Barefoot Fight Night

Hi Scott,
 
During lockdown my hubby started a small hobby business to ‘keep him busy’. It has now taken over, and not in a good way. He runs it with its own account, separate from our family. I didn’t mind this arrangement as, initially, he was saving for a motorbike. Then I discovered he’s been gambling the profits away into crypto. A massive argument ensued. He says he’s ‘investing for the future’ and it’s ‘his’ money. I say he’s misinformed. What say you?
 
Wendy

Hi Wendy,
 
I see crypto as being in the same category as betting on the nags, breeding gerbils or buying Pokémon cards. So tell him, “mate if that’s your idea of fun, well, pikachu to you!”
 
Just gently suggest he only set aside a small amount of money for his fantasy coin fetish … and then get him thinking about directing the bulk of his profits towards something more meaningful.
 
Like what?
 
Well, I’d go on a Barefoot Date Night and ask him the following question:
 
“What do you LOVE to spend money on?”
 
He might say ‘travel’.
 
Then you say, “Okay, what’s one experience you’ve always wanted to have travelling?” It might be a cooking class in Italy. It might be the Grand Prix in Monte Carlo.
 
The key is to get him excited about saving up for a goal, and not defensive (oh, and also to make it feel like it was his idea in the first place).

Scott.

Barefoot, You Offer the WORST Advice I Have EVER Heard

Scott,

I have to respond to your advice last week where the husband had lost $57,000 trading crypto. That was literally the worst ‘non-advice’ I have ever heard in my life! You don't even know what he was trading, for one. If he's invested in blue chip top 10 cryptocurrencies (Bitcoin, Ethereum, Solana) then, for the most part, it’s a long-term strategy like with any other stock. Giving non-advice like this is just making that woman panic and will probably result in her persuading her husband to sell at a huge loss. I call it non-advice because your advice, “invest your short-term savings in your bank account” – with 0.01% interest per year! Seriously!?

Elliott

Hi Elliott,

Seriously.

Look, I have no problem with people buying magical dog coins or anything else that tickles their greed gland.

But I wouldn’t be risking my house deposit on it.

If you’re ‘banking’ on the money being there within a few years to buy a house, you really should protect that capital, even if it means you’re not earning interest.

That’s just common sense, I would have thought.

Scott.

I’m Going to KILL him

Scott,

My husband of 12 years finally fessed up. He has been trading crypto coins and has lost $57,000! This was money our family of five was relying on to upgrade from our tiny three-bedroom home. We have always had separate accounts but vaguely knew what each of us was doing. At least I thought I did. I thought he had his money in shares but, unbeknownst to me, he sold them last year and started trading crypto. I cannot believe he’d be so stupid, I just want to KILL him. He thinks the market will come back and wants to hold on. What say you?

Sally

Hi Sally,

A few years ago, I walked into the lounge and noticed red crayon scrawled all over a wall.

“Who did this?” I thundered.

My three-year-old nervously put up her hand and said, “Daddy, I made an ‘uh-oh’.”

At that point I had a choice: I could yell and scream, or I could thank her for being honest and suggest we work together to clean up the mess.

Sally, you are in the same position. Your husband has admitted to making a big mistake playing with the crypto crayons. It’s over, done-ski. The only way to win from here is for you two to clean up the mess together.

(This is one reason I’m not in favour of happily married couples keeping their money separate: you need to be a team.)

My tip?

Don’t invest your short-term savings in the share market or a digital beanie baby – keep it in your savings account.

Finally, if you’re asking me where the crypto market is going, I have absolutely no idea in the short term. Yet I do have a rough yardstick on when we’ll see the bottom:

When Dogecoin is valued at zero.

Woof!

Scott.

You’re An Embarrassment, Barefoot

Mr Pape,

You are costing your followers HUGE gains by sticking your head in the sand with crypto. Okay, so let’s put to one side the 1000%+ gains that have been made on various coins, and focus on income. Who doesn’t want a 17% return from staking coins? Crypto and DeFi (Decentralised Finance) are the future. The Barefoot Investor is the past. Wake up. You’re embarrassing yourself.

Chris

Hi Chris,

First, an apology to my dear old mother, who always asks: “Why do you print the questions of people who attack you?”

