An eye opening interview with Robert Kiyosaki – the economic shock ahead in 2021

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According to leading financial educator Robert Kiyosaki, storm clouds and an economic meltdown is ahead.

That’s why I invited him for a chat, you can watch the eye-opening interview below to learn why and when he thinks this will happen and considering his prediction of how he is currently investing.

Now I didn’t agree with everything Robert said, in fact, I agreed with very little of it!

But I respect that Robert has taught not only me, but millions and millions of people about the basics of financial literacy, so I was keen to hear his opinions.

Don’t panic when you hear some of Roberts’s extreme thoughts, but please watch the whole interview, including my thoughts, and then you’ll have both sides of the discussion argument to make your decisions on.

 

As you watch you’ll hear us discuss:

  1. Why Robert thinks we’re in an economic bubble and what’s ahead for our economy, and property.
  2. What will cause the bubble to burst
  3. What Robert is investing in now
  4. What Robert thinks of Australian real estate and where he currently owns property in Australia.
  5. Robert Kiyosaki’s view on Gold, Silver, and Bitcoin, and whether precious metals are still a safe haven.

I spoke with Robert on my podcast last year at the beginning of Covid, when he warned Australians about the challenges for our economy ahead, and the opportunities that he felt would come on the other side of the downturn. globe-economy-growth-health-world-heart-decline-map

Fortunately, Robert’s dire predictions didn’t come to pass, so I was pleased when he reached out to me again recently to be on my podcast so I could ask him what the biggest surprise was for him over the last 12 months.

In the video above you’ll hear how Robert’s teachings challenge conventional thinking about money and he suggests that you should be doing what the 99% are not doing.

So I hope you’ll enjoy as we talk a bit about his basic financial concepts before we get onto deeper topics like what’s ahead for our economy, why he thinks we’re going into recession, how deep the recession is going to be, but also the great opportunities that are ahead once we get through the downturn.

You’ll hear Robert speak positively about Australia’s opportunities, but you may be shocked by some of his predictions of what will happen before these opportunities arise.

What does Robert Kiyosaki think of bitcoin?

In the interview you will hear that Robert Kiyosaki owns bitcoin as well as gold and silver, but you may find it interesting to hear his views that these are a form of savings (???) rather than investment.

As I said, I don’t agree with all (many of) of Robert’s thoughts, his ideas about real estate, and his forecasts for what’s ahead for the economy, but rather than debating him, I gave him the air time he deserved and then after our 40-minute chat I’ll share my views.

So I will give you an alternative view on 2 of Roberts assertions:

  1. His concept of whether your home is an investment.
  2. What’s in store for our economy

Let’s first talk about property.

Robert Kiyosaki is an ardent property investor – in fact, he tells us that he owns 8,000 rental properties.

So clearly, he knows a bit about Real Estate.

What I should say is clearly he knows a lot about United States Real Estate – where the rules are very different, the tax regime is very different, the markets are very different and the way to invest is very different.

In the past, I’ve explained why Australian Real Estate is very different from overseas but unfortunately many overseas gurus don’t “get it.”

Our property markets are underpinned by the fact the 10.6 million properties around Australia are in general owned by homeowners – in fact, 70% are owned by homeowners and half of these homeowners don’t have a mortgage against that property.

And for the other half that do you have a mortgage, many of them are ahead in their payments while others are using the mortgage to support the purchases of investment properties.

For property venues to crash in Australia as many overseas gurus keep suggest is going to happen, we will need to be in the position that people must sell up their properties, at virtually any price and there will be nobody there to buy them.

Over the last year, despite Covid related lockdowns and the first technical recession we’ve had in many decades, in fact, the biggest drop in GDP we’ve had in almost a century, our property markets showed their resilience, didn’t they?

And there is not a real property debt problem in Australia.

According to Corelogic, our property markets are worth a total of $8.6 trillion but there is only $1.9 trillion of outstanding mortgage debt against all the properties in Australia.

In other words, the total loan to value ratio of our property markets is in the order of 22%.

There’s no debt bubble here.

And in general and get it in the hands of those who can afford it.

 

Residential Real Estate

 

The other argument I would have with Robert is that he suggests that your home is not an asset.

