Barefoot Investor Scott Pape has issued an urgent warning that Australia is heading into financially ‘treacherous waters’.
Writing for his recent column, Mr Pape pointed to a comment from Oaktree Capital Management co-founder Howard Marks, who is also a well-known finance writer.
‘He’s so influential that Warren Buffett says that whenever Marks writes anything he stops what he’s doing and reads it immediately,’ Mr Pape said.
Scott Pape noted a well respected financial figure has forecast a major economic ‘sea change’ is on the way
He noted that late last year, Mr Marks wrote about an economic shift that could massively change the financial landscape.
Mr Marks wrote that: ‘In my 53 years in the investment world, I’ve seen a number of economic cycles, pendulum swings, manias and panics, bubbles and crashes, but I remember only two real sea changes. I think we may be in the midst of a third one today.’
Mr Pape said the ‘sea change’ he is referring to is sustained higher interest rates.
Australia has seen a prolonged period of falling and low interest rates since their record high of 17.5 per cent in 1990.
‘As a consequence, many people still believe that interest rates of 2 per cent are normal. They are not,’ Mr Pape said.
He said inflation has put an end to Australia’s economic ‘smooth sailing’.
The Reserve Bank has delivered 11 consecutive cash rate hikes in a little over a year, with economists divided on whether another will follow later today.
‘Inflation in Australia has passed its peak, but at 7 per cent is still too high and it will be some time yet before it is back in the target range,’ RBA governor Philip Lowe said of the last hike.
Mr Pape said the rocky financial outlook could be set in.
‘We’ll soon be moving into much more treacherous waters… You need to understand the economic winds are now blowing against us.’
‘So let’s focus on you, and where your ship is heading…. You’ve been putting off making that financial decision, right?’ Mr Pape asked.
Reserve Bank Governor Philip Lowe has delivered 11 interest rate hikes since May 2022
He urged Australians to do one thing they had been avoiding that would improve their financial wellbeing.
‘Perhaps it’s selling that dud investment property… or downsizing from your current place.’
‘Maybe it’s reaching out to your super fund’s financial advisor about your retirement… or making the call to get a better home loan rate.’
‘Hopefully it’s to sell your Dogecoin… or perhaps it’s calling the Small Business Debt Helpline.’
‘You may tell yourself that it’s not the right time, or that you don’t have all the facts, or that you’re too busy. Yet deep down they’re all excuses.’
Mr Pape said that actually taking action was the important thing, as he explained to one reader who wrote in to him.
Taylor said they had had strange occurrences of good fortune since reading ‘The Magic of Manifesting Money: 15 Advanced Manifestation Techniques to Attract Wealth, Success and Abundance Without Hard Work‘.
The small business owner said she scored three new clients, brining in about $15,000 of income, and that her husband got a call telling him he was entitled to an old insurance policy worth $3,000.
She asked Mr Pape to share the book with his audience, but he didn’t seemed convinced, recounting a story of when he had seen entrenched poverty firsthand.
He said when he visited a favela while on a trip to Brazil there were ‘tens of thousands of families living in tiny tin sheds’ in areas controlled by criminal gangs.
‘Surely all these wretchedly poor people need to do is simply think the right thoughts and they’d magically grow rich?
Mr Pape said his problem with such a philosophy was that people who follow it would be less likely to ‘do the thing that really manifests success.’
He said this was ‘a well-thought out plan backed by hard work and a commitment to taking massive action.’
He explained people who contact him who follow his money management books tend to see their version of success within several years because they are committed to making positive changes.
‘The results people manifest frequently astonish me… but there’s nothing magical about it,’ he said.
