Kiyosaki bets on gold


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J

joetaxpayer

I couldn't make this kind of thing up.

I really wasn't looking for this, but after our recent
chat about this charlatan, I couldn't help but notice
this on the front page of http://finance.yahoo.com

Bet on Gold, Not on Funny Money
by Robert Kiyosaki

http://finance.yahoo.com/columnist/article/richricher/7810


Jeez. I think this guy may be more dangerous to people's
financial well-being and net worth than Cramer.
In my website I updated recently with this anecdote;

Okay, I'm back for more. This time she replied to a retiree who wrote to
her in "The Costco Connection." I'll quote the question;

"I am retired and have concerns about the dollar continuing to lose
value. I have been considering moving a portion of my funds into
precious metals as a hedge against the dollar. Would this be wise?"

I was floored to read her answer, in sum, she first said she believes in
diversification, and also states that the metals have already had a big
run. Then the punchline; "So consider placing just a portion of your
assets in precious metals; as much as 20% seems reasonable to me."

20% in metals? For a retiree? Suze - have you seen the charts for Gold
for the last two centuries? Have you read any of the books on my list?
This 20% can be invested to grow with minimal risk and double in 12-14
years. Metals?


The idea that so-called financial advisors (what does Suze call herself,
anyway?) are suggesting this sickens me. There seemed to be consensus
here that 4% is a good retirement withdrawal rate, and she suggests, in
effect putting 5 years' worth of spending in a dead asset. Why does this
remind me of the tech bubble? Because when the shoe shine boy is talking
stocks, it's time to sell? When Gold (or anything else) is at a 26 year
high, maybe that's not a buy signal.
(Above, my 'reading list suggestion is "Stocks for the Long Run" by
Jeremy J. Siegel, the long term charts are worth the cost of the book.)

JOE
 
S

SD

I couldn't make this kind of thing up.

I really wasn't looking for this, but after our recent
chat about this charlatan, I couldn't help but notice
this on the front page of http://finance.yahoo.com

Bet on Gold, Not on Funny Money
by Robert Kiyosaki
Funny Money? That sounds eerily like one of the nutcases on m.i.stocks
 
S

speednxs

There is an obvious conclusion when people choose to call names, but
not comment on the content a person's message.

Here is a nibble of Kiyosaki from the article:

"My strategy remains the same as it's been for years: I bet on real
money, which is gold and silver. I also continue to borrow funny money
to buy real estate. Since oil and gas are in high demand globally and
appear to be going up in price, I also invest in oil and gas
production.

Again, I'm not really betting on these assets -- I'm primarily betting
against the dollar, and the leaders who manage the U.S. economy.

Now you know why I buy more gold and silver every time they drop in
value in the current economic environment. What smart investor wouldn't
gladly spend funny money to buy real money?"

Am I to understand that you think oil, gas, gold, silver and real
estate will become less valuable in the future and dollars more
valuable? You value dollar denominated assets?

I'm betting with Kiyosaki.
 
J

joetaxpayer

speednxs said:
There is an obvious conclusion when people choose to call names, but
not comment on the content a person's message.

Here is a nibble of Kiyosaki from the article:

"My strategy remains the same as it's been for years: I bet on real
money, which is gold and silver. I also continue to borrow funny money
to buy real estate. Since oil and gas are in high demand globally and
appear to be going up in price, I also invest in oil and gas
production.

Again, I'm not really betting on these assets -- I'm primarily betting
against the dollar, and the leaders who manage the U.S. economy.

Now you know why I buy more gold and silver every time they drop in
value in the current economic environment. What smart investor wouldn't
gladly spend funny money to buy real money?"

Am I to understand that you think oil, gas, gold, silver and real
estate will become less valuable in the future and dollars more
valuable? You value dollar denominated assets?

I'm betting with Kiyosaki.
Go with your heart, my friend. I wish you success.

