Kiyosaki on the coming market crash, originally published as Robert Kiyosaki: Biggest Stock Market Crash in History Coming in 2016 on 07/07/15.Palisade Radio Host, Collin Kettell: Welcome back to another episode of Palisade Radio. Today we have a new guest on the show none other than Robert Kiyosaki. You might know him better as The Rich Dad Poor Dad. Robert, thanks so much for coming on the show.
Author, Investor, and Entrepreneur, Robert Kiyosaki: Thank you, Collin. I am excited about talking to you because you are a wild man and a man after my own heart.
CK: Yeah, I was just joking before we hit record that you are making me look bad. You are in a professional studio with the soundboards and lighting, and rainy season is upon me here in Guatemala. It just got dark so you can hardly see me right now. But, anyway, we will go forward.
I saw you speak in Mexico and one of the brave predictions that you made, and you made this back in a book in 2002, is that there is going to be a major, major happening or market crash in 2016 or before that. I want to start the interview by touching on how you came to that conclusion?
Kiyosaki on the coming market crash
RK: Well, 2016 is basically a mathematical prediction based upon stupidity, and the stupidity comes about with this thing called the 401(k). As you know I do not particularly trust my government. I do not particularly trust Wall Street. I do not trust the Treasury or the Federal Reserve.
Kiyosaki exposes the myth of the 401k
Around ’74,’ 75 when I became aware of the 401(k) I knew they were just trying to screw the worker as they normally do. A 401(k) is basically a tax. When you walk into an American company and they say, “Well, which mutual fund do you want with your 401(k)?” And then they give you this BS about while it is the company will match your money, so you put a hundred bucks in a company that will give you a hundred bucks. That is BS because it is your $200. They are not doing you any favors, you know what I mean?
Poor guy gets screwed by 401k
Basically, it is like the ’43 Tax Act where they basically take your money before you get paid, and the poor, small worker, I feel for them, they do not have any idea what is going on. When my rich dad saw it looking at the 401(k), because we do not trust the government, the flaw in it is that you must start withdrawing your money at a certain age, and that year is 2016. It is basically a Ponzi scheme, so what happens when all of these guys with 401(k)s are putting their money in and old guys with 401(k)s start withdrawing the money.
How is the market going to go up when the money is coming out? It is based upon base actual tables on age. That was how I made the prediction on, but also knew that the government was printing money through quantitative easing. If you read the book, Rich Dad’s Prophecy, which is the book we are talking about, I said the other time that would happen was terrorism would increase. Why does it increase? Because terrorism is cheap. It is very, very cheap, and it is very expensive for the United States to fight extended wars, which we are doing today.
So 2016 was basically a guess based upon some mathematical formula, but it was also based upon stupidity of our government, so that is why 2016 is kind of the year. It may be 2020, but it is coming.
What is keeping this bull market going?
CK: Yeah, you made that prediction back in 2002. Now that we are in 2015, I do not know how closely you follow the markets, but actually in the equity market right now it has gone up for seven straight years. People think the market is still going up when in fact over 50% of the stocks in the Index are actually going down right now. The market is being carried up by less and less of these major companies. It is really remarkable, but it looks like, to a lot of different people for a lot of different reasons, 2016 may be the year, and you might have hit the nail on the head there.
RK: Well, I hope not. But if it is true at least you have a few more months to get out or do something different. Because this next— I do not know if you saw Ron Paul, that guy has got guts man, he is on CNBC saying 2016 is going to be much worse than 2007, and that is my prediction also. If you are sitting there hoping the market is going to keep going up, you better take some lap around the rosary beads and pray because you might get hammered. That is really my concern. I hope I am wrong. The job of a prophet is to be wrong so people can take action and not get hurt by this.
CK: Well, speaking of Ron Paul, he actually made his holding public a few years ago and that was partially because he was a public servant. He has lost a good amount of money the last few years, but his— I think a hundred percent of his net worth was in about ten different mining stocks. That is a testament to how much he believes in real money. He believes in gold and silver as somewhere to protect your money.
I know that you are big in real estate; that is kind of what people know you for. But you are also big in the gold and silver. Are you into the mining stocks as well?
RK: Well, I have started several mining companies so I understand the junior mining issue. The reason I have been in Peru for 20 years because that is where Barrick was. I also started a silver mining company in Argentina and one in Canada. I have been in the metals industry and all that, not because I am necessarily into it, but I really want to find out how the stock markets really operate, and as you know they are completely rigged a hundred percent.
