The Difference Between Gambling vs Investing - Robert Kiyosaki
- [Narrator] This is the Rich Dad Radio Show. The good news and bad news about money. Here's Robert Kiyosaki. - Hello, hello, hello, Robert Kiyosaki, the Rich Dad Radio Show.
And this is kind of a bonus program today. And the reason it's a bonus, is it's just gonna be me. You don't have anybody else to listen to or talk to. And I'm just gonna share with you kind of my concerns today. And again, we're a financial education show.
A lot of times, we have people who've been talking about real estate, or talking about crypto or they're talking about stocks or trading, and I'm going to give a more, a little bit more of a macro view, a bigger picture on it, and I'll tell you why. So this is kind of a bonus Rich Dad Show, you know, to thank you for being a loyal subscriber and listener to the Rich Dad program, because all we are is financial education. We sell things like cashflow games and books and tapes, but we really want you to be educated. So I'm gonna tell you why this, this little bonus program comes in. As the other day, I was at the gym, and this gentleman comes up to me and he was really proud, you know, he says, "I've been a bus driver for the city of Phoenix" "for 40 something years, and I'm gonna retire".
And I said, oh, did the, I didn't know anything about government employees, and I said, is the government giving you a retirement? So years ago, when I was a kid before 1974, there was a thing called a defined benefit pension plan. Defined benefit meant they guaranteed you X amount. So my poor dad, you know, if he retired, he lost his pension too, which was this book here "Who tole my pension?". But this book just came out, "Who stole my pension?", because this is gonna be one of the biggest problems America, the world faces, is our pensions have been stolen. And the reason it's in trouble is because when we had defined benefit pension plans, if the government promised my dad $1,000 a month, they had to give him the $1,000 a month. And then something happened in 1974.
It was called ERISA, and ERISA stands for Employee Retirement Income Security Act. And when the government says income security, you know they're lying to you. And today is called the 401k, the IRA, the Roth IRA, a SEP QIOs, and all this stuff. And when it shifted from defined benefit, which is a guaranteed set amount, and even like Ford Motors, Ford Motor had defined benefit plans.
So if I worked for Ford for let's say 30 years, I got guaranteed payment every month. Then in '74, they shifted to defined contribution. Those are massively different plans, but of course, they don't tell you that in school. So when this gentleman said, "I've been driving the bus for 40 something years", he's about my age and "I'm gonna retire", I said, oh, you have a government pension, defined benefit? He says, "no, I have a 401k".
I don't know if you listened to The Rich Dad program, but we dump all over that 401k, cause in my opinion it's not that it's bad, it's horrible. That's the problem with it. Because if the stock market crashes, this bus driver who's about my age, gets toasted. He gets wiped out, because it's a defined contribution, not a defined benefit.
And that's a very, very big difference. He says, "ah, don't worry". He says, "I know what you're saying", you know, "I know the stock market is way up there", "so I shifted into safety". I said (in foreign language), what did you do? He says, "I shifted into bonds", I went oh, you know, cause he drank the Kool-Aid, that US treasuries or bonds are safe. And when I was a kid, that was true, but not anymore because of the change for defined benefit to defined contribution, which took place in 1974. So we have our, you know, we have a new apprentice at The Rich Dad Company, his name is Spencer and he's just turned 20.
And you know, like Rich Dad Company was formed before he was born, so he's really young in other words. And he's in, you know, the Arizona State University, learning Business and all this stuff. So when we hired him as my apprentice, the first thing his mother said to him was, be sure you've got a 401k. Now, after I got finished vomiting, you know, I said, I better say something cause I don't really talk. I talk about it in books and things like this, but never really addressed my concerns on that. So without financial education, the average employee, or, you know, a doctor or a lawyer who has a IRA or a SEP, a Roth IRA or a QIO, they don't know anything about investing.
All they're doing sipping on the Kool-Aid. So I wanna show you why that bus driver, you know, great guy, 40 years on the bus, says, oh, you know, "I moved to safety". So what happens here is the relationship, as you can see this chart here, you have bonds like US treasuries, and then you have stocks, something that's called equities. So what happened was when the market, so when Nixon took the gold dollar off the gold standard, in '71, remember '71 was Nixon takin' the dollar off the gold standard, '72 Nixon went to China, which opened the door to, for Walmart shoppers and Amazon, and then all these things started to happen. So the US economy started to sink, because the Chinese were producing better products at better prices. And then a guy like Clinton opened the Chinese door to the WTO, the World Trade Organization.