Those who listened to the "gold bugs" back in 1980 and bought at $800
are still waiting to break even.
Those who bought the S&P at its recent high of 1500 (well, to me 2000
was recent) are already near break-even as the S&P still offers dividends.
I haven't run the numbers to include dividends, but in Jan 1980, the S&P
closed the month at 113, it's up 10 fold. 26 years of added dividends
likely double that, but my point is made.

If you are that anti-dollar you might consider foreign stock funds
(mutual funds). That would give you the best of both worlds.

JOE
 
I

Ignoramus14720

This comment is not addressed to make a precise objection to what Joe
or the previous poster said. I am a little bit prejudiced against
"soundbite investing". An example of such soundbite advice is to "flee
funny money, buy gold" or "stocks performed well in the last ___
years, buy stocks", etc.

There are several factors that any rationally thinking investor should
consider. Such as

* What is the price of the asset in relation to what it can possibly
earn (like for businesses) or production cost (like for commodities)

* What are exactly the risks of owning such assets in terms of impact
on investor's life (shorting or owning currencies have special
considerations)

* How deep is one's understanding of the asset

* Are there better alternatives, offering better rewards or less
personal risk, or more understandable opportunities.

Any soundbite advice that fails to consider price/reward ratio of an
asset (like "flee funny money, buy gold") is completely flawed, lacks
logic and thus cannot possibly be a basis for any decision.

Kiyosaki basically makes two leaps of logic in one sentence, one which
is that he does not like the dollar, and another that gold or other
commodities are the best alternative to the dollar. He poorly explains
the rationale for these two leaps of logic.

I happen to be pessimistic about the dollar, due to the following
considerations:

1) We are running a large foreign deficit
2) It cannot continue indefinitely
3) It would take a substantial price change (price of foreign
vs. domestic goods) for equilibrium to be re-established.
4) With a large amount of dollar denominated debt, devaluing the
dollar may appear attractive to dolar debtors.

The simplest alternative to having dollar assets is to have similar,
but foreign currency denominated assets, such as currency savings
accounts or foreign securities. (some of which trade on US markets as
depositary receipts).

Commodities do not have US dollar denominated equivalents, they are a
special asset class with their own risks and fundamentals (production
cost, industrial use, consumer demand etc). Recommending them as a
alternative to dollar without going into details is very cavalier and
ignores subtleties of investing decisions. That is especially so now,
after their price rose so much. Price and value were not at all even
looked at by Kiyosaki.

Risk of investing into foreign currencies should be seen against a
backdrop of a possibility, small but not nonexistent, of large loss of
purchasing power of the dollar. So the little foreign currency
fluctuations suddenly do not look that risky.

Similar soundbite advice is often applied to US stocks as well, when
advice given ignores some basic things such as their price. I think
that it ought to be clear that buying a dollar of earnings for, say,
$20 is less attractive than buying a dollar of earnings for $10. And
yet that is rarely said, usually stock related advice centers of some
not so relevant things such as how well they performed in the past
(when they cost less).

So, the summary of what I wrote is that soundbite investment advice
can be easily recognized by spotting a lack of logic or systematic
consideration, and the best one can do about such advice is to ignore
it.

i
 
D

Douglas Johnson

speednxs said:
What smart investor wouldn't
gladly spend funny money to buy real money?"
Could you define "funny money" and "real money"? The paper dollars in my pocket
are much more real in day-to-day terms than gold. I can't buy anything with
gold without first converting it to dollars.
Am I to understand that you think oil, gas, gold, silver and real
estate will become less valuable in the future and dollars more
valuable? You value dollar denominated assets?
Oil, gold, silver, and real estate are not money. They are assets and the
value of them goes up and down relative to each other and to dollars just like
any other asset.

I value dollar denominated assets because dollars are the only things I can
spend in my home country. Try buying lunch with a barrel of oil.

Having said that, I'll note I am over weighted in international stocks,
including international mining stocks.

