Rich Dad's Prophecy

Bubba Wheels · 03-09-2005, 09:19 PM

Alright, got a new one here since that last one went so well (right!) No personal attacks please! And I have actually read about half of this book so far, but that shouldn't keep some good discussion from happening.

Robert T. Kiyosaki, self-made millionaire and author, rights this second book predicting the coming crash of the stock market. "Why the Biggest Stock Market Crash in History is STILL Coming..." Very interesting stuff.

From what I gather from the first part of the book, congress' change in the ERISA law facillitated the changeover from Defined Benefit pension plans into Defined Contribution plans like 401ks. With mandatory withdrawl required at age 70 (for tax purposes) and the aging baby-boomers beginning their withdrawls in 2016, Kiyosaki sees the eminent collapse of the stock market as too many sellers will have too few buyers of stocks when that happens. Something to worry about? Also says buy and hold strategy for 401k will get you killed (financially).

Franklinnoble · 03-09-2005, 09:22 PM

Quote:

Originally Posted by Bubba Wheels

Alright, got a new one here since that last one went so well (right!) No personal attacks please! And I have actually read about half of this book so far, but that shouldn't keep some good discussion from happening.

Robert T. Kiyosaki, self-made millionaire and author, rights this second book predicting the coming crash of the stock market. "Why the Biggest Stock Market Crash in History is STILL Coming..." Very interesting stuff.

From what I gather from the first part of the book, congress' change in the ERISA law facillitated the changeover from Defined Benefit pension plans into Defined Contribution plans like 401ks. With mandatory withdrawl required at age 70 (for tax purposes) and the aging baby-boomers beginning their withdrawls in 2016, Kiyosaki sees the eminent collapse of the stock market as too many sellers will have too few buyers of stocks when that happens. Something to worry about? Also says buy and hold strategy for 401k will get you killed (financially).

Seriously, I don't think Congress is that stupid. By 2016, they'll see it coming, and just change the mandatory withdrawal rules.

flere-imsaho · 03-09-2005, 09:51 PM

Yeah, that doesn't really make a lot of sense. There will still be plenty, plenty of actors in the market. The Baby Boomers only beginning to start withdrawing (if the age doesn't get moved anyway) is unlikely to cause an immediate systemic collapse.

digamma · 03-10-2005, 09:07 AM

Quote:

Originally Posted by Bubba Wheels

Robert T. Kiyosaki, self-made millionaire and author, rights this second book predicting the coming crash of the stock market. "Why the Biggest Stock Market Crash in History is STILL Coming..." Very interesting stuff.

Did the first book get off course?

mhass · 03-10-2005, 09:11 AM

If the private Soc. Security accounts get started, there will be a LOT more buyers in 2016 - like every working person in the country.

albionmoonlight · 03-10-2005, 09:23 AM

His hypothesis--that a coming mass of retirees will pull money out of the market that they have been investing in order to consume that money in retirement--has very little to do with the move to defined contribution plans from what I can see.

If the money were not in 401(k) plans, it would be in pension plans. The baby boomers would still be retiring, and the money would still be withdrawn from the market in order to pay their expenses.

FWIW, the move to defined contribution plans has been a very good one, IMO. If you are paying attention, you are seeing that a lot of the traditional pension holders (blue collar workers in the midwest) are getting screwed because their former employers are declaring bankruptcy and getting out of paying the full pension and health benefits that the workers were promised.

[cynical] But at least the bankruptcy reform getting passed through Congress now will limit this practice and allow eldery retirees to enjoy the benefits that they have been promised. Oh, actually no. The current "reform" seems to just be a bone thrown to the credit card industry. My mistake.[/cynical]

Subby · 03-10-2005, 09:33 AM

In theory this makes sense, I guess - but I think I would like to see the numbers behind his theory. Are there going to be more retirees than individuals saving for retirement? Furthermore, will every one of those retirees be liquidating their savings?

This seems a lot like the Y2K bug to me...potentially a problem, but one that we have enough of a head start on to keep the worst from happening.

albionmoonlight · 03-10-2005, 09:44 AM

This hypothesis also seems to work on the theory that all stocks are overvalued. If .00001% of IBM is worth $50, I don't care how many baby boomers sell--the smart guys on Wall Street won't let it dip much below $50.