So when people wonder why I'm the most boring person on earth, that's what I think about, you know, I go to parties and I sit there eating potato chips and drinking beer, cause I don't know what else to talk to people about. So I'm gonna talk to you. So what happened when I was in my twenties, because the economy was stalling, they had to stop, start dropping bond yields. So my numbers are probably off cause I don't really like bonds, but let's say back when I was getting, I just entered the workforce, you could get 16% on a bond.
So if you put a million dollars or a hundred thousand, or whatever it was, you got 16% on your money. But as the economy slowed, they kept dropping the bond prices. They wanted to drop debt, make it cheaper. Then what happened is that the stock prices higher.
So that's macro, that's relationship between bond prices coming down and stock prices going up. So after 2008, what they call the GFC, the Great Financial VC, whatever they call it, they had to keep dropping bond prices lower and lower and lower, and it got near zero. So they call it zero bound.
So in some countries in Europe, you know, if you have a million dollars, you put it in a bank, they charge you money for your, there's no interest in it. So that's why our Rich Dad Poor Dad came out in 1997. I said, savers are losers. The reason I said that, well, interest rates on your savings was going down, and they're printing more and more money on the macro level.
And what happened is then these companies, like the fortune 500, they were borrowing cheap money to prop up their stocks. So they were, they were buying back their stocks, to send the stock price higher. So today this is April 2021. The stock market is at an all time high, bond prices are about I think the 10 years, about 1.5%. So it came up just a little bit. This affects the whole economy.
So when that bus driver said to me, he says, "ah, don't worry". "I got out of stocks". "I went into bonds", I said, I hope you like driving the Titanic. Cause you're gonna go down with it, you know? And he got so angry at me cause he did all the right things that his financial planner told him to do. And in a normal economy, that was smart, cause when I was a kid, only gamblers ran the stock market, even says, Jim Rickards had wrote "Currency Wars" and all that. He said, he, Jim and I about the same vintage, the only people that were in the stock market were gamblers.
Everybody else back in my times in the '60s and the '70s, were in bonds cause there were really safe. So you could get that. And now it's like this. The problem is for that bus driver, is this, if the bond prices go up again, because they got too much inflation, you know, I'm not saying it's gonna happen, it's either going inflation or deflation, we don't know, I don't know. But let's say they raise the bond price, stock market crashes, okay? Because the companies like Ford Motor Company, IBM, and those guys, the price of their debt goes higher. They're so deeply in debt, because they've been borrowing from, let's say IBM's treasury, and they've been buying back their stocks.
So their executives can parachute out with stock options. So the CEOs and the executives of these major corporations in America have been screwing everybody, cause they were borrowing money from the company to buy back the shares of their stock, because the price of money was so cheap, but it drove the stock market to all time highs. So today of the S&P 500, you know, sort of the benchmark of how good the economy is, of the S&P 500, 100 or 20% of the S&P 500, are zombies.
In other words, their debt is so high because of stock market. Their stock price is high but they kept borrowing money to prop up the stock market. So let's look at here, it's kind of a mini, macro, macro look at the world. So let's say they raise the bond price, okay? So they make less than a goal from one and a half to 3%, 100 companies crash. Of the fortune 500, they crash.
Cause they can't make enough money to pay off the debt they borrowed. So their CEOs and executive vice presidents, and all the investors can parachute out screwing in, you know the stock people, investing in the stock market. That's why I don't own any stocks.
I don't, you know, because I'm an entrepreneur. I don't need to buy stocks cause I can create my own assets. I create my own companies. You know, I invest in private companies.
These are public companies. So if you're understanding all that, there's public, private, there's stocks and bonds. So if they raise that up, this comes down. But guess what happens to bond prices, if they raised the bond price? The bond price crashes. Because look at it this way, okay? Let's say I have a bond that's paying me 10%, okay? And so this well, we need to get the, we need to goose the stock market.
So they drop it to 5% interest. And so this bond goes up in value because it's paying 10%. So would you rather have a bond that pays you 10%, or a bond that pays you 5%? I'll give you four hours to figure that one out, you know? So they kept dropping it.
