Rich Dad Poor Dad author Robert Kiyosaki, this week sounded a warning to Australia to be prepared for the “biggest crash in world history”.
“Unfortunately we had a big crash in 2000, they called it the dotcom crash, then in 2008 it was the subprime real estate crash. The next is going to be the biggest of all. When it’s coming I don’t really know, but the foreshocks are sounding right now.”
Kiyosaki blamed the US Federal Reserve’s money printing policies, known as quantitative easing, for inflating the bubble. “In Australia they always say when America sneezes, Australia passes out,” he said.”
Something similar can be said of New Zealand’s relationship with Australia. Being our largest trading partner, where Australia goes New Zealand will follow. New Zealand has done pretty well over the past decade compared to many nations as we discussed last week: Net Migration Falling – Could This Tip NZ into Recession?
Kiyosaki went on to say:
“I’ve always been a gold bug. My latest book coming out is called Fake. There’s so much fake money. In 1971 Nixon took the dollar off the gold standard and the US dollar became fake money.
“The problem is it also became invisible, so they could print as much as they wanted. That’s why savers got wiped out.”
His recommendation to the average Australian was:
So Should You Listen to Kiyosaki’s Warning About A Coming Crash?
We recall Kiyosaki also saying something similar back in 2012. We even reported on it at the time:
Kiyosaki Said: “Sell Aussie” Back in 2012
Kiyosaki discussed the Baltic Dry Index saying:
“I’m concerned for Australia because the Aussies ship in bulk which is measured by the Baltic Dry Index. Countries such as South Korea, Japan, India, and China ship refined manufactured products via containers which is measured by the Harpex Index. If this trend continues, Australia, India, and South Korea will follow the rest of the world into the recession—a double dip. This is not good for anyone. If I were in Australia today, I would use their strong dollar to buy gold and silver.”
How Did Kiyosaki’s Advice Work Out?
Well gold is up currently in Australian dollars from back then by about $50 per ounce. But gold did fall in the years following Kiyosaki’s statement. So Australians would have lost money initially but would still be up today.
“Don’t Listen to a Word of What the ‘Rich Dad, Poor Dad’ Author Robert Kiyosaki Says”
Today there was a commentary in the NZ Herald in response to Kiyosaki’s statement.
“This isn’t the first time he has made this claim.” [Of a coming market crash]
He literally made the same headlines in 2015.
In fact, he’s part of a swathe of people who have made similar claims and received similar headlines since 2011.
…The market goes up and down regularly, and this is just how markets behave—it has proven very difficult to try and pick when that happens. And it really shouldn’t matter, even if you started buying shares on the highest day before the Global Financial Crisis (2008 market crash), a few years on you would be feeling very happy with yourself if you had stuck to it.
Comments like those of Kiyosaki can often put people off getting started with investing, but trying to pick these ups and downs and removing all of your money (or not investing in the first place) could result in missing out on some great upsides.
For example, if you had sold your US500 (US company shares) investments when Kiyosaki spoke about this in 2015, you would have missed out on the 12 per cent increase in 2016 and the 21 per cent increase in 2017! And if it put you off investing altogether, you could have missed out on the gains that happened during that time. For example, if you had invested $50 a week in US500 shares over the last two years, instead of a bank account (or Gold for that matter), you’d be more than $1000 better off today.”
Looking Past the “Sound Bites” From Kiyosaki
What do we think about Kiyosaki’s comments?
It’s entirely possible they were made to generate publicity for the tour he was on in Australia. Or it could be that the journalist chose this particular sound bite as it made a good headline. Who knows?
We’ve reported previously on Kiyosaki’s timeline in his 2002 book “Rich Dad Prophecy”. This predicted the biggest crash around 2016. This was based upon the work of Buckminster “Bucky” Fuller and his predictions for “Spaceship Earth” as he called it. Check out “Grunch of Giants” by Fuller (GRoss UNiversal Cash Heist) for his angle on the monetary system. It’s available free online if you Google it.
That was a big call to make right back in 2002. It didn’t happen it 2016. However Kiyosaki did identify the problems caused by today’s monetary system. At some point the current 47 year fiat monetary experiment will come to an end. Timing it will be the hard part. >> Read more: Why New Zealand Won’t Have Any Say in a Global Currency Reset
So Do We Follow the Herald Authors Advice & Just Buy Shares for the Long Haul?
From what we’ve read of Kiyosaki he doesn’t necessarily say don’t invest. Rather he says don’t invest without knowledge and learning first. He has continued to expound the virtues of real estate investing. But quite wisely he also balances these investments with stockpiles of gold and silver. And even investments in gold and silver mines.
But it may also not be the best option to simply follow the Herald article author’s views.
It’s all very well gaining 10-20% a year, but to then potentially lose 70-80% in a crash?
The critic of Kiyosaki is also the co-founder of online trading platform Sharesies. So he is “pushing his own barrow” in recommending shares. Of course, we are the same in selling gold and silver! But we are up front about it. Be sure you are aware of any biases someone giving advice may have.
Why Buy Gold? Because It’s a Non-Correlated Asset
As we’ve discussed many times gold is a non correlated asset.
Gold acts as “investment insurance” as it is an asset that is non correlated with many other assets. So when the likes of shares/stocks, bonds and property are performing poorly gold can often smooth out your overall returns. Many studies have proven gold’s counter cyclical qualities.
Read more about these studies: Why Gold Bullion is Your Financial Insurance.
So if you choose to continue to invest in the share market and Kiyosaki’s prediction does eventuate – whether this year or in 10 years time – buying some gold or silver can help to protect your wealth. In an extreme crash situation it’s likely precious metals will go up and help balance out your losses in the bond, property, or share markets.