The Recession is Over?

This morning I opened up the Wall Street Journal to find out the recession is over for sure i know it not over in Nigeria yet. The National Bureau of Economic Research's (NBER) Business Cycle Dating Committee, the group that officially declares the beginning and end of each recession, declared it so. Yet, it also cautioned that while the recession may be technically over, the pain will still remain for most Americans. Most notably, unemployment is set to remain high through at least 2013—two more years. The article gives a perfect eulogy for the recession: "It's official: The 2007-2009 recession, which wiped out 7.3 million jobs, cut 4.1% from economic output and cost Americans 21% of their net worth, marked the longest slump since the Great Depression."

Official baloney

Most Americans know that official announcements about recessions are a bunch of baloney. For instance, NBER didn't declare we were in a recession until December of 2008—a full year after its supposed start. The fall prior to NBER's announcement had seen the near collapse of the world economy as companies like Lehman Brothers, AIG, and Fannie and Freddie Mac fell. Anybody with a brain knew we were in a recession, and everybody had experienced its effects. Now, they're telling us that the recession ended in June of 2009. Yet, the US has lost more jobs than it added since the supposed recovery began. Only think tanks and government agencies could be so officially stupid.

Please if you are a Nigeria think hard........... the hard times are coming do something about your financial future now!!!!!

Over for whom?

My question is this: For whom is the recession over? It certainly isn't over for the average American. The unemployment rate is officially at 9.6 percent. Unofficially, it is even higher because many Americans have been unemployed too long to even be counted. To top it off, those who have jobs have seen their incomes fall 4.2 percent between 2007 and 2009, and the percentage of Americans living below the poverty level rose to 14.3 percent. Finally, the gap between the rich and the poor is still widening. The top fifth of households now account for 50.3 percent of all pre-tax income in the US. That means the middle class is still shrinking.

Maybe when the NBER says the recession is over, they mean it's over for the ultra-rich. After all, many corporations are now posting better than expected earnings reports and balance sheets are getting healthier. For instance, FedEx recently announced that their earnings more than doubled. They also announced that they're firing 1,700 people. Why? I believe it's because they know what you already know, the recession may be "officially" over—but it's not really over. Is the recession over for housing? Not according to the numbers. Thanks to high unemployment, new home orders are down 15 percent over last year, foreclosures are still rising, and pricing is not recovering. People are predicting that the housing inventory, which is more than double healthy levels, will take up to three years to work through. There will be no recovery until that happens.

Double Dip

Though the recession may be technically over, in that the economy numerically isn't contracting, it's also not really growing. As The Wall Street Journal reports, "Real gross domestic product has made up only 2.9 percentage points of the 4.1% lost during the recession, while household net worth has recovered only 4 percentage points of the 21% lost…that means the government may need to continue providing extraordinary support for the labor market." Because of this, many economists are predicting that we'll have a double-dip recession. If that happens, the official recovery will really just be a merciful breather rather than a true recovery. And unlike previous recessions, long-term damage to the economy will result.

Double Opportunity

As I've stated before, all of this bad news can be good news—if you can change your mindset. For the financially educated, this is good news. For those who understand money and investing, a double-dip recession also means a double opportunity to buy more cash-flowing assets at bargain prices.

It can mean good news for you as well. If you missed out during the first recession, you will have a second opportunity to start building for your future.

Are You Sure You Want to Be “Rich”?

if you want to be rich please listen to Robert Kiyosaki and understand why i choose to be Rich as a Nigerian

I grew up in Hilo on the Big Island in Hawaii. Hilo is a sugar town, or at least it was, and there was a divide among the rich plantation owners and the plantation workers. The divide was more than just income. Even the schools were divided. The poor kids of the plantation workers went to Hilo Union Elementary School and the rich kids of the plantation owners went to Riverside School—these schools were literally across the road from each other.

When I was nine years old, we moved across the street into a small rambler by Riverside School. My dad was the Head of Education for the State of Hawaii, and when we moved, I was able to attend Riverside School instead of Hilo Union Elementary School. For the first time in my life, I felt poor.

Though my dad was highly educated and was a great government employee, he had a low financial intelligence and wasn’t very good with money. As a result, we were always struggling. As a kid at Hilo Union Elementary School, I didn’t know the difference—everyone was poor. But once I started going to Riverside School, it quickly became apparent that my family was poor and that the kids I went to school with were rich.

At a young age, I knew I wanted to be rich. I saw my parents struggle and the stress it brought, and I knew that wasn’t for me. I wanted to buy nice things, be generous, and enjoy life worry free.

When I told my rich dad, my best friend’s dad who was a successful businessman, that I wanted to be rich, he asked, “How do you think you become rich?”

“You make a lot of money,” I said confidently.

“That’s partially correct,” my rich dad said. “But you can make a lot of money and still not be rich.” He went on to explain how some employees and self-employed people made a lot of money but weren’t rich because they had low financial intelligence. They lost most of their wealth to high taxes and by purchasing liabilities.

