Announcer: Please note disclaimers at end of show. Welcome to Creating Wealth with Jason Hartman. During this program, Jason is going to tell you some really exciting things that you probably haven’t thought of before and a new slant on investing, fresh new approaches to America’s best investment that will enable you to create more wealth and happiness than you ever thought possible.
Jason is a genuine self-made multimillionaire, who not only talks the talk, but walks the walk. He’s been a successful investor for 20 years and currently owns properties in 11 states and 17 cities. This program will help you follow in Jason’s footsteps on the road to financial freedom. You really can do it. And now, here’s your host, Jason Hartman, with the Complete Solution For Real Estate Investors.
Jason Hartman: Welcome to Show No. 111. This is your host, Jason Hartman. Glad to have you here listening today. We have our interview with Rich Dad author, Robert Kiyosaki coming up in just a few minutes after we chat for a little bit. I’ve got Brittney here with me.
Brittney: Hi Jason and listeners.
Jason Hartman: How you doing? And listeners, yeah don’t just say hi to me. You’ve got to say hi to them too. Yeah, I guess we’ll start with you Brittney, since we introduced you. Of course, you’ve heard Brittney on the show before and she just visited her hometown, Phoenix, Arizona and looked at some of new property offerings out there. And it was hot, right?
Brittney: It was 113 degrees while I was driving around in the car.
Jason Hartman: But you know it’s a dry heat.
Brittney: It is dry. It is, but it’s in triple digits, it’s stinking hot. I’ll say that.
Jason Hartman: Yeah, that’s for sure. But you know what? Five million people live there, so. You know what’s funny, when I talk – being in California, we’re pretty much the only place in the country with sort of great weather, but I think it’s kind of boring weather because I love storms. I love changing weather and I love changing of seasons. Now, you always like what you don’t have, right? If you’re dating a brunette, you want a blonde or vice versa. Yeah, okay. None of that!
Brittney: Good example, right?
Jason Hartman: Well, I just threw that one in there. You know, everybody kind of wants what they don’t have. So, when I move and I am going to move, I’ll see how I like it. Maybe I’ll hate it and I’ll want this boring Southern California weather where it’s always 75, 80 degrees. Yeah, so a lot of people live in these places. That’s what kind of funny in our when we have live educational events here in Southern California, all of the locals say things like, “Well, who would want to live in Houston? It’s hot and muggy in the summer.”Well, the fact is five million people live there folks. Okay? The rest of the world doesn’t live in this Southern California climate.
Brittney: And a lot of the people are moving from Southern California to Phoenix.
Jason Hartman: That’s for sure. And they’re moving everywhere because California is kind of a failed state in my opinion. It’s a state with huge financial problems. I’m waiting for my tax refund. At least now I know that I’m not going to get an I.O.U. And the banks stopped honoring I.O.U.s when the state was issuing them. So, this state is a disaster of epic proportions. Chasing business out and that’s just the way it is. But here I am on another tangent. Brittney’s pointing at the watch and saying, “Hurry it up.”Brittney, what do you have to say?
Brittney: Alright, like Jason mentioned, I visited the Phoenix market, some of the properties we have out there. And yes, it is a hot market, figuratively and literally.
Jason Hartman: Well, it’s kind of hot now because prices have been slashed in half and, as I’ve said on prior shows, we were recommending the Phoenix market about four years ago. I bought a property there and it went way up and then it came way down. So now we think, again, we’re not optimists, we are opportunists and we think it’s time to look at this market again.
Brittney: Yes, great opportunities.
Jason Hartman: Because prices have become so low the RV or rent to value ratios are really desirable now. This is the time to get in when all the dead bodies are in the street. You pick up the great deals that way.
Brittney: Yes. I was able to meet with one of our agents out there and view some of the properties that we have recommended on our site. Unfortunately, for you the listeners and the investors, about half of those properties that I viewed are now sold. And that was two days ago that I visited.
Jason Hartman: And like you said, the market is pretty hot.
Brittney: It is.
Jason Hartman: You know properties are moving out there again because it is literally now cheaper to buy than it is to rent in many of the Phoenix submarkets. And we’re finding that in a lot of places. So that’s one of many good signs.
Brittney: The relationship that we have with the company out there, they have many great properties. They rehab the properties and most of the time they have a tenant in place by the time you purchase. These properties need little rehab. They’re pretty new, most of them built since 2000. And one property that was just uploaded onto our site today by one of our agents there, it is in Mesa, Arizona, a great growing area. It is only $107,000 is the listing price, renting for $950 and that’s a pretty low rent, very conservative, in the lower 25 percent for that area. And it’s cash flowing, 21 percent return on investment, great house, good curb appeal, great income property. I’d go on our site and look at that right away.
Jason Hartman: Yeah and so what Brittney is sharing with all of you listeners is the pro forma, the projection which is on our website, so it’s all detailed out at www.JasonHartman.com/properties. You click on the map of the United States, which state you’re interested in and we have properties in many states. And then you’ll see you click on list of properties in this area once you select sort of the bull’s eye of the city.
Brittney: Right the bull’s eye for some reason for Phoenix is listing more over to the patchy junction area, even though they’re more –
Jason Hartman: Just the way the Google map set it up, but you know.
Brittney: Right. Unfortunately, we can’t change that, but all the properties will be listed there anyway.
