Some of Robert Kiyosaki's sayings ...

Below are some of Robert Kiyosaki ( Rich Dad ) sayings and my thumbs UP or DOWN as a respond ...

"The recession is NOT over ... it has been Glossed over ..."

I was calling it the PM effect - (Prime Minister). I knew for sure Obama and Najib could have brought some effect but never did I know that they can really pull it off until today. Anyway, a nice 'gloss' they did indeed ...

"I park my money in gold, silver, oil commodities that goes up as USD goes down ..."

I agree but then again, don't forget in forex trading, USD down could easily be hedged by trading reverse currency pair too. I don't know if Rob knows about forex.

"Gold will crash in October November down to $800 range ..."

I was thinking December but there about share the same philosophy of gold trend.

"Market will be volatile for years to come, this means traders wins over long term investors."

I agree with the volatile part. Duh ... what market is not volatile in today's finance ? By traders Rob meant the speculators. This is the part why clearly Rob fails to make money from stock market for the past 40 years ( Not really true, but relatively it is true especially when compares to his passion in real estate). In a market that is more volatile than you, the higher frequency of transactions imply higher chance of losing. The only time when a speculator earn money in a volatile market is when the speculator's ability is still beyond the volatility, or in other words, to such a speculator, the market is not that volatile yet. This is a big topic and could probably be the last thing I can ever share in this blog but it will come eventually. But basically Rob gets this part in reverse and hence stock market is never his cup of tea.

"Stock market is not the place to invest for long term."

Its quite funny reading some of his views in stock market in his latest book Conspiracy Of the Rich to be published tomorrow. He was quoting the lows and the highs of Dow Jones. Then shows how bad it is going from the Highest to the Lowest. He also shows after one big cycle of Lowest to Lowest, there is really not much left. Although what he shared is true but nevertheless Definitely is NOT the complete picture. If a person is so smart spotting the cycles and patterns of ANY investment vehicle, why cann't he make use of it to his advantage ? That ... will always be my biggest puzzle to Rob's life story unless he admits he has personal preference to real estate and thats about all.

"Saving is bad."

This is a OMG respond some of the gun you sucker Rob kind of protest from me. USA is going through a very special kind of transformation in its finance today. So it may be ok to say savings is bad of USA folks but it ABSOLUTELY DOES NOT APPLY to the rest of the world.

Lets face the simple truth;

Spending less is better than spending too much,

Saving is better than NOT saving,

Able to INVEST with higher return is better than saving.

and lets review today's personal finance status;

Most personal investments produce an average return of less than fix deposit guarantee interest. Only 30% of such investments provides a positive returns, this means 70% lose money. And only 10% of them make a significant return in comparison with mutual fund return.

Although the title is 'Don't Save', but what Rob is really saying is 'Invesment is better than saving'. Which I agree with the content of the whole chapter. But the title is so misleading that it actually damage many young minds. All they see is the title and they stop saving and start spending ! They spend to lose, not spend to win. They would thought they are spending as to invest but as there is certain way that a human mind would work best - instinct - more and more fail just because our global personal finance guru, Mr. Robert Kiyosaki said that Saving is BAD.

The biggest conspiracy in "Conspiracy of the Rich" is Rob in need of making more money by abusing his global influence and cross the ethical line in his new book marketing ....

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nevertheless still a good book to keep. Other than the crazy 'Don't Save' stupid marketing talks, there are a lot of useful contents inside ...

Money makes the world go around...

A good comment from Markoz..

MarKoz here: I had really thought that the stagnation in sales and surge in listings last year was the beginning of the end. I was wrong. I had always considered government intervention in the RE market to be somewhat random, and that ultimately market forces would bring prices down. I now believe that no provincial or federal government will let prices down as long as their members have a pulse ...... I know that nearly 70% of Canadians are homeowners. Virtually all politicians are certain to be homeowners....

He is absolutely right. The politicians will do everything they possibly can to prop up real estate. It is the big kahuna. The result of it's collapse can be seen in the US. Wide spread bankruptcies, unemployment and bank bail-outs.

It's too bad they weren't a bit more concerned on the way up, allowing banks, speculators and regulators to behave completely irresponsibly. If you allow a huge unstable tower to be built in front of your eyes, don't you think it could come crashing down one day??

What more can they do in Canada if/when the down-trend resumes?

Not a lot.

Interest rates are already rock bottom and tax-relief on mortgages or other mechanisms to support prices will just exacerbate the huge deficit. (BTW the UK just posted it's largest ever deficit). So their options are becoming very limited.

Firstly we have to get one thing straight- who are these much maligned politicians? Are they aliens bread in captivity sent to rule and ultimately destroy our planet. No. On the whole they are just like us. Apart from the odd Billionaire like Paul Martin the rest of our pols are fairly regular Joes..who like to feel important (and popular). Some have a vision, others are guided by polls.

They will tell us what we want to hear, not what we (deep down) know has to happen. This is the same the world over. The response to the financial crisis, which by the way was completely avoidable, was to loosen money even more...punish savers yet again...and reward irresponsible activities, especially by highly paid bankers.

