When an actual, savvy hedge fund like Fortress (NYSE: FIG) goes public, the masses go nutty and bid up the price far beyond its worth. When Kenneth Cole takes his Hedge Fund shoes public, they are shunned and end up on markdown.
Robert Kiyosaki is a maroon.
I haven’t read Rich Dad Poor Dad but I assume it contains common sense probably hidden amongst boring platitudes and high levels of noise (Ed note: this assumption as to how much common sense is in the book is being challenged by feedback from readers). The writer, Robert Kiyosaki, has turned his book and himself into a brand for repackaging common sense and selling it to idiots in the form of books, speeches and classes at the Learning Annex. He probably has even found a way to work “consulting of dubious value” into his product offering as well. This type of commerce is fine. If you can sell products to The Idiot Demographic, then more power to you.
But he seems to have evolved from “common sense in layman’s terms” to “erroneous information in layman’s terms” with a side helping of “terrible terrible advice.” For the last year plus, Rich Dad Poor Dad has been espousing that, in the words of a reader:
the stockmarket/mutual funds were for suckers… [you should be] long real estate, and metals, etc…[all this] last year riiight at the top of the bubble, and that if you dont get rich its because your lazy, because anyone can buy a building, convert it into an apartment, and sell for triple the price. Buy high and sell low kids!
Now he has completely contradicted all that advice in this article Rich Today, Poor Tomorrow which outlines how his McMansion living, double vacation home buying 3-kid having friends went from millionaires to selling their BMWs (the horror!). The formerly non-lazy hustling investors who were protecting themselves against inflation (or was his fear, HYPER-inflation) by buying real estate with freedom loan financing are now fools. This alone is a testament to the value of his advice.
He then reinvents macroeconomics by stating that:
cash + credit = economyYep folks, it’s that simple. If cash + credit go up, we get inflation. If cash + credit go down, we get deflation. If the credit bubble bursts, all these freedom loan speculator types will be “short squeezed” as he calls it (it’s not really a short squeeze, if you want to use a trading analogy, it’s more like a margin call) and have to pay lenders cash to keep their collateral position whole in the face of declining real estate prices.
This is idiotic. In fact, this article is so terrible, I find it difficult to even know how to properly form an argument against it. It doesn’t even make sense.
But here is more evidence to unback-up the truck on Rich Dad Poor Dad guy.
From his first ever Yahoo article:
“I’m very bearish on the U.S. dollar and have been for years. That’s why I have so many of them. This sounds like a contradiction, but let me explain. The reason I have so many dollars, even though I think they’re worth less and less, is because I don’t hang on to them. In my mind, cash is trash..
In the late 1990s, when people were pouring money into the tech and dot-com stocks, my dollars moved into oil, gold, silver, and real estate, when prices were low. Today, because the dollar continues to drop in value, I keep moving my money into those same asset classes, although much more cautiously.”
From a later article:
In my opinion, that means getting out of anything else that’s “paper with ink on it” — anything backed by the full faith and confidence of the SS U.S.A. That means I’m very suspicious of stocks, bonds, savings, and mutual funds, especially if they’re U.S. dependent. Although I love real estate, I’m suspicious of any piece of property that doesn’t generate cash flow today. I don’t invest in future appreciation of real estate — not today, at least.
While he is effectively mananaging his intelligence, and I applaud that, what exactly does this leave people to do with their money? He advocates against cash, stocks, bonds, saving money, buying things, the US, real estate, etc etc. What is left? Brine shrimp futures? Short or long positions in abstract ideas like Perf?
Recommendation: While we respect selling common sense to idiots, if you sell wrong sense to idiots, we have to short you if only to maintain a feeling of moral rectitude. Furthermore, we recommend a blanket shorting of anyone who speaks at the Learning Annex or anyone who has written a book with “Success”, “Rich” or “Positive” in the title. By the way, if you would like to learn more about our views, we will be hosting a free* workshop** “Don’t Believe Anything You Hear at the Learning Annex” at the Learning Annex this Saturday.
*Free after a payment of $899 for the 1st day or $1299 for two days
**Not actually a workshop or actually a real event
Addendum: Here is an in depth review of Rich Dad, Poor Dad and Kiyosaki, I haven’t read it but the criticisms match his columns as well and point to the fact that the book is less common sense than I assumed.
The WSJ had an article which referenced several “Pink Dollar” products aimed at woman drivers such as pleasingly scented lavender tires and no-slip brake pedals for driving in hooker heels. The list neglected several other “Pink Dollar” products which are at least in a preliminary stage of development and should come to market within 5 years.
Submitted by LoS Reader “Matthias”
This weekend, per decree of our government, we all have “sprung forward” into “Daylight Savings Time”. One hour was taken from our schedule, that could have been spent on any sort of profitable or enjoyable activity. What did we get in return? A government IOU; a promise that this hour will be returned in six months time. Without interest.
Clearly, Congress is trying to push the American public into a ridiculous bargain. We could die in the coming six months, never to receive that hour back, or we could be getting the cold next fall, which would make the hour that much more un-enjoyable. And even if we subscribe to the notion of a risk-free government obligation, the time we are fronting the government should at least bear interest at the appropriate 6-month treasury rate. For the conspiracy theorists: Does anyone know, what the government does with the 300 million hours, that are being temproarily extracted from the lives of the American public? Is it the chronological fuel supply used to keep Dick Cheney’s cyborg heart running and provide him immortality?
