4 takeaways from Fake by Robert Kiyosaki

My takeaways from Fake

Image result for fake robert k

1) Fake money

Money is simply a medium of exchange. Fiat money are fake money as they can be manipulated by the central bank (so we have inflation, interest rate fluctuation all that sh*t). Gold and silver are God's money because they cannot be easily manipulated. If you want to be rich, buy and store gold. Cyptocurrency is possibly people's money because it also cannot be easily manipulated by central bank / governments either. [View this documentary on Bitcoin if you are interested to find out more.]

He also referred to Grunch (GRoss UNiversal Cash Heist) - the book by Fuller which talks about future of the global economy and how the wealth of the people of the world was being “stolen” — via a giant, invisible heist — by the uber rich who control the world via our governments, central banks, corporations, educational institutions, the military industrial complex and financial institutions.

"Grunch is impossible to see because Grunch is money, and money is everywhere, in everything - and invisible."

The poor are getting poorer and the rich are getting richer. Because the rich know where to 'invest' to get more of the so-called fake money.

You can't catch fish in clean water - "In the real world of business and investing, the word used for seeing in dirty water is transparency. In the real world of money, transparency is a very, very important word." Therefore, you need financial literacy to see what others can't see.



2) Fake assets

Anything that are derivatives of something physically valuable are fake assets. This include stocks, ETFs (gold etfs are not real gold), bonds, and of course, anything that cost us liabilities say our house. Liabilities are things that require outflow of cash from our pockets. Assets are things that give inflow of cash.

Be aware that the financial markets are rigged against employees, savers and small investors. 

He also mentioned the quadrant from the book Rich Dad, Poor Dad, and once again emphasized that Business owner is the way to go (tax benefits and stuff).



3) The Mandrake's tent

The inflation which kept the economy ballooning is being described as like the Mandrake's tent. It also kept the stock market bull running.

He's predicting that the next crash will be worse than 2008 because the national debts that kept blowing up the tent are far higher this time. Sub-prime crisis happened because the subprime mortgages (housing debts) are packaged into derivatives which eventually got defaulted as the home buyers failed to service all that debts.

When will the next financial crash be?

God knows.



4) Fake teachers

Fake teachers are those who teach from the textbooks or theories but are unable to give actual real life lessons to us. We don't learn real financial education from school.

He didn't forget to promote The Rich Dad Company which is supposed to empower people with financial education.



What do I say about the book

His book, per his previous style, is stories-laden to lead readers to his point of views and nothing new about his stories there. The good thing about it is that it broadened my perspective about how the economy is kept in pace (as desired by gov/ elites), how policies and financial markets could possibly set the poor and middle class back as they don't know the rich's game nor have the resources to partake.

Having said that, not anybody can propel themselves easily into the rich's game by being businessman (Kiyosaki always advocates that), just buying gold or staying away from derivatives. In fact, I suspect at times we ought to do the opposite. I say more importantly is we need to open our eyes to the changes in this world and what's making these changes and learn to ride on opportunities that presented themselves when change happens.

As for whether gold is good, let's take a look at how gold prices compared to stock prices over the past decades here.


Gold price since year 1982...



Stock market since the 80s...



If we had managed to catch the gold at $500/oz in year 2000, gold has gained about 300% now at $2000. Gold has rock-bottomed at the stock market peak of about $1500. So if one invested in the stock market (despite limitation, I am using S&P as a representative figure) at that time, he/ he would have only gained approximately 100% now at $3000+.

However, if we push back the timeline earlier to year 1985 when gold price was around $800 and S&P was around $180, the return would have been drastically different. S&P's return beat gold hands down.

If we look at the stocks at a bottom again in 2009 around $800, at that time gold prices have already been pushed up to $1200. The return from stock market again beat gold hands down simply because gold price did not get beaten down during a market downturn.

Gold, in fact, has not got beaten down to the year 2000 level, even with a mad bull run except in the later part of the years. But from year 2010 onward, it still makes perfect sense for anyone to invest in stock over gold in order to maximize return and beat inflation based on the magnitude of climb as seen on the charts.

Just when you think that gold is an infallible 'insurance' to your stocks - think again, look at year 2012 - 2018. For that time period, your investment in gold can't even beat inflation. It is till market volatility picks up again later (thanks to Trump) that gold price took a rocket ride up. If the mega mandrake's tent continues, then it's little surprise that gold price will find it hard to climb pass the high (unless demand for gold surges for whatever reason). Gold, however, MIGHT be an insurance to currencies.

Given the illustrations above, we can see that market timing matters even in the purchase of gold. Comparisons will differ vastly depending on the time-frames we take.

For now, I will term gold as "a commodity with lackluster demand till a war breaks out".

A quote to end the post.
"Had the Dow merely kept pace with inflation, it would be around 1,400 right now instead of over 3,000, a figure that seemed extreme to some 10 years ago, when I calculated that it was a very realistic possibility on the horizon. Look also at the Standard and Poor’s (S&P) Index of 500 stocks. From the start of the 1950s through the end of the 1980s—four decades altogether— the S&P 500 rose at an average rate of 12.5%, compared with 4.3% for inflation, 4.8% for US Treasury bonds, 5.2% for Treasury bills, and 5.4% for high-grade corporate bonds. In fact, the S&P 500 outperformed inflation, Treasury bills, and corporate bonds in every decade except the ’70s, and it outperformed Treasury bonds— supposedly the safest of all investments—in all four decades." 
- John Templeton

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Comments

  1. 300% gain over 20 yrs without yearly cash flow generated from Gold. Not sure whether it is good return.

    ReplyDelete
  2. Gurus & promoters (including politicians) often like to portray things as either this or that, all or nothing, with us or against us, binary outcome.

    From the first writings, even the ancients 6,000 years ago know that real life is not so simple (and I suspect our caveman ancestors 20,000 years ago too, even though that was pre-history without written records). They know that you need to cover a few bases at the same time. Maybe tilt more to 1 or 2 during different times. E.g. liquid medium of exchange, property for shelter, property or land for productive income, businesses with positive cash flow, security & defense of assets & lives (no insurance then), human capital for active income (skills & work), savings & investments into the above listed.

    A good example is the ancient Talmud asset allocation (33% gold), or the Permanent Portfolio (25% gold) which is a more modern application of the Talmud. Check out the long term returns of PP -- it's not going to give you FIRE in 10 or 15 years (maybe 20-25 if you can invest a large portion of your income). But it's consistent as hell (& heaven) even through the Lost Decade of 2000-2009.

    ReplyDelete

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