Jason Hartman: Yeah, they’re in the Phoenix area. So, you go and you click there. Click list of properties in this area and then you’ll see a whole list of properties, whatever we have available at the time. Then when you click on a specific property, a one-page performance projection comes up and that gives you the projected return on investment, before and after tax benefits, cash flow, projected rental rates, square footage, etc; all of the details.
Brittney: Anyway, that’s a current house that we have available in that area, Mesa, Arizona. Go ahead check it out. We’ll have new inventory hopefully there soon. Like I said, these are going fast. Purchase now.
Jason Hartman: Okay. Excellent. Good point. Yeah, in many of these markets, the markets are really heating up and if you’ve been taking in what the news media has been telling you in the last month or two, you’ll see that buyers are out. I mean we are not real bullish on the general overall economy, but in many of these markets, the bargain hunters are hitting the streets and they’re buying stuff like crazy because they’re sensing a bottom or we’re sensing very close to a bottom in many of these markets.
And I interviewed Gillian Tett today. She’s an award-winning journalist with The Financial Times and she wrote a book called, “Fools Gold”and we’ll have that interview up soon. And you know one of the things all of the experts are saying, remember it’s not just about price; real estate or income property investment is a multi-dimensional asset class. The interest rates are so darned low now, and the opportunity you have is that the Treasury Auctions, China is not buying our debt like they used to. And what does that mean?
That means we’re going to see higher interest rates in the future because we will have to offer as the dollar is being so debased, and again you’ve heard this discussion on prior shows – we will have to offer higher yields to attract buyers for these bonds and that means higher mortgage rates folks. That’s not like some crazy prediction. It’s just a fact of supply and demand. So look for higher interest rates, you’ll want to lock in while prices are low, rates are low. We’re not saying we’re expecting prices to rebound a whole bunch any time soon, but part of the multi-dimensional nature of the investment is the mortgage when you can lock in for 30 years at these low, low fixed rates. Okay, what else, Brittney, anything else?
Brittney: That about sums it up.
Jason Hartman: Okay. Thank you so much for visiting there and giving us that update. A couple of other things, I want to talk about a few more properties in just a moment before we go to the interview with Robert Kiyosaki. A couple of events coming up, of course, August 15th our Creating Wealth in Today’s Economy event here in Orange County, California. We’ve got the masters weekend on October 10th and 11th. That’s our semi-annual event, so it’s only twice a year. And be sure to come out for that. We’d love to have you. And I want to thank Richard Lilycrop who has been on the show before. We interviewed him a long time ago. He is in England and he is flying out for the Masters Weekend. So I think that’s our furthest away visitor so far. We’ve had many people fly in from New York, and all across the U.S. before, but I believe Richard, you have got the record. So thank you for joining us. We really appreciate having you attend the event and we want to see more of you. So, I know some of you listeners in Australia, in various parts of Europe, Asia, the Middle East – come on out. We’d love to have you for the Masters’ Weekend and we’d love to meet you in person.
Products – we have got many new products that we’re producing. Not the least of which is our new newsletter, The Financial Freedom Report. And our editor, Doug has put together a great third issue for August and we are about to go to print on that. That is available for subscription. There is a fee for the newsletter, but we have some free samples at www.JasonHartman.com in the Members Only section. So you can get a free sample there. And you can also subscribe under the “Events”and “Store”section of www.JasonHartman.com. You can buy a subscription there. Make sure you don’t miss any issues.
And we have the Loan Modification – the Do-It-Yourself Loan Modification Kit there. That is a 56-page PDF file, as well as an audio download. So we had it read by a professional voice-over person. And then we have the Creating Wealth in Today’s Economy seminar finally! I know we’ve had literally thousands of people ask us for this. We finally got around to producing this in audio and printed format. So that also is available on the site. And we edited it down to a nice stream-lined – it’s about two and a half hours long, I believe. If you’d like a copy of that, go to www.JasonHartman.com, click on Events and Store, and it is there for you. We’ve got the five-book series which is the hard copy of all the podcasts, with extensive visual aids, charts, all kinds of great things that many of you have asked for as well. The first book is about to be published for the Amazon.com Kindle product. I have the Amazon.com Kindle E-book reader, which is a great little product. And it will be available that way as well as in print and PDF downloads. So look for that as well in that same section of the website.
A couple of properties I just want to tell you about real quickly before we go to the Kiyosaki interview. We have a five-bedroom house in the student housing development in Columbia, South Carolina, University of South Carolina or USC campus housing. So this one is 1,836 square feet. It’s $250,000; we got a $5,000 discount for you on that and the projected rental income is fantastic. Now, remember this is brand new. So this is not a rehab; it’s a brand new development. The projected rental income is $2,350 per month. Cash flow is positive by $59 per month. Return on investment projected at 20 percent after-tax benefits. And again that’s a turn-key package, real simple, if you like that one.
Here is a better kind of deal property, but not as turn-key and not brand new. This is in Dallas, Texas area – four-bedroom, two-bath, projected rental income $1,350 per month, and the price is only $130,000. Price per square foot is only $65 per square foot. This is a newer property. Again, you can’t rebuild it for that price. So when you’re buying at or below the cost of construction, you’re in for a pretty good deal no matter what. Projected cash flow is $1,598 annually. Projected return on investment after tax benefits, 27 percent. So, call our investment counselors, or contact our investment counselors through the website on any of these properties.
