Robert Kiyosaki and other financial advisors predict that the biggest stock market crash in history is still to come. Want to know how to protect yourself? It’s not by having a diversified portfolio of paper assets. It’s by getting a financial education so you can do business and make investments that generate positive cash flow and build wealth. Read on to learn more.
Yesterday was a rainy day in eastern Virginia. In fact, seven of the past eight Saturdays have been rainy days in eastern Virginia. As have seven of the past eight Wednesdays along with many other days in between. And my how people have been complaining. You would think, after three consecutive years of drought conditions with strict water rationing in some parts of the state, that people would be overjoyed at the prospect of full reservoirs.
But people are people, and complaints about the negative impact on tourism, sports, leisure, yard work, and other outdoor activities are being expressed and heard with increasing frequency and intensity. “Enough all ready!” is the message that’s coming through loud and clear.
I, for one, used the day to stay home • after my morning run • and curl up with a good book. It was a delightful way to spend the day, that would not have seen me through all 286 pages of Robert Kiyosaki’s new book, Rich Dad’s Prophecy, were it not for the rain. So, “Thank you rain!” is all I can say. You won’t hear any complaints from me.
The prophecy has to do with the future of the stock market and even of the world as we know it. In reality, the book is not much of a prophecy since it’s not based upon divine inspiration. It’s rather based upon an assessment of current laws and demographics. Here’s the scenario:
In the year 2016, the first baby boomers in the USA will turn 70 and a half. They will, by law, have to begin systematic withdrawals from their 401(k) plans, IRAs, and other such retirement instruments. They will also need increasing amounts of cash to live on, for medical care alone if for no other reason.
When the baby boomers make a run for the money, where is that money going to come from? Who is going to buy the stock that they want to sell? Younger generations will have neither the cash nor the numbers to keep up with the demand. And this is the point, according to Kiyosaki, when we can expect the biggest stock market crash in history.
Before that time, perhaps all the way up to 2012, Kiyosaki believes we can expect one more stock market boom like we had in the 1990s. But after the next boom, Kiyosaki believes the bust could be so big as to bankrupt the USA and shift the balance of economic and world power in the direction of China (which is already taking over all of America’s manufacturing). Making comparisons to the rise and fall of the Roman Empire, Kiyosaki foresees the potential end of the American hegemony.
The point of Kiyosaki’s book is not, however, to paint a gloom and doom picture of the world. The world will go on, of that we can be certain. The question is whether we will go on with the world as victors or victims of the coming crisis. Kiyosaki wrote his book • the best one I’ve read yet in the Rich Dad, Poor Dad series • to coach people on how they can not only survive but thrive through the coming crisis. And he wrote it now, before the next and final stock market boom, giving people a timely fair warning as well as sound advice for coming out on top.
If all of your assets are still in the stock market ten years from now, Kiyosaki believes you will have waited too long. Perhaps that’s why one reader of recent LifeTrek Provisions sent in the following critical reply: “Have you looked at equity mutual fund returns during the last three years, five years and ten years? Your statement re: returns is pure bunk and irresponsible writing.”
In other words, we may already be at the point where it’s time to start looking into alternative investment strategies. In my defense, I specifically noted • or at least implied • that if you have less than ten years to work with before retirement, then you may want to do something else with your money than to plow it into mutual funds (which have averaged about 10% a year when you look at most, but not all, 10 year periods).
Take one large value fund in which I have been invested for almost 20 years. Its one year return is -9.91%. Its three year return is -2.78%. Its five year return is .38%. And its ten year return is 9.83%. So, to answer my reader’s reply, “Yes, I have looked at equity mutual fund returns during the last three years, five years and ten years. And if I look less than ten years, the return comes up short.”
Kiyosaki’s analysis introduces an entirely new wrinkle. If his analysis is correct, and it is certainly based on pretty solid ground which others do not dispute, then everyone of every age has no more than ten years to work with before mutual funds and the entire stock market takes a tumble from which it may not profitably recover before it’s too late for the vast majority of people.
So, Kiyosaki argues, we have to explore alternative investments now if we want to position ourselves to survive the coming crisis. What are those investments? He suggests that we start with a good financial education which, unfortunately, is not taught as a standard part of most academic curriculums. People graduate from high school and college knowing no more about how money works than when they went in, unless they go out of their way to do the work and teach themselves.
The investment in a good financial education will enable people in five years or less, Kiyosaki argues, to go from financial victims to financial victors. How? By starting with small deals and building up to large deals. Kiyosaki is particularly attracted to real estate investments and business opportunities. With the right financial education, Kiyosaki believes that just about anyone can get in and play these games, regardless of how much or how little cash they now have.
