once she’s opened the bond, she can choose to invest the balance into low-cost local and international index share funds – and then let compound interest do its thing! Finally, your mum can nominate the age your daughter can get the goodies (say, on her 25th birthday).

Now, in terms of minimising your admin, investment bonds don’t require an annual tax return – even when they’re eventually transferred to your daughter – so there’s very little admin required. As for your guilt, I’d tell your mum that as the years pass you’ll encourage your daughter to add to her portfolio by doing jobs and perhaps even setting up her very own Barefoot Business.

Scott.

Should We Forgive Our Prodigal Son?

Hi Scott,
 
My husband and I loaned our son and his partner, who have two small children, $30,000 as a deposit on a house. At the time we explained to them that we were not well off, that we were still paying off our own mortgage, that the money was to help them secure a home, and that they could eventually pay us back using their own house as collateral.  
 
 Well, they squandered it (we still don’t really know what on) and my son is very remorseful, though his partner not so much. So no house and $30,000 gone! My husband and I are now at odds – he says our son has to be accountable and pay it back. I’m feeling awful about it all and just want the old relationship with my son back, so I want to write off the loan as a gift (albeit ill spent) and move on with our life. Hubs says a firm NO. So, should we forgive and forget, or make them scrimp and save to pay it back over countless years?
 
Loving Mum

Hello Loving Mum
 
Oh, I really feel for you.
 
All you were trying to do was help your son, and it’s not only strained your relationship with him but is causing friction in your own marriage … and to top it off it’s cost you thirty grand!
 
So what do I think?
 
I think you should sit down with your husband and let him know that you agree it’s time you put yourselves first. After all, this is clearly eating you both up inside (a lot more than it is your son, or he’d be paying it off!).
 
I would also suggest to your hubby that the quickest way to get rid of this ugly angry feeling is to forgive the loan and move on – not for your son’s sake, but for yours. After all, you’re still grandparents to his kids, and he’s still your son.
 
But never, ever loan him another cent.

Scott.

My wildest testimonial ever

The prisoner stared deep into my eye sockets, leant back in his chair, and slowly raised his hand.
 
“Can I share something?” he asked.
 
“Shhhh … ure” I said nervously, looking at the other inmates sitting around the prison table.
 
“Before I got locked up in here, I read your book, and I set up all my Barefoot Buckets. But I also added another bucket that I named … ‘Drugs’. And it worked like magic. I never missed my rent or my rego, and I always had plenty of money for my drugs”, he said triumphantly.
 
Weirdest testimonial ever.
 
However, as I looked around the room, all the hardened crims were nodding their heads approvingly.
 
Then I hit them with it.
 
“The Barefoot Benchmark is to try and live off 60% of your income”, I announced.
 
“And then you set up savings buckets for treating yourself (Splurge, 10%), long-term savings goals (Smile, 10%) and putting out financial fires (Fire Extinguisher, 20%).”
 
Folded arms.
 
In a cost of living crisis, who the hell can live off 60% of their income?
 
Answer? Not many.
 
In fact, after reading my book, people write to me all the time – OFTEN IN ALL CAPS! – telling me how deluded I am. You can sense the murderous rage exploding out of each exclamation mark!
 
Yet today I was sitting across from men who had literally killed people.
 
So, reading the room, I told the inmates that the percentage splits don’t really matter, suggesting they use it more as an exercise to find out just how much it costs you to keep your high beams on.
 
I explained that things may be so tight that some people could be only putting $2 into their Smile bucket. What really matters is that you set up all the buckets and put the entire plan on autopilot. And that is the ultimate get-out-of-jail-free card.
 
Final tip: don’t do drugs … or at least try not to get caught.
 
Tread Your Own Path!

The no diet, no exercise plan

Imagine you have a friend who is morbidly obese.

They come to you and confess: “I can’t keep living like this, I’ve decided to take action.”
 
Then they explain their plan:
 
“There are two things I will not do: diet or exercise.
 
“However, I’ve been researching on the internet and I’ve come up with two amazing solutions: first, I’m going to drink 100ml of castor oil each night, which an ad I read promises will ‘burn my fat like a blowtorch’. And I’ve also bought some electrode pulsing pads that I saw on The Morning Show. All I have to do is stick one to each of my butt cheeks and they simulate running a marathon, all while I sit on the couch and watch Larry on the telly.”
 