But terms like "funny money" and "real money" are emotional terms, not useful
investment terms. Alarm bells go off when emotional terms are used by someone
attempting to give investment advice.

-- Doug
 
S

speednxs

I'll respond to joetaxpayer, ignoramus14720 and Douglas Johnson in
one post.

The S&P 500 is a huge disappointment to me. It didn't do much during
the 1970s, but it did have a very good run from 1980 to 1985 and 1995
to 2000. Your 26 year period conveniently includes these two boom
periods. I looked at the dividend yield

<http://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/spearn.htm>

and for the last ten years it has mostly been under 2%. This is lower
than the inflation rate even before taxes.

I had a wad of money to invest in 2000. I sure am glad I put it in
California Real Estate and not the S&P500. I never would have left it
in while my investment was cut in half from 2000 to 2002.

In reality you need to take money out of the stock market when you need
to. Maybe you can wait a year or so, but if you are buying a house,
changing jobs, moving to more conservative investment due to age,
starting a business or paying for a college education you can't
necessarily wait 5 to 10 years for the peak.

Foreign stocks are something I hadn't really considered because I
know so little about foreign countries. Maybe it's time to study up.

I still might invest in the S&P 500, but it will be hard on my nerves.

If you like history, the value of the dollar has gone done
consistently. 2% to 3% is commonly quoted, but I think the real rate
is much higher. Productivity increases tend to hide inflation. Most
electronic products are good examples. Hoover dam cost $165 million.
Money sure don't buy as much as it used to. The budget deficits
really scare me. Inflation is a convenient way for the government to
solve it's debt problems.

As dollars become worth less, "real" assets tend to be worth more.
Plus there is a lot of demand from China and India for commodities.
This may all work itself out, but it is hard to ignore. It's easy
enough to sell assets for dollars when you want to buy something. Even
real estate, which I own, can be sold in 3 to 6 months.

I'm willing to beat up on Kiyosaki when he's wrong. He does need
big, splashy attention grabbing headlines to sell his books. So there
is simplification and emotion in his work. How many products position
themselves as an aphrodisiac? Do girls really want guys who drink
beer, drive Camaros and spray on Hai Karate? I'm guessing not.
Kiyosaki does explain financial statements, the difference between
defined benefit and defined contribution retirement plans, being long
and short in the stock market, real estate and commodity investing. So
he does some things well.

Actually each of you gave me something valuable to think about because
you look at things from a different perspective.

Thank you
 
I

Ignoramus24559

Speednxs, I am sorry, so, what is your investment plan for now? To buy
gold? Or silver? Or oil futures? You were quite correct in noting that
sometimes stocks are too expensive to invest in, but you were a little
vague in your plans.

Like you, I also decline to buy "stocks in general", like indexes and
mutual funds, when they seem too expensive, regardless of various
"long run" propositions. That means that I missed some rallies and,
more pleasantly, some crashes.

I think that I have yet to hear some coherent analysis from you as to
why it makes sense to invest in whatever you want to invest (several
required analysis points that I mentioned in my previous post).

Myself, I still do hold some small quantity of silver, I had twice
more but sold that a few months ago. It is not at the price now where
I would consider buying, though.


i
 
N

nosmo king

speednxs said:
There is an obvious conclusion when people choose to call names, but
not comment on the content a person's message.

Here is a nibble of Kiyosaki from the article:

"My strategy remains the same as it's been for years: I bet on real
money, which is gold and silver. I also continue to borrow funny money
to buy real estate. Since oil and gas are in high demand globally and
appear to be going up in price, I also invest in oil and gas
production.
In the referenced article, he also said:

"In 1996, I founded a gold mining company in China and a silver mining
company in South America. Both companies eventually became publicly
traded on the Canadian Exchanges".

Last I heard, none of his claims like these, or being a major investor
in start-up companies, have ever been verified. I'll stick with
getting my investment advice elsewhere (such as this ng!)
 