Here’s one in Georgia, if you saw the picture of this house, you would be amazed. I love the looks of this house – $102,000, down payment $5,330. Again, these are really short on supply, so folks if you’re interested, you’ve got to call right away. You might have to wait to get one of these. They’re a little bit hard to get. The projected return on investment here, because of the additional leverage, is projected at 52 percent annually. Don’t try that in a mutual fund, very low down payment. So, go to www.JasonHartman.com and you can fill out the contact us form and contact any of our investment counselors by calling at the number on the website at www.JasonHartman.com.
Another thing I wanted to mention to all of you listeners is how funny it is when you look at the precious metals community, the gold bug community. You know, I get this news letter from a company called Lear Financial, just an email news letter – it comes about once a week I guess. And every single time I get it, it’s always about how gold is ready to do this and that. And look, you know my position on this, if you’re a regular listener – I think gold and silver are okay. I don’t think they are an investment. I think they’re just money. They’re just insurance. But if you want to really grow wealth, you’re not going to do it with gold and silver, unless you happen to get a lucky break. For 20, 30 years they’ve been talking about how everything is about to collapse and gold is going to triple in price and it just hasn’t happened yet.
Here, I’ll just read you a couple of the headlines, “Precious Metals are Ready to Shine”is one article. Here’s another one, ’Gold Will Hit $1,500 Within the Next Five Years”. Well, if that happens, that’s really no big deal. If you have a good leveraged income property, you’re return is going to be far better than that. Remember, these precious metals don’t produce income, they don’t have tax benefits. I’ve gone over those characteristics before. They’re subject to manipulation, etc, etc; you can’t finance them.
Folks, these aren’t investments. The problem is people are trying to treat metals like they’re investments. They’re money, I admit that. They’re better than dollars. I completely agree with that. So I take kind of a middle ground on this whole metals thing. So I just wanted to mention that because you know these gold bugs, I hear them on the radio, and I look at their stuff and we’ve got an interview coming up with Howard Ruff, and he’s a real famous gold and precious metals person, so I think you’ll be interested in that interview. I already recorded it and it will be coming up on a show real soon.
Enough talking about this stuff, let’s go to the interviews with famous Rich Dad, Robert Kiyosaki and he has about $250,000 a month in cash flow from his apartments. And I think you’ll really enjoy this interview. You’ve probably read his books. Here he is.
Interview with Robert Kiyosaki, author of Rich Dad
Jason Hartman: We have a very exciting interview for you today. It is our special, special guest, Mr. Robert Kiyosaki, the creator of the Rich Dad series. And more recently the Real Book of Real Estate with 22 contributors, including Donald Trump, and it has had great reviews from Publishers’ Weekly; and also his newest, very creative venture, which is entitled The Conspiracy of the Rich, which I will ask him about in the interview here today. Robert, welcome to the show.
Robert: Thank you very much.
Jason Hartman: It’s great to have you on board. Tell us a little bit about your thoughts. Of course, we want to get your take on the economy. I mean, you’ve had a very distinguished career as an entrepreneur, an investor, an inventor, and of course, a best-selling author. What recommendations do you have for people wanting to create or protect their wealth in today’s economy?
Robert: Well, I always recommend getting more financially educated. If you look at the people that are hurting financially today, most of it is due directly to a lack of financial education in our school systems. And then you look at our financial and political and banking leaders. They haven’t been putting out the best advice for people to follow. So, that’s why people are in trouble. So if you want to protect yourself, the best way is to just dedicate yourself to getting financially educated. That’s what my rich dad did for me. And one of the reasons I’m prospering in this time, is very simply because I have an education and I didn’t listen to those guys who sell mutual funds.
Jason Hartman: Yeah, no question about it. They want you to just stay long in the market and that doesn’t work any more does it?
Well, it never has. That’s suicide. You know, why would you put your money into such a volatile instrument, such as a stock or a bond or a mutal fund where they’ll – you know, they’re good, but they’re really short-term investments. They’re not long-term. I mean you’re in and out. Like Jim Kramer is a trader and he’s in and out of the market. And then the financial planners tell you to go long in the market, you’ve got to be nuts. That is crazy. That’s insanity.
Jason Hartman: I agree with you completely, Robert. But you know, I’m sort of wondering why the mainstream financial services industry has that advice. I mean is it because they’re just lazy? Is it because in the olden days the brokers got accused of trading or churning the accounts? I mean now it’s all like this managed money model and they just sit there and they’re long on everything. It’s just crazy, that whole industry seems like a big myth. It doesn’t work. It doesn’t work for anybody.
Robert: Well, that’s what I wrote about in my book, “Conspiracy of the Rich,”which is an on-line book that’s free and it’ll be taken down I think July 7th – you have until July 7th to read it for free. It’s 12 chapters long.
Jason Hartman: And that’s at ConspiracyoftheRich.com.
Robert: It’s just no mistake that they’re telling you to put your money in there long because that’s how they get your money. The same as when a banker tells you to save money. That’s how they get your money. And if you’re not really intelligent or they tell you your house is an asset, it’s not your asset; it’s the bank’s asset. So I really don’t know why people believe that garbage, but like I write in Conspiracy of the Rich, this crisis was a long time coming. It’s been coming for years.
