~ by Robert Kiyosaki
If you’re serious about getting rich, now is the time. We’ve entered a period of mass-produced pessimism, when bad news is everywhere, and the best time to invest is when optimists become pessimists.
The Weird Turn Pro
Journalist Hunter S. Thompson used to say, “When the going gets weird, the weird turn pro.” That’s true in investing, too: At the height of every market boom, the weird turn into professional investors. In 2000, millions of people became professional day traders or investors in dotcom companies. Mutual funds had a record net inflow of $309 billion that year, too.
In an earlier column, I stated that it was time to sell all nonperforming real estate. My market indicator? A checkout girl at the local supermarket, who handed me her real estate agent card. She was quitting her job to become a real estate professional.
As a bull market turns into a bear market, the new pros turn into optimists, hoping and praying the bear market will become a bull and save them. But as the market remains bearish, the optimists become pessimists, quit the profession, and return to their day jobs. This is when the real professional investors re-enter the market. That’s what’s happening now.
Pessimism vs. Realism
In 1987, the United States experienced one of the biggest stock market crashes in history. The savings and loan industry was wiped out. Real estate crashed and a federal bailout entity known as the Resolution Trust Corporation, or the RTC, was formed. The RTC took from the financially foolish and gave to the financially smart.
Right on schedule 20 years later, Dow Industrials and Transports struck their last highs together in July 2007. Since then, nothing but bad news has emerged. In August 2007 a new word surfaced in the world’s vocabulary: subprime. That October, I appeared on a number of television shows and was asked when the market would turn and head back up. My reply was, “This is a bad one. The worst is yet to come.”
Many of the optimistic TV hosts got angry with me, asking me why I was so pessimistic. I told them, “The difference between an optimist and a pessimist is that a pessimist is a realist. I’m just being realistic.”
As we all know, things only got worse in early 2008, with the demise of Bear Stearns and the Federal Reserve stepping in to save investment bankers. In February, many of those optimistic TV (and print) reporters became pessimists — and when journalists become pessimists, the public follows. By March, mutual funds had a net outflow of $45 billion as investors fled the market.
Surviving the Bad Times
Back in 1987, as savings and loans closed and investors’ stock and real estate portfolios were wiped out, my wife, Kim, and I were living in Portland, Ore. Many people were depressed and hiding from the truth. The following year, I said to Kim, “Now is the time for you to begin investing.”
In 1989, she purchased a two-bedroom, one-bathroom house for $45,000, putting $5,000 down and earning $25 a month in positive cash flow. Today, she owns over 1,400 units and — because more people are renting than buying — she earns hundreds of thousands a year in positive cash flow.
The period from 1987 to 1995 was a rough one, even for the rich. In his book “The Art of the Comeback,” my friend Donald Trump writes about being a billion dollars down at the time. Rather than give up, he kept on fighting to survive. He and I often talk about how that period was great for character development.
Two-Year Warning
I believe we’re through the worst of the current bust. I know there will be more aftershocks, and the news will continue to be pessimistic for at least two more years, possibly until the summer of 2010.
But the upside to this is that it gives us at least two years to do our market research and find the next big stock or real estate bargain. Before buying, I strongly suggest you study, read books, and take courses on your asset of choice. If your choice is stocks, take a course on stocks or options. If it’s real estate, take a course on real estate. Now is the time to learn; not only will you know more than the average person and be in a good position when the market turns, but you’ll also meet people with a similar mindset.
You have about two years to get into position. Opportunities this big don’t come along often, so this is your time to get rich.
Climbing Bulls, Flying Bears
Am I optimistic for the long-term? Absolutely not. I still believe we’re due for the mother of all market crashes, and that the U.S. economy is running on borrowed time — and I do mean borrowed. I think most baby boomers are in serious financial trouble, and that oil will climb above $200 a barrel. Inflation will also increase, causing more pain for the poor and middle class.
The Fed is flooding the market with nearly a trillion dollars of liquidity, which is why I believe gold under $1,200 an ounce and silver under $30 an ounce are bargains. Gold and silver should peak and decline before 2020, completing two 20-year cycles. My exit is to sell silver around 2015. I plan to hold onto gold, income-producing real estate, oil wells, and stocks.
Most of us know the bull climbs slowly up the stairs, but the bear jumps out the window. I believe the bull is still climbing the stairs, and the bear hasn’t jumped yet. But rest assured that it will.
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When Pessimism Prevails, It?s Time to Get Rich
Last night I happened to catch an episode of “Larry King Live” which included a feature on the current housing crisis along with a panel of participants including Robert Kiyosaki, author of ‘Rich Dad Poor Dad’, and Donald Trump.
While the stats by now are known to most people – The Shiller Home Price Index was down 15.5% for April ‘08 vs April ‘07, and over 1 Million foreclosures have been filed with many many more expected, the real overarching questions were a) is this a good time to sell and if you have to sell then what can you do to sell, b) what do you do if you are a homeowner facing foreclosure, and c) is this a good time in terms of opportunities to buy and invest?
