Today, Robert Kiyosaki explores one of the four basic assets, Paper, with Andy Tanner and John MacGregor. While Robert will admit he typically stays away from this class of assets, up to 90% of people fall into this category. Paper includes stocks, bonds, mutual funds, ETF, and cash.

Andy Tanner is an advisor on the Rich Dad Radio Show on paper assets. He is the author of Stock Market Cash Flow and 401 (K)aos.

John MacGregor is a financial planner and author of The Top 10 Reasons Why The Rich Go Broke. Both live in Hawaii.

How did 2020 treat you?

In many ways, Andy Tanner says, 2020 was one of the best years he’s had in a long time. With the pandemic, came a buying opportunity for a lot of good stocks “in the dip”. He was right in believing the US Government would print money to save the economy. Andy picked up a couple of good bargains, and says it’s going to continue into 2021. “Stocks are actually going to go higher because I think they’re going to continue to print (money).”

On a personal side, Andy tells us he enjoyed staying home with his family. Though he feels compassion for those who lost professionally and personally during this pandemic, he is optimistic for 2021 and where things are headed.

For John MacGregor, He’s eager to see “the ball drop in New York City on December 31st and call it a year!” John remarks that, in all the calls and emails he’s received from folks who are struggling, he can hear the desperation in their voices. He’ll be glad to see it over, he says. For him, personally, it’s been a great year, however. He’s worked hard, and gotten more done than ever before. Like Andy, he notes that there are a lot of people who saw opportunity in the COVID crisis, and took advantage of that.

“I think 2021 in the markets are going to be exceedingly strong as Andy says. So I'm very optimistic."

401 (k)aos…You’re going to get screwed

Andy Tanner wrote the book 401 (k)aos to help people open their eyes a bit to what they’re really happens with a 401(k). “They’re are three sides to a coin,” he says, “…heads, there are tails, and …the edge.” Where you can see both sides. That’s what 401 (k)aos is; the other side of the coin.

Andy’s other book, Stock Market Cash Flow, is all about seeing the stock market and the possibility of consistent, monthly income from it, as opposed to the common goal of “buying low and selling high”.

For example, Andy says, if you were to own a home that burns down, and you have insurance, you’re going to get paid for the house. Most people don’t know that when the market crashes, you can get paid for that, too. Mark Cuban once sold his company to Yahoo, but instead of cash, he sold it for $6 Billion in Yahoo Stock. He believed the stock was going to go up. It didn’t, but he was “paid tremendously because he bought insurance.”

Those things aren’t available in a 401(k), he says, and most people don’t know these options are available to them at all.

I hate to say we told you so…but we told you so.

In 2020, Andy says he sees a lot of ‘Johnny-come-lately’s’. People who watch the economy in a free fall and decide now they want to be educated in the money markets.

“And then the government props things back up and says, ‘We're going to send you a check.’ They go, "Oh, I guess I don't need to be educated now.”

Andy believes strongly that we’ll have another rise in the market but that this market doesn’t reflect the true value that is behind it.

“It’s detached from what we call fundamentals.” Detached from reality.

You don’t put your seatbelt on during a car wreck.

This isn’t going to last forever, Andy says. He doesn’t know when it will go, but the time to be educated is now. His big message is don’t wait for the crash to learn what you need to learn to protect yourself. So, now’s the time, he says.

John MacGregor, with 25 years as a financial planner agrees with Andy. “It’s always after the fact, that’s when people…want to take action.” In 25. years, John says, he has seen countless “train wrecks” and that’s why he wrote his book, The Top 10 Reasons Why the Rich Go Broke.

Learning from people’s successes is smart…but learning from their mistakes is GENUIS.

Although John’s book centers on the very wealthy, he says it really translates to everybody, and why so many people live paycheck to paycheck. “They're stuck in their old habits and way and behaviors.” His book is a way to learn from these mistakes, and change financial behaviors.

And as my rich dad always said…

“…the trouble with the Fed is they take from the poor and they give to the rich,” Robert says. That is what’s happening today. They (the Fed) take money in the form of taxes, inflation, and then they print money and “jack it into the stock market”.

“So everybody's sitting there fat, dumb, and happy with the stock market going up. But meanwhile, the gap between rich and poor gets exceedingly wider.” If there is another crash, Robert says, people like himself, Andy and John will get out early, but the poor and middle class will be left “holding the bag as they always do.”

Andy agrees that the Fed is completely out of touch. They’ve painted themselves into a corner, he believes, and they don’t have much choice but to print (money). The Fed changed, he says, with long-term capital management. “When they were going under they said, "Hey, we're going to go under, and our liability is supposed to be another person's asset.” If the Fed goes down, they take big business with them, in a domino effect. And to that point, they decide they can’t let the big business fail, so they pump money into them. “A blow to capitalism,” according to Andy.