Was there an alternative. You bet, but I am not sure anyone would like it very much. Let real estate drop.

1) Let all assets drop and find their natural support.

2) Let the big banks fail if need be.

3) Pay up on insured accounts.

4) Seize the bonuses of the bankers responsible and let the chips fall where they may

The result would have been a catharsis of default and even possibly a rapid depression. Awful, yes. But the excesses of the last twenty years of bubbling assets, deregulation, greed and materialistic orgy would have been dealt with in one fell swoop.

Governments would be there to pick up the pieces afterwards and stop people from starving -at a much lower cost. Then we would have had to rebuild a system that was not based on fractional lending or which did not allow the privatization of profits and the socialization of losses.

Were we ready for this around the world?

Not at all.

So our politicians did their damnedest to plug the hole, for now. As one economist said..."they just kicked the can down the road". The degree of debt that they are accumulating will require a huge expansion in the economy to service, if that doesn't happen there will be a de facto default which is monetization (you print the money to pay your debts).

Future generations won't be burdened by it, because it will probably come to a head in the next few years and will have to be dealt with: by slashing and cutting, or defaulting and printing money.

The FIRST Life insurance - a Whole Life Plan

Although Buy Term Invest the Rest is a better option but generally the first life insurance you should buy is a Whole Life Plan.

Typically such a plan runs until you die so its an insruance for them, not for you. One of the facts that some may overlook is that you will have to pay the premium your whole life too. However, the quotation is usually presented in a way that you pay a number of years and then the policy will be able to substain itself. Traditional policy would actually take a loan from yourself by paying interest to the insurance company. Which is usually viewed as a big disadvantage in personal finance planning. However in this article, it works towards our advantage, at least for 'most of us'.

Lets start by reviewing Buy Term Invest The Rest (BTITR), although it works best ideally but in real life when will it work and more importantly when will it NOT work ?

Statistically and historically, most people who practises BTITR starts with buying term insurance and almost certainly did not ends with investing the rest. Everyone has ups and downs in their lives. During the downs time, almost everybody's 'Buy Term' is stopped not to mention there is no such thing as '... The Rest' when cash flow is tight.

What is the ONLY requirment in BTITR to make it a success ? DISCIPLINE ! And guess what human nature is lack off ? DISCIPLINE !!

So if you have been having discipline your entire life up to this point, congratulation, you can start your first life insurance as BTITR. Else, buy a whole life insurance plan instead. You can always BTITR for your subsequent plans and just in case when lack of discipline really screw you in future, you still have at least one plan you can always fall back to - as a safety net.

This way, the worst it could become is you earn less but you are almost guarantee a fail safe approach. Strategically it puts you in a very good position even to start with.

If you are one of those who asked, "Term insurance premium increases as age increases" then you should buy the Whole Life Plan instead. Because you didn't really understand BTITR where the 'Invest The Rest' part should have ironed out this problem.

If you asked, "Should I buy term insurance until age 50 ro 60" then BTITR is also not for you. the 'Invest The Rest' part should usually take over the 'insurance' part after 15-20 years. If you didn't see that in your thoughts, you should be better off with a simply assuring whole life plan, although slightly more expensive.

Today Investment Link policy can also be quoted as a whole life plan. The good thing of investment link whole life plan is the elimination of policy loan - taking money out from your own plan to pay your future premium does not cost too much extra than just the unit price calculation. However, a badly configured link policy can lapse by itself when the market price goes too low. So a traditional whole life plan is implicitly having more assurance than investment link whole life plan.

Another rule of thumb to make your life easier, if you can pay high premium for your first policy, take investment link whole life plan. If you plan to pay minimum premium, then go for a traditional whole life plan.

Lastly, if you know you haven't been discipline but you are sure that you can be and will be from now on, do me a favor, buy a whole life plan now and then do the BTITR thing a couple of years later. 20 years later if your BTITR really does better than your whole life plan, come claim the 2 years differences from me.

British Starts educating finance in Primary School

One of the nicer effects left over from Lehman's trigger on world finance crisis is that now British starts to teach finances even in primary school. All the kids are taught what finances are all about, how to start a business and the importance of accountings etc.

The timing couldn't be more right especially when Internet has changed the way business can be.

Although there will be doubts on who can be teaching all these and what syllabus are considered 'correct' ? Afterall it is still hard to say if the world greatest finance is evil or saint. There isn't exactly a blue print to be based on. Don't forget not too long ago, Lehman is the exact blue print for everyone else to follow ...

This is nevertheless an exciting start. If I were to have a say, I would just recommend they should focus on "personal" finance first rather than the big 'finance' subject. If a person can manage himself well, the risk of a failing like Lehman would be greatly reduced ...

Where are all these bears coming from?

As a reader once stated, Fish..'you write an obscure blog that no-body reads'. He/She was right.

It was therapy for me, a way of thinking aloud.

In any case I would have about 130 readers on a busy day and 100 on a quiet one. The same folks.


The numbers have recently been moving up. Last Friday they reached
253!