The unanimous consent amongst the parties was pretty much as follows
a) This is not a good time to sell obviously and if you do not have to sell then you shouldn’t. If you do have to sell then you can sell if you price your property appropriately. This means first of all IGNORE what other homes are listed for, the only thing that matters is what homes have actually SOLD for recently as a valuation bench mark. If you must absolutely sell then discount your home 20% below current market value and you will find that it sells very rapidly. The bottom line is that it is not that there are no buyers, it all boils down to the numbers.
At our business we have been working diligently for the past 2 years, communicating to our sellers that the one thing that is more important than anything else in determining whether or not a listing will sell is price. We have some listings that have lingered without activity for a year where sellers simply refuse to face the realities of the market, and then other listings that are selling in a week, because in those cases the sellers are realistic and follow our advise. The Sarasota real estate market is what it is and if you ignore market realities then you simply will not sell.
b) If you are a home owner in trouble the resounding agreement was that the very worst thing you can do is ignore the lender when you get your notice. Lenders do not want to own your home, and they are willing to work out loans with home owners and today you have a lot of leverage as a owner in renegotiating your loan. The only predicament today is unfortunately that lenders will not discuss your loan until you are at least a couple of months late. Once you are late however you will find that you have the ability to get the lender to agree to work with you so you do not lose your home.
In our business we are working with a lot of short sales and I do see many lenders making amazing concessions. Some lenders are of course better than others. The worst unfortunately in terms of communicating is Countrywide and it is well possible that Countrywide’s own internal upheaval is contributing to this. Hopefully once the acquisition by Bank of America is finalized this will change.
c) Is this the time to buy? The panelist were in full agreement that we are either at or very near the bottom of the market. And yes, this is a great time to buy, as the best time to buy in any market is when prices are down and everyone is selling.
That being said, the days of real estate as a get rich quick scheme is over. You have to know what you are doing. Just because something is a foreclosure or bank owned property and priced at a seemingly amazing price does not mean that it is a great investment.
I tend to agree. If you are looking to buy a home as your residence then definitely now is the time to strike. Sellers are super motivated and there are a lot of opportunities to snap up a property that simply was unheard of in the past. And 5 years from now your property will certainly be worth more than you are paying today. If you are an investor then you need to understand how to evaluate a property as an investment. If you buy something in hopes of a quick flip then you will get most likely hurt. This is not the time to flip properties.
Overall I felt this was a very informative segment with a lot of optimistic view points. I would love to hear your views on the aforementioned 3 points, particularly with respect to the Sarasota Real Estate Market.
All the best…
Thomas Heimann, President & CEO
Bravo Real Estate Solutions
http://www.bravobrokers.com/
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Housing Market Crisis Opportunity?
I am still reading Kim Kiyosaki’s Rich Woman and in the true Kiyosaki style she offers some incredible common sense “objection handling†to the common issues thrown up when it comes to why so few women have succeeded in obtaining financial independence either within a relationship or on their own.
1. I don’t have the time.
2. I am not smart enough.
3. I haven’t got the money.
Now as a mother myself, I can fully relate to the time factor involved with bringing up children, however I take on board Kim Kiyosaki’s viewpoint that if my life depended upon finding the time, I’d have found it somehow.
I concur with the viewpoint that men are not born smarter than women when it comes to finances, in fact biologically women are better equipped for investing than men. ( Kim goes on to show this .) I began studying investing over 12 years ago, when on regular trips to the USA & Canada I was amazed at the extent of personal finance books, business and self help books available everywhere compared to the extremely limited selection in the UK. ( So I bought several on every trip & changed my course.)
I have been guilty of waiting to hit the big deal, then start investing, and with money to invest too much too soon without first practising, I have set myself a small challenge this week of finding an asset ( something that pays me a positive cashflow ) this week for around £100. I am a massive believer in learn by doing, I have come through all the money management levels required in order to be free to invest in passive income so I will research what is available and do my due diligence.
If you ever come across the chance to play the Cashflow 101 game by Robert Kiyosaki then jump at the chance, you play the part of a Rat, trying to get out of the Rat Race. You collect your “Monthly Cashflow†payment and decide which small deals provide you with a positive Cashflow, when to convert those samll deals to capital gains to clear liabilities and when to purchase a big deal.
The object of the game ( and is highlighted throughout Kim Kiyosaki’s book ) is Financial Freedom is achieved when your Passive Income pays for your Total Expenses.