Jason Hartman: Sure. The Conspiracy of the Rich project is fascinating. I remember when I first received an email on that and I went to the website and there was one sample chapter there. The subject matter is exciting and interesting, but also the way you’re involving people in the project. Can you tell us a little bit more about that? It’s really a fascinating model that you’ve created there.
Robert: Well, this crisis has happened before. It’s happened all throughout history. And so I thought it would be kind of interesting to write a book about history as history was being written. And so as people are reading along, they could actually see that this has happened before. And this is no mistake. It’s not an accident. The whole model was based upon bailing out the banks. So, that’s why we have the Federal Reserve Bank, which as you know, the Federal Reserve is not a bank.
Jason Hartman: That’s for sure.
Robert: But this whole thing was basically how to get your money and my money legally via that system of the government. If you look at the four things that make people poor every single month, number one is taxes. Number two is debt – car payments, mortgage payments. Three is inflation; that’s why you notice the price of gas going up, food can go up. And four, is a retirement plan. So those are the four things that make the average middle class person poor. But they’re the very same things that make guys like me rich. And if you have a financial education, you can make millions of dollars and pay zero percent in taxes. I used debt to get rich, not poor. Now I’m not set against owning a home, but I own apartment houses, thousands of them. And I use debt to get rich. I use inflation to get rich. That’s why I invest in oil, gold, silver, copper. And I don’t need a retirement plan.
Jason Hartman: Yeah.
Robert: And all of that money goes to conspiracy.
Jason Hartman: Right. The 401k is probably one of the worst deals going nowadays, isn’t it?
Robert: Oh, disastrous and then these morons are still out there saying, “Oh, I called my financial planner and he said just stay there for the long term.”I said, “Boy, I don’t know where you came from, but you’re not a very bright person.”
Jason Hartman: Yeah, no question about it. We are definitely living in interesting economic times, with government spending and the creation of fake fiat money at unprecedented levels. What are your thoughts on the opportunities that are out there nowadays for prudent investors? I mean I want to ask you geographically, too, as far as real estate goes and product type, apartments, single family homes, mobile home parks? Any particular likes and dislikes there?
Robert: Well, my message is the same. If you’re an idiot, you’re going to lose your money. So you don’t just go and buy something. There are four basic asset classes. No. 1 is a business and the richest people in the world own businesses, like Bill Gates of Microsoft and Apple, Steve Jobs. The second is real estate. The third are stocks, bonds and paper assets. And then the fourth are commodities. So I own all four, but I am a student of all four. If you don’t have any education, you’re going to lose money in any one of them. People have lost money in real estate, they’ve lost money in gold and silver, they’ve lost money in businesses. And yet they sit there and still think they can get lucky. I don’t know where people – where their heads are. Trying to get rich is like flying an airplane. You don’t just climb in it and take off because you will crash. So it’s not investments, not the real estate, or mobile home, or apartment houses or business. It’s you, the individual. It’s your financial education that determines if you’ll be successful or not.
Jason Hartman: You know, you can make money basically in any product type, if you know what you’re doing. That’s kind of the take away?
Jason Hartman: Okay. Do you feel this is a good time to be stocking up on more income properties and more mortgage debt? One of our big strategies is you’re buying these properties basically as packaged commodities when you get the land cheap or free and you buy below the cost of actual construction. Then you put long-term, fixed-rate debt against them and as inflation comes it makes the value of the commodities increase and wipes out the value of the debt. We see this as the ultimate arbitrage opportunity. Do you feel the same way?
Jason Hartman: How come?
Robert: Well, because you’re counting on something else. I don’t do it that way. I just don’t do it that way. What I do is, if it doesn’t cash flow, I don’t buy it. And then my whole thing is to buy it and then to increase the debt on it, not reduce the debt.
Jason Hartman: We agree with that, too. I mean, we definitely agree with that.
Robert: Oh, okay. Basically, what I’m saying, Jason is that if you’re not smart, you’re going to get your butt handed to you out there. Look, real estate, like the economy is predicated upon jobs. So you can buy the best real estate in Detroit and if jobs keep going out of Detroit, you’re still going to lose money. So, I only buy real estate where there’s jobs, i.e., like Oklahoma City, Tulsa, Oklahoma, Dallas, and Houston because there’s oil there. As long as there’s oil, there are jobs. The other thing is not just buying it and hitting and missing it. In theory, your ideas work well. But there’s far more to it than just real estate and financing and debt. There’s a lot more to it. That’s why I caution people on it. Just because a stock is cheap or real estate is cheap or a business is cheap, doesn’t mean it’s of any value.
Jason Hartman: You are so right about that. We see promoters out there all the time, promoting these properties in Michigan, especially in Detroit, and Detroit used to be one of America’s flagship cities. And the population has been virtually cut in half over the last couple of decades. And I just think there is no real future there. If you don’t have job growth, if you don’t have population growth, you’re dead. And California, that’s one of the reasons we haven’t recommended California in years. We like the markets you mentioned. We like Texas quite a bit. We have a lot of investors buying properties there. We like the Southeastern U.S., the mid-Atlantic is pretty good and the Carolinas. I definitely agree. But the property has to be self-sustainable so that you’re not in big negative cash flow situations, and then you have that other stuff working for you. I’m completely agreeing with you, I just want you to know that.
Jason Hartman: There’s no difference of opinion on that stuff.
