Wikinvest Wire

Rich Dad, Gold Bug

Thursday, March 23, 2006

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.
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.
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.


Anonymous said...

Kiyosaki is a fraud:

Anonymous said...

John T. Reed has quite a bug in his bonnet when it comes to Kiyosaki
That thing goes on and on and on and he says he's not jealous, but having written a book that is clearly superior to Rich Dad, Poor Dad which doesn't seem to show up anywhere on the internet, his ranting sounds more and more like an unhealthy fixation.
John, let it go!

Anonymous said...

I read Reed's page the other day, after seeing Kiyosaki's "Gold Bug" article.

I have come to a shocking conclusion: both Kiyosaki and Reed are right about some things and wrong on others.

Kiyosaki's cardinal sins are vagueness and innaccuracy. These can mislead the naive, but the astute can still pick up on good insights from Kiyosaki.

As Reed points out, much of Kiyosaki's background may involve "creative embellishment", a-la Frey. But, I care more about the content of a message than its bearer or his history...

Reed, in trying to counter most things Kiyosaki says, errs in often asserting an orthodoxy that isn't so correct.

For this kind of situation, its better to be selectively nuanced than a "conceptual absolutist". Anyone can say both wrong and right things.

Anonymous said...

I, too, believe gold is in a secular bull market. However, Kiyosaki is incorrect to link gold inversely to the US Dollar, i.e. Dollar down and gold up and vice versa. That relationship has already broke down last year - both gold and US Dollar have been rallying. How can gold be in a secular bull market if it is only rallying against the USD? For gold to be in a real bull market, it has to rally against "all" major currencies and this is what it has been doing since 2005. The Dollar is doomed thesis is not a certainty (too many people are thinking this way). I am actually a bull on the USD and gold. Gold and Dollars are what I have been owning.

Thanks for a great site.

Anonymous said...


But isn't the dollar in a secular bear market? Just look at its performance compared to the euro since 2000. One year does not a trend make...

Probably the reason to hold up dollars to gold is that dollars have a special status as the world's reserve currency. Yes, a more complete comparison to gold would use a basket of all the world's currencies weighted pro rata, but this would be the same as saying "mostly dollars".

As for the "dollar is doomed" thesis, my opinion is that it has been doomed for 30 years, but that last-minute maneuvering by the US has kept it in its position of dominance. However the US has just about spent all of its "social capital" thanks to Iraq and Bush. Now we're coasting on various forms of momentum; ignorance, and as this blog chronicles, incredible levels of extraction of fictional home equity.

Anonymous said...

Aaron, for my thoughts on the Dollar please see Dollar Index

You may be correct that the Dollar is ultimately doomed but that is by no means certain at this point (see above). My point is there is no certainty in markets and based on history what is "blatantly obvious" to most participants in the market frequently doesn't pan out. The market has a way of making a fool out of the masses.

You wrote:
"However the US has just about spent all of its "social capital" thanks to Iraq and Bush. Now we're coasting on various forms of momentum; ignorance, and as this blog chronicles, incredible levels of extraction of fictional home equity."

I agree with your above statement. However, the folks at Instituional Advisors have done some interesting research going back to a few hundred years. In the past whenever a major credit fueled bubble burst, the senior currency of the senior economy at the time had always "strengthened relentelessly" in the aftermath. For details of the research, you should visit their site.

Anonymous said...

Re: However, the folks at Instituional Advisors have done some interesting research going back to a few hundred years. In the past whenever a major credit fueled bubble burst, the senior currency of the senior economy at the time had always "strengthened relentelessly" in the aftermath.

(1) Going back a few hundred years, the senior currency was never 100% paper
(2) In real terms, the Asia-bloc is likely to have superseded the US as the senior economy by the time the credit bubble bursts.

Anonymous said...

The only thing that you will Learn is how to take out our credit card and buy home courses books and tapes. Every speakers will be selling you stuff.
Make sure that you return the product if you fall for the trap to buy it.
Save your money!

Anonymous said...

Hey Anonymous...

Save your money and do what? Buy beer? Buy tickets to a game?

That's certainly a better investment...LOL


Anonymous said...

The Learning Annex Real Estate Wealth Expo is a complete fraud.

All they are trying to do is sell you USELESS courses by speakers that are basically just salespeople scaring you or tempting you into giving them your credit card.

Whatever you do - do NOT purchase anything at a Learning Annex show.

Check out and the BetterBusinessBureau and look at how many complaints they have. A complete scam.

Anonymous said...

The Learning Annex Real Estate and Wealth Expo is a scam designed to sell overpriced books, CDs, and programs.

Check out this account of the Atlanta Real Estate and Wealth Expo

Anonymous said...

Gold will go way up, maybe to $1,500 an ounce or higher because the dollar will fall for years. The dollar will keep falling and here is why:

The U.S. cannot sustain 800 bilion a year trade deficits. We cannot export our way out of this mess. The only answer is a sharply lower dollar to drive manufactruing home and to lower the trade deficit. The dollar has much farther to fall. What you are seeing is a long term effort (it will take 20 years) to get the trade deficit back under 1% of GDP. We are currently running a trade imbalance of nearly 6% of GDP. No nation can do this. The IMF would be stepping in to help any nation if its trade imbalance went to 6% of GDP becuase its currency would collapse! The U.S. is different, but still, we cannot sustain a trade deficit of this magnitude. People must understand that when we buy an item from say China, we pay in dollars. The Chinese company we just bought from them goes to an Exchange Bank in China and converts those dollars to Yuan. The Chinese banking system (Chinese Government) is now sitting on those dollars. They can either 1, buy oil, 2, buy Treasuries, 3. buy U.S goods, 4. buy U.S. Corporations, 5. other. Over time if we (the U.S. ) continue to run a trade deficit we could simply be completely bought and controlled by foreigners. Warren Buffet has explained the situation as being like a rich Texas farmer who loses a small piece of his land year after year and never notices for a while. When he then notices, tragedy sets in because he no longer controls his land. So in sum, we need to get the trade deficit way down. This is why the Fed has abandoned the dollar. It wil be going down for the next 20 years. That is how long it is going to take to correct this imbalance mess. Bottom line: Lower, much lower dollar will equal higher inflation and higher GOLD prices. Much higher!

Anonymous said...


Everybody seems to know something, just wait and see that non of you know that much, of anything, are you so sure that you will die for it.
didn't think so.

Let it go, no one knows what will happend tomorrow.

Be kind, and expect kindness back.


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