And the price of the bonds kept going up because the interest rates were going down. At the same time, stock prices were going up and now we're what they call near zero bond. How much more can they go? I don't know. I really don't know. You know, will they go lower? I don't know, is it inflation or deflation? I don't know.
But I'm just saying to you, that bus driver, if they raise interest rates on his bonds, not only does the stock market crash, but his bonds crash also. So he's following his financial advisor's advice who, you know, the reason they're called brokers, you know, financial stock brokers, real estate brokers, is cause they're broker than you are. They only make money if they sell you something. So they made a lot of money on that guy, trading him out of stocks and into bonds. They got commissions. But this guy is now, skipper of the Titanic, I don't know what's gonna happen.
I hope it all goes well for him. But if they raise bond prices the value of his bonds crashes. So the reason I sit around and yack about gold, silver, crypto, Bitcoin, Ethereum and all that is I simply don't trust the money markets, or the stock market or the Central Bank. So that's why the Rich Dad Company was founded back in 1997, to educate people.
So I trust you kind of understand, this is really basic. They should teach you that in school. So when we come back, I'll be going into how this model here affects gold, silver and Bitcoin, okay? Cause we're all part of the same system.
Be right back. Welcome back, Robert Kiyosaki, the Rich Dad radio show, good news and bad news about money. And this is like a, a bonus event here. It's just me yacking to you. And it kind of explains why The Rich Dad Company was founded, because as I've always asked what does school teach you about money, the answer is what, nothing, nothing. So you can listen to The Rich Dad radio program, anytime, anywhere on iTunes, Android, or YouTube, and all of our programs are archived at richdadradio.com,
because if you listened to this again, you'll pick up twice as much. But more importantly, you can discuss this with friends, family members, and especially business friends, you know, fellow entrepreneurs and things like this. Because this, they'll never teach you this, Wall Street will never teach you this, your stockbroker won't teach you this. And your financial planner won't teach you this.
That's why The Rich Dad Company was founded. So Sara, what was your question? - [Sara] My question at break was does the, does the rule always hold true? If the stock market crashes, will the bond market price go up? You know, does it always hold true? - And that's the problem is, because nobody has that crystal ball, you know, we can guess this and guests that, you know, at Rich Dad, we're always studying something. Remember that we found out that quantitative easing doesn't mean they're printed any money? - [Sara] Yep. They held it in that reserve account and nobody can ever borrow, you know, they, they don't actually get the cash. - No. That's not money entering the system. - [Sara] Right.
- But everybody thought they printed money. So they, they expect stock prices to go higher and all of that. So it's, that's why I wrote my book, you know, capitalist manifesto and people say, why don't you invest in stocks? Cause I don't have to, you know, I'm an entrepreneur, I can create my own assets. I'm not saying you should do that. But with my Rich Dad, that's why I started, you know, ESBI, I'm not, my poor dad was employee or self-employed or small business owner.
And there's big business owner and there's inside investor. So I'm a big, I'm a big entrepreneur. I've over 500 employees, multiple companies, but I invest from the inside.
So if I ever show, I'll show it to you later, but the thing is, nobody knows, Sara. - [Sara] Mm hm. - So that bus driver, you know, my age, his financial planner says bonds are safe.
And I'm quite sure the financial planner means that cause that's what they're taught to sell you. But what is gonna happen? Who knows? Who knows, this is the biggest bubble in world history. So it's either gonna be the best of times or the worst of times. And that's why we thank you for listening to our Rich Dad, we have cashflow games and books and all this, we have real teachers, you know, like my advisors, like Ken McElroy is really in real estate. We have Tom Wheelwright, who is a real tax guy.
He's in, Garrett Sutton is in the law and all that stuff. We're real, but none of us are giving advice. So we just had John Adams from As Good As Gold Australia, he says, is it stagflation? Is it this? People don't know. But I want you to understand the relationship.
This is macro between stocks or equities and bonds. So this is cash. This is debt you see. So if I have a million dollars, I would put it in a bond and hopefully get 16%.
