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Robert Kiyosaki Why the Rich Get Richer

Robert Kiyosaki, Why the Rich Get Richer

A Silver Lining for Nervous Investors

by Robert Kiyosaki

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Posted on Monday, August 20, 2007, 12:00AM

 

The subprime mess is widespread, and it seems to be getting worse. It's certainly worse if you're about to lose your home.

The stock market is schizoid -- up one day and down the next. If you're a day trader, this volatility is pure heaven; if you're getting ready to retire, it's likely to give you a heart attack.

Big Deal

As for commercial real estate, it's a great market. I just bought a 350-unit apartment house in Tulsa with an assumable loan at a 4.9 percent interest rate. Rents are low, the oil business is creating jobs, and demand for apartments is high.

As with any market, the real estate business is terrible for some people and couldn't be better for others (like me).

But as much as I love real estate, I believe the biggest opportunity today is in silver. I think this precious metal is about to become the most spectacular investment in recent history -- bigger than oil, even bigger than Google.

All That Glitters

Let me give you some reasons why:

• Silver is a consumable industrial commodity.

It's used in computers, cells phones, and electrical relays. This means that as countries like China, India, and Vietnam, and regions like Eastern Europe, become more modernized, the demand for silver will increase.

Silver is also applied in medicine. One little-known use is as a bactericide, a role silver has filled throughout history. Today, medical devices such as catheters and stethoscopes use silver, and every hospital in the western world uses silver sulfadiazine to prevent infections.

• Silver is scarcer than gold.

Gold is hoarded. It's estimated that 95 percent of all gold ever mined is still around. The exact opposite is true of silver: An estimated 95 percent of all silver ever mined has been consumed.

Forty-five percent of all silver mined is burned up in industrial uses. Jewelry accounts for 28 percent, and 20 percent has been consumed in photography. Only 5 percent is in coins.

• Silver supplies are down.

In 1900, it was estimated that the world had 12 billion ounces of silver. By 1990 it had dropped to 2.2 billion ounces. By 2007, the supply was down to 300 million ounces.

Some of the more pessimistic forecasts estimate that the world will be out of silver in about 10 years. This could be catastrophic to the world economy. In 10 years, silver might have as much of an impact on the world economy as $200-a-barrel oil.

A Safe Haven?

As a precious metal, silver is also money. And as the U.S. dollar drops, gold and silver are seen as a hedge against a loss of value. As more and more people wake up to the reality that their cash is trash, real estate is a gamble, and the stock market is too volatile, silver may be a great safe haven.

As I write, silver is approximately $13 an ounce. If industrial consumption continues and monetary panic sets in, who knows how high the price will go? Between 1979 and 1980, silver went to $48 an ounce. In today's dollars, that would be the same as $80 an ounce.

And recently, exchange traded funds in silver have been added as a way for investors to hold silver. The reason I find the silver ETF so intriguing is because an ETF represents real money -- not fake money like the U.S. dollar.

The ETF Solution

Prior to 1963, a U.S. dollar was real money that could conceivably be exchanged for silver. After 1963, it became a Federal Reserve note that was no longer backed by silver. A silver ETF is similar to old-time money, then, and as the U.S. dollar continues to drop in purchasing power these new ETFs may become the "new old money."

The significance of the new silver ETF is that it makes owning silver simple and convenient for the general public. Owning silver ETFs is easier than owning physical silver, which is heavy and requires security such as a safe. And owning silver ETFs is safer than buying a silver mining stock, which can be risky.

Silver ETFs are also pretty straightforward: If silver is $13 an ounce, you buy so many ounces at that price. If the price of silver goes up, you make money; if the price goes down, you lose money. The risk is minimized because you're buying physical silver -- you aren't buying a share of a silver company, which can go bust. As long as the ETF is honorable and protects your silver, your investment is secure. (A caveat: Silver ETFs haven't proven reliable yet, so use caution if you take this route.)

A Rich Find for Investors

My prediction is that the industrial demand for silver will continue to go up as the wider world becomes more modernized. At the same time, as the dollar drops in purchasing power, the average investor will wake up to the convenience of owning silver ETFs and start to buy them.

Consequently, the ETF side will dry up the silver supply for the industrial side. Someday in the near future, then -- maybe in two to five years from now -- these two forces will collide and the price of silver will go up faster than anything on the market today.

