Thursday, December 24, 2009, 12:56AM ET - U.S. Markets open in 8 hours and 34 minutes.

Robert Kiyosaki Why the Rich Get Richer

Robert Kiyosaki, Why the Rich Get Richer

The Slow-Motion Stock Market Crash

by Robert Kiyosaki

Email this Page IM this StoryBookmark this StoryAdd to your Del.icio.us accountDigg this StoryPrint this Story
Good (2523 Ratings)
2.47047/5
Posted on Monday, March 19, 2007, 12:00AM

When my book "Rich Dad's Prophecy" was released in 2002, most financial newspapers and magazines trashed it because I discussed a looming stock market crash. Ironically, much of what I predicted in the book is coming true earlier than I expected.

On Feb. 27 of this year, a 9 percent market sell-off in China sent ripples of fear through stocks markets across the world. In the United States, the Dow's one-day plunge of 416 points was the steepest decline since the market opened after Sept. 11, 2001.

So the question is: Should stock investors be worried? As you might expect, some say yes and some say no.

Correction or Crash?

Personally, if I were counting on the stock market for my retirement or to put my kids through college, I'd be worried. Why? Because from my perspective, even if the Dow were to miraculously soar through 15,000, the stock market has been experiencing a long, slow crash for years.

This February, investors witnessed a drop of $583 billion in U.S. market wealth. Many experts are quick to point out that this loss of wealth is a mere drop in the bucket when you take into account that the stock market has been going up for four years. Most market experts say that the market was due for a correction, which is true.

In fact, the recent 3.5 percent drop is miniscule when compared to the 21 percent drop of the S&P 500 back in 1987. By definition, such a small drop isn't even classified as a true correction. According to BusinessWeek, a full-fledged correction is defined as a 10 percent drop, and a bear market is defined as a 20 percent drop.

Comparing Apples to Oranges

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.

Years 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.

For 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.

The Dow vs. Gold

To get a truer picture of comparative values, compare the Dow to the price of gold. When the purchasing power of gold is compared to the purchasing power of the Dow, the Dow appears to be crashing.

That means the average investor will need at least a 15 percent annual return on their stocks or mutual funds just to stay ahead of the U.S. dollar's purchasing power erosion -- that is, just to break even.

In my earlier Yahoo! Finance columns, I used history to forecast the future by comparing the dollar to gold and oil over a 10-year period. Here's the data:

 19962006Percent Increase
Oil$10/barrel$60/barrel500
Gold$275/ounce$600/ounce118

Table updated 3/21/07.

What Next?

What this means for you depends upon your bullish or bearish outlook, your financial education, and financial experience. For example, I hear many young people today saying that the price of real estate doesn't go down. This is a naive opinion due to lack of financial education and experience. I heard similar misguided opinions about stocks in the dotcom era, just before the market crashed.

Personally, I tend to heed former Federal Reserve Chairman Alan Greenspan's caution about a possible recession ahead. I predict that if there is a recession, current Fed chairman Ben Bernanke (and, in an attempt to hold onto the White House, the Republicans) will flood the market with more money at lower interest rates.

Then the purchasing power of the dollar will once again drop, asset prices may rise, and the financially naive will actually believe that the value of their assets -- houses, stocks, and mutual funds -- have gone up in value.

Thanks to Mike Maloney, my go-to guy for information on gold and silver.

Email this Page IM this StoryBookmark this StoryAdd to your Del.icio.us accountDigg this StoryPrint this Story

Rate This story

Good (2523 Ratings)
2.5/5
Sign-in to rate!

738 Comments

Showing comments 6-35 of 738<< PreviousNext >>
Sort: first to last

  • Andre Piwoni - Wednesday, June 13, 2007, 2:48AM ET  Report Abuse

    • Overall: 4/5

    I couldn't agree more but I also blame Greenspan for keeping interest rates low for too long. Based on financial situation of many of my friends that I extrapolate to majority of Americans, I think that people have less and less money to spend because of an accumulated debt encouraged by low interest rates. I don't believe that even lower interest rates will be able to squeeze much more out of consumers. It is possible that Bernake will flood the market with lower interest rates to buy some time for the Republicans until elections. What worries me is a potential fall that may be very hard.

  • Yahoo! Finance User - Thursday, May 17, 2007, 2:36AM ET  Report Abuse

    • Overall: 2/5

    Very limited and almost verbatim synopsis of Mike Maloney's article "THE DOW IS CRASHING"---just with different (and more elementary) metaphors. Looks like another Kiyosaki book promotion blurb.