Robert: And the other thing is that you have to know whether you’re buying A, B’s, or C’s. A are high-end, B is middle class, and C is slumlord. And I have focused only on B because the A guys are getting crushed. You have to be highly specialized to do those, what do you call those – Section 8’s and all that stuff. I don’t touch that. I’m not a slumlord guy. I’m strictly in the B category. I have been there all my life. So I don’t just jump around the place. I really focus and I know my product. I know my customer. I know my market. That’s why I’m saying it takes education. It’s nothing to do with real estate. It has to do with who’s your customer. What’s the business you’re in? And we provide affordable, safe housing is what we do. And as long as there are jobs, we’ll be okay.
Jason Hartman: Very good. In the Who Took My Money book, which I really enjoyed, there’s a fantastic graph right in the introduction that shows a $10,000 investment in the S&P 500 compared to real estate. And it shows that from 1992 to 2002 and basically, with some leverage added, the real estate investment outperforms the S&P by like 800 percent because it has, of course, these special characteristics. Why is it that people still believe that the stock market is the best way to go? I mean, I know you alluded to it already. But any more points you can give our listeners on that would be just always appreciated because this myth is just so perpetuated. It’s everywhere.
Robert: Okay. Let me give you the four asset classes again. There’s start your own business and a big business person has 500 employees or more. That’s what I have. Second, is real estate. Third is paper and fourth is commodities. The reason most people are in paper is because that’s where the conspiracy makes their money. And after 1974, they pushed everybody into the 401k’s and they have no control. To run a business takes the most brain power, real estate takes the second, and third is stocks. So the reason most people are in stocks is it doesn’t take much intelligence. You just sort of buy it and it’s scalable. I mean you can buy a $100’s worth or a $100,000’s worth. And you don’t really have to manage it. You just kind of buy, hold, and sit on it, and then hope the company stays alive.
Jason Hartman: Yeah.
Robert: With stocks, you can make a lot of money in stocks, just like [inaudible], if you’re smart. But since most people really don’t know anything and they’re not competent in the financial world, it’s really easy just to buy, hold, diversify, and pray. They get killed, the people. It’s really tragic; the middle class of America has been disappearing.
Jason Hartman: Yeah I know it is, and when you mentioned before the A, B and C property types, I think we’re going to see, and we’re already seeing a lot of people moving from A to B, and a lot of people, unfortunately, are going to move from B to C, probably, as we see the middle class disappearing. I mean what are your thoughts on the middle class? It’s interesting that you call this the Conspiracy of the Rich and I hate how people get sort of vilified that ever bring up a conspiracy theory here or there. And I interviewed G. Edward Griffin on my show a couple of months ago and other people. And we’ve brought up the issue of conspiracy theories and so forth. It’s getting tough to think, in a way, that this isn’t a conspiracy. That they, the powers that be, want to see the size of the middle class reduced. Or is that just kind of a title? What do you think about that?
Robert: Well, it’s really easy to take control of stupid people who are broke.
Jason Hartman: Yeah, right and buy their votes, right?
Robert: Yeah, just make them any promise. We’ll send you money every month, social security. No. I mean, this is a tragedy. I’m not a socialist. I think it’s socialism taking over unfortunately.
Jason Hartman: Yeah. Yeah. I agree with you. It is. It is quite scary and I think with all the talk of healthcare, what’s interesting is they say they’re going to cover another 50 million people with government healthcare, yet the number of doctors and nurses isn’t really increasing. The math on this whole deal just doesn’t work. And I’m afraid it will become like the other socialized countries, where people basically die waiting in line. It’s really scary when you see what’s happening. And the elite class won’t be participating in the plan they’re recommending for the rest of us.
Robert: Right. So, again it goes back to what I – in the Conspiracy of the Rich, in 1903, John D. Rockefeller took over the school system. That’s why we don’t have financial education in our schools. That’s not an accident. So, I mean if you really wanted this country to prosper, you would have financial education. But you look at most school teachers, they’re good people, highly educated, but they need a job just as bad as everybody else. They’re all, most of them, are union members and that’s socialist. I mean they have the right to do that. It’s just not who I am. I’d rather not need a job and I’d rather not be a socialist.
Jason Hartman: Yeah, no question about it.
Robert: This is a free country. Make your choice.
Jason Hartman: Right. It seems as though the school system, and I know you’ve talked about this before, was really set up to train workers for the big industrial companies at the time. And it really hasn’t changed much for modern society. It’s be a follower, don’t learn financial education, it’s mind-boggling. And I know you do this as part of your foundation as well, for your charitable side, is people get out of high school and they don’t know a thing about money. They don’t know whether you should buy or lease a car, how to balance a checkbook, how to structure anything, how to buy a house, the most obvious things. I mean it’s amazing that that is not taught in school. Even in business school, it amazes me that people go get an MBA and they’re sort of naive in certain ways about financial matters.
Robert: Well, you listen to the mantra, “Go to school so you can get a job. Work hard, save money, buy a house, and put your money in a 401k.”They’re programmed like Pavlovian dogs. “Go to school. Get a job. Work hard. Save money. Buy a house. Get out of debt. And invest for the long-term in a well diversified portfolio of mutual funds.”I mean, that’s all they know. Those poor guys are just cheated. It’s really tragic.
Jason Hartman: Yeah, it sure is. Do you have any thoughts on predictions for the future, where we’re going to see the economy, what part of the cycle we’re in now, what the stock market is going to do, etc?