Okay, so what I’ve just described is like both of the major parties’ policies on tackling housing affordability.
 
The fact is that neither Labor nor the Coalition wants to do anything that will cause house prices to fall … and become more affordable.
 
Why not?
 
Well, think of it from a politician’s point of view: a third of voters own their own home outright, another third are paying their home off, while the final third rent. In other words, the overwhelming majority of voters want to see their homes rise in value.
 
So that means that politicians need to play a game of legislative limbo and come up with pole-dancing property policies that really don’t achieve anything.

 And the closest match to those pulsating electrode pads has to be the Government’s signature housing policy, the Help to Buy Scheme, which encourages low-income earners with just a 2% deposit to buy a home. Now I don’t need your vote, so I’ll tell you this is a dumb idea: broke people shouldn’t buy homes.
 
So I know what you’re thinking …  
 
You’re thinking it’s easy for me to take potshots at obese people, and politicians (or both, hello Clive Palmer!), yet it’s much harder to come up with anything constructive myself.  
 
So let me give it a go.
 
The biggest losers from our housing dumpster fire, ironically, are not voters.
 
It’s Aussie kids.
 
Specifically, more than 76,000 Aussie children under the age of 18 who sought help from homelessness services in 2022–23. Almost 16,000 of these kids were alone – unaccompanied by a parent or caregiver. The other 60,000 kids sought help with their family, according to Homelessness Australia.
 
Know this: the long-term trauma of a childhood spent without a stable roof over your head, of constantly moving schools, and   absorbing the impact of Mum or Dad being constantly stressed about where they will live, is real and it’s long lasting.
 
Now this is something the Government can fix … but again, politically, it’s not really a vote-winner.
 
Many years ago politicians decided it was a better vote-grabber to give tax breaks to investors to provide private rentals, rather than build more public housing.
 
It hasn’t worked.
 
Who’s going to vote for the people who don’t get a vote?
 
Tread Your Own Path!

The Millionaire Mentor?

Hi Scott,
 
I’ve only just turned 18, but my question is actually for my 16-year-old brother. Recently, he has become increasingly interested in building his own business and learning how to be successful. A couple of weeks ago he found a ‘mentor’ who is apparently successful and is helping him start his own business.
 
He was giving his advice for free to my brother, but has now decided there should be something in it for him (which is fair enough). However, what he wants is $1,200 for three months of mentoring, or $400 each month from my brother. This is a lot of money for a 16-year-old still at school, who in a year of working on his business has not gotten a single client yet.
 
My parents have talked to him about it but he is adamant about it being beneficial. It is not my place to do anything but I do not want him to get scammed or waste his money. What should I do?
 
Sarah
 
Hi Sarah,
 
First up, your little brother is blessed to have such a loving, protective big sister looking out for him.
 
So what do I think you should do?
 
Well, it sounds like your brother is young, hungry and impressionable … like most 16-year-old boys. So I’d help him get some perspective by asking him the following question:
 
How successful is this mentor if he has to resort to putting the hard word on a schoolkid?
 
Answer: not very.
 
I’d also point out that a successful businessman would set their price before they started a project, rather than retrospectively plucking a figure out of their backside months after, as he’s apparently done.
 
Your little brother is learning a lot from this mentor, but unfortunately it’s how not to behave in business.
 
So what do you do?
 
When I was your brother’s age I fell in love with books, because they were my mentors. I could escape into someone else’s world and learn from their mistakes, wins and wisdom.
 
So, what I’d do is to go to a bookshop and buy him these books:
 
How to Get Rich, by Felix Dennis (one of the UK’s richest self-made men).
 
Shoe Dog, by Phil Knight (the founder of Nike).
 
Oh, and I’d also throw in the classic How to Win Friends and Influence People by Dale Carnegie, and of course The Barefoot Investor!
 
Finally, let me just say this: when you’re young, the best mentors are older people who take the time and effort to see the potential that you don’t yet see in yourself. That sounds like you, big sister.

Scott.