That was too much for my young brain to comprehend. I just knew I wanted to make a lot of money. But now that I’m older and hopefully wiser, I understand what my rich dad meant. Money doesn’t make you rich. Your financial intelligence does.

That’s why our mantra at Rich Dad is Knowledge is the New Money.

A recent article I read in Fortune Magazine entitled “Why the ‘rich’ aren’t feeling so rich”, highlights further what I mean by this. The article’s author, Shawn Tully, invented a term that is catching on—HENRY. It’s an acronym for “High Earners, Not Rich Yet”. What Tully is getting at is that those we’d consider rich because they make a lot of money, such as doctors and lawyers making $250,000 to $500,000, aren’t really rich at all.

Why?

Because they lose so much money to taxes, their income is based on the services they provide rather than passive income from investments, and they spend their money on liabilities like homes instead of on assets that produce cash flow.

As Tully writes, “When my story appeared, just before the presidential election, Barack Obama was targeting the HENRYs for big tax increases, declaring that families making over $250,000 a year were ‘the rich’ and needed to ‘pay their fair share.’ Even then, I argued, the HENRYs were so squeezed between their big expenses for the things they considered staples -- private schools and day care for the kids, for example -- and an immense tax burden that typically took $100,000 from a $350,000 income, that they not only weren't rich, but stood little chance of ever saving the big nest egg to qualify as truly wealthy.”

This is something I talk about in my book Conspiracy of the Rich: The 8 New Rules of Money. There are four things that steal your wealth: Taxes, Debt, Inflation, and Retirement. People who make a lot of money aren’t necessarily rich because they lose so much of it to those four forces.

Here’s an example. Let’s say we have two people who both earn $100,000. One pays 20 percent in taxes, has a crippling mortgage, and saves money in a 401(k) that barely keeps up with inflation. The other pays nothing in taxes, owns rental properties that provide passive income that adjusts with inflation, and has a plan to use that passive income to purchase more passive income investments. Who’s richer? It’s possible to make a lot of money and use the forces of taxes, debt, inflation, and retirement for your benefit—but it takes high financial intelligence.

Here’s the fundamental problem for ‘the rich’, high-income employees: They have the highest tax burden, the lowest control over their retirement, and can sell only their time.

My CASHFLOW Quadrant explains this simply. There are four types of people: Employees (E’s), Self-Employed (S’s), Big Business Owners (B’s), and Investors (I’s). The E’s and S’s are on the left side of the CASHFLOW Quadrant and the B’s and I’s are on the right side of the quadrant. Those on the left side pay the most in taxes, have the least control, and will never be truly rich. These are people like blue-collar employees but also people like doctors and lawyers who are self-employed but really don’t own a company—they own a job. They are victims to the four wealth-stealing forces.

Those on the right side, however, have all the tax advantages; have control over their money, business, and investments; and have the possibility of infinite returns because they know how to create money out of thin air through passive income. And they know how to use Taxes, Debt, Inflation, and Retirement to make them even richer—not poorer. If you want to learn more about the CASHFLOW Quadrant, I encourage you to read my book CASHFLOW Quadrant: Rich Dad’s Guide to Financial Freedom.

To be on the right side of the CASHFLOW Quadrant, you need a high financial intelligence. That means you need to continually increase your financial education. Read books, attend seminars, network with like-minded individuals, and change your mindset.

You can be truly rich, not just part of the HENRYs. Don’t settle for making a lot of money. Increase your financial IQ and become truly rich.

Who Is Profiting From This Downturn?

This is an important Month for many investors. This week scores of corporations release their earnings reports. As you may have heard, most companies are posting near-record high profits.

The Wall Street Journal reports that the US Commerce Department is predicting corporate profits will be up 26.5 percent from a year earlier, which comes off of a second quarter year-over-year rise of 38 percent.

Yet, unemployment is still at an all-time high and some companies are even laying off workers despite these record profits. Why?

The answer is that's how they're getting those record profits. The record profits aren't a product of record sales. Sales are still stagnant. They're a product of record cuts in expenses, primarily driven by layoffs.

The Cash Hoard

Not only are companies experiencing record profits, they're also holding onto record cash reserves. Marketwatch reports that non-financial companies in the S&P 500 are holding onto over $1 trillion in cash reserves and assets as of the end of the second quarter. And many experts are predicting those reserves could rise to $2 trillion by the end of the year.

Yet, companies aren't increasing dividends. And they aren't hiring new people. Those are the two things that traditionally happen when profits and cash are so high. Why the disconnect?

Companies still remember the cash crunch they just came through, and because sales are stagnant, they don't want to make aggressive moves without assurances that they'll be able to sell product.

The problem, of course, is that people won't buy product and spend money when unemployment is so high and the economy so uncertain. So, both sides are in a holding pattern, waiting to see who moves first.