Robert: No, I mean nothing’s really changed. If you read Rich Dad, Poor Dad, nothing has changed. I write in there, I think it’s chapter 6, you should just print your own money. That’s what the Federal Reserve does. I just print my own money. To me that makes more sense than trying to get a job as a pancake maker.
Jason Hartman: Yeah.
Robert: Why would you go and get a job and they’re going to take 50% of it in taxes and then you’re going to try to pay for your car and your car insurance, and try and buy a house and get deeper in debt. And then you wonder why inflation is beating you. And the reason inflation is beating you is because the bank just prints money. And they go what’s happening? And then they tell you to save for your retirement. And then you lose it all in the stock market. I mean people who are doing that, obviously aren’t that bright. I don’t understand why they just keep doing the same thing. It doesn’t make sense to me, but they do it.
Jason Hartman: Well, it doesn’t make sense to me either. But if you look at the powerful voice of the financial services industry and the government and the education system, it’s just so pervasive. I mean in every magazine, I can’t believe it, Robert. When I open a magazine like Money Magazine, or Kiplinger’s Personal Finance, or even Forbes, you know?
Robert: Well, you’re not particular where you read.
Jason Hartman: Yeah. I know. Sorry, I don’t really open them that often, but the cover will say, “Retire Rich, 48 Ways to Make Sure You Can Retire in Comfort and Prosperity.”And then you open the articles and it says, “Buy a diversified portfolio of mutual funds.””Invest in TIPS – Treasury Inflation Protected Securities”. I mean, this is like amateur advice. It’s just childish. It’s everywhere. It’s all over the place. You turn on CNBC and you get this kind of advice from a lot of their guests.
Jason Hartman: Yeah, it’s the same thing. And what’s interesting is that the IRS, most people, and the stock market, really doesn’t recognize inflation. I had Peter Schiff on my show a few months ago. He makes this statement, he says, “The appreciation from 1929 until the DOW hit its peak where we were looking at bumping up against 14,000 in the market, has been only dividends. There has been no real capital appreciation in real dollars, although, there has been in nominal dollars obviously, in 70 years. And it’s amazing that people invest in this stuff. It’s 19 ounces of gold back then and it’s 19 ounces of gold at the peak to buy the DOW. It’s just mind-boggling that people don’t understand how the value of money keeps – it’s fluctuating.
When you talk about inflation, I mean obviously, we’ve got a lot of it coming, and credit has contracted so much and I think that’s the reason we don’t see it yet. Do you have any thoughts on when we’re going to see this inflation? A lot of the so-called experts say 18 months out the inflation is really going to rear its ugly head. Two years out. What are Kiyosaki’s thoughts on that?
Robert: You’re already seeing it. It’s called taxes. When taxes go up, you have to have inflation. So Obama is going to have to raise taxes, California is raising taxes. Everybody’s raising taxes. I mean state governments are bankrupt.
Jason Hartman: Yeah.
Robert: So, look. Inflation is caused by the purchasing power of your dollar going down. But it’s also caused by the government taking your money through taxes. So, it’s already happening.
Jason Hartman: Right. It’s amazing when you look at it. I saw in a recent article that, 46 states are in financial trouble to one degree or another. Obviously, California is one of the worst. Do you think we’re going to see a Federal bailout of California? I mean, what’s going to happen? I live in California. I’ve lived here most of my life and it’s a joke. I mean it is disgusting the way they have run this state into the ground. Just spending more money on social programs and buying votes with it. That’s all they’re doing.
Robert: Yeah. And I do my best to stay away from politics and those predictions. I know California is in trouble, but they’re starting to pay those I.O.U.’s now. So, what’s going to happen, I really don’t know. Probably the most likely thing is Bernanke will just spend more money and give it to the states. He’s already giving the state of California billions of dollars. I think that’s where people will see inflation. But it’s just being sucked out right now. I mean, people are in so much debt.
Jason Hartman: Yeah.
Robert: I mean people are trying to hang on to their homes. It’s a tragedy.
Jason Hartman: It really is.
Robert: I just got off the plane from New York just now. I was at Fox News last night. I walked up to the desk to this young girl and said, “Hey, how you doing?”She said, “Terrible day. They just let me go.”
Jason Hartman: Wow.
Robert: There you go. That’s really probably the biggest tragedy because jobs, jobs, jobs, jobs. People keep losing their jobs, it’s not going to get – the economy needs jobs and I don’t see new jobs coming in. We talked about Detroit. When I was on Fox News, they did a story on Tata Motors, which is the Indian car company. And they’re coming in with cars like half the price of GM.
Jason Hartman: Right. In India they sell their car for $2,500 I guess, or under $3,000. It’s a real revolution the Tata Motors thing, yeah.
Robert: I don’t know why people think a bail out is going to save them. I just think we’re delaying the inevitable. I don’t have – I’m not optimistic. I have lots of gold and lots of silver. Cash, income-producing real estate, and well-managed properties where there are jobs. Not that hard a formula.
Jason Hartman: Yeah. I agree. I agree it’s not. But certainly people need to get educated and understand the stuff you teach. How many books do you have now between your “Rich Dad, Poor Dad”series and the one you did with Trump and the latest one, and “The Conspiracy of the Rich”will be a book right, in September?
Robert: I think it will be.
