Your “Biggest Asset” Is a Big Scam
- Say it ain’t so: “I do believe we’ll see more ARMs”
- Why the author of Rich Dad Poor Dad believes…
- Your home is not an asset
- North Dakota blows off recreational weed
- What to expect from the post-midterm market
- India says “da” to de-dollarization
- An Emma Lazarus retread for the stickerless masses
- A pro-weed Arizonan explains why he just said no.
“I do believe we’ll see more ARMs,” says Rick Sharga, executive vice president for Carrington Mortgage Holdings in Orange County, California.
No, he’s not talking about the latest workout fad, fashion trend or weapons deal. He’s talking adjustable-rate mortgages — the loan vehicles that helped drive American “homeowners” off the foreclosure cliff during the Great Recession.
Àla Thelma & Louise… only sadder.
Mr. Sharga continues: “But I don’t believe we’ll see [ARMs] issued like in the last housing boom.”
Well, we’re not completely out of the woods… While ARMs accounted for just 1% of all mortgage loans applications in 2008, they’re up to 7% today.
To give you an idea, about 20% of mortgages were ARMs in the 10 years before 2008, according to the Mortgage Bankers Association.
So 7% is low; still, seems to be moving in the wrong direction.
“For those needing a refresher,” says Robert Kiyosaki — our newest superstar contributor at Agora Financial — “an adjustable-rate mortgage, or ARM, allows potential homeowners to purchase more expensive houses…
“… by having lower interest rates than a traditional 30-year fixed-rate mortgage.”
Robert continues: “ARMs are usually offered at one, three or five years, meaning the interest rate will adjust to market rates after that period.
“In essence, it’s betting that interest rates will be as low or lower down the road… and that you’ll be in a better financial position to pay more, should the need arise.”
ARMs are a gamble — or a game of Russian roulette. Post-recession, that’s a fairly mainstream opinion, right?
What’s not so mainstream is Robert’s take on homeownership in general….
“Many financial advisers will tell you that your house is an asset, but that is untrue,” says Robert.
When Robert first published this contrarian opinion in his book Rich Dad Poor Dad — years before the housing crisis — “the so-called experts lambasted me,” he says.
“At the time, the real estate market was skyrocketing,” Robert continues. “Then 2008 hit, and after one of the worst housing crashes in U.S. history, no one was laughing anymore.”
To Robert’s way of thinking, “An asset is only something that puts money in your pocket.”
If you’re a homeowner — or at least a “mortgage owner” — you know nothing picks your pocket like home sweet home.
So to be clear, something that takes money out of your pocket? “That is the definition of a liability.
“This is doubly true if you don’t own your home yet,” says Robert. “Then it’s the bank’s asset — it’s working for them, but it’s not earning you anything.”
And even if you hold the deed to your house and it’s yours lock, stock and barrel by Robert’s definition, it’s still not an asset. (You’re still shelling out for maintenance and property taxes, right?)
But real estate can be an asset; in fact, it’s one of four categories of assets Robert uses to generate cash flow:
- Investment real estate
“Investment real estate,” Robert says, “puts money in your pocket each month in the form of rent.
“If you are an entrepreneur or a business owner,” says Robert, “your business is an asset.”
Here Robert’s kickin’ it old school: “Paper assets are stocks, bonds, mutual funds and so on. And commodities include gold, silver and any other physical resources like oil and gas.”
Now that’s a diversified portfolio. Not complicated… just the way Robert likes it.
We introduced you to Robert last week. His best-selling book Rich Dad Poor Dad is based on his real-life experience with his highly educated father — who couldn’t get a handle on money — and his mentor who only had an eighth-grade education… and became the richest man in Hawaii.
“The difference between my poor dad and my rich dad was a financial education,” says Robert. “And that’s not a classroom-and-books education; that’s a nuts-and-bolts, street-smart education, a way of looking at money that is true and that works.”
In terms of real estate, Robert says: “Rather than invest for appreciation, my rich dad taught me to invest for cash flow and to treat appreciation like icing on a cake.
“I encourage you to do the same.”
Next week, we’ll hear more from Robert; ultimately — his goal as an Agora Financial contributor is to show you how to play it smart… so you can make money in any market.
[Ed. note: Robert is headlining our biggest event of the year, The Weekly Cash Flow Summit, on Wednesday, Nov. 14, at 1:00 EST.
During which Robert and his team will reveal a brand-new way of making anywhere from $840, $4,540 and even as much as $10,600 on a weekly basis…
Regardless if stocks go up, down or sideways.
Taking a look at the markets, the Dow’s up over 350 points at the time of writing — now just under 26,000.
The S&P 500 is up 40 points, to 2,796.22, while the Nasdaq’s gained 150 points, to 7,530.79.
The price of gold’s also floating higher, adding $2.30 to its price of $1,228.60.
Oil, on the other hand, is down 17 cents or so, to $62.04 for a barrel of West Texas crude.
“The campaign to legalize recreational marijuana in North Dakota threw in the towel,” says Marijuana Business Daily.
“This is what happens when you’re outspent more than 5-to-1, and our opponents are pushing the ‘sky is falling message should this pass,’” says Cole Haymond of Legalize ND. “It’s inevitably going to be a tough row to hoe.”
But that’s the only setback among the four ballot measures in play yesterday. Michigan is the first Midwestern state to adopt recreational cannabis… while Missouri and Utah become the 32nd and 33rd states to approve marijuana as medicine.
By the way, if you missed Ray Blanco’s exclusive live briefing with Montel Williams last night — complete with Ray’s discussion of his three favorite post-election pot plays… you can watch a replay of the event for a limited time. Here’s the link.
