Why it’s crucial to act now to avoid slaughter
Right now we’re in the early stages of reopening the economy and riding a wave of optimism after a long lockdown, but by September we’ll be smack bang in the deepest recession in living memory. So now’s the time to hatch a plan that gets you on the front foot, writes the Barefoot Investor.
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In early March, as we prepared for lockdown on the farm, the first of our fluffy little lambs was born.
There are always one or two who are rejected by their mother and need to be bottle-fed multiple times a day.
Liz puts the lambs in cute little knitted coats, and the kids feed them colostrum formula with baby bottles.
Instagram: #sooocute #farmlife #furbabies!
It takes a few goes for the lambs to get used to the bottle, but when they get a taste for it they’re hooked.
Soon they’re so excited to get the bottle that they literally knock the kids over. Terrified, the kids hold out the bottle and brace for impact. The lambs charge at them, suck it down as fast as they can, and then wander around “milk drunk”.
There’s a time limit to how long we’ll trudge up to the yards twice a day in the dead of winter, of course.
Yet the lambs don’t know that.
Can you see where I’m going with this?
I’m really talking about JobKeeper, the boosted JobSeeker, your caring bank who’s let you pause your mortgage payments (but not your interest and charges), and the landlord who’s discounted your rent.
You’re sucking on that milk. Tasty, ain’t it?
Well, don’t get too comfortable.
Soon September will roll around on our farm. The season will change, the flowers will begin to bloom, the air will start to get warm.
And our cute, fat, hand-raised lambs will be … hanging out with the butcher.
One day they’re frolicking in the warm glow of sunlight, the next they’re simmering in a roadside BP bain-marie.
At this point my editor stopped reading and wisely advised me to spike this column: “You will get hate mail.”
Well, I’m trying to make a point. See, I’ve lived through natural disasters and seen the outpouring of emotion and generous offers of support.
And I’ve also seen just how quickly people move on — banks, politicians, the media, the general public.
They always do, and quicker than you think.
Case in point: the banks have painted themselves as the “financial doctors” of this pandemic, pausing repayments (but, again, not the interest) on $220 billion worth of loans.
And having won praise for giving customers “up to” six-month payment holds, the NAB has already begun ringing its COVID-affected customers just to check in (“How you doin’, lil buddy? You got some money for us?”).
Similarly, politicians have bestowed on renters a six-month “eviction ban” and, in many cases, the option of negotiating reduced rent, i.e. landlords cop it in the neck. Yet, with 1.3 million landlords negatively gearing (aka losing money), this can’t last forever.
And, while the government has unveiled the biggest welfare response in history (though slightly revised down!), they’re now under pressure to restart the economy and begin cutting back the gravy.
The bottom line?
Right now we’re in the early stages of reopening the economy, and we’re riding a wave of optimism after being locked down for so long.
But just remember that for many people things will change in September. That’s when the economic season changes and we’ll find ourselves smack bang in the deepest recession in living memory.
What does that mean for you?
It means you have 90 days (at the most).
You need to cobble together a plan that gets you on the front foot. It’s time to reinvent yourself. It’s time to radically cut your costs. It’s time to have a hard conversation with your bank. It’s time to sell something, or many things. Do whatever it takes.
The time to act is right now, while the milk of human kindness is still flowing.
Tread your own path!
READERS WRITE
SHOULD I BUY SHARES IN A CRUISE LINER?
DOROTHY WRITES: I am about to receive money back from Princess Cruises, due to a cancelled cruise.
The owner of Princess Cruises, Carnival Corporation, has just seen its share price hit a record low. With this in mind, I am considering purchasing 100 Carnival shares. This will benefit us, as shareholders get $250 on-board credit for every future sailing of over 13 nights.
We are already platinum status members and plan on continuing to build our loyalty. Is it a good idea to buy now?
BAREFOOT REPLIES: So you’re talking about the tub that kicked off the coronavirus in Australia, right? Just making sure.
Let’s be honest — your motivation for making this investment starts and ends at the minibar. You’re thinking of buying some shares simply to get the shareholder discount.
And I’m perfectly OK with that, so let’s sail:
At pre-corona levels, 100 shares in Carnival Corp cost around $850 Aussie.
Today those 100 shares are going to set you back around $280, and you get a $250 credit! And the more cruises you take, the more shareholder credits you can spend!
Then, when you’ve worn out your sea legs (or hips), you can sell your shares, hopefully at a profit.
Really, the only downside is if the company goes broke. And if there’s a second wave of infection, Carnival Corp could very well sink: the company burned through $US12.9 billion of expenses in 2019 … and post a capital raising, they’ve only got $US7.6 billion in cash on their balance sheet.
Yet let’s be honest: if contracting a highly infectious and potentially fatal disease doesn’t bother you, losing a few hundred bucks is the least of your worries.
That being the case, if I were in your boat shoes I’d take the punt and buy the shares. Bon voyage!
PARDON MY FRENCH
GENEVIEVE WRITES: I would like to know if a French version of your books exists please?
BAREFOOT REPLIES: Bonjour mademoiselle, Non! Cordialement, Barefoot.
FIGHTING IT OUT WITH MY DAD
PETE WRITES: My dad and I are just about coming to blows!
He has a mate, an investment manager, who is managing his $700,000 in superannuation.
The portfolio currently has 15 holdings, all ETFs and LICs, and his “mate” is slugging him $330 a quarter to manage this rubbish.
I said I could do this for free, or spend a day explaining the basics so he could do it himself.
His response: “I’m happy with how much I am making, plus you don’t know what you are talking about.” Haha!
How can I get the message through to him that passive investing will take a whole 10 minutes out of his year to organise? Or should I just let him be?
BAREFOOT REPLIES: I actually agree with your old man, for a couple of reasons:
At $330 a month ($1,320 a year), it represents around 0.18% per annum cost to his portfolio.
And, so long as he’s invested in decent, low-cost products (no expensive actively managed funds), he’ll be fine.
More importantly, if his “mate” can stop him from freaking out and jumping off the stock market rollercoaster as we do the occasional loop-the-loop, then he will have more than earnt his money.
Don’t feel bad.
My old man talks to me about stocks all the time, but then when he wants “real” advice he talks to my analyst, Mike (who then says the same thing as me).
It must be something about the fact that they’ve had to wipe our bottoms at one point in our lives.
Then again, their turn will come someday soon. Circle of life.
KIDS SAY THE DARNDEST THINGS
NICK WRITES: My wife and I have been doing the Jam Jars with our two girls for a bit over a year now.
I just wanted to let you in on a conversation I overheard this morning:
Wife: “Why don’t you have more money in your Give Jar?”
Six-year-old: “I give it to the people.”
Wife: “Which people?”
Six-year-old: “The people in the tuckshop I get my Icy Pole from.”
Wife: “That’s not what your Give Jar is for, darling.”
Six-year-old: “But I give them money for my Icy Pole!”
BAREFOOT REPLIES: You, my friend, have won question of the year.
I got a real laugh from this one.
Let’s hope your daughter doesn’t become a lawyer!
If you have a money question, go to barefootinvestor.com and #askbarefoot
The Barefoot Investor holds an Australian Financial Services Licence (302081). This is general advice only. It should not replace individual, independent, personal financial advice.
The Barefoot Investor for Families: The Only Kids’ Money Guide You’ll Ever Need (HarperCollins)RRP $29.99