Recommendation: With the entire country being in a short position of 1 hour per person, I went the other way. I set my watch not forward, but BACK. I have tentatively set my watch back 23 hours, which intuitively balances risk and reward, but I am not certain of the appropriate hedge ratio.
Lastly, how much of the run-up in Phoenix’ real estate market do you attribute to Arizona’s exemption from the national Daylight Savings tax? The regulatory risk of Arizona joining the rest of the country at some point must be properly discounted.
The New York Observer recently ran a great article where they asked the terrible people who frequent Bungalow 8 to comment on the Iraq war. I highly recommend it.
“I live this debauched life of partying and fun,†he added, “but you have to think about Darfur, you have to think about Iraq, you have to think about the pressing danger of Iran. I think people should enjoy themselves—which I’m not going to stop doing—but at the same time, there should be a level of guilt.â€
He looked around Bungalow 8. “Do you think the Iraqis, little villagers in Kandahar, are doing this?†he said. “None of them are. And that’s the sad, awful truth.â€
Recommendation: As you know, I often start businesses based on whims, run them until I bore, and then sell them for a huge profit. Well, this d-bag actually has a point. There are no high-end, exclusive clubs where the douchebags of Iraq can go to escape the plebes and pay thousands of Iraqi Dinar for the same bottle of liquor that retails for 49 drachma in the local store. This is clearly a stellar opportunity. Open Bunker 8, the hottest club Bagdhad has ever seen, and you will be rewarded down the line.
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Widsom comes from suffering and error and when the passions die down and the observations begin.
-David Brooks in a March 8th, 2007 Op-Ed
Past Quotes Entirely Relevant to Investing
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Short: American Express Red Card
Long:: American Express Black Card
One has the veneer of charity. One is for winners.
vs
Also Short: Bono, Scarlet Letters
Just months after the first live giant squid was captured on film, New Zealand fisherman caught the largest squid ever, a 990lb colossal squid which measures 46 feet long in length. The next largest squid ever was 660lbs. The increasing frequency of giant and colossal squid sightings continues to point to only one logical conclusion — squids are scouting out the surface world for conquest and real estate development for when global warming fully empowers them to master the human race.
Some background on the colossal squid:
This squid has one of the largest beaks known of any squid and also has unique swivelling hooks on the clubs at the ends of its tentacles.
This combination allows it to attack fish as large as the Patagonian toothfish and probably to also attempt to maul sperm whales.
“When this animal was alive, it really has to be one of the most frightening predators out there. It’s without parallel in the oceans,” said Dr. O’Shea.
Global warming ensures that the oceans will rise and cover more of the Earth, causing polar bears to drown left and right and man to be subject to dominance by squid. In a world filled with ocean, we recommend having a position in the being which is “without parallel in the oceans” and which is three times the size of a bus.
At a recent meeting of internet gurus, I heard one particularly guru-ish fellow remark that his company “collected anonymous user information at the cookie level.” A brilliant strategy! Companies have, for years, been investing up and down the OSI model stack, targeting the application, presentation, session, transport, network, data link, and physical layers. That’s a lot of layers (and internet dork talk). And yet no one — other than this one guru — has been targeting the sweetest, crumbliest, tastiest layer of all: the cookie level.
If you have been a diligent reader, you will know that finding a hot (and, in this case, sweet) sector is Step 1 in the Pure Play model of investing. Have at it.
Paraphrasing from NPR this morning on the circling of Daimler Chrysler (NYSE: DCX by private equity vultures:
Daimler Chrysler is reported to be exploring selling its Chrysler division. According to our sources, private qquity firm Cerberus has made several awfuls…offers for the unit.
The core competency of Cerberus is presenting firms with “awfuls”.
The press is bad enough when asked to handle simple things like NFL contracts with non-guaranteed money which consist almost entirely of hugely underwater option years or the compensation of retiring Exxon Mobil CEOs. But conflating geological based wealth and sports seems to lead to a whole ‘nother level of stupidity as evidenced by this sensationalist headline Dodger could be first billionaire player.
The player, Matt White, is a marginal one who owned property in Western Mass that happened to be situated on 24mm tons of goshen rock, which is used in landscaping and is sold for $100 / ton. So $100 times 24mm equals $2.4bn in value to the AP. Simple. Obvious. Right?
Wait…you are saying it actually might….cost something to pull that goshen rock out of the ground? Hmmm. And permitting for mining may be an issue? But he could still be the first billionaire ballplayer right? No? Then how does this help the article? You and your facts, factman! I hope the AP will just ignore the reality and continue to write almost all of their news ex anum.
I will say this unequivocally, there is no chance he makes a billion off this. There is no chance he makes $100mm off this. It is unlikely, in my relatively uninformed estimation, that he makes as much from his goshen rock as even the average earnings of a baseball player who squeaks out a 10 year MLB career.
Recommendation: Short the press. Long brains.
“Casual commitments invite casual reversal, exposing portfolio managers to the damaging whipsaw of buying high and selling low. Only with the confidence created by a strong decision-making process can investors sell speculative excess and buy despair-driven value.” [Ed: our emphasis]
-David Swensen, Pioneering Portfolio Management
Past Quotes Entirely Relevant to Investing