Kiyosaki: No Doom and Gloom, Please

I think Robert Kiyoskai has done a great deal for many Americans by getting them interested in the world of investing. He is a smart businessman and is quite a wealthy guy, touting his real-estate ownership principles to millions worldwide. However (and you knew it was coming)...

However, I think the popularity has gone to his head just a little when he wrote his book in 2002: Rich Dad’s Prophecy. The book pretty much predicts that the stock market will experience a significant crash in 2016, causing worldwide depression, screaming in the streets, and moms and dads, grandmas and grandpas everywhere will be on the street because of the economic recession caused by the stock market crash. His solution to survive the crash (of course) is to generate cash from rental properties.

Yeah…

Well, to each is own. I have history on my side, which, contrary to popular belief, can be fairly indicative of future results when predicting market performance as a whole.

Rest assured readers – the stock market is dependent not only on IRA/401(k) contributions, but also by American spending and American confidence in its economy. I bet that’s not going away. Consider some of the following points as you examine Kiyosaki’s idea closely:

- The Sky is still up there. Kiyosaki has not been the first guy to claim that the economy is going to hell in a nicely-bowed handbasket. A cursory review of the reviewers even find that they predicted (in 2003) a “major” stock crash in 2006. Well…maybe they’ll have a shot–there’s 4 months left! There was once a common belief in the 80’s and 90’s that the stock market was going to decline as the best source to keep your funds. However, the stock market still stands as the superior place for long-term funds, even when you consider the crashes of 1929, 1987, and 2000.

- The Housing Market is not Bulletproof, either. Kiyosaki suggests, as he does in several of his works, that the real-estate market is the best solution to “ride out” the coming stock market crash in 2016. But you have to realize that owning real estate is much harder than owning stock over a long-term period. Real estate is a fabulous investment, but it’s not something you could cash out whenever you want. Know that when you own real estate, especially as rental property, you have to take into account that tenants don’t always pay on time and sometimes will abandon property if they cannot pay.

If the stock market falls in on individual investors because older people are forced to take out money from their IRAs, what would stop these investors from using their real estate investments as leverage to cover their losses from the stock market? The housing/real estate market will most likely follow closely behind the stock market if a major crash is on the horizon.

So ignore the fearmongering. Bottom line—no one knows what life will present ten years from now. Back in 1996, few people actually believed that we would be where we are now—financially or politically. After the crash in 1987, few believed that the stock market would come roaring back to some of the highest returns ever. Maybe some did, but really, its at best educated guesswork. After all, you’d probably find just as many people who “predicted” the 1990’s bull market as those who “predicted” it wouldn’t happen. Political changes to ERISA may happen in 10 years to prevent such a catastrophic fall, and then again maybe it won’t need to. History tells us that we’ll be OK.

The American economy—and by extension, the stock market—is largely driven by American consumer confidence. It’s what keeps us afloat even in struggling times. Investors who are on board for the “long-haul” will laugh all the way to the bank—and chances are strong that the only thing that will hit them from the sky is a little rain.

As usual, I don’t claim to be right on issues like these, but I like to spark discussion. Leave a comment or two, and let’s talk about it.

Next Week: Online Banks—Revisited!