For love, not money

Dear Scott,
 
I am a 58-year-old woman. I own an apartment in Sydney with about $1 million in equity and have $200,000 in super, though I have no savings. For the past 20 years I have run a reasonably successful small business. Two years ago I married a rich older Asian guy, eight years my senior. His offer on the table was that he pays for pretty much all my day-to-day expenses, and when he dies I will inherit his monthly (ex-diplomat) pension of US$5,000 per month until the day I die! We live half at his place in Asia (I run the business remotely) and half at mine in Sydney. He does not want to combine any assets, nor move to Australia, and he wants to keep his assets and cash separate as all this will go to his daughter and grandson.
 
Yet now I’m jack of spending half the year in Asia at his house, and I want to move to Sydney, pay off my mortgage, find a lower cost home in rural Australia, and settle. He will not contribute to this move. Should I see a financial accountant or a family lawyer, or both?
 
The Wanderer
 
Hi Wanderer
 
Your husband has an old-school defined benefit pension (which defines the payout: $US5,000 a month, probably increasing with inflation, for the rest of his life … or to his surviving partner). They’re so generous that almost no employers offer them now. Still, most of these plans are very clear: if you are not classified as his de facto when he kicks the bucket, you won’t be entitled to receive his pension.
 
Come to think of it, that would be a very attractive thing to put on a Tinder profile:
 
“89-year-old seeks fun-loving hot 25-year-old. I like long wheelchair pushes along the beach … and when I kick the bucket I can offer you a $5,000 a month pension, indexed to inflation, for the rest of your life.”
 
OH BEHAVE, BAREFOOT!
 
Hey, I’m just pointing out that there’s a lot of hungry young people doing OnlyFans earning a lot less.
 
All jokes aside. You’ve got a million bucks and, in your words, a decent business that affords you a decent living. You’ve got 20 (or so) years to do whatever the hell you want to do. So my advice would be to only stay with him if you love him – don’t do it just for the money.
 
After all, the old bugger might end up outliving you!

Scott.

An embarrassing confession

Let’s start off today with an embarrassing confession:
 
I’ve sat twiddling my thumbs for years when I could have earned a 30% return on my money. Seriously, the thought of it almost makes me want to hang up my footprints in shame.
 
What investment am I talking about?
 
Installing solar panels.
 
I’ve just had them hooked up to the shearing shed, and the only thing I can keep thinking is … why didn’t I do it earlier?
 
Well, upon reflection, it turns out that I had the same excuses people give me about not investing in the share market:
 
First, it was all a bit boring and a bit complicated.  
 
Second, I’d heard stories of cowboys and scammers ripping people off (which always happens when the government throws money at something).
 
And third, over the past decade we’ve had four kids, so life is busy … you know?
 
Okay, so all my excuses were not only pathetic – they were also costing me money.
 
Yet all that changed a few months back when I read this book:*
 
The Good Solar Guide: 7 Steps to Tiny Bills for Australian Homeowners, by Finn Peacock
 
* Actually, I just skimmed the book and then handed it to my 11-year-old, who read it cover to cover that weekend. (This is the start of a very long downhill slide of me relying on my children.)
 
The book does a good job covering the basics of solar, and steps out how to save big bucks.
 
So here’s what I did:
 
First, I went to solarquotes.com.au (this is Finn Peacock’s own website – which I fully admit feels a bit ‘suss’ –  but the not-for-profit consumer champion CHOICE also uses this site for their recommendations). After typing in my postcode, I was given three quotes for installers in my area.
 
Second, I stalked those companies’ user reviews on SolarQuotes, ProductReview, Google and Facebook. Two cut the mustard, one didn’t. (Still, that’s a better strike rate than Tinder.)
 
Finally, they both called me within the week and booked in a site visit. When they arrived I explained that the brains of the outfit was currently at primary school. It didn’t matter: they poked around the place, took some photos, grabbed a copy of my latest electricity bill, and were gone within 30 minutes.
 
A few days later they emailed through their quotes: they’d both designed basically the same system and came within a few hundred bucks of each other.
 
Look, the numbers don’t lie: in most cases you’ll get a better return from installing solar than you will from most other investments. Learn from my mistakes, and get your kids onto it! Seriously, it’s child’s play. Hello sunshine!
 