(Because it keeps me amused, Mum.)

Chris, you have me all wrong: I’m wide awake, and watching finance being both disrupted and digitised.

The only difference is that I haven’t made it part of my belief system, as so many other people seem to have.

That’s how I can simultaneously admire and cheer on the next development of the internet (dubbed ‘web3’), while also calling out a lot of dumb, greedy stuff that’s going on. And there is a LOT of dumb stuff happening right now. Case in point, a crypto token that shares the name of the new COVID-19 variant ‘Omicron’ skyrocketed 1100% last weekend.

Why?

Because it has the same name. Seriously. It starts and ends right there. Then Monday came the hangover, and the coin nosedived 75% overnight. Yet at the time of writing, it’s still worth around $440 million. That’s some serious coin!

Finally, let me answer your question: “Who doesn’t want a 17% return staking coins?”

Me!

Let me explain why: for all the amazing technological progress that’s occurring right now, none of it changes the basic tenet of risk and reward. In a world of zero percent interest rates, any investment that offers a 17% yield is a red flag that you’re taking on an increased risk that you’ll lose your money.

I pray for you Chris.

Scott.

My crypto confession

It was a privilege just to be there.

We were deep in the outback on a guided tour run by First Nations people. Our host, a traditional elder, showed us incredible ancient rock art, pointed out animal tracks, and told us dreamtime stories.

It really was a spiritual experience.

At the end of the tour, our host came up to me and asked:

“What do you like?”

“Oh, all of it”, I gushed.

He looked a little perplexed as he pulled out his phone.

“Here’s what I like,” he said, gesturing for me to take a look at his phone.

What was on his phone?

His crypto portfolio.

Wow.

Here I was, in the middle of the Never-Never, with the oldest living culture on earth, and we were discussing … Dogecoin?

That was the first time I fully grasped that crypto really has gone mainstream in Australia.

Earlier this month Commbank announced they’ll soon give their 6.5 million customers the option to trade crypto smack bang on it’s banking app. My bet is the other banks won’t be far behind them. (After all, the Big Four are about as relevant as incontinence pads to Millennials, so they’re desperate to show the kids they’ve finally unchained their ballpoint pens from their desks.)

Bitcoin is one of a staggering 7773 cryptocurrencies in the world.

For the record, I think what’s going on in the crypto space is absolutely fascinating. We’re in the early stages of a revolution, watching the financial industry be both disrupted and democratised. Clearly, this is the future.

Yet history also teaches us that in every gold rush there are scams, cons and bubbles just waiting to be popped.

This time is no different. If anything it’s worse — today a majority of Gen Z investors in the US think crypto will make them millionaires, according to a new survey by data analytics firm Engine Insights.

It won’t happen.

There are now a staggering 7773 cryptocurrencies, according to Coinmarketcap (compared to 180 traditional currencies across the world!).

Let me be clear: I am sure that a handful of these will be genuinely transformational (don’t ask me which ones). And I’m also just as sure that the vast majority of these coins will end up being worth digital diddly squat.

Still, now that crypto has gone mainstream, it’s me who needs the reality check. Statistically, there’s a good chance you own crypto … or at least you’re thinking about it. And if that’s you … all I can say is best of luck!

Tread Your Own Path!

My Saturday night date with Lindsay Lohan

On Saturday night I was watching Herbie: Fully Loaded with the kids.

That’s the one starring Lindsay Lohan, when she was still sweet and innocent and doing Disney.

It’s a terrible movie.

So, while the kids munched on popcorn, I fired up my laptop and began looking through reader questions.

A new email pinged ... with the subject line ‘SOS - help me Scott’

Scott,

I should have listened, I read your articles about crypto and I sold mine before the rise. Then I got FOMO and invested $18,000. Now it has dropped ... MASSIVELY. I’m down $10,000. What do I do? I want to sell but I don’t want to lose my money. Seriously. I’m 22 and just quit my job!

Ben

Hang on a minute.

Of all the things a 22-year-old bloke could (or perhaps should) be doing on a Saturday night ... he’s sending a daggy dad a question on crypto?

Herbie goes bananas!

Still, Saturday night was a knife fight for crypto: some coins were slashed by half.