Capitalism is about having a little pain once in a while.

Guys are going to fail, guys are going to succeed. It’s a part of the system, Andy says. When they go from just buying bonds to bailing out private banks, they changed. In Andy’s view, ‘they opened a can of worms.’

The Fed has one game, according to Robert; take from the poor and give to the rich.

Something Andy has learned is that success in the stock market has nothing to do with predictability, or, as Andy says, whether it goes up or down. When asked that very question, his answer is invariably, “…I don’t know and I don’t care.” He believes you have to be educated in stocks and when you are, you can make money. “The stock market,” he says, “is machine that transfers money from the uneducated to the educated. End of story.”

“I would say, and I don't have data to back it up, but it'd be my opinion that there is no asset class that people are more involved in with less education than paper assets.”

For most successful investors, it should make sense to you, Andy says. You should ask yourself, “Should I invest my money into something I don’t understand?” If the answer is no, then you need to either educate yourself or invest in something else.

John MacGregor is a Paper Assets Guy

And while he believes in real estate and in commodities, he doesn’t know much about them. But paper assets, particularly for the liquidity and the ease of getting in and out, is where he is feels he is strongest.

John, as opposed to Andy, is in favor of 401(k)’s for most people. If someone has a better alternative for people to save for retirement, he says he is “all ears.” But right now, that is the system we have, he says.

And he’d much rather have a 401(k) today than a pension.

Free Money

In most cases, with a 401(k) you’re getting free money from your employer. The average balance in a 401(k) plan today is $100,000. Without such a plan, John feels like most people would have zero retirement or savings.

So, what are the risks for those who have all their money, or significant money in a 401(k)? Andy, author of 401(k)aos has some advice.

One of the biggest mistakes people make, he says, is that they see a pension and a 401(k) as similar. And they couldn’t be more different. A pension is a function of the income statement. It’s about the income from a company to last you the rest of your life if it’s solvent. A 401k is a function of net worth; you’re building something in your asset column. But really, it’s in Wall Streets asset column-Assets Under Management.

The problem, to Andy, is that if you have $70,000 in your 401k at retirement age, and you need that to last from age 75-90, you’re in trouble if the market crashes and cuts that $70k down to $35k.

No one, according to Andy, has ever said “I was poor and broke…I put my money in a 401k and now I’m rich.”

Well, tell that to the United Mine Workers…

John MacGregor points out that the United Mine Workers, 86,000 retirees, have a pension plan that will be insolvent in three years.

And the Iron Workers Local 17, in Ohio, he says, also just reduced their benefits by 30%. Their insurance (PDGC) will be insolvent in two years. John points out the glaring difference if someone had a 401k instead.

If someone put $15,000 into a 401k and even with an 8% return on the stock market (average return is roughly 10%), over 30 years that’s $1.8 million.

“I would much rather have a 401k where I know I see the money rather than some hope and promise that, "Hey, John, if you stick with us for 30 years, you're going to get 80% of your salary and you're going to get 5 grand a month for the rest of your life, maybe. Maybe, we think." And now we know pensions are blowing up.”

But Robert makes the point that you can’t guarantee any return on the stock market, and that many people, Robert included, believe that you can’t keep pumping money into the economy. A crash, he believes, is coming.

John, even with his stout belief in 401k for the majority of people, can’t guarantee any return on the stocks. Robert invests in real estate, in business, in gold, silver and bitcoin. Because for him, he can control his returns, as opposed to the stock market.

You have more control, he says, trading options on stocks however. Andy agrees and says he wouldn’t be trading stocks without options. It would be “like buying a house with no insurance.”

An option, Andy says, is a guarantee. You can sell or buy at any price you want, if you have the option to do so.

If you love paper assets…

There are two ways to look at paper assets, says Andy. You can say you either own a business, or you’re trading in stock. Like Warren Buffett, own the business, understand the financials, understand the balance sheet, income statement, debt, assets, and liabilities. You would be a true business owner, and your option is you have liquidity if you don’t like what you see at some point. If you’re into paper assets, treat it like owning a business, not a stock.

If the market crashes in 2021, will Andy get richer?

Yes.

Will John become richer if the market crashes?

Also, yes.

Because you can make money either way.

Roberts advice is to treat your money as if you are owning that business, rather than trading stock for quick fix or quick profit. He urges people, as 2020 draws to a close, to educate themselves, get involved, get proactive in whatever asset class that excites or interests you.

Why?

“Because we do believe the market is going to go up this coming year, and the big fall is coming.” The Fed can’t continue to print money, Robert reminds us, without harsh ramifications or consequences down the road.

The Tsunami is coming….

…so just prepare yourself. Now’s the time.

Pick up Andy Tanner’s book, "Stock Market Cash Flow and 401(k)aos", and John MacGregor’s, "The Top Ten Reasons Why The Rich Go Broke".