Rich Dad, Gold Bug

Donald Trump and Robeet Kiyosaki might want to compare notes if they plan to appear together during the Los Angeles Real Estate Wealth Expo next month - what The Donald has been saying in TV commercials doesn't seem to match up very well with what The Son has been writing lately.


Spared from having to view roughly 98 percent of the commercials airing during programs that are replayed on a faithful Tivo, now well into it's fourth year of service, to have seen this spot at least three times now is a sure indication that it is in a very heavy rotation leading up to the event in a few weeks at the L.A. Convention Center.

Donald Trump: Come see me at the Learning Annex Real Estate Wealth Expo and learn the secrets to making millions, even billions. I've done it, so can you. I'll be teaching you how to make serious money in real estate. If you're a first time buyer, or an experienced investor, this event will change your life.

Asian Woman: Great information. Very motivational. A hundred percent recommended.

Trump: Join me and Rich Dad, Robert Kiyosaki. We'll tell you the secrets to success. Stop dreaming and start doing. Register now!

Did you just read that in your best The Apprentice Donald Trump forceful monotone? Yes, it's hard not to do, but what about the content?

First time buyer? Change your life? That's entirely possible.

Planning for this event must have been done well in advance, so it's reasonable to think that when the deposit checks were being made out sometime last year, Southern California real estate had a completely different feel to it than it does now. That is, wildly bullish optimism where everyone grows fabulously wealthy by mailing in their monthly mortgage payment vs. the trepidation that is associated with For Sale signs that now sprout like weeds.

Oh well, the show must go on.

Although it's natural to wonder what The Donald will be teaching aspiring real estate millionaires (and don't forget the aspiring billionaires), you don't have to wonder what Robert Kiyosaki thinks about real estate these days - he's been writing about it lately.

We all know a real estate crash is coming. The problem is we don't know when.
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I love [market crashes] because that's the best time to buy -- finding true value is a lot easier during such periods. And since so many people are selling, they're more willing to negotiate and make you a better deal.

Although a crash is the best time to buy, the market's high pessimism also makes it a tough time to do so. I remember buying gold at $275 an ounce in the late 1990s. Although I knew it was a great value at that price, the so-called experts were calling gold a "dog" and advised that everyone should be in high-tech and dot-com stocks. Today, with gold above $500 an ounce, those same experts are now recommending gold as a percentage of a well-diversified portfolio. Talk about expensive advice.
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So the lesson is: Now, more than ever, it's important to focus on value, not price. When prices are low, finding value is easy. When prices are high, value is a lot harder to find -- which means you need to be smarter, more cautious, and resist your knee-jerk reactions.

Now, value is relative and it changes with time. To some people, getting 10 percent off the asking price for a San Diego condo that had doubled in price in recent years may seem to be a good value today. To others it may not.

The real problem with value is that you only know good value in retrospect. For example, to most people living in California in 2004, real estate appeared to be a good value, to others it was overpriced. Today it is clear that it was indeed a good value, but will that still be true in 2008 or 2010?

Whatever the discount from today's lofty prices, it's hard to imagine that any kind of real estate around here is the sort of value that Robert is referring to, however, you can't be a wet blanket all the time. It's way too early to start talking about making your millions in real estate foreclosures, which are rising briskly, but which are still near historic lows.

You have to wonder what Robert is going to talk about - gold?

A couple weeks after the above article, these views on real estate were offered:

Although I love real estate, I'm suspicious of any piece of property that doesn't generate cash flow today. I don't invest in future appreciation of real estate -- not today, at least.

Oh, now it's clear - Robert's got that weird, old cash flow valuation thinking in his head. Like where you buy a house, rent it out and hope for a black number at the end of the month. That's so last century Bobby!

Well, good luck finding something that can generate cash flow in Southern California. Rents are still very, very low relative to house values - it doesn't cost much over $2000 a month to rent a million dollar home. Do the math on that one, but don't factor in a negative amortization loan with a half million dollar down payment - that would be cheating.

You have to wonder just what it is that Robert is going to be saying at this event. Maybe his advice at the Real Estate Wealth Expo will be as simple as a single word - SELL!

A few weeks later, the inner Kiyosaki gold bug emerges.

The secret to surviving the next few years is keeping your wealth in real money, not in the U.S. dollar. Buy things that hold their value and are exchangeable all over the world. Commodities such as gold and silver have a world market that transcends national borders, politics, religions, and race. A person may not like someone else's religion, but he'll accept his gold.

One of the reasons why I'm bullish on gold and silver is because the American public is still sound asleep to this asset class. Most Americans have no idea how or where to buy physical gold and silver. The outlets that sell gold and silver I have visited are already low on inventory.

If and when the American public wakes up to the reality that their dollars are not money, but a currency, the panic and stampede will begin. Should that happen, today's prices for gold and silver will look like bargains.

Robert really does make a lot of sense. His book has done very well over the years, and maybe he'll enlighten some people at this gathering of real estate enthusiasts - it almost seems like it would be worth the $99 (using the special promo code "DONALD") to stop by just to try to assess the mood.

And maybe to hear a few more of his thought on real estate and gold.