Tread Your Own Path!

Bank CEO is OUTRAGED

Hi Scott,
 
Another one of your predictions is coming true, with the Government planning on scrapping surcharge fees. I read in the paper today that the NAB CEO said he was horrified after he was slugged with a 10% surcharge for a coffee! Change is coming!
 
Krishna
 
Hi Krishna
 
Wake up and smell the coffee!

Up until now the Government hasn’t given a frappé-latte about the billions of dollars in surcharge fees we’ve been slugged over the years.
 
So what’s changed?
 
Albo knows he’s in more muck than a Werribee duck, and he needs to do something about the cost of living before the coming election.
 
Then there’s the (new) NAB CEO. If he meets his target this year, he’ll earn $5,000,000. Do you really think a 50 cent surcharge is enough to blow the froth off his coffee?
 
Please.
 
Look, until they ban surcharge fees, the only hope of getting around the percentage-based surcharge is (annoyingly) to pull out your card and stick it in the machine, or swipe and select ‘cheque’ or ‘savings’ to go through the EFTPOS system, which means you hopefully will be charged only 30 cents or so for the transaction.

Scott.

You’re Telling me NOT to Invest in the Stock Market?

Scott,
 
I’m 50 years old and confused. You recently said: “Don’t save up a deposit in the share market; instead park that money in an online saver or term deposit”. But isn’t the point of investing in shares that you can have the financial freedom to do what you want, like buy a dream house?
 
Barry

Hi Barry,

How would you feel if after years of saving you found your dream home to buy … and that same day the share market fell and wiped out 25% of your deposit savings?
 
You’d be pretty bummed, I’d reckon.
 
I’m not saying that’s going to happen to you, but I am saying that it’s happened at least once before.
 
That’s why the Barefoot Steps are very clear: until you own a home, the majority of your long-term investments should be via your super. In other words, save for your deposit in a high-interest online saver or a term deposit – not in shares.

Scott.

Warren Buffett’s $5.4 BILLION Warning to investors

Scott,
 
Why haven’t you written about your idol Warren Buffett selling BILLIONS of dollars worth of his Bank of America shares? Sounds like he knows something we don’t …
 
Chris
 
Hi Chris,
 
So I’m guessing you picked this up from that prestigious financial news digest Daily Mail – which ran this typical Daily Mail headline this week:
 
“Warren Buffett’s $5.4 BILLION warning to investors after he dumps popular stock – and Wall Street better pay attention”
 
“Oh my god”, I thought to myself.
 
Then I spat out my coffee and violently jerked my mouse towards the headline on the screen.
 
DOUBLE-CLICK!
 
However, as I read the actual article, I started frowning. Shockingly, it didn’t live up to the headline.
 
(Does it ever?)
 
Yes, it’s true that Buffett has sold $5.4 billion in Bank of America shares (well, the actual figure is $7 billion, but … close enough).
 
So, is he sending investors a warning?
 
No.
 
How can I be so sure?
 
Well, firstly, because the 94-year-old has said publicly thousands of times over his career:
 
“I have never made any investment decision based on an economic prediction.”
 
So there’s that.

Yet what was missing from the headline was context:
 
His Bank of America sale represents … just 0.7% of Berkshire’s overall assets.
 
(And he still owns a whopping 882 million Bank of America shares, worth US$33.7 billion.) A more likely explanation is that he was taking a profit, given the stock is up 70% since October.
 
Anyway, just for kicks, I decided to get my Daily Mail on and ask ChatGPT to come up with a clickbaity headline on Buffett that investors could actually use.
 
Here’s what it came up with:
 
“Shocking Move: Warren Buffett Bets His Entire Fortune on Just ONE Stock”
 
It’s true.
 
For context, in his will, the 94-year-old billionaire is investing his inheritance into one low-cost index fund.
 
The reason is that Buffett argues that index funds are the best investment for everyone and advises that we should be buying them consistently throughout our lives, saying:
 
“The temptation when you see bad headlines in newspapers is to say, well, maybe I should skip a year or something. Just keep buying.”

Scott.

This is going to hurt

This week, I found myself standing in my underwear while a man took photos of me.
 