I

Ignoramus24559

In the referenced article, he also said:

"In 1996, I founded a gold mining company in China and a silver mining
company in South America. Both companies eventually became publicly
traded on the Canadian Exchanges".

Last I heard, none of his claims like these, or being a major investor
in start-up companies, have ever been verified. I'll stick with
getting my investment advice elsewhere (such as this ng!)
The onus of proof of his "success" is on him, and he has not fulfilled
it. He is a waste of time.

i
 
J

joetaxpayer

speednxs said:
I'll respond to joetaxpayer, ignoramus14720 and Douglas Johnson in
one post.

The S&P 500 is a huge disappointment to me. It didn't do much during
the 1970s, but it did have a very good run from 1980 to 1985 and 1995
to 2000. Your 26 year period conveniently includes these two boom
periods. I looked at the dividend yield

<http://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/spearn.htm>
The disappointing 70's had a total return of 92.7% per the link you
above. The index was up only 17%, but dividend offered the balance.
That beat inflation, and while owning gold may have been right for the
run up, those who held it since got destroyed, while those who kept
their stocks enjoyed a 10 fold return.
JOE
 
W

Will Trice

speednxs said:
If you like history, the value of the dollar has gone done
consistently. 2% to 3% is commonly quoted
Money sure don't buy as much as it used to.
I believe this is called, "inflation."
Inflation is a convenient way for the government to
solve it's debt problems.
So the government *likes* inflation? Are they also causing it? I know
some disagree with the Fed policies, and the Fed has been blamed for
recessions, but...
As dollars become worth less, "real" assets tend to be worth more.
So partial ownership of a company is an "imaginary" asset?
Plus there is a lot of demand from China and India for commodities.
This may all work itself out, but it is hard to ignore. It's easy
enough to sell assets for dollars when you want to buy something. Even
real estate, which I own, can be sold in 3 to 6 months.

I'm willing to beat up on Kiyosaki when he's wrong. He does need
big, splashy attention grabbing headlines to sell his books. So there
is simplification and emotion in his work. How many products position
themselves as an aphrodisiac?
How many of them work?
Do girls really want guys who drink
beer, drive Camaros and spray on Hai Karate?
Of course they do, duh. Just like following Kiyosaki is going to make
me rich!

-Will
 
B

Bucky

Douglas said:
But terms like "funny money" and "real money" are emotional terms, not useful
investment terms. Alarm bells go off when emotional terms are used by someone
attempting to give investment advice.
Good advice.
 
G

Gil Favor

well, the Chinese are about finished with their Three Gorges
Dam project, and at some point they will be finishing up
their other, numerous dam projects. And at some point, they
will stop building skyscrapers when they figure they have
enough vacant office space (they have a TON of empty office
space). Whether or not China comes crashing down, as it
just might, it will certainly calm down, and commodity
prices will fall back to earth.

buy high, sell low?
 
B

BreadWithSpam

Will Trice said:
speednxs wrote:

So the government *likes* inflation? Are they also causing it? I
know some disagree with the Fed policies, and the Fed has been blamed
for recessions, but...
If it's used to "solve the debt problem" it's likely to have
to be high enough to cause huge economic disruptions which
are far worse than the debt, at least so far.

On the other hand, it can be argued that a *steady* and
*moderate* rate of inflation is a good thing economically.
It (a) motivates people to put capital to use - if there
is no inflation - or especially if there is deflation -
people take cash and sit on it, stick it in their mattresses,
etc - instead of investing it in economic growth through
either lending it (bonds) or buying/starting businesses
(stocks, small businesses, etc). (b) it helps deal with
certain economic goods which have price-stickiness (ie.
labor costs - prices of lots of goods go up and down
as the market demands (think, say, oil or gas) but certain
things are a lot harder to move in one direction or the
other (ie. labor costs - you can give people raises or
keep their wages steady, but it's very hard to cut wages)
so by having overall prices move, those other things can
have changes in their value without anyone having to change
them (ie. instead of wage cuts, they just don't give raises).