That's safest. You know, if it's US treasury, it's guaranteed. But to keep the stock market going up, they kept reducing the, so today it's about, I think it's about, I don't like bonds, you can tell that, So don't take a word, you know, don't listen a word I say, but when that guy said to me, "I shifted into bonds because they're safer", I'm going, Oh, my God. But that's the price of not knowing, when I try to explain it to him, he got really angry. He says, are you a financial planner? I said, heavens, no, I do have some self-respect, you know, but that's why we have John McGregor with Andy Tanner as part of our advisors, because those guys are for real, they're in paper assets.
And nobody has the answer, Sara. That's what I'm trying to say. So if you're prepared for it. So if we could go into a gold, silver and crypto.
Okay so, the question is why hasn't gold gone up? Who knows where it's gonna go? So I thought gold would be like $2,500 today, but it's $1,700. And the reason is, again, it goes to when the bond price went up, the price of gold came down. So they're all related and nobody has an answer, but you gotta pay attention to that. And then, if you just listened to the, our Rich Dad Radio Show with John Adams from Good as Gold Australia, the Perth Mint is out of silver. Now, what does that mean? You know, how could our Mint be out of silver? How could our Mint be out of gold? Because they're selling stuff they don't have. So that's corruption.
So can I make a prediction? No. But that's why you gotta be very, very careful. So the price of gold didn't go up.
One reason is because crypto is so, you know, Bitcoin is sucking the air out of gold and silver and the, you know, the Bitcoin guys are going nuts or happy as Larry, okay? So two things are affecting the price of gold. One is interest rates went up and Bitcoin came in, Ethereum and all those other things, which brings to my real rant, is a thing I'm really upset about is, I'm talking to the poor bus driver and then I was talking to one of these young, what do they call them, hodlers or something, young guy who now is, he thinks he's Donald Trump of crypto or something. And so when, when Bitcoin dropped from, I think it was 65 down to 50 per coin, I bought more.
And this Donald Trump of crypto, who's probably 22 years old, says "Ah, you made a mistake". You should've bought this, you should've bought that, should've bought this. He started telling me about all these doge coins, or Kardashians.
I had no idea what that guy was talking about. He says Bitcoin is all, it's going da-da-da-da. The kid's a gambler.
Not that I'm not gambling in crypto. I am not gambling in this in gold and silver. I've started gold mines. I've started silver mines. But let me explain this.
The reason I'm in Bitcoin is because it's the most established. It already has a network. It's got a headstart on everybody. So this guy is now, he doesn't, won't touch Bitcoin because he's chasing the next hot thing. Now he's too young to remember pets.com and Amazon, okay? Do you remember? There was Amazon was, Amazon was a struggling, little company.
They had no profits. And Bitcoin had them in, I mean pets.com at the sock puppet. Now they was jumping up and down, cause the sock puppet was on Super Bowl and all this stuff. So all of these yo-yo's, chasing the sock puppet and Amazon was the biggest thing going, but it wasn't turning a profit cause they were reinvesting. They were doing, you know, I don't especially care for Amazon, but they're doing the right thing. So they struggled, you know, they kept reinvesting.
I've been, I've met Jeff Bezos, you know, because when Rich Dad Poor Dad made the list, he invited me to their openings. He's a good guy. I just don't like the politics.
If you know what I mean, don't censor me. How dare you censor me. But other than that, that's the only bitch I have. So Amazon was the better buy, but everybody bought pets.com
and that's what's happening to what else is going on? There's NFTs or something? - [Sara] Oh, the non fungible trades or tokens. - Yeah. - [Sara] Sorry. Yeah.
But those are all just driven by. - Speculation. - [Sara] Hype and speculation, yeah. - Yeah. And, and so gold goes down and all you, Bitcoin yodelers out there or hodlers. - [Sara] It's the FOMO, fear of missing out.
You know, everybody wants to get in cause they don't want to be left out. - But all these young guys got their heads up their asses, that's the problem. They haven't, they're not old like me, they don't have all the scars on their back to see the stupidity.
They don't even know what the sock puppet was. - [Sara] You know what I think it's funny? Is that, so a lot of people accuse you, oh, you're old school. Cause you're a gold guy. But there's a generation now, these 22 year olds, who think Bitcoin's old school.
