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Robert Kiyosaki remains bearish.
“I say crash landing,” the entrepreneur and author of the Rich Dad Poor Dad book series tweeted recently. “I hope I am wrong yet that is what I believe.” Kiyosaki’s comments were related to the ongoing debate about the future of the global economy given the rapid escalation of interest rates.
Economists have long believed that central bank tightening raises the cost to borrow money, which discourages spending and in turn, causes a recession. This scenario is described as a “hard landing” for the economy. In contrast, central bankers believe they can achieve a so-called “soft landing” which means successfully clamping down on inflation with higher interest rates while avoiding a recession.
Simply put, Kiyosaki believes the global economy is heading for a recession. Some signs of this are already evident. The IMF warns that a third of the world faces a recession in 2023, while Germany is already technically in one. Kiyosaki is focused on three assets that he believes are the “best insurance against corruption & incompetence,” of global governments in the face of this crisis.
Kiyosaki’s top pick is gold, which has a stellar track record of withstanding economic chaos. From 1974 to 2008, there were eight years when inflation in the U.S. was considered abnormally high. Gold prices surged an average of 14.9% year-over-year during these eight periods, according to research published in the Journal of Wealth Management.
Gold prices are also up over the past year. Every ounce of the yellow metal is worth roughly 6.8% more this year than last June, while inflation has been between 6% and 4% over that period. Simply put, gold has retained its value despite the cost of living crisis, which is precisely what it’s expected to do.
This is why gold serves as an anchor for portfolios built to maximize wealth protection.
Silver is another favorite among concerned investors like Kiyosaki. In fact, silver outperformed gold during a historic wave of inflation half a century ago. During the 1970s, the price of silver surged 3,900%, while the stock market was up only 188% and gold was up 1,800%. This is why some have preferred silver over gold during periods of high inflation.
However, its potential outlook during a hard landing isn’t certain. Silver’s performance during recessions and economic pullbacks is mixed. In fact, the S&P 500 outperformed silver during five out of eight recessions since the 1970s.
Nevertheless, silver is on Kiyosaki’s list of “best insurance” during a hard landing and that could be a good reason to add it to your watch list too.
Kiyosaki’s last pick is, perhaps, the trickiest. Bitcoin doesn’t have the track record of gold or silver since it was only launched after the Great Financial Crisis of 2008. Since then, of course, it has delivered a tremendous return for early adopters. Later adopters, however, have missed out.
Bitcoin is trading at nearly $27,000, which is more or less the same level it reached in late-2020. That means investors of Bitcoin have had a 0% total return for more than two and a half years. This underperformance is even more egregious when we consider the rise of inflation over that period.
Simply put, Bitcoin hasn’t proven to be an effective inflation hedge outside of the stock market. However, some believe it needs more time to deliver on its promise.
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