But for the above two things to help more than they hurt,
inflation has to be *moderate* and *steady* and predictable.

The things wrong with Kiyosaki's article on gold are numerous -
from the fact that he gives no suggestion of scale or risk
to the fact that he doesn't define "funny money" investments
in the slightest (is he talking about dollar bills, cash in
money-market funds, corp bonds, TIPS, domestic equities - what -
all of those things are generally traded in dollar values
but almost none of them is "money" and all except one of
them actually has values that tend to move along with
inflation). The article is complete crap. If he wants folks
to protect against a falling dollar, loading up on gold -
especially *after* a huge runup - is absurd. An argument can
be made for having a little exposure to gold in one's
portfolio, but it's not a no-brainer argument and it's
certainly not represented in Kiyosaki's crapola.

As far as his claims to have either moved to gold or
to have started mining companies, take them with a grain
of salt. He's never actually demonstrated that his ideas
or suggestions either work nor that he's actually implemented
any of them. What he has proven is that he's a phenomenal
marketer of *himself* and he makes a lot of money selling
that.
 
S

speednxs

I have to agree with most of what you said here.

Yet, the world changes. Other countries may start to enjoy the high
consumption of natural resouces Americans have become used to. This
puts a big strain on natural resources. So in getting me to think
about this, Kiyosaki has done about as much as I expect. It's up to me
to further investigate and figure out what it all means.

I'm sure there were American Indians who looked at the white man and
his industrialization and said it was just a passing fad and nothing
would come of it. Given the outsourcing of manufacturing, maybe they
were right.

Thanks for the discussion.
 
D

Douglas Johnson

Will Trice said:
So the government *likes* inflation? Are they also causing it? I know
some disagree with the Fed policies, and the Fed has been blamed for
recessions, but...
I don't think the government especially likes inflation, but the Fed is
definitely causing it. Money is subject to the laws of supply and demand, just
like anything else. Since the Fed is in charge of supply (with their printing
press) and has some control over demand, they are pretty much in charge of
inflation.

In retrospect, the 70's inflation was caused by the Fed expanding the money too
fast. At the time, there was a lot of nonsense about "wage-price spirals",
Gerald Ford's "Whip Inflation Now" campaign, and Nixon's price controls. But
Milton Friedman was a lone voice in the wilderness saying that inflation was
caused by too much money chasing too few goods.

The inflation rate fell fast in the early 80's when Paul Volker became Fed chief
and turned off the money taps. These days, the Fed has decided that small
amounts of inflation (ca. 2% a year) is better than deflation, which has been
dogging the Japanese economy for the last 15 years.

-- Doug
 
S

speednxs

joetaxpayer said:
speednxs wrote:
The disappointing 70's had a total return of 92.7% per the link you
above. The index was up only 17%, but dividend offered the balance.
That beat inflation,

According to the Bureau of Labor Statistics Inflation Calculator $100
of 1970 goods and services would cost you $212 in 1980. Dividends are
taxed annually and I believe tax rates were higher back then. I'm not
so sure that re-investing after tax money would have kept up with
inflation. Keeping up with inflation is a pretty poor target anyway.

You apparently own the S&P 500 and are happy with it. Good for you.
It had a couple of really good run ups. I hope you get more.
 
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P

Paul Michael Brown

If you are that anti-dollar you might consider foreign stock funds
(mutual funds). That would give you the best of both worlds.
Excellent point here. If you want to play a falling dollar, you can buy an
EAFE index fund from any of the major players. You'll be investing in the
most successful companies in the Europe, Australia, and the Far East (not
volatile emerging makets). When the profits of those companies are
converted from their local currencies to dollars, you'll do better when
the dollar is relatively weaker. And it's an index fund, so your fees and
transaction costs are going to be minimal.
 

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