Beware the Killer Chihuahua

Question


Hi Scott,

My wife and I are both in our early seventies, retired, and have just been given another ‘pay cut’ on our term deposits, courtesy of the Reserve Bank! I have two questions:

1) What are your thoughts on current interest rates?

2) I have half my money ($600,000) in term deposits paying a pitiful 1.5% with Bendigo Bank. What are your thoughts on moving them over to Mayfair Platinum term deposits, who are offering 5.45%?

Bruce

Scott's Answer


Hi Bruce,

You’ve asked two fantastic questions that many people are asking themselves right now. So let me answer with an admittedly weird analogy:

For me, the current level of interest rates (0.5% — the lowest on record) is a bit like camping out in the bush.

You’ve spent the day shooting your rifle at random tin cans and the like, wasting your bullets.

Night falls and you hear something rustling in the bushes: what the hell is that? A killer bear?

But you only have three bullets left.

Scared witless, you fire one off into the darkness and hope you hit whatever is making the noise.

Now you have two bullets left.

Let me explain: the bullets are interest rate cuts, which are designed to stimulate the economy. And the latest cut the Reserve Bank fired off this week will, in my view, prove to be about as effective as shooting randomly into the darkness. If anything, it’ll just serve to scare your fellow campers.

What happens if there really is something bad in the (economic) bushes? Will we have enough bullets in the chamber to defend ourselves?

That’s my worry.

Now, to your second question: should you move your money over to Mayfair Platinum, who are offering 5.45% on their term deposits?

I’ve written about Mayfair Platinum before. They’re heavy advertisers, and in the past have used a cute little chihuahua as their mascot. I explained how they have snapped up some (in my view) very questionable offerings, including Dunk Island (an island south of Cairns that was wiped out by Cyclone Yasi in 2011), various cryptocurrency-related companies, a food app, and a host of other investments across the world.

For my answer to your question, then, let’s keep going with my camping analogy.

You’re worried the noise in the bushes might be a killer bear. But it’s not. In fact the cutest little chihuahua comes trotting out. It cuddles up to you by the campfire and lovingly licks your face while you drift off to sleep, confident that everything is going to be a-okay. That’s Mayfair Platinum.

And then, in the middle of the night, it bites your face off.

Scott