“If you want to make money in the markets, you have to divorce yourself from political policies,” says our income specialist Zach Scheidt, “and focus on how developments in the political environment actually affect market prices.”
Regardless of the midterm election outcome (or maybe even because of it?), Zach says: “Expect volatility in the stock market.”
Here’s the thing in light of the Democrats winning the House: “The stock market actually does well in gridlock because neither side of government can get major new legislation passed through the branches of government.
“It’s all part of the checks and balances our government was intended to have,” says Zach.
“So if Congress is split between two parties, things in politics become a bit more stable, which investors love!
“As a trader,” Zach says, “you win!”
“Since 1950, stocks have rallied in the year following midterm elections every single time,” adds retirement specialist Mike Burnick.
“We’re moving into the ‘sweet spot’ of the four-year presidential cycle right now.
“Comb through the historical data and you’ll find the S&P 500 rises an average of 12% in the six months from November through April after the midterms, and that period has posted gains nearly 86.4% of the time over the past 90 years,” says Mike.
“To top things off,” says Mike “corporate buybacks are about to surge.”
Following up on the October earnings “buyback blackout” we reported yesterday, Mike says: “Companies that came out of their blackout periods last week have already announced $50 billion in upcoming buybacks.”
And that number balloons to $110 billion this week and $145 billion next week.
“Over the next month,” says Mike, “a total of $170 billion worth of stock buybacks should be unleashed on the market.”
To Mike’s way of thinking: “We have a market that is extremely oversold, an economy firing on all cylinders and a tidal wave of buybacks about to spark a massive run in stocks.
“Nothing is guaranteed in the investment business,” he concludes. “But my money is betting on the upside.”
More on de-dollarization: “The contract between Moscow and New Delhi on supplies of Russian S-400 air defense systems will be settled in rubles,” RT reports.
Just another sign Russia’s upping the ante on moving toward the de-dollarization of its economy.
“The Kremlin is looking for an alternative to the U.S. dollar in mutual settlements with international partners,” RT continues.
“Earlier this month, President Vladimir Putin said safety and security of the economy was the major driver behind the decision to eliminate the role of the U.S. dollar.
“The measure reportedly comes amid threats from Washington to cut Russia off from dollar transactions and hit Russia’s sovereign bonds with another round of sanctions.”
As for India, it’s looking to fortify its military. In October, India struck a deal with Russia to purchase S-400 missile systems worth $5.4 billion or, doing the conversion here, about 357 billion rubles.
RT reports the country’s also planning to buy Russian T-14 Armata tanks and guided-missile frigates. And the two countries might work together on developing next-generation fighter jets.
RT says: “Last week, the White House, which had previously threatened India with sanctions over Russian arms purchases, said the U.S. could give the deal a waiver, if New Delhi agrees to buy American F-16 jets.”
In response to Russia’s deal-making with India, Jim Rickards says: “This is a clear sign that such improvised and voluntary arrangements are emerging…”
In terms of India paying in rubles, Jim says, “India might have accumulated the rubles from prior sales to Russia, or Russian banks might lend them rubles to facilitate the arms purchase. Either way, there are no dollars involved.
“Once trading relationships like this get started,” says Jim, “they tend to grow and reinforce themselves as the two nations look for ways to invest or spend the ruble balances.
“This deal by itself does not mean the end of the dollar,” Jim continues.
Of course, the spotlight’s been on Russia and China — with their stockpiles of physical gold — trying to unseat the dollar’s global dominance.
Jim foresees a way Russia and China will try to end run the U.S. dollar: “Their gold could be combined with a new encrypted digital SDR-linked instrument, which would serve as a unit of account in direct trade among a club of countries that might include Russia, China, India, Turkey, Iran and many others.”
Just call it Stickergate: “Voters were fired up as they headed to the polls,” says MarketWatch, “and… complained Tuesday that polling places had run out of ‘I Voted’ stickers.”
Oh, for the love of…
“My voting precinct ran out of ‘I Voted’ stickers, so I took a picture with a sign instead,” tweeted a voter in Mississippi.
A little whine with your cheese?
“Some voters were eager to show off the stickers on social media as proof that they were doing their part for either the ‘red sweep’ or ‘blue wave.’”
So in response to the sticker shortage — and to help with humble-bragging — Facebook and Snapchat provided “I Voted” filters for Election Day selfies.
Exactly what the Founding Fathers had in mind… heh.
And here’s a quick Emma Lazarus retread for those who take their first-world problems — sticker shortages, for example — way too seriously: Give me your tired (voters), your poor/Your stickerless masses yearning to breathe free…
But hey, The 5’s not above admiring a good “I Voted” sticker.
For that we turn to the Land of the Midnight Sun (Alaska for those not down with state monikers):
Artist Pat Race of Juneau was tapped to create these nifty works of art for the State of Alaska Division of Elections.
The sticker in Maryland — where Agora Financial’s headquartered — just, meh, didn’t pop in selfies.
“As an Arizonan,” a reader says, “I don’t think the referendum lost because of the law enforcement lobby.”
The 5: The reader from Arizona’s responding to something we said last week concerning two legal weed failures in Arizona and Ohio… and holding powerful law enforcement lobbies partly responsible.
“The bill was poorly designed, with profits going to building new government agencies to regulate, track, tax, etc. There was no limit to how much would be spent on these agencies. If any money happened to be left over, it was to be split between several groups including the schools.
“I know several people, including myself, that support legalization but voted against this crappy bill. If they really wanted my vote, they’d put 100% of the profits toward the schools and reduce property taxes by the same amount!”
The 5: Fair enough… and now that we have a third recreational weed failure in North Dakota, we’d be interested in feedback from the Peace Garden State, too.
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