Source: http://witoo.wordpress.com/2008/04/05/financial-freedom-is-achieved-through-passive-income/
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Financial Freedom is Achieved Through Passive Income
Technically speaking, a credit card is an unsecured loan. This means that unlike a secured loan, which is advanced by a bank/financial institution against a security like property for instance, a credit card is offered without any security.Â
Not surprisingly, many of the negatives that get written about credit cards are related to expenses, hidden or otherwise, that the user did not know (or was not informed) at the time of opting for the card. To avoid distress at a later date, we have listed down some points that you must note while using the card:Â
1. Term and conditions
How many times have you read this before – read the terms and conditions carefully before signing up for anything. For every product you purchase or service you opt for, always read the terms and conditions and that includes credit cards. If you find anything in the terms and conditions of the credit card that was not conveyed to you or is contrary to what was conveyed to you, then seek a clarification from the bank. If you are not satisfied with the clarification, dump the card.
It’s important that you read up on the terms and conditions before you use the card and not after. Once you use the card, it is assumed that you have read the terms and conditions and have accepted the same.
2. Annual fees
It is common for banks to waive off the annual fees/membership fees in the first year (cards are usually issued for at least two years). The second year fees are usually charged. It is possible that you are promised that the second year’s fees will be waived off as well. The only way to find out is to check with the bank in the second year.
It is possible that the bank may waive off the fees based on your track record of making timely payments. If the bank does not waive off the fees in the second year, you can cancel the card. However, if you wish to cancel the card in the second year ensure you do so before using it, because using the card indicates that you have agreed to pay the fees/charges for the second year’s subscription.
3. Lifetime free cards
Offering ‘lifetime free credit cards’ is a relatively new trend in the credit card industry. While there was a time when most banks charged annual fees on their credit cards, the industry is graduating to a level where annual fees are being phased out. In effect, clients are being given lifetime free cards i.e. no annual fees are charged. However, its best to double-check with the bank what the executive has promised you about all annual fees being waived off.
4. Minimum payment
One detail you will find relatively well highlighted in your monthly account statement is the Minimum Payment Due. This is the minimum amount that you must pay for the purchases done in that month so as to not attract a penalty for default on payment of card dues.
We would recommend that you pay the entire sum to the extent possible. Buying on a credit card is okay till the time you pay your bills religiously. The moment you carry forward your payment to the next monthly cycle, you will have to pay interest on the unpaid amount along with taxes. In the final analysis this turns out to be very expensive.
5. Payment by EMI
On the same lines, whenever you make a large purchase (the amount varies across banks) you may get an offer from the bank to opt for the EMI (equated monthly installment) facility to make the payment. This facility does not come cheap and the interest on the EMI is prohibitive. Again to the extent possible, we recommend that you make the payment before the due date in one go and give the EMI facility a miss.
6. Borrowing cash is expensive
Credit cards can be used for making purchases on credit as also for borrowing cash. While making purchases on your credit card (so long as you pay on time) is okay, borrowing cash on your credit card is a very expensive affair. Avoid borrowing cash on your card; use the card to the extent possible for making purchases.
7. Insurance benefit
Many credit cards are known to offer an insurance cover. We recommend that you ignore this benefit and go for the core offering – credit card. If the card has features that suit you, then you can opt for it even if there is no insurance cover. On the other hand, if the card features are not to your liking then reject it regardless of the insurance cover.
In any case, on most occasions the insurance cover is usually linked with so many terms and conditions that it is very difficult to claim the same. It is altogether another thing that the insurance cover is unlikely to be sufficient for you.
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Using credit card? 7 points to note
This keynote address at the NAB by Tim Robbins is short but powerful. Tim Robbins takes a leadership position and scolds the broadcasters for their indescretions and choices in content to the public. He also tells them that they have a choice and can make a huge difference. Here are a few of the quotes. Feel his passion. It starts with one person at a time, as Guy Finley says.
“We are at an abyss as an industry (media and broadcasters) and as a country. We are at a critical juncture. The broadcasters have the power to effect change. Broadcasters have a tremendous power to turn the country away from the cynicism and hatred and divisive dialogue that has rendered such a corrosive effect of the body politic.â€
“We don’t need to look at the car crash.  We don’t need to live off the pain of the humiliation of the unfortunate. We don’t need to celebrate our pornographic obsession of celebrity culture, we are better than that.â€
“Enough is enough! Now is the time to move away from our lesser selves. Now is the time to stop making money on the misfortunes of others and the prurient and salacious desires of the public. Now is the time to admit and recognize that we aren’t just businessmen but the guardians of the human spirit with a responsibility of the health of this nation that we can lift this country up with our programming.â€
“We are ready for change. We are ready to imagine a new broadcasting industry aesthetic. We can appeal to the better nature in our audience. We are ready for a new broadcasting industry aesthetic that produces shows that promote strength instead of fear. That does not divide, but inspires. That does not promote hate, but unity. That will not tear the weak down but build up their strength. Imagine a world of broadcasting with the American people are encouraged to reject despair and distrust.â€Â Tim Robbins
Take action by writing and calling your broadcasters and by not watching or listening to the normal junk that they put out.
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Tim Robbins provides inspiration to broadcasters (NAB) in keynote address