Robert Kiyosaki says your home is not an asset as there is no income coming in, only expenses going out and therefore your home is a liability, not an asset.

Now if you accept his definition of an asset as being something that brings in cash flow, then he is correct.

But the common definition of an asset has nothing to do with cash flow.

The fact that Robert invests in gold and silver, suggests he believes they are an asset, however, they don’t bring any cash in do they?

I believe that if I had $1 million in my bank account, that would be an asset, even though it would hardly bring any cash into my pocket.

And I believe if I took it out of the bank and put it under my mattress, that $1million would still remain an asset, even with no cash flow.

Meaning Kiyosaki’s basic assumption that your home is not an asset is flawed.

How I see it is that the way you get income from your investment properties is in 4 ways:

  1. Capital Growth
  2. Rental returns
  3. tax benefits
  4. Accelerated/ manufactured growth.

Unfortunately, too many people look for cash flow from their residential real estate investments in Australia and that’s just not how it works.

In Australia residential real estate is a high-growth relatively low-yield investment and to try and make it something different just tarnishes it and the results don’t allow you to build a substantial asset base to give you a cash machine in the future.

Your home as a stepping-stone

In this new age of property investment, when interest rates are accommodatingly low and mortgages so cheap, present-day homeowners are actually sitting on a potential goldmine. Australia Property

Far from being a drain on the household coffers, many of us are taking the opportunity to reduce our mortgages faster, contributing extra to our continually shrinking monthly repayments.

In turn, some property owners are building up equity at a considerable rate, with the help of the long-term appreciation of well-located property.

Think about it for a moment… Your home is an asset with zero tax liability if you choose to sell it.

But better than that, it could represent the leaping-off point to hasten your climb up the property ladder.

Robert Kiyosaki’s views about our economy

When I spoke with Robert last year he was concerned that Australia would fall into recession as would most countries around the world.

And that prediction came true, but the recessions weren’t as deep or disastrous as he expected because our governments have learned they can buy their way out of a recession by spending money. Robert-Kiyosaki

Last year we saw a combination of monetary and fiscal policy cause an economic rebound and nobody that nobody expected, and today more Australians are employed than prior to the recession pandemic, and more jobs full-time jobs are there for the taking for anyone who wants them.

There is no doubt we’re going to have ongoing challenges due to coronavirus that is going to create headwinds, but while Robert is an innovative thinker and expert in personal finance, he’s not an economist.

Now, while I’ve been a student of economics for almost 50 years, I’m not a qualified economist but there are some very astute economists employed by our banks, the RBA and the International Monetary Fund, and they all see a very different future ahead and nowhere as negative a picture as some of the headline-grabbing naysayers are suggesting in the media.

Australia has performed better than most advanced economies and of course, we are still susceptible to coronavirus-induced problems and I won’t even discuss the potential geopolitical problems with China, but I see a number of reasons to be optimistic about the future.

  1. Global economic growth is recovering rapidly, driven in part by vaccines enabling reopening of borders, pent-up demand, and monetary and fiscal stimulus by governments around the world. This is driving strong growth in demand for Australia’s exports which are showing up in our high commodity prices.
  2. Australian consumers are going to keep spending. They have stashed their cash, and access bank deposits of over $100 billion right that they would not have had in the absence of the pandemic.
    Currently, we have a high level of consumer confidence.
    Aussies are feeling comfortable about their jobs and financial future and experiencing the benefits positive benefits of the wealth effect from the rise in the value of their home, rising share prices, and ultra-low interest rates.
  3.  Fiscal stimulus will continue
    Australia has successfully negotiated the so-called fiscal cliff with the wind-down of JobKeeper and other supports, and fiscal stimulus is set to continue with our federal and state governments and the Reserve Bank doing everything they can to ensure our economic recovery.
    They are not going to waste all the time money and effort they put in so far to let things falter.
  4. Monetary policy remains ultra-easy
    While the RBA is going to slowly cut its quantitative easing moving forward, official interest rates are likely to remain around zero for the next few years.
  5. When our borders eventually open, there will be a flood of new migrants coming to Australia, and we will clearly be choosing skilled migrants who will also be bringing money into the country, and this will support our property markets and our economy.

Some other areas where I disagree with Robert Kiyosaki

Kiyosaki has done a great job of making people aware of the importance of understanding how money works.

