Why ‘Rich Dad’ author Robert Kiyosaki still thinks the market is about to crash

Robert Kiyosaki, author of the “Rich Dad” series of books, has for years predicted an epic market crash when baby boomers, forced by law, start drawing from retirement funds in large numbers.

That meltdown was supposed to happen last year. Instead, the bull market raged on: It will be eight years old in March, if measured by the 2009 bottom. Kiyosaki has drawn some flak along the way.

Kiyosaki hasn’t given up on the prediction, however, he told MarketWatch in a late-January interview and a series of follow-up emails.

Baby boomers still need to start drawing money in 2017, he notes: They hold about $10 trillion in tax-deferred savings accounts, according to Bank of New York Mellon; Americans who turn 70 1/2 have until April of the following calendar year to make withdrawals or face stiff penalties. (There were nearly 75 million Boomers in 2015, according to Pew Research.)

“Every time I say that to people they scoff at me,” said Kiyosaki of his baby boomer meltdown theory. “The fact is, they’re pulling the money out…the thing that did happen that I never expected, was the market went up a lot due to the ‘Trump Bump.’”

Early in 2016, when stocks posted their worst January since 2009, it looked like Kiyosaki might be right about the market. Stocks recovered only to slide on Brexit last summer and then fall briefly in an autumn pre-election dip. It’s been upward momentum ever since.

The surprise election victory of President Donald Trump, who rallied investors with his promise to revamp the economy, further muddied the picture for Kiyosaki’s forecast.

While stocks were already up about 4.3% before the election, its outcome boosted the S&P 500 SPX, +1.44% to finish 2016 with a 9.5% gain. The Dow industrials DJIA, +1.44% logged their best annual finish in 3 years, up 13.4%.
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Kiyosaki says he likes Trump’s efforts toward creating jobs and pushing U.S. companies to invest domestically so far.

But he worries about how much “change” the U.S. and the world can stomach, given the president’s determination to carry through on the range of promises — including some controversial ones regarding national security and immigration — that got him elected.

“He has to do something, and change always causes upset,” said Kiyosaki. “So the ripple effect is what I’m not clear on.”

And no president, he says, will be able to prevent a meltdown he still believes is on course.

“We have structural financial problems that are so big, nothing can stop them,” Kiyosaki said. “The number one fear among my generation is running out of money. It’s fear and emotion that drive markets, not logic.”

Read: A look at the economy Trump inherited, which he calls a ‘mess’
Kiyosaki says 2016 brought about other, unexpected, crashes.

“What has happened instead of a market crash was the crash in interest rates, which are adversely affecting millions of fixed-income retirees, pension plans, and savers — at the same time incentivizing people like me to become debtors, using debt to acquire income-producing real estate,” he said.

Most retirement plans assume an 8% return, Kiyosaki said, but “when interest rates are a 1% or 0% or negative percent, returns aren’t working.”

At the most recent Fed meeting in early February, the Federal Reserve voted to keep federal funds in a range of 0.5% to 0.75%, though the central bank has signaled that this year it wants to hike interest rates three times this year.
The second crash Kiyosaki said he didn’t see coming was the one that sent oil prices tumbling last year. Kiyosaki said he expected crude US:CLH7 to stay over $100 a barrel, but last year it tumbled below $50.

Oil moved back up above $50 late last year, but has been hovering for weeks between $53 and $55.

See also: Robert Kiyosaki says entrepreneurs should read this book — it will ‘talk to your soul’
Kiyosaki says there’s an element of danger in the fact everyone is “exuberant” that the Dow industrials passed 20,000. The index recorded its first closing above that all-time high in late January before pulling back, but has maintained that level for much of February.

“It’s a little high,” Kiyosaki said. “The global fundamentals are still weak when you include Brexit, and Italy and Germany are in trouble. We’re not a strong global economy right now.”

Who should worry? “I’m not concerned about the professional investor who can short the market, go long, use options, calls and puts,” he said. “It’s the person with a 401(k) or IRA, where all their eggs are in this thing called a retirement plan.”

Market Watch
3/1/2017