Robert Kiyosaki is dead on the money. Now, some may have qualms about his various marketing machinations: selling books, seminars, and whatnot, but I’ll tell you that when I read Rich Dad, Poor Dad, I thought it was a fresh and brilliant book for educating the financially illiterate.
So how can I say that the market is crashing even if it continues to
go up? To see the true crash, educated investors need to compare apples
to oranges, not apples to apples.
When you compare the Dow to
the Dow, or the S&P 500 to the S&P 500, that’s comparing apples
to apples. The Dow at 12,000 appears better than the Dow at 9,000, just
as an apple at $1 a pound looks better than at $1.50 a pound, even
though it’s still the same apple. All that’s happened is the price per
pound of the apple has gone up — the apple hasn’t changed.
ago, my rich dad taught me to be a comparison shopper, especially when
it comes to investments. He said, "You need to understand value more
than price. Just because the price of something goes up doesn’t
necessarily mean the value has gone up."
He also told me, "If
prices go up without a corresponding increase in value, it means the
value of the asset has actually gone down." This holds true for all
assets, including stocks, bonds, and real estate.
example, when the price of a house goes up it doesn’t mean that the
house is more valuable. And prices going up may mean that something
else is going down in value. In today’s global markets, what’s going
down is the purchasing power of the U.S. dollar.
Bingo. Do you know what? When your S&P loaded fund gives you 11% in a year, and taxes reduce that to 8%%, guess what? You’re about 7% in the hole, because that’s what’s happening to the dollar since about 2000. Its devaluation is unprecedented in recent history.