Financial success is not lined with silver and gold

IT’S 3.19am … and I’m writing to you from my iPhone... Right now my six-month-old, Eddie, is about as cranky as my Triple M boss (Big Eddie).

Closeup silver ingots and golden bullions in bank vault. Finance 3d illustration

IT’S 3.19am … and I’m writing to you from my iPhone.

Right now my six-month-old, Eddie, is about as cranky as my Triple M boss (Big Eddie).

Reason being, he’s teething (Little Eddie, that is ... we all know Big Eddie’s Collingwood mates don’t have any teeth).

Still, the 3am shift does have some advantages: it gives me time to read through the feedback I get from writing this little column.

Turns out some people love me, some hate me, and some just want to confess things they aren’t game to tell their partners. With that in mind, here’s some ‘constructive criticism’ from the past month.

ALL THAT GLITTERS IS ... SILVER?

Scott,

Why would you tell Mark (March 27) to get rid of his silver? If you were to do some deeper research on gold and silver, you would find they are likely to multiply many times. This will be due to the inflated world money supply producing a Ponzi-like bubble on world stock markets, and then crashing, making for a rush to silver and gold, even with a high Aussie dollar. Look ahead a bit!

Doug

Hi Doug,

Let’s do some ‘deeper research’.

First, I appreciate and totally agree with you that central bankers have put the world in uncharted territory.

I also share your hunch that, when our day of reckoning comes, gold and silver and tinned baked beans will move up, albeit temporarily, which could make you a trading profit.

The question is when this will happen. You don’t know. I don’t know. The doom and gloom newsletter publishers who make millions of dollars a year selling subscriptions don’t know either. A 20-year study by academic Philip Tetlock from the University of Pennsylvania tracked 82,361 economic and political predictions from academics, experts and gurus, and found they were about as reliable as a dart-throwing monkey.

So while you wait for the world to crash, you’ll be stuck with an investment that misses the secret source of wealth: compound interest. See, the problem with trying to predict the future price of silver, gold, or my grandma’s prized Victorian teapot is that none of them have any practical utility (other than looking pretty). They’re not like a company that generates profits and pays dividends, nor a home that can be rented. You can only make money by trading it — selling a lump of metal with no intrinsic use to someone who believes the same story that you do.

Finally, if you do some ‘deeper research’, you’ll see that over the past 100 years, gold and silver have barely managed to keep up with inflation.

Over the same time, the US share market has risen a staggering 18,520-fold.

ONCE BITTEN, TWICE BROKE

Hi Scott,

Your article on land banking hit me between the eyes. You really try and protect people. I wish I had listened to your advice! I invested about $100,000 in a land banking deal, which I paid for with an SMSF they set up for me (just like you said). The company is now in liquidation and lawyers are trying to get some money back for us investors. At the age of 53 I am left with only $30,000 in super and a huge mortgage to pay. I want to close my SMSF down, but the lawyers say that if they get some money it has to be paid back to the same super fund. It’s costing me $2000 a year to keep it open. What should I do?

Lisa

Hi Lisa,

Most people get robbed with a gun — you got robbed with a pen.

Here’s the thing that frustrates me about white-collar crime: if they’d used a gun instead of a pen, these crooks would be (rightly) rotting in jail, and you’d have some recourse to your money through the Victims of Crime compensation system.

Yet this scam is aided and abetted by lawyers, and is designed with the end game in mind — making off with your loot, no matter how long it takes them. (At the very least, when a scumbag sticks you up in a dark alley you know what the outcome will be, and that it’ll be over quickly.)

For all these reasons it’s doubtful they’ll ever get you any money; that was never part of the plan. However, I can understand you live in hope that they’ll get some back for you, and if so, it’s true they can only pay the trustees of your current super fund, So you’ll have to keep it open. However, with only $30,000 in your account it’ll be eaten up if you live in hope for too long. My recommendation is to switch your fund over to an outfit like esuperfund, which will run an SMSF for $799 (it will still be the same fund, just managed by a different outfit). If at the end of the two years there’s no money, close it down.

HOW TO BE A LIFESTYLE ENTREPRENEUR

Hi Scott,

I really enjoyed your last piece on starting your own business. I’m 35, married, with a son (three), and a mortgage of $660,000. I’m an account exec at an advertising agency, earning $115,000 plus super. It is hard work, long hours and totally unfulfilling. I know I have more to offer the world. Specifically, I am planning on creating a virtual coaching business for executives in the connected economy. Other lifestyle entrepreneurs in this niche earn amazing money, can work around family commitments, and even find time to travel. Financially, what do I need before I quit my job?

Chris

Hey Chris,

A couple of observations.

Firstly, I’ve met many a lifestyle entrepreneur, including quite a few who’ve been written up in magazines with headlines like ‘I stumbled on to a million-dollar business and now live on my own island!’ Experience has shown me it’s all coconuts.

The people who make it to the top of their field in small business are, in most cases, workaholics, absolutely ruthless, and often a little unhinged.

It makes total sense when you think about it. They’re willing to throw in the security and benefits of a full-time job to go into battle with established players who have more experience and more money than they do. It’s not an easy path, or everyone would follow it. Most people are not cut out for it.

Second observation. Reading The 4-Hour Workweek a few times will not prepare you for business.

The only way you can work out whether you’ve got the ticker is to go out on your own while still working full time. If you’re doing 40 hours a week at the advertising agency, do another four hours each night after the anklebiter is in bed (oh, and work all weekend) for a few years until you’re earning at least $115,000 a year from the business.

I call it the ‘trapeze strategy’: don’t let go of the bar (your secure paycheck) until you’re safely holding the next one (your successful business). Enjoy the lifestyle!

If you’d like to send me an email, head to Barefoot Investor and shoot me a message. I promise I’ll read each one — Eddie will make sure of it (there are plenty of teeth on the way).

Tread Your Own Path!

Originally published as Financial success is not lined with silver and gold