- Yeah! - [Sara] Isn't that how fast that technology moves? - Yeah! - [Sara] That mindset, yeah. - And that's what happens when no basic financial education, you know, whether you're old or young, if you're stupid, you're stupid. I mean, this, don't worry about it. You know, the market will take care of you. And the difference was, is that in my generation, it was real estate.
So I took real estate courses. I've never lost money in real estate. I've made fortunes in it.
Do you know I'm an insider cause I do all my, I don't, I don't touch REITs, R-E-I-Ts, Real Estate Investment, I don't trust paper. I am, I handle my own. I've started my own gold mine in China, Of course, the Chinese took it. That was a lesson. And I started my own silver mine in Argentina. So I understand mining.
So all of these guys, my friends who are in crypto, now tell they expect about 15,000 new ICO's. So it is, you know, basically all it takes is a brain and some electricity and a computer, and you can create your own crypto. So could Bitcoin be toast also? Possibly. You know? So when I told this guy, I bought Bitcoin when it dropped from 65 to 50, he says, it's gonna go to $5.
I said, it might. The difference is I can afford to lose that money but that's called I'm speculating. So this is in my world as a professional investor, I'm in the acquisition phase, I've taken a position, I've taken a position in Bitcoin and Ethereum, every time it looks like it's getting a little cheaper, I'll buy it, I'll buy it, I'll buy it.
So I saw Bitcoin at 20,000, I think it was, and it dropped to seven and I waited. And when it came to nine, I bought. So today let's say it's 50, I'm still in the money. And if it goes to 40, I'm gonna buy more. Now could I be wrong? Absolutely.
Could some hodler coin takeoff? Yeah. You know, could there be another pets.com of crypto? Absolutely. But the difference is I'm in the acquisition.
I've taken a position. I took a position in silver and gold. I have millions, not in this country, but I don't have any paper. I don't have any ETFs. I only take the real stuff because as I said, the Perth Mint can't deliver on silver. If a Mint can't deliver on silver, who do you trust? And so with all of these young kids coming up, gonna invent the next Bitcoin, I don't doubt they will.
I don't doubt one of those 10,000 new crypto may blow Bitcoin and Ethereum out of the water. And if that happens, I'll make my switch. But until then, I'm like I was with gold and silver. I'm in acquisition. I've taken a position. When I sell is called distribution.
So as a professional, I'm not a speculator, I don't flip houses. Cause I think that's really stupid, because of such high risk to flip a house. But today everybody's flipping houses because the price of real estate is going through the roof. And I, I was talking to the guy who cuts my hair, he says, "Oh, I finally bought a house". You know what? "I offered a hundred thousand over the price", I'm going, Holy moly, that's a mania.
As you know, there's bones, bust and mania. Real estate isn't a mania because of this, because interest rates are so low. So not only are stocks going up, real estate's going up. And everybody's jumping in. When this happens, the idiots jump in and that's what's happening right now. So Bitcoin is the same way.
So when it took a dip, I bought more. Can it go lower? Yes. I'll buy more. But there's one big difference between Bitcoin and Ethereum and real estate. Bitcoin and Ethereum are liquid, means I can get out.
If I realized that there's a new NFC, whatever, whatever they call them or a new, guys gonna get of Bitcoin, I can get out. But with real estate, the job with real estate, if it goes down, you're the skipper of the Titanic. You're gonna ride that baby all the way down. So real estate is not liquid. At least stocks are liquid, but that poor bus driver dropped from liquid stocks into liquid bonds.
He's got no place to go. So when I talked to him about possibly gold, silver or crypto, "NO!", It's an old guy, you know, it's an old guy. So those are, they're all related. So in, in this world of money, they're all related. It's like, we're all related somehow, on this whole planet.
And so that's the world of money today. So that's real financial education, if you realize you cannot make a prediction especially today, because nobody knows what's gonna happen until it happens. The question is, are you prepared for what it happens? So I love Bitcoin because if I realize is a hot, new, hot, new coin coming along, I can get out. But in real estate, I'm stuck in it.
So those are some of the differences between investors, acquisition, taking a position and distribution. I can distribute my Bitcoin and gold and silver quickly. I cannot distribute my real estate that quickly or my businesses.
So those are some of the differences and that's real financial education. So I thank you all for listening to this, my rant on this, but the reason I didn't buy the new hot coin is because I'd rather stick with the old coin called Bitcoin and Ethereum, cause I'm an old guy. And I like the fact that it's such a good, solid, more and more people are coming into Bitcoin. So I, could it be in a bubble? Yes. Could it go lower? Yes.
