The Baby-Boomer Crash No One Is Talking About

Most financial advisors say you can’t predict the future. These experts claim you can’t pick a market’s top or bottom. And since you (or they) can’t predict the future, they advise that you just leave your money with them for the long term.

For most people, this is good advice. But for those who want to get rich, being ahead of the market’s next move is one of the best ways to amass wealth.

The best way to predict the future is to study the past or prognosticate. My rich dad often said, “There’s a difference between a fortune-teller and a prognosticator.” That’s why he encouraged me to take the study of history seriously.

Over the years, I’ve read some great books on economic history that have opened my mind to the world we face today

Unfortunately, we had a big crash in 2000, they called it the dotcom crash, then in 2008 it was the subprime real estate crash, which I predicted.

While I don’t know when the next crash will happen—though I know it will, crashes always happen—the next one will devastate baby boomers. It will be like an avalanche.

Don’t just learn how you might recognize a looming crisis but, more importantly, how you can make money from it. The greatest opportunities to invest occur when things are at their worst.

Trump’s Role in the Next Crash

The bull market has reached almost 3500 days old. The longest on record by most definitions. “Never-Trumpers” never thought this bull market could happen.

Two years ago, it was former Clinton and Obama chief economist, Larry Summers, who said “Under Trump, I would expect a protracted recession to begin within 18 months. The damage would be felt far beyond the United States.”

He was wrong.

This time, last year, filmmaker Michael Moore predicted a Trump-driven economic crash. He advised, at the time, not to invest in the stock market. FYI, he is the last person I would take stock market tips from.

I wrote two books with President Trump. In fact, I hold the distinct honor of being the only person to have authored as many with him.

I can tell you Trump is just Trump.

What you see is exactly who he is. He doesn’t pretend he’s something else. He’s a good man. This I know.

And as you know, there’s no news without Trump anymore. I turn on any US station, it’s either Trump said this, Trump said that, Trump will do this, or will do that.

He’s shaking everything up.

If you look beyond the headlines on the news, however, there’s something that the media isn’t talking about and it’s happening now at the Federal Reserve.

President Trump will be the first president since Woodrow Wilson (during whose administration the Federal Reserve was established) to have appointed as many board members to the Fed. So far, he’s filled two open seats and has the opportunity to remake the Fed board in his first two years in office by filling six of seven positions.

No matter how you feel about the president, Trump’s nominees will control the Fed. It will be Trump’s Fed.

The Fed’s Role in Our Economy

The Fed is the gatekeeper of the U.S. economy and, as such, it regulates the nation’s financial institutions.

Prior to 1913, Congress passed and President Woodrow Wilson signed the 1913 Federal Reserve Act. At the time, the United States had no central bank. Today, the Fed is tasked with managing the U.S. monetary policy, regulating bank holding companies and monitoring risk.

The Fed is desperately trying to reflate the US economy and, thereby, the global economy—and it is succeeding, at least for the moment.

Preventing a worldwide credit bubble from collapsing is a lot to ask of the Fed, but the truth is that the fate of the global economy will be determined by what the Fed does during the months and years ahead.

Some of the Fed’s most notable events during history:

  • In the early 1930’s the Fed failed in its original mission to prevent financial panics from turning into economic crisis. A third of all US banks failed and the economy spiraled into a decade-long depression.
  • 1971, Nixon took the dollar off the gold standard giving us the saying that the U.S. dollar is backed by the “full faith and credit” of the U.S. Government.
  • Alan Greenspan, Fed Chairman until 2006, bailed out the speculating community so consistently following each and every market dip that the public came to believe that investing in stocks and property was a guaranteed path to riches. All the while, he championed financial sector deregulation and encouraged the development of a $700 trillion (largely unregulated) derivatives industry.
  • During the financial crisis of 2007, the Federal Reserve came under heightened focus while its role in setting economic policy drastically expanded. I, among others, scrutinized the Fed for its policy of Quantitative Easing (QE) which was a policy intended to help the recovery but instead ballooned the Fed’s assets to $4.5 trillion in 2017.

Plan, Prepare, Act

If you plan now, prepare, and act out based on your preparation, your financial future may be much brighter even if the biggest crash in the history of the world does not occur.

Being proactive, educated, and prepared is much better than the financial strategy most people have when it comes to their investments—the passive strategy of “buy, hold, and pray” almost guarantees you’ll lose money. And it gives you no control over the outcome of your investments.

Of course, people who believe that the stock market only goes up and never comes down probably also believe in the infallibility of the U.S. government, “full faith and credit,” and maybe the Easter Bunny, too.

I am pretty optimistic I am going to make even more money when the next crash comes, but unfortunately for most, those who are not prepared will not fare quite as well.

The next is going to be the biggest of all. When it’s coming I don’t really know, but the foreshocks are sounding right now.

The global economy is an enormous credit bubble that was reinflated after 2008 by historic low interest rates and Quantitative Easing.

The economic policies President Trump has proposed are likely to cause interest rates to spike.

If they do, the global bubble will pop.

If it pops, the world could be plunged into a new Great Depression.

Don’t be a victim of the avalanche.

Keep studying, keep focusing, keep sharpening your financial mind.

Play it smart,

Robert Kiyosaki

The Daily Reckoning