Buckle Up the Roller Coaster Economy is Heading Down

In the clip above, we see an interview with Rich Dad, Poor Dad author Robert Kyosaki from June 28, 2015.  He has been predicting a major stock crash in about 2016 since 2002.  If you listen to the first few minutes of this clip, you'll see his reasoning.  I'll brief you on it in this post.

As some of you may know, I'm a big picture guy.  I've been interested in the economy since high school in the mid-80's, and have read a lot of books by people who have various views on where our world is going.  Here's the gist of it:  We're in for a rough ride financially in the next couple of years, and possibly for several years.  I'm aiming this post at the guys I know running businesses, so I'm going to give VERY brief looks at a variety of things that will affect your business in the near future.

First of all, since 1974, everyday people have been investing in 401k retirement plans, which is what Robert Kiyosaki, in the clip above, bases his theory for a crash on.  To over-simplify this idea, the huge Baby Boomer generation invested millions and millions of dollars into 401k's.  That money went into mutual funds and into the stock markets.  But by law, they have to start taking that money out at age 70 1/2.  So their retirement money has continually fed the stock market for decades.  But this year, the older Boomers have to start taking their money out.  Next year, another group has to start taking their money out.  This keeps going on and on for a couple of decades.  So it's going to be really hard for the stock market to keep going up when a huge number of retirees HAVE to take their money out.  Behind the Baby Boomers come Generation X, a much smaller generation, who are about to get completely scalped in the stock market.  Behind them come the Millenials, and guess what, they just watched their parents and grandparents get wiped out in 2008-2009.  By and large, they don't want anything to do with stocks.  So the long term outlook on the U.S. stock market isn't good. 

So far this MONTH (it's Jan. 21, 2016 as I write this), the Dow Jones Industrial Average is down nearly 2,000 points.  If you watch the financial news networks, they don't really have a clue what's going on. 

The Federal Reserve has kept interest rates abnormally low for about a decade.  The good part is that means cheap money for businesses.  The bad part is, they can't lower interest rates much if they see the need to.  In December they raised interest rates a tiny bit, and now all hell has broken loose in the economy.

As many of you know, the Chinese economy has been going gangbusters for several years.  But not that's slowing down dramatically.  No one is sure just how much, because no one trusts the numbers China puts out. 

The World Economic Forum is going on in Davos, Switzerland right now, and the majority of CEO's of major companies are worried about the global economy in the near term.

The global economy is skidding to a near halt.  So their aren't a major amount of consumers anywhere.

The U.S. economy is growing slowly, but it's about the only one in the world.  And our consumers have lost a huge amount of buying power over the last three decades as the middle class disintigrated as high paying factory jobs were taken over by robots or shipped to other countries. 

Then there's the factor we all know about, but tend to forget:  technology.  Think about the music industry in 1990.  MTV, Rolling Stone Magazine, some LP's, a few cassettes, and tons of CD's being sold.  Musicians played gigs to attract a major label and sign a huge record deal.  Now what is that industry like?  Most people don't even want to pay for the music.  Ticket prices have soared, and there are million of indy groups and musicians building their own followings and DIYing it.  That kind of dramatic change is going to happen to EVERY industry.  The music, print, and movie industries have seen it already.  Technology killed the taxi industry I used to be a part of.  Right now banks and colleges, among many other groups, are struggling with the new world tech has created.

Another thing few people are aware of is the rise of the mega-cities and mega regions.  Economically, huge parts of the U.S. are dying, or at least in a state of serious atrophy.  I live in one of those areas.  Meanwhile, the businesses that are doing well are clumping together in certain regions, like high tech in Silicon Valley (San Jose/Bay Area), California, Boston, Austin, Seattle, and SoCal.  These huge mega cities (10 million people or more) or mega regions are growing, while most of the country is in a state of decline, trying to figure out what to do.  A mega-region is a large area of cities and suburbs grouped in a relatively concise area.  Think NorCal, SoCal, Boston-NYC-Washington D.C., Texas Triangle, the Raleigh Research Triangle, Seattle-Vancouver-Portland, etc.  These places are where the smart, creative people are grouping, and that's where the new businesses driving the changing economy are setting up shop, BECAUSE the talented people are there.  Meanwhile, most of the rest of the country is declining.  Where are you?

Oh yeah, and the commodity bubble has burst, sending oil prices and many other indutrial products down in prices, which is also rippling through the economy right now.

So what does this mean for your bike company, skate company, shoe company or other business?  Remember the early 1990's?  That's the kind of situation you should expect.  Time to get lean, look for opportunities the technology provides as your industry changes, and keep some cash on hand to take advantage of opportunites as they arise.  A lot of businesses will fail in coming years, but a whole lot will also be born.  Economic downturns are some of the most creative times for business.  Get ready, it's gonna be an interesting ride!  Oh, and if you happen to know a day trader living in a really nice house, that house may be for sale cheap soon.