It was a great education. I still own shares of my mining stock, but I got really what I wanted was my education on how markets operate. I do not care if it is oil, gold, tech companies, and all that. It is all manipulated. Exactly as you said, right now, the stock market is heading all time highs, but the insiders are selling; they are not buying. It is called the pump and dump. They pump up the stock market so the amateurs can come in or the Fed comes in and with plunge protection team to prop the market up so all the idiots think their retirement or college is safe. But the insider is actually selling.
What they are doing is they are taking company funds, like GE takes company funds to prop up their stock called stock repurchases. But what CEOs are doing they are selling their personal shares. They are using corporate money to keep the market high, but the guys are pulling their money out, the personal money out going to cash. That is what is going on.
Savers are losers
CK: I do not know if you just saw the article that Peter Schiff put out a couple of weeks ago. But without going into detail the headline was, “In 1964 the minimum wage was 5 silver quarters. In 2015, 5 silver quarters have a melt value of $15.15.” What I am getting at here is you made a prediction a while ago that said savers will be losers. We used to tell our children save and the money that you save will be worth something in the end. What are people going to do now that are working and trying to grow a nest egg?
Check the expiration date on your ideas
RK: Well, I would check the expiration date on their brain. When you go to the supermarket and buy a carton of milk, hopefully you checked the expiration date, because if you drink rotten milk you will get sick. But most people do not check the expiration date on their ideas. I have gotten in trouble for the last 30 years. The worst advice was go to school, get a job, work hard, save money, and invest in a long term in the stock market, and get out of debt. That is why it is a stupid advice because what happened in 1971, as we all know, Nixon took the dollar off the gold standard and then they could print money indiscriminately. Cash become trash, the dollar became debt, and yet people are saying to their kids save money.
I am a lot older than you are but I remember in 1970s I could get 14 to 16% on my savings. If I put my money into a certificate of deposit or CD with an S & L, which is out of business now, but S & L would give me 14 to 16% plus a toaster, you know. They actually gave me a toaster. Imagine that! That is how much your sayings were worth.
But when Nixon took the dollar off the gold standard, they do not want your money anymore. What they want are debtors. Guys like me. I borrowed in 2014 and 2015 nearly $300 million, nearly half a billion dollars. I just refinanced from 5% to 2.5%. That is just the cost of money.
The cost of debt is going down, and yet people say get out of debt. I mean how friggin stupid can you be to tell your kids to save money when they are not giving you any money for your savings? You know it is reverse savings now. There was ZERP, Zero Interest Rate Policy. Now it is NERP, No Interest Rate Policies. They do not want your money. They do not want your cash because they got too much of it. They printed too much of it, and yet they say to your kids – save money. You got to be nuts. You have got to be crazy. You got to be a complete lunatic. That means check the expiration dates on the ideas in your head. Today, you have got to check your expiration date probably every half an hour because things are moving so fast, so, so fast.
College isn;t all it’s cracked up to be says Kiyosaki
Look at how many businesses are out of business today because they got wiped out due to technology or they moved the company overseas? Really, it is our obsolete education, our corrupt government, the corrupt banking system, and Wall Street, which I love dearly, because they make me richer. I am on the 1% side, not on the 99% side. If you want to get to the 1% side you better check the expiration date of your college education. That is all I say.
CK: You have the foresight in 2008 when the market crashed. Correct me if I am wrong, but you picked up a lot real estate assets. Now, you are going ahead and refinancing those assets at extremely low debt levels. You are probably getting somewhere between 2 and 5%. You are going to able to grow substantially even in a bad market.
What is a young person that just wasted four years going to college, hopefully they do not have any debt. What are they to do to become the next rich dad, poor dad thirty, forty years from now?
RK: Well, you might want to sue your school for malpractice, because that is the new game of how you make money – you sue people, which is why I got asset protection. To answer your question about 2008, I was preparing for 2008 back in 1983. If you read my book, it was actually in 1973, I came back from Vietnam. My rich dad said I should take real estate courses, not because of real estate. People think I am a real estate guy, but I am not. Really, I am a debt and taxes guy. You see, the more debt I have the richer I get, and the more debt I have the less taxes I pay.
Good debt makes you rich
If you understand that the 1% does not pay tax, they are also deeply in debt but it is good debt – debt that makes them rich. What the banks do is they will give you a credit card and then they tell you to have a FICO score, whatever that is, and they make it real easy to deposit your money in a 401(k) and they make it really easy to save money and they screw you. And yet these parents are telling their kids, “Oh, go to school, you got to go to Harvard, get a college degree, get a job, save money, get out of debt, buy a house,” and they are idiots. Everything has changed since 1971. The dollar is no longer backed by gold. Wake up and smell the roses. Today, every Central Bank is printing money. This is the worst part about it is you know the G8 meeting is now a G7? Who was not invited? Russia…