(However — and this is important — it was simply a marker in time. Since Ben sent the email, Bitcoin has rallied 25%, and Etherium 50%, so maybe he made his money back?)

In any event, I do have some advice for you, Ben:

STOP WASTING YOUR TIME.

The money you’ll make in crypto is chickenfeed compared to the life-changing gains you can make if you get serious.

You might think I’m talking about investing — and I am.

But it’s more than that.

See, Ben, you’ve got two things most people don’t have enough of:

Time … and energy.

Now you can waste that time betting on things you have no control over (like crypto) … or you can invest it in skills and habits that will compound for the rest of your life.

That could be finding a mentor, starting a side business, getting fit, or even just reading some good books (my pick: Extraordinary Popular Delusions and the Madness of Crowds — no talk of crypto, though, it was published in 1841).

In other words, anything that you master now will compound over your life and make things exponentially better.

When you’re 22, you think you’ll always be young and that you’ve got plenty of time to get around to all that stuff.

However, I reckon you have just 10, maybe 15, years to really focus on the hustle.

After that, your time and a lot of your energy will likely be diverted by a partner, kids, a mortgage.

I don’t want to scare you, Ben, but one day you’re going to wake up. You’ll have three kids on your lap, popcorn in your pants ... and you'll be watching Lindsay Lohan pretending to talk to a car.

Beep, beep!

Tread Your Own Path!

The crypto test

Last Saturday night I found myself standing alone at a bonfire party, staring thoughtfully at the flames.

A guy walked up to me awkwardly.

“Would you like a beer?” he asked.

“Well, sure!” I said.

He handed me a beer.

“Now … can I talk to you about … Bitcoin?”

“Oh … kay.”

Truth is, I’ve spent a lot of time thinking about and learning about crypto, and the future of decentralised finance. It’s a fascinating area … but I think I may have wasted my time.

That’s because all I needed to do was buy the joke crypto Dogecoin, which, at the time of writing this, has returned a staggering 8,300% year to date (though the price is volatile and has dropped in the past few days).

Let me say that again:

The best-performing cryptocurrency stretching back six years — the top dog — is Dogecoin.

Remember, Dogecoin was set up as a ‘piss-take’ by its Aussie founder. It has zero tangible value. It is worthless.

And to prove what a ‘chump’ I am, I wrote about the dangers of Dogecoin in this column 10 weeks ago … and since then it has increased by 400%!

Woof, woof!

So do I feel a twinge of regret for not getting in?

No.

For much the same reason that I’ve never contemplated putting 1% of my net worth into the pokies (“Just in case, you know, I win the jackpot”).

Here’s the point:

Life is really hard when you believe you can make a quick buck from magical dog memes.

It’s stressful being a gambler.

There is no skill involved, and the odds are stacked against you.

You see, in order to make real money you have to sell. And every man and his dog is planning to sell out of Dogecoin right at the top. Every single one of them. It’s called the ‘greater fool theory’ (i.e. you only win when some greater fool buys in at a higher price), and history is littered with people who abruptly discovered that they in fact were the fool.

Wise old billionaire Charlie Munger advised: “The first rule of compounding is to never interrupt it unnecessarily.” In other words, you’re being tested right now. If you’re persuaded to sell your boring index funds and lay down with dogs, I can almost guarantee you’ll eventually end up with financial fleas.

Tread Your Own Path!

Barefoot Endorsement, Please

Hi Scott,

A reputable friend has suggested I invest in a CFX project (cryptocurrency foreign exchange). From what I understand it is kind of like multilevel marketing and a type of cryptocurrency. I have looked into it and it sounds good. However, I am hesitant to pay out my hard-earned cash without some endorsement from someone like you. I am planning a baby as a single woman at 45 and I bought my first home only a year ago, so I am looking at ways to increase my income and secure my future. Thoughts?

Lilly

Hi Lilly,

You want my endorsement?

Okay, here goes: No. No. No. Lilly, oh god no. No.

Is that emphatic enough for you?

Now, I’m betting your ‘reputable’ friend isn’t a brand-new home owner who is about to become a mature-age single parent. Lilly, you simply can’t afford to get swept up in this rubbish.

If you want to increase your income and secure your future — and that’s an admirable ambition! — work towards a qualification or skill that you can use when you’re at home with your bub.

Scott