Like a thinking person’s MAFS

On Sunday nights my wife and I have a ritual. We turn on the telly and begin searching for something we both want to watch. Problem.

My wife refuses to watch anything that’s violent, or sad, or scary … or too “finance-y”.

I refuse to watch romantic comedies.

So, even though there are a thousand shows to watch, I inevitably end up reading a book while my wife scrolls Instagram.

Yet in a fantasy world, far far away, where I rule the remote, here’s what I’d click on:

Money For Nothing: Inside the Federal Reserve (YouTube)

This is the story of some of the most powerful people in the world.

If ordinary Americans understood the mistakes the US Federal Reserve has made, they’d be outraged: by keeping interest rates at zero and printing money, they’ve driven record wealth inequality in the US … and around the world.

This documentary is now 10 years old but it hasn’t dated one bit. It paints a picture of a Federal Reserve that is arrogant, out of touch and enslaved to Wall Street interests. And, a decade on, things are even worse. Rates are still at basically zero and, when Covid hit, the Fed printed 300 years’ worth of money in just a few months. You’re going to hear a lot about the Federal Reserve in the next few years. This doco is a good primer.

Dirty Money: Payday (Netflix)

Okay, so there’s a theme here: most good finance shows involve greed and stupidity (or both) … like a thinking person’s MAFS.

I love the Dirty Money series on Netflix, and my favourite episode is Payday, which tells the story of Scott Tucker, an amateur race car driver turned loan shark. He was a financial predator who created payday loans that charged huge interest rates and big fees (with deliberately confusing terms that skirted legislation), trapping millions of Americans. And if you think this isn’t happening in Australia, you’re wrong.

Principles for Dealing with the New World Order (YouTube)

This is an animated presentation by Ray Dalio, who runs the biggest hedge fund in the world. His basic theme is that we are on the cusp of a “changing of the new world order”, with the decline of the US as a superpower and the rise of China to top spot. Personally, I’m not sure the Chinese Communist Party can continue its reign over the long term. Still, Dalio is a smart guy who has gone back over 500 years of history to study the big economic cycles … and he explains it pretty succinctly in 20 minutes or so.

In truth, Liz is never going to watch any of these.

However, there are a couple of saucy finance series coming out that I might just be able to tempt her with: On Disney+ there’s The Dropout, which details Elizabeth Holmes’s fraud at Theranos. And on Apple TV there’s WeCrashed, which looks at how the co-working space dropped $US40 billion in less than a year.

And if all that fails, the third season of Apple TV’s Ted Lasso is soon to arrive to save our Sundays.

Tread Your Own Path!

COMEDIAN GOES IN FOR THE SLAUGHTER

Hi Scott,

I’m a 30-year-old married Muslim woman living in Sydney. Being Muslim makes it very challenging to buy a first home. I am sure you are aware that Muslims are prohibited from dealing with interest. I am ready to take all the Barefoot Steps but I don’t know how I can do so without dealing with interest. My family came to Australia in 1991 – and 31 years on they are still renting because they haven’t been able to save $1m in cash. Many Australian Muslims are in the same boat. I want to be able to own a home and provide safety for my children and not be in the same situation that my parents are in 30 years from now. What can I do?

Rina

Hi Rina,

What an interesting question! There are a number of institutions that do Islamic finance.

NAB, for instance, has a product that it claims meets Islamic law requirements by structuring the loan as a lease and charging “rent” instead of interest. (It’s a bit like my kids telling me they’re eating fruit … while digging into a bowl of Froot Loops).

Anyway, I asked my favourite Muslim, Nazeem Hussain, about Islamic finance and he gave me the following fatwa: “I think it’s like halal meat. The animal is the same but it’s how it’s slaughtered that matters.”

Touché! When you’re dealing with any banker, the trick is making sure you’re not the one getting skinned.

I reviewed some rates of shariacompliant home loans and they tended to be quite a bit more expensive than the cheapest standard variable loans. However, I still think it might be a good deal for you. Reason being, Rina, it’s almost impossible for a working-class couple to save up cash and buy a house in Sydney. It’s like chasing a moving train.

BUDGET WARNING

Hi Scott,

I’ve just watched the budget, and I reckon people need to be warned about these 5 per cent deposit government schemes. I am old enough to remember the 1960s and early ’70s, when I was working in conveyancing. The state government had “vendor’s contract” set-ups where people purchased homes under a

I don’t need your it to vote, so I’ ll tell you straight: avoid this scheme.

contract of sale, with the title not transferred into their names until it was paid off. These were an absolute disaster as most people could never have paid off the contract, with interest rates too high and repayments too low. Many of them had to walk away as they owed more than the original purchase price of the property. Beware of governments bearing gifts! Nancy

Hi Nancy,

You’re right, it’s potentially a taxpayer-funded trap for 50,000 families. Let me explain.

In the budget, the government increased the Home Guarantee Scheme to 50,000 places.

The scheme allows first-home buyers on low incomes to buy a home with just a 5 per cent deposit. And for single parents it’s even less – all they need to scrounge up is a piddly 2 per cent deposit.

Yet, hang on a minute … isn’t this entire budget about the rising cost of living? So why is the government encouraging low-income earners to load up on debt at a time when interest rates are rising? Answer: for the very same reason that Labor has made this dud policy part of its election pitch: they want your vote.

Strike me handsome! Giving people extra money to buy a home just filters through the market and makes all houses more expensive. When interest rates rise and house prices fall, many of these people will be underwater. And it’s you and me – taxpayers – who’ll be on the hook for the losses. Luckily, I don’t need your vote, so I’ll tell it to you straight: avoid this scheme.

YOU’RE TALKING OUT OF YOUR BACKSIDE, BAREFOOT

Hi Scott,

I enjoy your columns, but I was a little concerned about last week and the “cold stethoscope to your nether regions”. A stethoscope is a listening device, and for the life of me I can’t think of a reason to listen to one’s crotch. Bowel sounds, yes, but that’s as far south as it should go. I think your doctor might be taking advantage of you.

Ryan

Hi Ryan,

I think you may be on to something (I’m not even going to tell you how he checks my prostate). Anyway, by all accounts last week’s column on getting a better deal on health insurance managed to temporarily crash the government website privatehealth.gov.au. I feel better now!

P.S. As always, I’m off for the school holidays, and I’ll be taking an extra week’s book-writing leave. For those who’ll miss me, the new classic edition of The Barefoot Investor hits the shelves later this week.

Information and opinions provided in this column are general in nature and have been prepared for educational purposes only. Always seek personal financial advice tailored to your specific needs before making financial and investment decisions.