Financial D-Day is Coming

Financial D-Day is Coming

Can you feel the fear growing? As I write this blog, the markets are getting pummeled. Today, Tuesday morning, June 29, 2010, the Dow is down 245 points, a 2.48 percent decline. The Nasdaq is down 68 points, a 3.07 percent decline. The S&P 500 is down 29 points, a 2.75 percent decline.

And here's a sampling of the morning's headlines: "Global Growth Fears Hit U.S. Markets", "Confidence Tumbles In U.S. in June", "Stocks Skid on Renewed Fears of Global Slowdown", "Fannie-Freddie Bailout Could Cost Taxpayers 1 Trillion", and my personal favorite, "High Unemployment, lower stocks, growing worries: Is it 1930 All Over Again?"

I thought we were supposed to be in a recovery.

Seems the world is waking up to what you, the Rich Dad faithful, have known for some time now. The economy is not recovering—it's crashing.

This knowledge is finally setting in for the masses. The mainstream media is finally covering the reality of the global economic crisis. Even the economists are pitching in. Paul Krugman predicted two days ago that the US is headed for another depression and that the economy will plunge into a double dip.

Of course none of this is news to you. I've blogged about the coming depression here ("Living on Borrowed Time," "The Dirty Dollar," & "Fed's Fears Quietly Grow").

Financial D-Day

The reason why this recovery is a false one—what Dan Alpert, Managing Director of Westwood Capital, called the "greatest sucker's rally in history,"—is because the underlying issues that caused the financial crisis still remain. The Fed is still printing billions and billions of dollars to pay for programs we can't afford, our debt is at record levels, true unemployment is well above 10 percent and not getting better, neighborhoods across America are ghost towns littered with empty and foreclosed houses, there has been no true financial reform to address derivatives trading (what Warren Buffet calls financial weapons of mass destruction), and we're still keeping zombie financial institutions too big to fail alive with taxpayer dollars (see this Washington Post article on the so-called landmark financial reform bill).

As Katrina vanden Heuvel writes in her column at the Washington Post:

"The current banking structure and practices virtually ensure repeated financial crises. Take that from uberbanker Jamie Dimon, CEO of JPMorgan Chase. In his testimony before the Financial Crisis commission, Dimon said: 'It's not a surprise that we know we have crises every five or ten years. My daughter called me from school one day and said, "Dad, what's a financial crisis?" And without trying to be funny, I said, "It's the type of thing that happens every five to seven years." And she said: "Why is everyone so surprised?" So we shouldn't be surprised.'

In every respect, the cards are stacked against us. The question is not will Financial D-Day come but when.

The Difference

Here's the difference between the ultra rich like Dimon and the average America: The ultra rich know that the system is set up to experience wild swings—and they know how to profit from it. The ultra rich play by the New Rules of Money. They know that the old rules—go to school, get a good job, save your money, and invest in a diversified portfolio of stocks, bonds, and mutual funds—is financial suicide. And they're counting on you to keep playing by the old rules so they can get rich.

Opportunity Knocks

A depression is coming. The world is waking up to this fact. The good news is that in every crisis there is also opportunity. The ultra rich know that and have profited from the market's swings many times over.

As I've often said, this coming depression will be the biggest wealth transfer in history. This is your opportunity to become rich. But you must stop playing by the old rules of money. You must understand how to make the wealth-stealing forces of taxes, inflation, debt and retirement work for you—not against you. And in order to do that, you must be financially educated.

Opportunity is knocking at your door. Will you answer? I want you to come out of this crisis on top. But only you can position yourself to do that.

My final thoughts to you today are this: Don't join the world in panic and despair. The coming times will be hard, but for the well-positioned they will also be times of great promise and opportunity. Keep your head up. Continue to learn as much as you can. And take every opportunity that comes your way.

Original publish date: June 29, 2010