The Birth of a Silver Bug

I personally became interested in silver in 1957 as a 10-year-old boy, when I began collecting coins. I became a true silver bug when, in 1965, the federal government took silver coins out of circulation and reduced the silver content of a silver dollar from 90 percent to 40 percent. I immediately began getting bags of coins from my local bank and scratching through them looking for real silver coins.

Little did I know that I was simply behaving according to Gresham's Law, which states that good money goes into hiding when bad money enters the system. Today, I still have the silver coins I socked away as a kid.

While it's true that I could've profited more by putting my money into investments other than coins, my love of silver caused me to watch and understand the silver market. After five decades of doing so, I'm quite certain that silver will soon emerge as not just a good investment, but a spectacular one -- maybe even a once-in-a-lifetime investment. Of course, I've been saying that for 50 years now, so take my advice with a shot of tequila.

Buying In

Anyway, there are three ways to play silver:

• Buy coins from a coin dealer

• Buy shares in silver mining companies

• Cautiously buy silver ETFs through your stockbroker

The web sites for Kitco and Gold & Silver Inc. provide more detailed information.

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425 Comments

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  • Yahoo! Finance User - Monday, December 17, 2007, 11:21PM ET  Report Abuse

    • Overall: 4/5

    He's right. Volatility is pure heaven for day traders!

  • PHOENIX30 - Thursday, December 13, 2007, 1:55PM ET  Report Abuse

    • Overall: 4/5

    Thanks for the homework assignment easily explained... maybe others will get as much out of it.

  • MotoExpo - Monday, December 10, 2007, 6:14PM ET  Report Abuse

    • Overall: 5/5

    I took his advice, Bought SLV and have made over 20% in a few months. Dont believe me check SLVs price a few months ago

  • Mike B - Sunday, November 25, 2007, 8:45AM ET  Report Abuse

    • Overall: 4/5

    The web site "gold & Silver" was MOST interesting...especially about oil. I have been asking for past 3 yrs "WHAT is happening with price of GOLD?"

  • Reggie C - Wednesday, November 7, 2007, 8:13PM ET  Report Abuse

    • Overall: 5/5

    It's interesting to see that silver and gold are on a tear, yet these papers pushers are still in denial. Hey wake up guys, your stocks and bonds are going nowhere but commodities are on a tear. Why? Because your currency is not what you think it's worth. RK is right on again, and you still don't believe? You paper pushers are such trusting souls for buying all those paper products, you need to be rewarded. So I have some nice subprime paper to feed you, and once you regurgitate some of that, I have I nice bridge in Brooklyn to help you digest the rest. Later losers.

  • Yahoo! Finance User - Sunday, November 4, 2007, 1:15AM ET  Report Abuse

    • Overall: 5/5

    Silver, The Best Investment I ever made! bought at $5.00, waiting for $100 The US dollar will go to HELL in a handbasket. Helicopter Ben Bernanke Will run the printing presses till the wheels fall off! Just pull up a chart of the $CCI index ...and PLEASE dont believe the lying government B.S. about 2.8% Inflation. Just look at the price of Food, Oil & Gas ??? Get Some Silver, while it's still cheap!

  • Freedom - Tuesday, October 30, 2007, 4:51PM ET  Report Abuse

    • Overall: 5/5

    Excelscior, I share your understanding of the precious metals markets. I too have been a coin collector as a child and have never lost the enthusiasm. In the summer of 2005 I purchased 2,000 silver coins for $8.00 each and now they are worth $15.00 each almost double what I paid! What the "Paper" investment guys don't get is that I can still buy a Tank full of gas for $4 dollars. I just take them to my local coin shop, sell them for $15.00 each or $60.00 then go to the gas station and pay the guy there in the only dollars he knows about. The people who only know about paper dollars will pay the lions share of the tax increase bill once it becomes increased. Since it will take more dollars to buy what ever they need, and they do not have thier money in rising investments (They probably own lots of stocks) they will do not have an increasing asset to off set the inflation that will consume them. Suckers

  • C.L.B. - Tuesday, October 30, 2007, 12:38PM ET  Report Abuse

    • Overall: 5/5

    I'd also like to comment on "yahoo Finance user's" obvious lack of knowledge in anything he talks about. If he would have looked at silver prices, he would have seen that when this article came out silver was at $11.50. And by the time he wrote his dissertation of ignorace, it had risen to $14.25. A 21% gain. Also, silver is bought at 35 cents above spot, which right now would be 2.5% above spot not 30%. Now I dont know what the S&P fund did, because I dont bother with investments of such pitiful returns that mutual funds provide. However, it seems as though you didnt realize that R.K. was suggesting silver as a hedge, not an investment. So I'm not sure why you compared the two. I dont buy silver as an investment, if my investments only went up the 21% in 2 months that silver did I would be very disapointed. And lastly, you stated that the owers of legal entities are public knowledge. And I am happy to say that you are once again painfully wrong. R.K., like myself, operates out of a Nevada C corp. The share holders of such corporations are not public information.

