Today I read an interview MarketWatch did with Robert Kiyosaki: “‘Rich Dad’ author Robert Kiyosaki: If you’re investing for the long term, ‘you’re crazy’”
I’ve never read Robert Kiyosaki’s Rich Dad Poor Dad but I have read Unfair Advantage. From what I understand from speaking with folks who have read Rich Dad Poor Dad the principles in Unfair Advantage are very similar.
I learned from reading his book. I didn’t learn a lot about specifics actions I could take but I did learn about mindset and principles of the wealthy.
For specifics he pushes his paid training classes and seminars pretty hard. I went to one of his “free” real estate seminars and it is sales heavy and content light.
I’ve never been to a paid Rich Dad seminar but I hope they have a lot more actionable content than the free one I attended.
Based on my exposure to the teachings of Robert Kiyosaki I will say that I agree with what he is saying. I just think he overcharges for training and actionable information.
Summary of Kiyosaki’s Interview
In the MarketWatch article above he says a few things:
- Money isn’t money because it isn’t backed by gold
- The rich don’t work for money they work for assets
- He is predicting a 2016 market collapse
- Describes himself as a “gold bug” and views gold not as an investment but an insurance policy and hedge
- He states who he’ll vote for with the caveat the president doesn’t make any difference at this time
You know what, I agree with all of that, with the exception of calling 2016 as the year of the crash. It could be but I don’t know when stocks will crash and when they do I believe the Fed will step in and prop up prices.
Kiyosaki in Comment Pillory
But what I’m surprised by is the comments below the article. They weren’t all negative, but it seemed like most of the ones I read were.
Not a lot of substance besides name calling. I think the comments could provide some insights into how some retail investors think. They don’t want anyone raining on the stock rally parade.
These quotes are from people who, in my opinion, don’t understand the stock market or the economy.
Why I think Kiyosaki is Right
The Federal Reserve’s unprecedented action in propping up assets has created a huge bubble. The bubble is bigger than the dot com bubble in 2000 and the housing crisis of 2008.
Even if you think that the $4 trillion fed balance sheet is no big deal, there are other metrics that indicate the S&P 500 is overvalued. On average the P/E ratio of the S&P 500 has been around 15. It’s currently up to 25. Not exactly a bargain.
Gold is a hedge against Federal Reserve and central bank insanity. I don’t think gold should be the sole asset in one’s portfolio but could very well have an important place depending on your risk tolerance and other factors impacting suitability.
I also know several people personally who have done very well investing in real estate. I think real estate is a great way to grow wealth with lot’s of tax benefits.
In the article Kiyosaki also discusses one practical strategy for buying a stock, first buying an option, as well as the importance of buying stocks at a great discount. Buying companies for less than their book value is classic Benjamin Graham.
I can appreciate if people don’t like Kiyosaki’s sales tactics as I don’t particularly care for them either. But I would like it if people could discuss ideas without immediately resorting to name calling.
If you think stocks are fairly valued based on fundamental factors, why?
Stocks may or may not be fairly valued. Are you sure real-estate is fairly valued based on fundamental factors? Real-estate prices are outlandish, if not ridiculous, in some parts
of the country. San Francisco Bay Area anyone? I know Robert does not recommend investing in California, Manhattan, etc. Similarly, certain sectors can be avoided for stock investments as well.
In either case, due diligence has to be done to pick the right stock and the right property….and their fundamentals have to be monitored constantly as long as you want to own them. I don’t think its one vs the other. Diversify including both in a portfolio. Not everybody can afford to invest in real-estate. Ridiculing people for investing in stocks because that’s they can afford is name-calling in a way too. How can these people invest in real-estate? Hence REITs!
Why do you think stocks are fairly valued? I’ve given some reasons why I think most stocks are overvalued.
I don’t know enough about real estate to have a strong opinion if it is fairly valued, but I think that it is much closer to being overvalued, particularly in the hotter markets. That isn’t to say there aren’t bargains out there.
REITs are a way to get into real estate but (granted I’m not a CPA) I understand that you miss out on a lot of the tax benefits by going this route.
I will reiterate here what I posted because it applies to your comments as well: This guy is like a broken clock; he was right one time in the past so now he thinks he really knows something. The fact that he doesn’t, is not my opinion; it is the markets’. The long term bond markets show that the market expects low inflation and low interest rate out into the indefinite future. If the market were really concerned about printing too much money, the prices of long-term bonds would fall, hence increasing the earned rate of interest.
Similarly, these low long-term interest rates produce an extraordinarily low discount rate for the equity markets. With a discount rate this low, the stock market prices should be a lot higher than they are. This shows that stocks are probably the best investment available today. Once again, this guy knows nothing.
When the Fed balance sheet is $4 trillion and they keep rolling over their bond purchases I don’t think you can talk about what the market expects. The Fed controls the bond market.
It doesn’t sound like you’re open to an alternative scenario so we’ll just have to see see who’s right. Maybe the stock market will make new highs and the key to prosperity is just to print a lot of money.
I just don’t think that has any chance of working in the long term.
“When the Fed balance sheet is $4 trillion and they keep rolling over their bond purchases I don’t think you can talk about what the market expects.”
“I don’t think that has any chance of working in the long-term.”
Apparently, I am not being permitted to reply.
Hi Philip. You’re certainly permitted and encouraged to reply. There might be something wrong with the comments on this page? I just keep getting a comment from you with two quotes from something I said. But no only information. I’m certainly no trying to prevent you from commenting!
I see you cherry picked some comments from the Marketwatch website where several commenters didn’t back up their assertions with solid reasoning. However, there were LOTS of posts on there that DID, but you seemed to ignore all of those. I am far from a financial expert, but I can tell you that I am one of those guys who worked for a paycheck at various sized companies over the past 30 years, saved at an early age as much as I could in both 401Ks and non-retirement investments, bought a small condo at an early age and upgraded a couple of times since. Most of my investments have been in mutual funds with a diversified portfolio of stock funds, REITS, ETFs, individual bonds, etc. In other words, I did pretty much the exact opposite of what Robert suggested. And I am FAR from a “loser”. Of course, my results may be atypical because of how early I started saving, and was very disciplined, and took advantage of some good timing (bought quite a bit of residential (NOT commercial) real-estate REITS in the 2009 time frame when I figured that market had bottomed out, etc.
Oh, and I completely disagree with his comments about CA real estate. I know plenty of people who invested in real estate in the LA/Orange County area and did EXTREMELY well. Housing relatively close to the ocean in that area will always do well (granted, there will be a few short term blips here and there) in the long run. Demand will always outstrip supply. The fact that he can’t understand this makes me question his ability to understand economic trends. There’s much more, but I don’t have the time to rebut more of his points right now.
I appreciate the comment David. Which reasoned comments are you referring to? I did not read all the market watch comments (there were hundreds). Perhaps you could point out some of the stronger arguments that I missed.
I would also humbly ask you to reread some parts of my article:
“They weren’t all negative, but it seemed like most of the ones I read were.”
“If you think stocks are fairly valued based on fundamental factors, why?”
I’m sure you could do well over the past thirty years using your methods, but if you look at the past 16, I don’t think you will have done as well as just buying gold. This is due to the unprecedented Fed money printing and isn’t because of a lot of genuine economic growth in the US.