Of course, if you assume that .00001% of IBM is really only worth $2, and we have just been buying and selling it at $50 for the last few years, then I could see buying into his theory.

miked · 03-10-2005, 10:32 AM

My dad is a big follower of this dude. I think I have one of his books, but haven't read it yet. All I know is he has a game, some books and seems to be a good marketer of himself. I will see if I can dive into this book...

tategter · 03-10-2005, 12:22 PM

While I believe the stock market went through its last boom when 401(k)s became popular, the forced liquidation of stocks when baby boomers cash-out shouldn't cause the opposite effect. It's not like they will all hit 70 in the same year. Congress should and most likely will raise the mandatory cash-out age so that investors only take-out what they need which leaves most of their money in the market.

Out of curiosity, does anyone know what the average Price to Earning ratio is on stocks these days? That has always been a good indicator for how overvalued the market is.

03-10-2005, 09:11 AM	#5
mhass High School Varsity Join Date: Jan 2004 Location: Here	If the private Soc. Security accounts get started, there will be a LOT more buyers in 2016 - like every working person in the country. __________________ Now while I wasn't able to cut everyone I wanted to, I have cut a lot of you. - H.J.S.

03-10-2005, 09:33 AM	#7
Subby lolzcat Join Date: Oct 2000 Location: sans pants	In theory this makes sense, I guess - but I think I would like to see the numbers behind his theory. Are there going to be more retirees than individuals saving for retirement? Furthermore, will every one of those retirees be liquidating their savings? This seems a lot like the Y2K bug to me...potentially a problem, but one that we have enough of a head start on to keep the worst from happening. __________________ Superman was flying around and saw Wonder Woman getting a tan in the nude on her balcony. Superman said I going to hit that real fast. So he flys down toward Wonder Woman to hit it and their is a loud scream. The Invincible Man scream what just hit me in the ass!!!!! I do shit, I take pictures, I write about it: chrisshue.com

03-09-2005, 09:51 PM	#3
flere-imsaho Coordinator Join Date: Sep 2004 Location: Chicagoland	Yeah, that doesn't really make a lot of sense. There will still be plenty, plenty of actors in the market. The Baby Boomers only beginning to start withdrawing (if the age doesn't get moved anyway) is unlikely to cause an immediate systemic collapse.

03-10-2005, 09:23 AM	#6
albionmoonlight Head Coach Join Date: Oct 2000 Location: North Carolina	His hypothesis--that a coming mass of retirees will pull money out of the market that they have been investing in order to consume that money in retirement--has very little to do with the move to defined contribution plans from what I can see. If the money were not in 401(k) plans, it would be in pension plans. The baby boomers would still be retiring, and the money would still be withdrawn from the market in order to pay their expenses. FWIW, the move to defined contribution plans has been a very good one, IMO. If you are paying attention, you are seeing that a lot of the traditional pension holders (blue collar workers in the midwest) are getting screwed because their former employers are declaring bankruptcy and getting out of paying the full pension and health benefits that the workers were promised. [cynical] But at least the bankruptcy reform getting passed through Congress now will limit this practice and allow eldery retirees to enjoy the benefits that they have been promised. Oh, actually no. The current "reform" seems to just be a bone thrown to the credit card industry. My mistake.[/cynical]

03-10-2005, 09:44 AM	#8
albionmoonlight Head Coach Join Date: Oct 2000 Location: North Carolina	This hypothesis also seems to work on the theory that all stocks are overvalued. If .00001% of IBM is worth $50, I don't care how many baby boomers sell--the smart guys on Wall Street won't let it dip much below $50. Of course, if you assume that .00001% of IBM is really only worth $2, and we have just been buying and selling it at $50 for the last few years, then I could see buying into his theory.

03-10-2005, 10:32 AM	#9
miked College Starter Join Date: Jun 2001 Location: The Dirty	My dad is a big follower of this dude. I think I have one of his books, but haven't read it yet. All I know is he has a game, some books and seems to be a good marketer of himself. I will see if I can dive into this book...

03-10-2005, 12:22 PM	#10
tategter High School JV Join Date: Apr 2004 Location: Florida Swampland	While I believe the stock market went through its last boom when 401(k)s became popular, the forced liquidation of stocks when baby boomers cash-out shouldn't cause the opposite effect. It's not like they will all hit 70 in the same year. Congress should and most likely will raise the mandatory cash-out age so that investors only take-out what they need which leaves most of their money in the market. Out of curiosity, does anyone know what the average Price to Earning ratio is on stocks these days? That has always been a good indicator for how overvalued the market is.

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