  • Yahoo! Finance User - Friday, May 11, 2007, 11:30PM ET  Report Abuse

    • Overall: 1/5

    Please do not listen to this inept fool.

  • Yahoo! Finance User - Thursday, May 10, 2007, 3:22AM ET  Report Abuse

    • Overall: 1/5

    article really does not say anything--has no conclusion or ideas for the future

  • Joe - Monday, May 7, 2007, 12:14AM ET  Report Abuse

    • Overall: 5/5

    Why do so many people get so upset when Robert writes an article? I think the answer is in the old adage "Nobody likes calling what they think they know into question." The S&P is still below its high in the year 2000, which means that the broader market has made no gains in seven years, and all this excitement about record highs in the Dow is not all its made up to be. Also, the NASDAQ is still down 50% from its high. If Robert or anyone had said anything negative about the NASDAQ is 1999, he would have made a lot of people angry, but he would have been right.

  • Anna - Wednesday, May 2, 2007, 10:12PM ET  Report Abuse

    • Overall: 5/5

    Mr. Kiyoskai is dead on. The government is inflating at about 10% per year, but tell the people the core PPI is only 2%. Just look at the price of milk or eggs from past year to now. It is a lot more then 2%. Get rid of your dollars now before they are worthless.

  • larry - Wednesday, April 25, 2007, 3:26PM ET  Report Abuse

    • Overall: 1/5

    STOCK MARKET CRASH??? WELL THIS IS HANDS DOWN THE WORST ARTICLE OF THE YEAR WRITTEN ANYWHERE ON EARTH.IT WOULD BE IMPOSSIBLE TO BE MORE WRONG THE FACTS ARE IN AND ARE UNMISTAKABLE.ITS NO LONGER GUESS-WORK ITS HISTORY.AND HISTORY SAYS KYOSUCKY AND HIS DIM-WIT SUPPORTERS HAVE ABSOLUTELY NO CLUE!!!!!!ANYONE WHO HAS POSTED A BETTER THAN 1 STAR RATING FOR THIS POS COLUMN SHOULD BE BANNED FORM FURTHER POSTING!!!!!! ZERO STARS- ZERO STARS- ZERO STARS!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

  • DavidS - Monday, April 23, 2007, 5:06PM ET  Report Abuse

    • Overall: 5/5

    To the fool below who posts under several names: What kind of fool would forcast the next 10 years based on the last 10?

  • Nodentures - Wednesday, April 18, 2007, 2:45AM ET  Report Abuse

    • Overall: 1/5

    Simpleton thinking...taking past 10yrs to forecast future...(so gold will be 1200/ounce and oil 360/barrel in 10yrs)..among several other mis-takes ...(weak dollar is great for exports...see the weak yuan and China). Worst is trashing the stock market...which will always fall..and rise... He should go tell that to Warren Buffet. However, credit is due: subprime mess; keep cash for RE bargains later.

  • Yahoo! Finance User - Tuesday, April 17, 2007, 9:40AM ET  Report Abuse

    • Overall: 1/5

    this guy is a joke. he is typical of the commentators that disappeared in the 2001 market mania. he says what he thinks will grab a headline today. Where is the market compared to when this as written - ip... today I read his article on subprime disaster where he stated real estate is not an investment. I bought at a time of rapidly rising prices in 1978 and was told it was a mistake... best return I have ever made - bar none... your other columnists are great compared to this blow hard

  • Pam - Sunday, April 15, 2007, 3:25PM ET  Report Abuse

    • Overall: 5/5

    Absolutely correct, as always ! Thank you for your continued insight.

  • Devendra - Monday, April 9, 2007, 3:26PM ET  Report Abuse

    • Overall: 1/5

    RK is again giving wrong data to support his arguments. Lets talk gold. He just take the period when it appreciated... what about before that. SP500 has beaten Gold very well in past almost all the time. But Mr RK doesn't seemt o understand that. And if others are not as RealEstate expert as RK, that doesn't mean that they are fool & stupid. They will stil do their best, and comparing everyone to RK would be just a madness.

