Sunday, July 24, 2005

Self-Help RE Guru Says There is a Bubble About to Bust

There's defection among the ranks of the real estate bulls. According to this San Francisco Chronicle article, a former publisher of pop RE investing advice books, RE bull lecturer, RE infomercial speaker, teacher in RE investment classes, someone with the exuberance to claim "One Weekend Can Make You a Millionaire", and all around cheerleader for the RE market now claims that RE is no longer a wise investment. How could it be? The horror of it!

Some choice quotes:
"You read the real estate-to-riches books and finally took the plunge. You pulled the equity out of your home and bought another and then another. Despite your income of $45,000 a year, now you're leveraged to the tune of $1. 7 million and loving every minute. Because when the properties appreciate you'll have made the nest egg of your dreams."

"Then you log on to your investment guru's Web site and discover this stunning news: Your real estate dreams are soon to be dust in the wind."

"But now, in the past couple of months, the man -- whose engaging financial parables have coaxed millions of ordinary under-earning boobs (including yours truly) into the real estate market -- has become a major bubble-blower."

"He cites the Economist at length, including the assertion that "the global housing boom is the biggest financial bubble in history." He confesses that he's currently dumping real estate that produces no cash flow (from rental income) and going "long on gold and oil.""

"He knows that many others have not been so prudent. "I'm worried about people using their houses as ATM machines," he says, referring to those homeowners who have refinanced their homes to buy cars, pay for remodels or to buy more real estate."

""And I'm worried about all the people who are flipping properties (those who buy in order to immediately resell for a profit) -- that's really stupid right now.""

"But didn't his books, despite all their sound financial advice about reducing liabilities and increasing assets, probably help fuel this real estate craze?"

""I think it's so," he concedes."

"One of the key tenets he hammers away at is that a home is not an asset but a liability."

"The real culprit behind the real estate bubble, he contends, is the federal government. "They're printing too much money," he says. "It's Gresham's law: When bad money enters the system, good money goes into hiding.""

""There's been enormous inflation," he explains. "(Federal Reserve Chairman Alan) Greenspan walks around saying there's no inflation, but that is based on the Consumer Price Index. They've taken all the assets out -- housing has gone through the roof, my steak has gone through the roof, oil has gone through the roof. In 1997, the price of oil was $10 per barrel -- now it's $57. If that's not inflation, I don't know what is.""

"Kiyosaki's solution is to invest in oil, gas, gold, silver -- whatever might be a hedge against the coming financial crisis."

"Like most influential self-help gurus, Kiyosaki's power lies in his charm, which is at once self-effacing, brash and disarmingly straightforward. This has allowed him to walk both sides of the street -- as an altruistic educator who shares his knowledge with the average wage earners whose pain he feels, and as the calculating, unabashed Machiavellian player who lives to win. In this sense, his sounding the alarm bells about the real estate market may be anything but altruistic. It may be, simply put, good business."

""Please crash, so I can buy some more," he says with a hardy laugh. "I want it to bust anyway. There's more opportunities in a down market.""


Anonymous Anonymous said...

Kiyosaki what a F&&King sellout!
In OCT He joined trump and a rapper in Real estate EXPO in vegas - pushing how great RE is and of course his book. NOw hes turned the other coin. Is that the mark of a businessman or a con artist? you decide

Jul 24, 2005, 12:01:00 PM  

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