  • David - Tuesday, October 30, 2007, 1:36AM ET  Report Abuse

    • Overall: 5/5

    In response to the previous "Yahoo! finance user's" comment: As a real estate professional in the Tulsa Market, it is my fiduciary responsibility to correct your ignorance of the real estate industry. When an apartment complex exceeds 4 units it is considered COMMERCIAL real estate. And, because I hold an Oklahoma Real Estate License, I was able to confirm that a corporation controlled by Robert Kiyosaki did, in fact, purchase a 350 unit apartment building in Tulsa.

  • Yahoo! Finance User - Saturday, October 27, 2007, 10:06PM ET  Report Abuse

    • Overall: 1/5

    That's right kids! Sell that S&P index fund and buy silver on the day this clown recommended it, and you would have lost out on an 8% S&P market move. Silver has gone nowhere. If you bought coins at a dealer, you would also have paid about a 30% premium. Coin dealers are for hobbyists who enjoy coins. Has anyone checked to see if Kiyosaki actually bought an apartment complex in Tulsa? All RE transactions are public information. Ownership of every incorporated entity is public information. PS: Hey Kiyosaki, apartments are not commercial real estate, they are residential rental real estate. Commercial real estate has a commercial enterprise as a tenant. If you owned any real estate, you would know that.

  • rordog - Friday, October 19, 2007, 3:15AM ET  Report Abuse

    • Overall: 5/5

    silver up from $8 to $14 in a years time. Way to go Kiyosaki!!!!!

  • Yahoo! Finance User - Monday, October 15, 2007, 7:15PM ET  Report Abuse

    • Overall: 5/5

    Awww@blocking comments. I was wondering why no one has posted anything there yet. I like reading the articles for their optimistic, yet unbridled enthusiasm in promoting some particular investment. It seems cute that he can be so naive and speak with an authoritative tone at the same time. I hope Yahoo! allows users to post comments on the next Kiyosaki article that comes out this month because the articles, discussion, and hilarious comments that come out afterward are what bring me back to Yahoo! Finance again and again.

  • jo - Saturday, October 13, 2007, 9:06AM ET  Report Abuse

    • Overall: 1/5

    DEAD WRONG AGAIN...STOCK MARKETS AROUND THE WORLD ON FIRE SINCE THIS COLUMN WAS WRITTEN.RECORD SETTING GAINS .SILVER HAS GONE NOWHERE....BUYING FROM A COIN DEALER ONE OF THE WORST INVESTMENTS YOU CAN MAKE.

  • Yahoo! Finance User - Thursday, October 11, 2007, 7:08AM ET  Report Abuse

    • Overall: 1/5

    Yahoo has gotten smart and now has blocked comments on RK's latest article. His investing principle is basically the advice de jour as one week he states to go all silver, the previous week buy lottery tickets. He must be sipping the tequilla or the Trump Vodka as his advice would cripple you. Short Trump.. you would have tripled your money...even better if you had options. So his best friend is making investors bleed big time yet RK calls him a genius. Now your buddy is following you and conducting his worthless 2-3 day seminars on how to make it big. I bet he charges at least 1K more per session as he does have the name recognition and has captivated the idiot masses in America. Think big!

  • jhghjg - Tuesday, September 25, 2007, 8:44PM ET  Report Abuse

    • Overall: 1/5

    I'd like Kyosucki to explain to us how he would deal with the worldwide liquidity crises if he had his dream of a universal currency based on gold....What would the answer be...work overtime at the mines?....Kyosucki,your a twit.

  • RobertM - Friday, September 21, 2007, 5:33PM ET  Report Abuse

    • Overall: 5/5

    HEY!!! If it's good enough for Buffett to buy in!!!! (Well 'nuff said) No one thought Gold would ever see $800. again (HA!!) So silver has to top $52. (could happen!!) Learn to take the Downs with the UPS!! Remember the old SAW " You could buy 10 loaves of bread with one silver dollar in 1936" Now you can get about 10 slices if go cheap!!