Don’t get me wrong; I think the subject of financial literacy is very important. Recession Australia Note Money Economy Squeeze Tighten Save Saving Budget Cut 300x200

For years I’ve been trying to educate as many people as possible about property investment, personal finance, the psychology of success, and even a little about economics.

But I’ve been concerned that he’s scared off many investors and led others astray with his various prophecies of Armageddon.

In 2002 he brought out his book Rich Dad’s Prophecy where he warned the biggest stock market crash in history is coming.

And since then has forecast 10 of the last two stock market downturns.

Of course, I understand nobody is perfect, especially when it comes to market forecasting.

But in my recent interview with Robert, I found there was no real substance behind the reasons why he felt the market would crash further and why we would experience a great depression other than a bunch of conspiracy theories.

But my biggest concern is that he has misled many Australian property investors, who try to use his Real Estate investment strategies, that may work well in the United States, but don’t work in Australia.

You see…in Australia residential real estate is a high-growth relatively low-yield investment.

In other words, it is not a cash flow investment, yet many Australians who read Kiyosaki’s books try to buy cash flow positive properties here and then wonder why they don’t become rich like the books tell them they will.

In my mind, your investment decisions should be based on the potential for capital growth. Investing Into Property

This, of course, means that if you’re focusing on cash flow as the goal, you’re not doing it right.

Sure cash flow is important, it keeps you in the game, but is capital growth that builds your asset base and gets you out of the rat race.

Cash flow is just one of the forms of income the asset class of residential real estate yields.

In Australia you pay tax on the rental you receive, but not on the capital growth, which allows you to grow your wealth faster than those who pay tax on their income.

As I said, too many people look for cash flow from their residential real estate investments in Australia and that’s just not how it works.

In Australia residential real estate is a high-growth relatively low-yield investment and to try and make it something different just tarnishes it and the results you achieve don’t allow you to build a big enough asset base to give you a cash machine in the future.

In the interview, we mention Robert’s upcoming virtual seminar on 22nd July – www.RobertandHarry.com 

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About

Michael is a director of Metropole Property Strategists who help their clients grow, protect and pass on their wealth through independent, unbiased property advice and advocacy. He's once again been voted Australia's leading property investment adviser and one of Australia's 50 most influential Thought Leaders. His opinions are regularly featured in the media. Visit Metropole.com.au


'An eye opening interview with Robert Kiyosaki – the economic shock ahead in 2021' have 4 comments

    Avatar for Michael Yardney

    July 18, 2021 Frank Genovesi

    Hi Michael,
    For the benefit of your wide readership, just to clarify towards the end of your article whereby you said here in Australia, that rent is taxable but not capital growth whereas that is not the case as investment properties are subject to cgt. In the context as positioned within that sentence, I do not accept that you were also talking about owner occupied properties. Hence the best one can hope for is a 50% discount where the income producing asset was held for a year or more prior to disposal i.e. the date of the cgt event. Of course you know this only too well so I can only presume it was a momentary slip. Hey … just like Robert, we’re all human. Otherwise an insightful article. Kind regards.

    Reply

      July 18, 2021 Michael Yardney

      Thanks for the clarification Frank.
      Capital growth is not taxable unless you sell your property investment property and most investors who have a long-term strategic approach don’t plan to sell their properties, they use the increasing non-taxed equity growth to leverage into more properties.
      Again, thanks for the clarification because those who do you plan to sell, or must sell of course will lose a portion of the capital growth through CGT.

      Reply

    Avatar for Michael Yardney

    July 16, 2021 MRKUMAR

    16 JULY 2021,0840PM.
    It is of no meaning to interview (Get opinion) like this if the person not living in Australia and do not have any in depth real life fact situation of the property market of Australia. In past his predictions were gone wrong rather every time it reversed. Hence such information can be of no more useful for the Australian property investors. Rather to research from the current and past data and to act.

    As we all know its pandemic time in the whole globe world, hence all knew and can easily predict that the economy is going in up and down pattern. Thank you.

    Reply

      July 16, 2021 Michael Yardney

      The problem is Robert Kiyosaki is advising Australians what to do, so I thought it is appropriate to hear his views and add mine

      Reply


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