Wednesday, May 03, 2006

SLV Robert Kiyosaki says buy silver. The fat lady is singing but who's listening?

Robert Kiyosaki is now promoting silver. Kiyosaki lists five factors he feels are bullish for silver. Kiyosaki is able make cliches appear to have meaning and insight. His thoughts and thinking process are typical of the cliche's noise traders piling onto silver use to rationalize their purchases.
  1. Kiyosaki's first claim is that silver is a consumable precious metal, which makes it different from gold. This is specious. The bottom has fallen out of the industrial market for silver. Silver is the new lead. In 1970 lead has extensive uses: leaded gasoline for cars, lead paint for houses, and non corroding lead pipes for everyone. By 1985 each of these markets were gone. For silver the single biggest market was photography, that market is disappearing at the same 15-25% YoY rate that the lead market shrank. Silver is being replaced in consumer photography, X-ray, and movie photography. It is also being displaced in the offset printing market as well. The imaging market is the industrial market for silver. In ten years the industrial market for silver will be mostly gone, and the market will consist of traders passing metal back and forth.
  2. Kiyosaki then claims to have had a deep thought, that silver is a monetary metal, while "standing on a mountaintop in Peru, doing my due diligence on a gold mine." I deeply doubt Robert Kiyosaki has ever been in Peru doing due diligence on a gold mine. I further doubt that "For years, I [Robert Kiyosaki] have visited gold and silver mining sites all over the world," unless you consider Amway motivational seminars to be gold and silver mines.
  3. For his third claim, Kiyosaki rehashes cliches about the meltdown of the dollar. He makes the profound statement "and the way you short the [dollar] is by going long on gold and silver." Which is false because buying gold is a fiat money vs. hard asset bet, it is not a pure dollar Vs other currencies bet. The price of gold is based on the supply/demand for gold, not on the supply/demand for dollars. The price of gold fluctuates against all currencies together. Any pricing disparity between gold prices and exchange rates will be quickly destroyed by arbitrageurs. If you specifically wanted to short the dollar, then you would buy foreign currencies directly.
  4. Kiyosaki's forth assertion is that "Equities (stocks) and commodities (gold, copper, oil, and silver) are counter-cyclical." and that magical 20 year cycles are the invisible hand that is lifting commodities. Therefore "around 2016 to 2020, start getting back into stocks and out of commodities." The claim that vast deterministic market cycles exist, is baloney. The economy and capital markets are dynamic and ever changing, their movements and behavior are not guided heavenly bodies that can be charted. The psychic friends network was not able to predict their bankruptcy in 1998
  5. Finally Kiyosaki claims that the iShares silver trust ETF (SLV), has made silver accessible to the masses Kiyosaki ends his article with the deep thought: "I could also be wrong -- but at under $20 an ounce, silver is a good buy, in my opinion. I believe it's the last great affordable investment for the masses. And when the masses find out, another bubble will inflate and, of course, at some point burst."

The current ETF fueled gold and silver bubble will end just as badly as all previous bubbles. Gold, like tulip bulbs or internet stocks does not produce income. Precious metals are only a speculative vehicle, a short bus for greater idiots. The only way to make a profit with gold is to find a greater idiot willing to pay a higher price than you paid.


At July 25, 2006 12:17 PM, Anonymous Anonymous said...

Glad to see someone taking a shot at Robert. He is nothing more then a salesman of his books, CDs and games. I am a salesperson myself and realize the importance of giving good advice. Roberts advice only benefits Robert.

At October 03, 2006 2:39 PM, Anonymous Anonymous said...

Robert's advice will only work if you do your own due dilligence and act on it. If you don't listen to his advice at all, or do nothing, you will not benefit. So, unless you took his advice, you have no way to know.

At October 29, 2006 11:41 PM, Anonymous Anonymous said...

I neither know nor care anything about this Robert Kiyosaki character, but the objections to silver investment are patently idiotic and reveal a fundamental ignorance. One, the silver consumed in photography was and is largely recycled, meaning that the supply/demand balance in that instance is basically a wash. Silver is a vital commodity in electronic applications, since it is the best and safest electrical conductor, among its many other uses. Second, anyone who doesn't understand that gold trades as a world currency is a profoundly ignorant poser when it comes to economic or currency issues; look at the monetary reserves of foreign countries, who are increasingly diversifying their currency reserves into gold. And indeed gold is the best way to short the dollar, because foreign central banks would be likely to inflate their own fiat currencies in the event of a dollar crisis, for the purposes of market stability and the ever-popular desire to remain a net exporter to the rest of the world. Third, anyone who looks at a long-term chart knows about the alternating stock and commodity cycles dating back hundreds of years and understands the reasons for them, the biggest being that the long lead time in investment in the infrastructure needed to produce commodities results in oversupply alternating with undersupply. In short, the person who wrote this has no idea what he is talking about; whether the person he is criticizing does or not, I cannot say.

At April 11, 2008 5:39 AM, Anonymous Anonymous said...

Not all fiat money trades up and down
with gold equally. In the case of hyperinflation gold and silver will retain their value.The total national debt is over $60 trillion check out
look at total household net worth vs
total fiscal exposure. Everyone would
have to sell everything they own just to pay for government debt. Obviously
this wont happen, so the government will just print money to cover the debt or as they do now instantly by wiring money anywhere,just look at the Bear Stearns bail out and quickly the money was"printed" for that deal. Now is the time to buy gold and silver before the dollar loses even more value.


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