“Oh, this doesn’t look good” he said, getting right up in my grill. “Best we freeze this sunspot off,” said my doctor, walking back to his desk.
 
He returned with a giant metal canister and pointed it at my temple, Terminator style.
 
“This … is going to hurt”, he said matter of factly.
 
“Hey! You are not supposed to say that!” I protested.

Yet it was too late. I felt a stinging sensation for a couple of seconds … and then it was all over.
 
Contrast this approach to that of another doctor – our Federal Treasurer, Dr Jim Chalmers.
 
(He’s not a medical doctor, he’s a doctor of political science … in other words, he’s a spin-doctor).
 
In the past few weeks the Treasurer has thrown a little bit of inner Karen at the Reserve Bank, whining that they are ‘smashing the economy’ by their decision not to cut interest rates.
 
I actually agree with Jim.  
 
There is no doubt that interest rates are hurting our economy, just as they are in other parts of the world, like the United States, the United Kingdom and New Zealand, all of which, it has to be said, have higher rates than us right now.
 
Having said that, the Treasurer is doing the equivalent of protesting against a sting on the side of the forehead, while the Reserve Bank is focused on eliminating a potentially cancerous melanoma … in the form of entrenched inflation.
 
As we’ve experienced since Covid, the effects of runaway inflation are cancerous to the economy … and they hurt people on the lowest incomes the most.
 
So now I’m going to pick up a giant metal canister and aim it at your temple:
 
Too many people (and journalists!) have anchored their expectations to ultra-low interest rates. It’s high time we pulled up that anchor and sailed into the sea of sustained higher rates.
 
(And to be clear, I expect them to be consistently higher than we’ve experienced in the past few years, whether it’s Labor, the Coalition or the Breakdancing Party – don’t discount her: Raygun has better name recognition than Albo or Whatshisname).
 
Last week, RBA Governor Michele Bullock spoke about the small number of borrowers who can’t make ends meet, suggesting that some “may ultimately make the difficult decision to sell their homes”.
 
That’s the “this is going to hurt” line my doctor gave me. Which is a ballsy thing to say in her position, but also good advice: if I had a dollar for every time I’d told people in financial stress that they need to consider selling their home, I could rent a house in Ouyen (for a week).
 
Yet, as a spin doctor (especially one on the eve of an election), Jim sadly can’t say that. Still, if the thought of that causes you heart palpitations, right now is a very good time to get a financial check-up!
 
Tread Your Own Path!

Blowing Smoke Up Your Backside

Hi Scott,
 
Your financial advice, as always, is second to none … but this short email is to confirm you also scored a bull’s-eye with your suggestion a few weeks ago to Bella to buy Allen Carr’s book to help her husband give up smoking. Years ago, I was so addicted to cigarettes that, even after watching BOTH my mum and brother die prematurely from smoking-related illnesses, I STILL wasn’t able to quit.
 
But then I bought a copy of that book –   and quit immediately after reading the last page. This was after smoking a pack a day for about 20 years and genuinely believing that life wasn’t worth living if I couldn’t smoke. Not to mention the fact that I had tried EVERY SINGLE other method in an attempt to quit.
 
Keep up the good work, and never stop recommending Allen Carr’s book to smokers. As a former confirmed smoker, I can only describe the feeling of genuinely never wanting another cigarette again after finishing the book as magic. I hope Bella and her husband take your advice and I wish them the same success.
 
Andy
 
Thanks, Andy!
 
I aim to be helpful in these pages. If this helps people escape the prison of addiction, it’s a good day for me. Well done for giving up the darts.

Scott.

Barefoot Book Week!

Hi Scott, 
 
Book Week time again and Barefoot was the only person Hamish wanted to dress as! He has read Barefoot Kids and is now nearly finished your original Barefoot Investor book. He has all his buckets and a great plan. Keep inspiring my kids, please!
 
Nicky

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Hey Nicky,
 
I absolutely love Book Week (and Father’s Day).  
 
Every year I get kids who dress up as me (well, except for my kids, who think I’m super embarrassing).
 
Please thank Hamish for reading both books, and let him know that I think he’s a legend.
 
(And a shout-out to all the other kids who had a Barefoot Book Week too.)

Scott.