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Several years ago, I was invited to visit the New York Mercantile Exchange (or NYMEX) by my friend Steven Spivak, a professional commodities trader.

For those of you unfamiliar with the NYMEX, it's the exchange where commodities like orange juice, pork bellies, gold, crude oil, natural gas, copper, and silver are traded. (A good deal of the Eddie Murphy movie Trading Places takes place there.) The New York Stock Exchange (NYSE) trades primarily in equities, as opposed to the commodities traded on the NYMEX.

To my surprise, I was asked to ring the opening bell for the gold and crude oil exchanges, two commodities I'm heavily invested in. As soon I rang the bells, all hell broke loose. Traders like Steven were buying and selling commodity futures?as well as put and call options?as fast as they could.

For Steven, it didn't matter if the market was going up or down. He was busily buying and selling as he ran between the gold and crude oil pits. In less than an hour, he'd made over $70,000 in profits. Not bad for a guy in his 20s.

During that hour, I was standing next to a NYMEX employee. I asked him if he understood what was going on. He replied, ?No. I've worked here for nineteen years and I've never bothered to learn. I like my job, and I don't like the pressure these guys go through every day.? Although I didn't ask, I suspect he's lucky if he makes $70,000 a year.

The reason I'm comparing my young friend Steven to this older, clearly less wealthy man is to give you an idea of the disparity between individuals' earning power in this country. Financially, millions of Americans are being left in the dust. Even this many years later? it's the same story.

Clueless in La-La Land

Which brings me to my politically incorrect thesis for today: Most Americans live in la-la land.

They're clueless about what's going on in the world of money, and still think we're the richest country in the world. In reality, we're the biggest debtor nation there is.

Most Americans also still think our government will protect them. The world is changing at an alarming rate, yet most people here waddle stubbornly through the crosswalk, so to speak, still believing this country has the right of way and that our political institutions are still sound.

Midterm elections will take place next week. The common question regarding the outcome is: Will the Democrats or Republicans win?

But the question should be: What difference does it make? Regardless of which party wins, the rich still make the rules.

The Chickens Come Home to Roost

In Thomas Frank's book What's the Matter with Kansas? : How Conservatives Won the Heart of America(which I highly recommend) a poor man reports that he voted Republican because he wanted to get back at Wall Street.

Can you imagine that? I always suspected that a lot of people aren't very bright. To paraphrase a popular statement, a poor person voting for a Republican is like a chicken voting for Col. Sanders.

What about Medicare? And what about Social Security? I wrote in an earlier issue, Social Security and Medicare were a $65 trillion off-balance-sheet of liabilities. It's reported that the U.S. government will pay out more in Social Security benefits than it takes in this year for the first time since 1982.

Yet in spite of these financial challenges, millions of Americans continue to waddle through the crosswalk of life, expecting our government to take care of them instead of building wealth. They're living in la-la land.

The Catastrophe Ahead

Prior to becoming President of the United States, Donald Trump and I co-authored a book about what individuals can do to address the massive problems facing this country. Our point of view is that, while it would be nice to change the government, doing so seems to be an unrealistic goal at this time.

Instead of changing the government? we recommend you change yourself. A much easier task. You have to prepare for the economic turbulence that lies ahead. If you think political action can save this country from itself, I'm afraid you're dreaming?or perhaps daydreaming as you waddle through that figurative crosswalk.

In the next few years, I believe the United States and the world will go through some of the most financially disruptive times in the history of the world. Once again, the rich will become very, very rich, and the unsuspecting will be left like the passengers on the S.S. Titanic, getting sunk by an economic iceberg.

One way to approach the coming changes is to ask yourself whether you'll be like my friend Steven Spivak?trading rapidly, earning over $70,000 in an hour?or like that 19-year veteran NYMEX employee, content to work for $70,000 a year at best. While both men are working for a dollar that's declining in value, one is earning more than enough of them to stay ahead of its erosion.

Both options are available to each of us. Which reality you choose?deciding on how much you can earn and how fast you can earn it?will determine your station in life years from now.

Learn the Four Foundations of Financial Literacy

My poor dad was not unlike many people in his generation. For them, money was a dirty subject that was not appropriate to talk about, let alone with children. They could get away with this because, for them, things were relatively predictable.

For those of my parents' generation, if you followed the old rules of money, you could be comfortable. This meant going to college, getting a good job, investing in stocks and saving in the bank, and buying a house.

If not for my rich dad, I would probably have grown up following the old rules of money. If you find yourself walking down that path, it's important now, to learn four foundations of financial literacy. These will set both you and your kids up for financial success if you internalize them and spend your life learning more and more about them.

Foundation of Financial Literacy #1: The difference between an asset and a liability

An asset is anything that puts money in your pocket and a liability is anything that takes money out of your pocket.

Your house is not an asset because it takes money out of your pocket each month. Even if you own your house outright, you still have to pay for the taxes, maintenance, and more out of your own pocket.

But if you own a rental property, that can be an asset?if it puts money in your pocket each month as positive cash flow. When your tenant pays rent, they cover your mortgage, maintenance, taxes, etc. And, ideally, some extra tax-free income.

Foundation of Financial Literacy #2: Cash flow versus capital gains

By investing for cash flow instead of capital gains, the rich have control over their income and pay the lowest rate in taxes?which can amount to 0%.

But investing for cash flow, while a simple concept, requires a strong financial education in order to make your own financial decisions.

Foundation of Financial Literacy #3: Using debt and taxes to get richer

Your financial adviser will tell you that debt is bad, and taxes are inevitable. But the rich understand that both debt and taxes can be used to create immense wealth.

When it comes to taxes, the rich understand that governments write tax codes to encourage specific types of behavior. If governments want you to build affordable housing, they give you a tax cut. If they want to encourage oil exploration, they give you a tax cut. If they want to see higher employment, they give you a tax cut.

The secret is that most tax benefits are made to help entrepreneurs and investors. With the right financial education, you too can utilize the tax code to not only get richer, but also pay nothing in taxes.

Foundation of Financial Literacy #4: Making your own financial decisions

The rich don't follow the crowds. They set the trends and are gone by the time the trends become mainstream. What's their secret? They think for themselves about money and make their own financial decisions because they have a high financial intelligence.

The key to building great wealth is having great knowledge to act on and great wisdom to know which course of action is best.

Regards,

Robert Kiyosaki
Editor, Rich Dad Poor Dad Daily

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