Jason Hartman: Okay.
Robert: It’s supposed to be coming out then. I don’t know how many books I have. I mean, I just keep working.
Jason Hartman: Yeah, that’s fantastic what you do though, it really is.
Robert: I think the book that really did it was called “Rich Dad’s Prophecy”. I think it was 2002. And it’s predicting the biggest stock market crash is still coming. I mean it hasn’t hit yet.
Jason Hartman: And the “Rich Dad’s Prophecy,”my understanding of that book is that it’s based on people pulling their money out of the ERISA plans that were started in the ’70’s right?
Robert: Right, because they have to.
Jason Hartman: Right, so they’ll be forced to take distributions I think at 70 and they can take them at 59 and a half or something like that. And so that will cause a collapse of the stock market, and that’s coming right up. What is that, about three years away, until we start to see a lot of those forced distributions?
Robert: Right. It might be faster.
Jason Hartman: Wow.
Robert: So, I mean that’s why you and I know it’s silly to be counting on the stock market for long-term financial security. That’s insane. But as you say, people do it and they don’t know why they do it. And I don’t know why they do it. So, we’re singing to the choir here.
Jason Hartman: Yeah, we certainly are, but some of our listeners, they’re still having faith in the stock market, too, because I get their emails and I get their comments and so forth. What is it you’re really up to in terms of your latest stuff? I mean, you’ve got educational classes. You’ve got books. The main thing really right now is the “Real Book of Real Estate”right? That’s the 22 contributors?
Robert: Well, that’s one of them. I have the “Real Book of Real Estate”, “Conspiracy of the Rich”, and I’m working on a couple other books.
Jason Hartman: When you come back to real estate, what makes me pretty optimistic about good income properties in the right markets, done the right way, obviously, with the education that you talk about as being so important, and of course, that is the first most vital step, what makes me feel good about them is that we still have a population increasing at really one of the fastest rates in U.S. history right now. About 3,000,000 people a year. It’s another baby boom, combined with an immigration boom. Now immigration has subsided a bit because the jobs aren’t here like they used to be. And then globally, there is a huge population boom going on globally. That gives me a sense of security when it comes to really any commodity. And what it seems like they’re investing in a lot of times with these little inexpensive rental properties is the construction materials. I know you’ve mentioned that before. I believe it was on your PBS special, if I’m not mistaken.
Robert: Right. If you’re talking about the fundamentals and it makes a lot of sense and all that, there are three things to any business deal. You have to get the right partners, and you know if you invest in a mutual fund, if you’re the mutual fund’s partner, they’re not a good partner, but people invest in them. So I have very good partners. You have to have good financing and the trouble with mutual funds is the financing sucks, simply because it’s your money. You put up 100 percent of the money, take 100 percent of the risk, and you only get 20 percent of the profit because the mutual fund companies take their money out. On top of that, your money is taxed at earned income levels, which is the highest tax. I mean why would you put money in savings and mutual funds? I don’t know because you get taxed the highest at that. And the third thing you have to have is good management. So real estate, after you put all those things together, it’s management intensive [inaudible], but if you have a car, and there’s nobody to take care of the car [inaudible].
So those are the three basic things and if somebody tells me I’ve got an investment, I want to know the partners, I want to know the financing, I want to know the manager.
Jason Hartman: Right.
Robert: I just right now have [inaudible] in residential and I have athletic clubs. But I think office buildings are in trouble. Retail is in trouble. Again, it’s jobs.
Jason Hartman: Yeah. Right.
Robert: We have a lot of empty, big boxes in town right now.
Jason Hartman: You can go to many cities in America and look at see-through office buildings again, which we really haven’t seen much of that since I guess the early ’80’s, where we had that other big downturn. It’s like, will the last person to leave a lot of these places, please turn out the lights. It’s really terrible.
Jason Hartman: And so the office and retail market are very bad. But people always need a place to live, don’t they?
Robert: Well, like I always say with my properties, it’s the last stop before the street.
Jason Hartman: Right.
Robert: And you know, it’s really sad because the number of homeless is skyrocketing.
Jason Hartman: Oh yeah.
Robert: So they’re hitting the streets. I had a lot of houses in Honolulu and you have all of these guys sleeping on the beach right next to the tourists and it’s driving – the business bad enough, without having bums sleeping, I mean a homeless person sleeping next to you on the beach. And so tent cities are – in fact, I was in New York yesterday and you can see the lines of homeless people lining up for food. This is not an ordinary time. It’s really a time to be smarter.
Jason Hartman: Right. Yeah.
Robert: It’s a good time, but not just a reckless time.
Jason Hartman: Yeah, no question about it. You’ve got to be very careful right now. And I think we’re going to see the homeless numbers increase quite a bit. And what’s really scary about it, Robert, is that we’re seeing formerly middle class people – I did some volunteer work with the soup kitchen here locally in Orange County, and they are feeding a lot more formerly middle class people nowadays. This is not the lower end of society anymore that is coming in for a free lunch meal. It’s really scary and when you see those tent city interviews and so forth, the middle class is just being – it’s just being attacked. And I think Wall Street is a big part of it, and the Federal Reserve, as you say.
