The famous Rich Dad, Poor Dad author Robert Kiyosaki states that the United States might face a future of unprecedented economic crevasse. As prices continue climbing, the Federal Reserve System no longer addresses inflation as transitory.
As per Kiyosaki’s recent video interaction, Kiyosaki stated that the shortfalls in social security, rising inflation, and massive healthcare funding serve as the key facets affecting the economy. This could possibly hammer a tremendous number of baby boomers.
The United States consumer price index jumped to 8.5% a year ago, marking the fastest hike since December 1981. This drove the increase in interest rates, which is casting a Goliath-sized shadow over the stock market. Investing veterans have blasted this nasty cycle, and Kiyosaki was one of the experts to sound the alarm.
According to Kiyosaki, “When inflation goes up, we’re going to wipe out 50% of the U.S. population.”
He’s surely not so pleased with the current state of the U.S. economy. But what exactly does he mean by this statement?
Time to Protect Yourself
Kiyosaki is a huge fan of safe-haven assets like silver and gold. Well, this is not much of a surprise given his grim outlook.
For centuries, precious metals have helped investors preserve the purchasing power of fiat money. Gold prices have gone up to 8% to fate, and Russia’s invasion of Ukraine provided a platform for investors to check out the yellow metal.
In 1972, Kiyosaki first purchased the yellow metal as an investment, but he favors silver in today’s economic environment. In fact, in Kiyosaki’s tweet, he mentioned that he purchased 2,500 American Silver Eagle bullion coins and expressed his bullish reasons for doing so.
Kiyosaki tweeted, “Gold already moved up. Bitcoin is still too high. Silver is 50% below its all-time high. Silver is an industrial metal as well as $.”
Consumer Crunched
“America has stopped producing products. We produce bubbles,” Kiyosaki says, underscoring that the U.S. now has bubbles in stock, bond, and real estate markets.
The renowned author openly reproaches President Joe Biden’s decision to halt the Keystone XL oil pipeline, which he strongly believes to be the primary reason for high energy prices.
Kiyosaki believes that once the bubble bursts, the stock market will crash, and people who are sitting on their 401(k) are toast, and this spells trouble for people who want to make the most out of their golden years.
The pension that these elderly should have been enjoying will get burst, and they will have no money for retirement.
Bubble Tactics
All bubbles eventually pop. And whenever they do, many people see their wealth take a substantial hit. However, these declines also open up opportunities for people who are willing to purchase amidst the dip.
Bubbles can also be a good thing. This is because its occurrence puts everything in the market on sale, giving people a chance to enter and make enormous profits in the market.
The author expressed “buying real estate at bargain prices” during the great financial crisis back in 2008. Just imagine how much he made for buying them at a full swing sale. No one can probably deny that it was such a sharp move.
One of the greatest investors of all time, Berkshire CEO Warren Buffett, said, “Be fearful when others are greedy, and be greedy when others are fearful.” Take courage every time the market seems to be a scary place to be.
The stock market finished a bit lower on Wednesday after consumer prices disembark a higher than expected. Despite the fact experts think that inflation may have skyrocketed, the FED may still need to increase rates more aggressively because it would take quite a long time before it returns to normal levels.
After March’s surge in gas prices, slower inflation in April was given back in April, which was a knock-on effect brought by the Russia-Ukraine war.
The recent inflation data frightened some investors, who continue to dump riskier assets like cryptocurrencies amidst the ongoing selloff in the market. According to Coin Metrics, Bitcoin prices even fell to around $29,000 (7%) before diminishing back losses.
Stocks to Own When Inflation Spikes
In Buffett’s letter to shareholders back in 1981, Buffett spotlighted two characteristics that assist companies in thriving amid high inflation.
First is the ability to increase prices easily, and next is the ability to put on the payroll businesses without the need to spend too much. Basically, it all boils down to investing in asset-light businesses with pricing power.
Here are some of the businesses that fit those criteria:
Coca-Cola (KO)
Coca-Cola is a “recession-resistant” business since the business thrives whether the economy is struggling or booming. This is because a can of cold Coke is still affordable despite how the market is doing.
The company also has a simple trick up in its sleeve that made its profitability just fine: keeping its selling price the same but subtly downsizing its bottle size.
The iconic brand portfolio also played a great role, not to mention that its products are available in over 200 territories. There’s surely no doubt that Coca-Cola’s business model can thrive through thick and thin.
The company survived many periods of inflation in its one hundred years in the industry. At the time of writing, Berkshire owns 400 million shares within the company, which is worth around $23.8 billion.
With the company’s current price, you have the opportunity to lock a dividend yield of about 3%.
American Express (AXP)
American Express (AXP) is at an advantage in an inflationary environment like what we have right now.
The company makes most of its money through discount fees, whereas the merchants are charged a portion of every Amex card transaction. As prices of services and goods increase, American Express gets to make money out of the larger bills.
The business is currently booming, with a 30% revenue increase in the last quarter of 2021. Berkshire Hathaway holds high regard for this company, positioning it just behind Bank of America and Apple— it is the empire’s third-largest holding.
American Express is at $170 per share, but aspiring investors can buy a smaller piece of the company through investing applications that permit buying small portions. It currently offers a dividend yield of 1.2%.
Apple (AAPL)
A fully decked-out iPhone isn’t actually a good steal, but patrons love splurging money on Apple products anyway.
Apple management disclosed that the company’s active installed base of hardware had outperformed 1.65 billion devices, including more than 1 billion iPhones.
Many consumers want to live inside the Apple ecosystem and not on other cheaper devices. This only means that Apple can pass higher costs to its global consumer base without stressing as much about the descent in sales volume as inflation spikes.