But I don't chase the hot new thing. So thank you for listening to this, this edition of Rich Dad Radio. Any comments now, Sara, before we go? - [Sara] So I appreciate you doing this, this episode because I think people like to hear directly from you and this lesson was so simple and so clear. So I do encourage people to, to listen to it more than once because they'll pick up something new every time. - Yeah, yeah. - [Sara] But I, I think that your, your assessment of these new guys coming in with their crypto's is spot on because it's true, you know? It's the same thing that happened in the .com bubble.
- Yeah. - [Sara] All these guys, you know, we gotta invest in this, this and this and look, look, who's left standing. - Yeah. And people fell through, remember, you know, Apple, it's a FANG stock, right? Facebook, Apple, Netflix. - [Sara] Google. - Google.
You know, Apple was toasted. You know, like it went down to like $18 a share because this corporate guy named Sculley came over and they kicked jobs out of Apple. And I didn't buy Apple at 18 just because I don't trust paper. - [Sara] Mm hm.
- Now I'll be a lot richer had I bought Apple. But the reason I like real estate is I don't use my own money. I use debt. - [Sara] Right.
- So when the real estate market crashed in 2008, you know, Ken McElroy and myself, we borrowed $300 million to buy real estate. You can't borrow $300 million to buy Bitcoin. (Sara laughs) - [Sara] Can I ask you a question before we go? - Sure.
- Maybe this is our next episode is, you know, Biden just came out and they are talking about him raising his rates to 46%. Well, I saw a TikTok video, where this guy's like, he can raise it to 100%, but because I'm in it for the, you know, cashflow, I don't invest for capital gains. - Right. - [Sara] And really that's what you and Ken do, you know, you borrowed, you use the debt, and then you get a tax break for using debt. - Oh, yeah, yeah. - [Sara] I mean, we've seen, you know, we've talked.
So really that that tax increase on capital gains doesn't affect you guys. - Capital gains affects you when you sell. And we never sell.
In all my years of buying gold and silver, my mother spent my silver, unfortunately, when I was at school, which is why I said, that's why she was poor. She didn't know real money from fake money. She didn't know real silver from fake silver. You know, that was Gresham's Law. Fake money drives out good money.
And when 1964, they turned real silver into fake silver. And I started collecting in 1964 when I was 17. And I went away to school in New York and my mother spent it.
That was one of the biggest wake-up calls of my life. I said, the reason between rich people and poor people, is that they don't know real money from fake money. My mom and dad didn't, good people, but they didn't know that. So they spent it. And so today, and I have millions and millions and millions in golden, silver, and I also use debt. I don't use money.
And guys like Dave Ramsey still will say, live debt free. And for 99% of the people, that's good advice. But if you're going to be really rich, you have to learn how to use debt as money. But to do that, you gotta be a lot smarter than some hodler, you know, chasing Ethereum and all that other stuff, okay? So that's what real financial education. I don't have an answer. I don't know what's gonna happen in the future.
Could my Bitcoin go to zero? Yes. But gold and silver have been here since the Earth was formed. It's been, gold has been the money for about 12,000 years.
Bitcoin has been money for 10. Now, does that mean I don't buy Bitcoin? No. I still buy it, but I'll buy it because it's liquid.
I can get out of it if I made a mistake. - [Sara] What was it that Rand Paul said about gold, you know, if you bury gold, then you bury cash. Because really, you know, there's a lot you could, if you wanna say the quote, that that would be great. - Not Rand Paul, it was Senator Rand Paul's father. He was Congressman Paul, ran for president and he's a gold bug.
And he said 200 years ago, if a Spanish galleon went down with gold on board, 200 years later, people are still diving for that gold, that treasure. Today, if a ship went down with dollars, nobody die for it. It's not worth it. So that's the difference in gold and the US dollar. - [Sara] It's a great visual of-- - Fake money versus real money. - [Sara] Yep. Yep.
- Remember, golden and silver, God's money. Bitcoin, Ethereum, people's money. And we still don't know that, the jury is still out on both. So thank you for listening to this program.
2021-05-08 17:58