Robert: Well, it’s in those four things: taxes, debt, inflation, and retirement killing people. They don’t even know what’s hitting them. And then they want the hot tip as to what to buy next. And I’m going, “Geez. Don’t you know that’s what got you into the trouble? You don’t have any financial education.”So I really don’t have much, should I say compassion, if somebody doesn’t really want to make any changes in their lives. They’re just going to do the same old thing
Jason Hartman: Right, yeah.
Robert: I have guys my age in their 60’s and they’re now going, “I’ve got to go look for a job.”And I said, “Well, you should have thought about this in your 30’s.”
Jason Hartman: Yeah.
Robert: “Well, you know, my retirement’s gone. What should I invest in?”I say, “You should have thought about this when you were 30.”
Jason Hartman: Yeah.
Robert: But he says, “Well, it’s too late now.”And I say, “Well, that’s up to you.”Like Colonel Saunders lost everything at age 66 when a highway went past his chicken shop. And so at 66, he started selling his little chicken recipe and built Colonel Saunders out of that. No, it’s not too late. It’s just that people are too lazy.
Jason Hartman: Everybody wants the easy way out, don’t they? They want the instant gratification and the easy answer, right?
Robert: I do. But I didn’t find one yet. So, I’m still waiting for it.
Jason Hartman: So you’re still working hard and you don’t need to work.
Robert: Yeah, I’m waiting for the easy answer. I still haven’t found one.
Jason Hartman: Yeah. A very good point. I just have two more questions for you. Do you have any particular – I know you seem very focused on the fundamentals, which is great. It’s pretty simple what you’ve said. It just takes some work to follow it and some education to follow it. But do you have any particular sort of economic indicators that you like, or things that you look at to understand what’s going on and to make proper decisions?
Robert: Well, it’s like I said, I wrote “Rich Dad, Poor Dad”and nothing’s really changed. You know there’s cash flow and there are capital gains and most people invest with capital gain. That’s why those are the guys who are getting wiped out; 90% are capital gains guys. That’s why they say my house has appreciated or my stock went up in value. But you’re getting killed. Why do you keep doing this? Like today, the stock market is up 9 million points again and people are happy. And then it will come crashing down and it’s like, what a stupid game to play. No, I don’t want stupidity back, like I just want my cash flow. Every month, send me my check. I own 1,400 rental units. Every month I get my check in the hundreds of thousands of dollars. I have eight oil wells. Every month, they send me tens of thousands of dollars. It’s not big money, but if you’re making about a quarter of a million a month in cash flow, you can sleep at night. Most people don’t make that a year and most of it is not highly taxed money. So to me, that just makes sense. I don’t understand this watching the ups and downs of the market. What you’re saying, you know, why would you do that?
Jason Hartman: I can’t give you an answer because I don’t understand it either. I’m in your camp, so I completely agree with you.
Robert: It’s like you say, people have to have a place to sleep and you know that number is increasing and people are downsizing. And if they think that the stock market is going to save them, that’s not too smart. But they’ll do that, or Obama will save them.
Jason Hartman: I don’t think Obama is going to save them. I think he’s going to destroy the value of their savings and their stocks and bonds through inflation, but time will tell. We’ll see. It’s not going to be much time, if you ask me. Well, just in closing things up, any words of wisdom you can share with the listeners. I know I have a lot of big fans of your work who are listening. What do you want them to know?
Robert: Well, I think we’ve covered everything. Definitely make up your mind which asset you want to develop. Do you want to develop your own business? Do you want to develop real estate, paper stocks, you can trade the options market, or do you want to do commodities because I do all four, but I made the decision a long time ago. So, there’s so much more opportunity, but not if you’re thinking of the same old ways, like the market’s going to go up, or my house will appreciate in value. That’s gambling. That’s capital gains. Nothing has really changed that much for me. I print my own money. Like, when I write a book, I print my own money. When I put a million dollars into a piece of real estate, I get my million dollars back and I still own the property and I still get my cash flow. I love those kinds of deals. It makes sense. I take that million dollars and I move it some place else. It’s all tax free money. I buy another apartment building. Nothing has really changed. So buy a business. Buy real estate. Play the stock market, or invest in commodities.
Jason Hartman: Very good. Very good. Well, Robert Kiyosaki, thank you so much for joining us today. And more information at www.ConspiracyoftheRich.com. And I know you have other websites as well; you’re welcome to give them out, or www.ConspiracyoftheRich.com.
Robert: Yeah, Conspiracy of the Rich, like I said, will be pulled down July 7th. So it’s for free right now and the intention is to put it out in book form. It’s already had like 25,000,000 hits to it. So, it’s been very successful. And it explains why we’re in this crisis and why people are being just wiped off the map with taxes, debt, inflation, and retirement plans. And they make other people rich. But it makes them poor. And they keep putting it back in the stock market. How stupid can you get?
Jason Hartman: It’s the definition of insanity. Keep doing the same thing and expect a different result. That’s what the stock market really is for the non-insiders.
Robert: Or go to school and get a job.
Jason Hartman: Yeah.
Robert: How’s that? Work hard, save money, get out of debt, and invest in a long-term [inaudible] portfolio of mutual funds and read Money Magazine.
Jason Hartman: Yep. Not very good advice for sure. Yeah, that’s a good closing, ending with what people shouldn’t be doing. And those are the things they shouldn’t be doing. They should be following the Rich Dad plan. And you’ve covered that here. Thank you so much for joining us today; I really appreciate it.
Robert: Thank you. Bye.
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Duration: 49 minutes