Who are these new readers? They could only be coming from 4 groups:

1) Those that own but don't want to sell
2) Those that own but want to sell
3) Those that don't own but want to buy
4) Those that don't own and don't want to buy

Groups 1 and 4 aren't going to waste their time reading a RE blog, so it is the potential buyers and sellers who have flocked here.

I wonder which group is more? I could run a poll if I thought it would be truthfully answered.
...........................................................................

Ok whither the market.

That was a VERY strong bounce from March. It caught a lot of us by surprise. It mirrored the US and Canadian stock-markets. As soon as it was apparent that the world (actually the banks of the world) would not be coming to an end, the buyers rushed out to buy, benefiting from lower mortgage rates and lower prices. For a short time the rent/buy comparison got pretty close.

The mortgage rates have inched up a tiny bit recently, the prices have firmed and so the 'great deals' are not so great. Once again the numbers support renting rather than owning.

Now we are starting to see some early signs of weakness. Two things to remember if we have moved into a bear market:

1) The bubble graph suggests that we should start seeing the drop starting soon or all bets are off.
2) The initial drop is precipitous, the subsequent one long and drawn out.

That would support what a RE-savvy friend said last night at dinner. Now retired, I asked him what to do. You missed the big drop last year when the blood was running in the streets, now you have to wait for the slow drop.

Buyers Gone Wild

As I said in my last comment in the previous post, folks can get too excited when they are in 'buying mode' and throw caution to the wind.

Not just foreclosures which SHOULD be bought at good discounts to asking, but often ARE NOT...but even regular purchases.

They have probably looked around a lot and finally found something that both partners (and their parents) agree is suitable, they have the pre-approved mortgage in their back pocket which will soon expire, the poor realtor has taken them to dozens of showings, friends are asking.."haven't you found anything you liked yet?", implying they are being difficult and picky.

In short, there is a lot of emotional baggage tied up in the property, and it is hard to walk away if the sellers refuse to budge on price.

That's why it is critical to decide exactly how much house you can afford and stick to it. Remember to draw up a spread-sheet and plug all possible expenses in like repairs and special assessments and higher mortgage rates in a few years.

And look around. There is no need to be panicked into buying. Remember no one HAS to buy, but many people HAVE to sell.

Yaletown and Downtown

Looks to me like the going rate is now $500 +/- /foot. Anyone paying more should have a good reason to do so. Anyone paying a lot less, is probably doing well in this market.

http://vancouver.en.craigslist.ca/van/reb/1366223183.html

http://vancouver.en.craigslist.ca/van/reb/1366551049.html

http://vancouver.en.craigslist.ca/van/reb/1366449948.html

http://vancouver.en.craigslist.ca/van/reb/1366146515.html

coal harbour:

http://vancouver.en.craigslist.ca/van/reo/1366318820.html

Here's your choice:

A one bedroom in the Fraser Valley or a 4 bed on an acre in Hawaii:

http://vancouver.en.craigslist.ca/van/reb/1366744669.html

Time to clear something up...

I read on many bear blogs that rich outside investors from China, Hong Kong, the US, Alberta, The Middle East, South Africa, Israel etc are helping drive up real estate. (These are just some of the absentee owners in my building)

I think it is true, they are a factor. Especially in the high-end and down-town market.

However before we get too self-righteous about it, we have to remember that one of the reasons we get to live such a high standard of living is due to the constant infusion of outside money.

What do we produce in this Province that has monetary value:

Some of our fruit and vegetables and meat.
Natural gas and hydro power
Wine
Natural resources- coal, metals, wood, some oil
Films
Gaming Software
Gold and silver

The price of many of the above have plummeted in value.

Meanwhile we have a lot of things to pay for...cars, trips to Mexico, TV's, fridges, medicines, huge medical costs for the greying population, doctors fees, huge costs for the permanently-on-welfare and drug-damaged populations. We also have to pay for a Province the size of a huge European country, where everyone expects clean water, electricity, a school nearby and to be flown down for free, for emergency treatment, by helicopter even if they live in the farthest flung corner or an inaccessible Island.

Then there is the Olympics...

How can we possibly afford all this?

We can't.

We have been kept solvent due to the constant influx of outside money. From tourists, unfortunately from drugs (with all the mayhem that brings) and outside investors. They maybe Taiwanese 'helicopter' families living on the Westside sending kids to Private Schools, they maybe Korean or Middle Eastern investors on the North Shore, Germans buying ranches in the interior or South Americans parking money in our banks.

What they all have in common is the dollars they bring with them. Millions of them to buy their properties, pay for the up-keep and enjoy our Province. Their money moves around, gets taxed, gets deposited in our banks, gets lent out, gets spent again and makes jobs etc etc.

So while us bears may complain about these folks competing with locals for properties, the truth is, without the constant infusion of outside money we could not sustain our life-style. A lot of us bears would probably lose our jobs and the medical and social system would not be sustainable.

Even now our Province is in a serious financial mess. Somehow the Liberals believed that despite the financial catastrophe down south and in Europe we would only have modest deficits, or that is what they told us before they were re-elected. Well that myth has been blown out of the water. Major cuts are coming.

If the money stops flowing from outside, you can expect those cuts to be a LOT deeper.

JIMVHO