  • Jason - Friday, April 6, 2007, 5:59AM ET  Report Abuse

    • Overall: 5/5

    After reading Rich Dad Poor Dad in 2005 I opened a brokerage account with 30K that came from equity in my house. 18 months later I had cleared a cool 3K or 10%. Admittadly I was invested in mutal funds - but thats because I didn't know any better. In the month of march alone I cleared 2.6K - writing covered calls against the stock I own. I plan to do it again next month. Will I be retired 6 mos. fom now? No! Will I be 18 K richer? Probably. Point is I wouldn't even know what a covered call is if I didn't read that book. Open your eyes people. Opportunity is in your face - stop complaining and cultivate your destiny. JV

  • ToddS - Thursday, April 5, 2007, 11:53PM ET  Report Abuse

    • Overall: 5/5

    Kiyosaki is rich becuase he's able to look at things from a different standpoint than the average investor or even the layman. Although nobody can be 100% right all of the time, his opinions always make sense and he's always able to back up his views with concrete fact and deductive logic. This is yet another wonderful article and should be viewed as a red flag to all investors out there - the crash is coming, if you don't already have stop orders set, SET YOUR STOP ORDERS ASAP!

  • Yahoo! Finance User - Thursday, April 5, 2007, 1:25PM ET  Report Abuse

    • Overall: 4/5

    I like his perspective on the issue. I appreciate this point of view, it gives me reason to question my thoughts regarding the current issues with the stock market. Although I am not fully convinced that the stock market is on the brink of collapse, I love that this man was able to help me questin why I believe so by giving the opposing argument. Good job Yahoo!, don't get rid of this guy. At least someone has the guts to be so direct in the matter.

  • Yao - Wednesday, April 4, 2007, 11:38AM ET  Report Abuse

    • Overall: 5/5

    Wake up, we need to deal with the truth. RK is right.

  • not a realtor - Tuesday, April 3, 2007, 4:51PM ET  Report Abuse

    • Overall: 1/5

    I concur with a previous opinion. “worthless drivvle” This guy is great at selling his books to the financially uneducated. Conservative investing in this “overpriced market” has paid for my daughters college, my new Corvette, a debt free life and most importantly my ability to retire in my 50s should I please. Perhaps I should write a book! My conservative investments have been winners. I'm not a genius, I have done a lot of homework and go for dividend payers and mutual funds with historically good returns no loads and low expenses. Don’t let this guy scare you away from the best investment left to the middle class.

  • Richard - Tuesday, April 3, 2007, 4:48PM ET  Report Abuse

    • Overall: 5/5

    A great article to introduce the blind to what has been happening since 2000 to our investments. The US dollar is a fiat currency. It isn't an accurate representation of wealth. It's an accurate representation of how much paper we are printing, and how many bonds we are "monetizing". This is also known as "stealing" on the part of our politicians by diluting our currency to ensure their next election is in the bag. Although gold is a commodity, it is seen by the majority of investors who buy it as the "true" currency, a store of wealth. Fluctuations in gold price, irrespective of manipulations by central banks, is an excellent gauge of the true "worth" of fiat currencies such as the USD (epsecially since the stopped publishing the M3 figures). When you look at the markets in terms of their price in gold, you get a true sense of the stagflation that has overtaken US markets. This is because gold can't be printed.

  • Yahoo! Finance User - Tuesday, April 3, 2007, 2:31PM ET  Report Abuse

    • Overall: 1/5

    This guy really doesn't have a clue. How is he an expert?

  • Yahoo! Finance User - Tuesday, April 3, 2007, 10:59AM ET  Report Abuse

    • Overall: 1/5

    Continued worthless drivel. Value is relative to where you live and have to live. You aren't about to go to Europa and start buying real estate there because it is a better value. Yahoo, get rid of this guy and get something better.

  • Hongsiquanwingdingchong - Tuesday, April 3, 2007, 10:20AM ET  Report Abuse

    • Overall: 2/5

    This guy is so pessimistic and anti-stock market. He must have once tried to play the market and got burned badly. And he's always smashing mutual funds by saying they have high maintenance costs... there's plenty of funds that have very low, insignificant fees that generate nice returns. It's depressing to read his articles... which gets me to conclude that it's all a set-up to bring people who read his articles down... to suppress your positive flow of thinking and stir up chaos and panic.... Don't buy into this negativeness and read something better, and more positive.

  • JC - Tuesday, April 3, 2007, 12:54AM ET  Report Abuse

    • Overall: 4/5

    The drop in the dollar is scary and will lead to asset prices inflating. Which one do you want to be in? The Fed still doesn't get it that printing excess money will have a detrimental effect in the future. Their thinking is always in the present instead of the future.

