Are We Experiencing a Black Swan Event?
This is a trick question. I have to ask you okay. You know what the standard pitch in from people on the world's go to school get a job work hard save money get out of debt. Invest long-term above their festival portfolios talks wants which avoids. Atf's so if you're a financial planner and you've been telling people for the last thirty thousand years. Invest along term and the well diversified portfolios stocks bonds mutual funds and. Don't worry you know the market's always bounce back by the dip is going to be probably a V bottom which means it goes down and comes right back up or a w goes up down and then back up again which it has done over the last. Let's say fifty years so if you're a financial planner and your clients are calling you and you've given them that advise of invested a long-term well-diversified for pulling the plug mutual funds. What do you say to them today? Harry well I I say a financial adviser is going to be more hated than I am. That were passing the end. Up this bubble booms When it happens and and that is true most of the time. But what my work shows and clear the bell clears your heartbeat. Every second generational booms come about every forty years technology surges every forty five and then big bubbles every ninety years when you get east. T- turning points like the late sixties and stocks or the late the roaring nineteen twenty nine stocks or now stocked. Go Down Robert. And they don't get back to those levels for twenty three to twenty five years. I think this time with slowing demographics and the US we may never see the dow higher adjusted for inflation than it is recently so this is not the time to sit through it these type of long-term corrections or crashes after bubbles. They're going to be seventy to ninety percent like twenty nine to thirty two that by the way not small-cap stocks or penny stocks blue chip leading stocks like General Motors Ford and RCA. Back then went down. Eighty nine percent. The Dow and two point seven years can talk until nineteen fifty three twenty four years later to get back to even so when a stockbroker tells you that doesn't understand history. Harry hang on you got to take a breath and so what Harry is saying. Nineteen twenty nine with a crash came if you are holding waiting for the market to come back so in one thousand nine hundred eighty nine dollars at three eighty one. It took approximately twenty four to twenty five years to get back to three eighty one and when I was a kid nineteen fifties when I was growing up most of the people who are part of the Great Depression my parents and the people who are pounded by the Great Depression and the stock market crash. They were never in stocks there so gun shy of stocks and then in my generation the baby boom generation that brought back the Sangala 401k defined contribution pension plans and all this at the stock market took off so the baby boomers are caught pro with the proverbial pants down and now comes the next big crash. Which you've been forecasting for a long time airy so what you're saying. This one might be a long one. Yes because this is the culmination not only of the baby. Boom gigantic is your heading the largest generation history and it wasn't just. Us hit globally to to grow up in earnest. Money which is totally predictable. Average person peaks in forty six for the baby boomers and spending forty seven for the millennials today and then and then decline so. We started to see that declined to name her. This is a rich audience. Like me a little slow. We gotta speak a little slower. So what you're saying. Is that when a person hits forty six? That's when they're at the peak. Earning and spending and millennials is forty. Seven is that what you're saying. Yes the average. The average person for more fluent people college educated professionals. It's more like in the mid fifties but still average forty six so baby boomers if that peak collectively in two thousand seven something. I predicted like twenty some years before that. And we've been just what we went down big big crisis worst since the Great Depression but not as bad because they printed so much money to stop it and we've been living on quantitative easing ever since to make up for these slow down in this generation spending. That's simple and we're not coming out so let me so. Let me go back again. So let's talk to you. Know My generation. The boomers you know. What would you say to them? If they bought that they drank the KOOL aid. Let's say they have a 401k on IRA one of those things are Roth IRA. They've they've they've seen their portfolio per se. Go Up and now it's crashing. What advice do you have for them? I mean how do they do? They stay in or they exit. We don't give advice rich TAB. I WanNa hear your advice. No you get the hell out period. I think he may have one more. Little run left could be a couple of months. Could be a couple of weeks because the feds pumping in more money than ever with the Repo crisis and now the Krahn advisors but I think this is the death knell for the stock market. They can print money to stop. A recession stopped banks from failing companies from failing even stocks from crashing too much normally. But they can't stop this virus from spreading and it just kills business businesses. Stop people stop. Traveling people start stop spending. I mean my wife's not going to a of of women stay over tomorrow night. They're all coming in from New York you know. And she's you know she made the virus and she's over sixty like I am and that's what it hit. Its old people like you said earlier. So so this is something. They can't buy with money printing. They have kept this following far beyond when it should've peaked in two thousand seven and now they've got something that this doesn't work on so I think this is it so you have to get out of the way so Harry. I was talking to this young guy. He was He's a laborer. Was Painting parts of my house and he says you know. I bought a house like you told me to back in two thousand eleven you bought it for like I think hundred thousand and the reason round numbers and now it's three hundred thousand and he has no retirement is what should I do. I said I saw my house I went. I don't once again ladies and gentlemen at Rich Dad. We don't give financial advice and I definitely couldn't advise US guys. Only forty got three kids. He's got a job. Painting houses got no snow stocks. You and I are calling for twenty five year possible. Depression long-term deflation. What do you say to people what you because if he sells he sells his house? I sit where do you go? What are you going to do with that money? Let's say you have two hundred thousand dollars. I gotTa Pay Capital Gains Tax on it. What are you GONNA do any? He was clueless. I I got some simple rules Robert. I had become a bubble experts since the tech bubble crashed and early. Two thousand on top of demographics and technology and all these psycho because we are in a bubble era and the last bubble era we saw the roaring twenties. So nobody's lived in a bubble before and real estate was not the bubble back then. Because you couldn't borrow money so easily against housing back is very difficult so now. It's everything the rule for. Housing is real quick bubbles. Go back to where they started that that house if he bought it at the bottom of one hundred eleven and now it's worth three hundred K. My rough estimate is going to go back to near that level if he's comfortable sitting through one hundred eighty nine thousand potential decline in something he probably has a mortgage against maybe some home equity lines that he went on deck that fine. I think anybody with any brains would say oh no. I don't want to sit through that one in by the way The demographics I've got a new real estate model. That doesn't just project peak spending like other consumer categories. I have to subtract the dyers and guess what baby boomers are now dying unprecedented rates and will continue to do so into two thousand thirty nine or forty that takes down the net demand even takes it negative at some point for real estate so homes are never gonNA appreciate like they did this boom even in the next boom so it's better especially older. People who retiring lot of baby boomers are realizing they didn't say per retirement. 'cause they're living in good times thought they didn't need to and now they're saying. Oh wait a minute though might make mansion which I don't need now that my kids are gone. I can sell that instantly. Fund my retirement plan and rent my retirement home. I think that's really excellent vice. Do that