The Rich Get Richer

The unfortunate truth of this downturn is that the rich are getting richer. That's because they have control. Entrepreneurs and business owners are able to experience record profits because they can control their bottom line. This time they've done so through cuts and layoffs. It's unfortunate that they are choosing to hoard cash and cut jobs while experiencing so much prosperity. But that is their right, regardless if it's the right thing for the country and economy.

The gap between the rich and the poor is widening, and the middle-class is shrinking. If anything, this downturn has proved the importance of having control. As an employee you have no control. You are at the mercy of your boss and your company. During the financial crisis, many employees found out that even a high salary doesn't mean security.

If anything, the lesson from this downturn should be that the more control you have over money and business, the better position you're in to profit even when others are struggling.

Take Control

Eventually the dam will break. Money will start flowing—both from consumers and from companies. When it does, expect to see inflation take off. There is a lot of cash out there, and when it hits the market, an already weak dollar will become weaker.

The good news is that in the meantime, great deals are out there ready for the right investors. For instance, if you're interested in investing in real estate, there are many opportunities to find cash-flowing properties at rock-bottom pricing. And for those that want to start businesses, now is the time to take control and put your financial intelligence to work. By understanding how money works and by having control over your future, you can prosper even while others don't.

As I've said before, this is the biggest wealth transfer in history. You have the choice today to be on the winning end or the losing end. You have the opportunity to profit from this downturn. But you have to be financially intelligent. Continue to learn. Find great mentors. Make the right moves.

Opportunity abounds for those who can see.

A Dispatch from the Money War - Robert Kiyosaki

For a while now, I've been writing about the money war—how the world's governments are battling to devalue their currencies to boost exports. This week a truce was called.

The G-20 nations agreed to a deal to end the currency war in principal.
According to The Wall Street Journal, the deal paves the way for:Ending the competitive devaluation of global currencies
Creating a mechanism to examine excessive imbalances in current accounts
Reviewing and sign off on financial-sector reform measures
Reshaping how the IMF governs
Starting work on a "safety net" for developing nations who are victims of the money war
All of these things sound great, but I doubt they'll work. Why? Because as The Wall Street Journal reported, "Unable to agree on a precise metric, as the U.S. proposed, the ministers agreed only to measure compliance by 'indicative guidelines,' still to be negotiated." In other words, they can't even agree on what it means to break the truce. And beyond that, G-20 has no authority to enforce the truce.

In the end, the truce is a straw man that will fall quickly. I'm not holding my breath to see the money war end any time soon.

The War on the Middle Class
In other news, a new front has been opened in the war on the middle class—tax breaks. In an article entitled "Key Tax Breaks at Risk As Panel Looks at Cuts", The Wall Street Journal reports that the deficit commission, a commission charged with making recommendations to reduce the deficit and balance the budget, is considering recommendations to kill off the mortgage-interest deduction, child tax credits, and the ability of employees to pay their health insurance with pre-tax dollars.

In other words, to fund the deficit spending of our government, the deficit commission is talking about cutting the few tax breaks the middle class and employees enjoy.

While these are just proposed ideas right now, the fact that they're even being considered is a travesty. As the middle class continues to shrink, cutting the few tax breaks they enjoy would do nothing to help the economy—in fact, it would hurt it significantly, especially real estate—and will only harm struggling families.

Still, I'm not surprised. As I've written before, the tax code is written to help the rich, not the middle class. That's why it's so important to be on the right side of the CASHFLOW Quadrant.
The CASHFLOW Quadrant In my book, The CASHFLOW Quadrant, I write about the four kinds of people in the world of money:
E - Employees, those who work for others
S - Self-Employed, those who work for themselves and own a job
B - Big Business, those who own a business and have others work for them
I - Investors, those who invest in cash flowing investments and have money work for them
Nearly every tax break in the tax code favors those who are on the right side of the CASHFLOW Quadrant, the Bs an the Is. They make the most money and pay the least in taxes. Those on the left side, the Es and Ss, enjoy few if any tax breaks and pay the most in taxes.
While I'm not happy about the idea of losing my mortgage deduction, I'm not really worried about it. That deduction is one of my smallest. Regardless of what happens to the mortgage deduction, the child tax credit, and the pre-tax insurance deduction, I'll be fine. Why? Because I'm on the right side of the CASHFLOW Quadrant. I can deduct my business expenses. I can depreciate my investments. I can borrow money tax free to invest in real estate. And instead of earned income, the most taxed income, I receive passive income, the least taxed income.
I'll be just fine. The middle class will not. They'll be the losers in the money war as inflation destroys their savings and the government destroys their tax breaks.
It's Time to Switch Sides
If you're on the left side of the CASHFLOW Quadrant, it's time to switch sides. Things will only get tougher for employees and the self-employed as the war on money rages on.
The best way to switch sides is to increase your financial education. If you don't understand why I can make more money and pay less in taxes because I'm on the right side of the CASHFLOW Quadrant, I encourage you to start learning why. If you do understand, but haven't taken action yet, I encourage you to take your first step. Make an investment. Start building your business.
In the end, the only survivors of the money war will be those who are financially educated and those who relied on themselves—not the government—to survive.