“Keep your day job and start a part-time business or invest in rental real estate,” seems to be his mantra for the future. Take that money you would have otherwise sunk into your 401(k) or your IRA and start building assets that generate positive cash flow independent of the market. That way, when the market crash comes, you will be in a position to survive it in style while others see their life savings go up in smoke like another Enron debacle.
Of course there’s no space here to go into the details of how start playing a bigger game. But day after day, more and more people figure this out. This morning at church I met a veterinarian who is starting her own veterinary hospital because, “I got tired of making someone else rich.” With a strong financial partner, this woman is ready to start a full-time business that sounds very much like a Kiyosaki scenario. When the stock markets crash, people will still be beating a path to the door of her hospital.
Kiyosaki sees rental real estate as working much the same way. For a very small amount of money, perhaps as little as five percent down, you can purchase rental properties that will both generate rental income and build an asset base for the future. Of course you have to pick the right properties in the right areas. That’s where the financial education and hard work comes into play. But as with veterinary care, people will still need a place to live after the market crashes. The only question now is, “To whom will they be paying their rent?”
The point of this Provision is no different than the point of Kiyosaki’s book. We need to get educated and explore alternatives if we want to secure our financial futures. It is not beyond anyone to take hold of the reigns and ride the horse. But unless you first learn how to ride, and unless you first gain experience with ponies (small deals), don’t be surprised if you get thrown off the horse (big deals) in rather short order.
The choice • like choosing to enjoy and celebrate a rainy day • is up to you. I, for one, choose to ride, which is why I founded LifeTrek back in 1998 and why I continue to seek ways to be involved with business opportunities that both express my values and give me a solid return. To learn more, or to explore these dynamics for yourself, don’t hesitate to Contact Us For Coaching.
Coach Question(s): Are you financially educated? Are you investing in business deals and real estate as well as in paper assets such as stocks and bonds? What choices are you making about this? What choices would you like to make?
Editor’s Note: The LifeTrek Readers’ Forum contains selections from the comments and materials sent in each week by the readers of LifeTrek Provisions. They do not necessarily reflect the perspective of LifeTrek Coaching International. To submit your comment, use our Feedback Formor Email Bob.
When I was younger and began earning more money than I absolutely needed to live, I began giving a considerable portion of that excess to various charities. I did not track it well, until one point I realized I was paying my annual renewal every eight months or so. Now I simply save all the possible solicitations for donations (and once one starts giving, one can expect to be asked VERY frequently). Then in December I send all my checks for the year. It’s quick, efficient, manageable and a good tax strategy.
As I was reflecting over the past year on my run yesterday I thought about one of our last conversations together. I can honestly say, that while job transition is never easy, my outlook on life has changed in many ways. My career move has had such a positive effect on me and my wife that I could kick myself for no doing it sooner. Yes, I did give up a fair amount of money in lost 401(k) contributions, but I would pay any amount for what I have gained. It is truly a blessing to work at a place where your opinion counts, that is family oriented and not all about gaining the last dollar of work out of it’s employees! That does not mean I don’t work hard, I do, but people also understand that there does come a time when the work must rest for a period. Yes, I can say that I did give up a few things with the change but the price of my integrity and a good nights sleep is more than worth the price!!!
I just received this and thought it applied well to your recent discussions. This was written by Dr. Ismar Schorsch, chancellor of the Jewish Theological Seminary. “For the Rabbis, the biblical injunction ‘You shall be holy’ means to live apart. A degree of separation from the allurements that engulf us helps to focus the mind on matters of ultimate consequence. Thus we rest one day out of seven for the spiritual renewal that sustains us for the other six. Or we deny ourselves many of God’s creatures [eating no meat to commemorate the receipt of the Torah] to impress upon us the right of all animals to inhabit the planet. Nature surely does not exist solely to gratify human need or greed. Reverence for land and life is the attitude that the Torah seeks to engender within us.
An everyday example of this world view that less is more is encapsulated in the rabbinic epigram that ‘the salt of wealth is its depletion.’ Counterintuitive, the proposition holds that the way to husband our wealth is not to amass ever more but to share some of it with the unfortunate. Doing well is doing good. And in return, the principal will continue to grow. I have yet to meet a philanthropist impoverished by giving.”
May you be filled with goodness, peace, and joy.
Bob Tschannen-Moran, MCC, BCC
LifeTrek Coaching International
121 Will Scarlet Lane
Williamsburg, VA 23185-5043