  • MyoM - Monday, April 2, 2007, 9:48PM ET  Report Abuse

    • Overall: 5/5

    Always great advice! A true mastermind of american and global finance! keep up the good work Robert!!

  • Yahoo! Finance User - Monday, April 2, 2007, 4:32PM ET  Report Abuse

    • Overall: 1/5

    This guy takes ambiguity to a whole new level!

  • Yahoo! Finance User - Monday, April 2, 2007, 4:10PM ET  Report Abuse

    • Overall: 1/5

    Garbage.

  • Yahoo! Finance User - Monday, April 2, 2007, 12:38PM ET  Report Abuse

    • Overall: 1/5

    Hmmm? One star is one too many... Once again a superficial commentary supported by the barest of analysis! Consider the comments on oil. Indeed it remains at record prices, but there is no guarantee given the past vicissitudes in price the direction is up and not down. Readers should give pause and consider the impact on oil prices if the current impasse with Iran is resolved without a military confrontation. For a more indepth assessment of trends in oil production, imports and demands interested readers should refer to theworldlyphilosopher.com There you will find substance as well as style...

  • Yahoo! Finance User - Sunday, April 1, 2007, 10:36AM ET  Report Abuse

    • Overall: 1/5

    This clown inherited his money. The rest of us can make fortunes from the stock market and he just hates it.

  • Yahoo! Finance User - Saturday, March 31, 2007, 5:40PM ET  Report Abuse

    • Overall: 3/5

    some gentleman wrote this: "there is some truth in his article but there are different ways at looking at the numbers and interpeting where the market is going...years ago I checked out his website (it was the time when Nasdaq was dropping from it's peak of 5000 )...at the time the nasdaq had dropped 40% and Kiyosaki was saying "now's the time to jump in, if you look at history, the nasdaq is a great opportunity, etc." well, as everyone knows, after that it dropped another 70%... how many lost their shirts listening to his advice... does he make money off his investments or thru his own promotions and books? I can't stand guys who get rich telling others how to get rich when their own fortunes are made not from successful investing. Anyone can sell advice." Many experts give tips that are wrong. No one can predict the future. He was just saying that there was a good chance this stock will go up after the blow. You cannot critic an article on predictions made by the author that are not in the article itself. Rate the article not weather or not you believe Robert is a jackass. Is does he have a point or good argument in the article?

  • Chris - Saturday, March 31, 2007, 8:50AM ET  Report Abuse

    • Overall: 5/5

    VG article Robert. I always look forward to reading them.

  • Yahoo! Finance User - Friday, March 30, 2007, 2:20PM ET  Report Abuse

    • Overall: 1/5

    Gold has a poor track record. Those numbers are not true.

Showing comments 6-35 of 738<< PreviousNext >>
The columns, articles, message board posts and any other features provided on Yahoo! Finance are provided for personal finance and investment information and are not to be construed as investment advice. Under no circumstances does the information in this content represent a recommendation to buy, sell or hold any security. The views and opinions expressed in an article or column are the author's own and not necessarily those of Yahoo! and there is no implied endorsement by Yahoo! of any advice or trading strategy.

More from Yahoo! Sources

  • CNN Money
  • Consumer Reports
  • Kiplinger
  • The Motley Fool
  • Business Week
  • Wall Street Journal

Historical chart data and daily updates provided by Commodity Systems, Inc. (CSI). International historical chart data and daily updates provided by Morningstar, Inc. Fundamental company data provided by Capital IQ. Quotes and other information supplied by independent providers identified on the Yahoo! Finance partner page. Quotes are updated automatically, but will be turned off after 25 minutes of inactivity. Quotes are delayed at least 15 minutes. Real-Time continuous streaming quotes are available through our premium service. You may turn streaming quotes on or off. All information provided "as is" for informational purposes only, not intended for trading purposes or advice. Neither Yahoo! nor any of independent providers is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. By accessing the Yahoo! site, you agree not to redistribute the information found therein.

Yahoo! Answers is provided for informational purposes only, and no Q&A is intended for trading or investing purposes. Yahoo! shall not be responsible or liable for the accuracy, usefulness or availability of any Q&A information, and shall not be responsible or liable for any trading or investment decisions based on such information. View Complete Answers Disclaimer.