Flight FROM Safety before “biggest crash in world history”?

The author of one of the most famous personal finance books in history, Robert Kiyosaki’s ‘Rich Dad Poor Dad’ is hitting headlines today with his warning we are heading toward the “biggest crash in world history”.  You can read the news.com.au version here.

The reality however is that he is a rare voice at present.  The markets are full ‘everything’s awesome’ right now with consumer confidence sky high, the volatility index (VIX) shorts heading back to 2017 highs, and investors with huge short positions on the traditional safe haven assets of gold and government bonds.  That this coincides with the S&P500 being just 2 weeks off seeing the longest bull market of all time.

The VIX is heading south again, futures at their biggest short position since the sudden reversal at the beginning of this year (S&P500 fell 9.5% in Feb18) and already forgetting the carnage then:

US Treasuries are massively shorted and last week seeing the biggest 1 week addition since November last year at the height of ‘everything’s awesome’.  Likewise shorting Euros against a longer USD is big…

And as an update on what we wrote a couple of weeks ago the Speculators (Managed Money) have now never been so net short gold:

The crux of “Rich Dad Poor Dad” was the lack of education on real finance in schools and that rich dad’s taught their kids about finance giving them an advantage to continue that cycle.  Without the ability to critically assess financial markets people become ‘sheeple’ and follow the herd believing they must know better.  That herd is ‘all in’ risk and short safety right now.  It is the greater fool theory in its simplest form.  A dispassionate look at the current economic environment and reminding oneself of the ‘this time is different’ trap, surely some alarm bells should be sounding.  As Mr Kiyosaki says:

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