  • deny - Friday, September 21, 2007, 8:11AM ET  Report Abuse

    • Overall: 1/5

    I've seen better investment advice in penny stock spam!!!

  • Yahoo! Finance User - Thursday, September 20, 2007, 11:05AM ET  Report Abuse

    • Overall: 5/5

    Wow! With all the negativity it's no wonder the world is the way it is. Anyway, I agree wholeheartedly with this article. From my own research and the advise from other analysts/advisors/experts, betting on Silver is a good bet. I’m glad that RK is in the know as well. RK, keep on scaring the sheep! They need it!

  • hank - Wednesday, September 19, 2007, 3:48PM ET  Report Abuse

    • Overall: 1/5

    Idiot sock puppet.

  • David - Wednesday, September 19, 2007, 3:44PM ET  Report Abuse

    • Overall: 1/5

    After reading the article I was left wondering what lesson could be learned from the jump from equity market volatility, to Mr. K's most recent property acquisition, and then over to silver as a commodity play. Any three would make a great article, but the hodge-podge presented here is more harmful than helpful.

  • Yahoo! Finance User - Wednesday, September 19, 2007, 2:03PM ET  Report Abuse

    • Overall: 5/5

    I've read many articles but never bothered to look at the comments. I was surprised to see the negative ones. Not because their negative (theres always some), but because if you don't like the articles, why do you take the time out of your day to read them and comment on them? Why not use that time to read the experts you do like? I'm not challenging the negative comments, just curious as to why you don't take advantage of your time.

  • Joe - Tuesday, September 18, 2007, 7:20PM ET  Report Abuse

    • Overall: 1/5

    I can't wait to see the comments on his latest article. Lot's of "horn-tooting" and questionable opinions.

  • __A_YAHOO_USER__ - Tuesday, September 18, 2007, 6:30PM ET  Report Abuse

    • Overall: 1/5

    why is this idiot considered an expert?

  • nindra - Tuesday, September 18, 2007, 10:59AM ET  Report Abuse

    • Overall: 3/5

    This is new to me. I never heard that Silver will be a good investment.Let me try buying silver coins and keep them for 4-5 yrs and come back to Kiyosaki.

  • GeneB - Monday, September 17, 2007, 11:44PM ET  Report Abuse

    • Overall: 1/5

    Did they finally get rid of this con artist? Almost a month and no article.

  • Yahoo! Finance User - Monday, September 17, 2007, 5:54AM ET  Report Abuse

    • Overall: 1/5

    Would have been a good article, except for three things that he either conveniently or ignorantly forgot.... Silver is a very small market and is with massive hedging and shorting to be tune of billions. Secondly, Silver declines in a recession as it's more of an industrial commodity than a measure of value (unlike gold). Retail investors will never realize how volatile this market is unless they experience volatility that is normal in this market....40% swings are common (yes 40%)

  • rkisanidi0t - Friday, September 14, 2007, 11:30PM ET  Report Abuse

    • Overall: 1/5

    Wow. 5-star raters are a strange bunch. This is a rare article that bobby tells you what to do - "I'm quite certain that silver will soon emerge not as a good investment, but as a spectacular on - maybe a once-in-a-lifetime investment". But, yet the cult insists that bobby is not telling you what to do. They are so wrapped up defending bobby and interpreting his words - that they miss the obvious! Just look at yourselves - you are a sorry bunch!

  • Gianna - Friday, September 14, 2007, 2:30PM ET  Report Abuse

    • Overall: 5/5

    I'm sick of all these people criticizing a man who has the courage to think for himself, a rare trait these days. The reason I have grown and prospered from using rich dad principles, is because I have had to think for myself. Robert does not tell you what to do, which seems to be interpreted by some people as telling you nothing. Expanding your mind is helpful, then adapting the principles he points out to your own situation will cause you to flourish. I am living proof.

  • Yahoo! Finance User - Friday, September 14, 2007, 12:49PM ET  Report Abuse

    • Overall: 2/5

    Sorry Bob. You missed the silver windfall in the early '80's when the Hunt brothers were trying to corner the silver market. Silver went up to $50 /oz. Hasnt been near there since. Unlike you, I sold my paperboy coins that I saved at that time, and made a killing.

  • Yahoo! Finance User - Tuesday, September 11, 2007, 10:05AM ET  Report Abuse

    • Overall: 1/5

    It's been a while since we've heard from bobby. Hopefully Yahoo has listened to their customers and removed the least popular product from their shelves.

Showing comments 6-35 of 425<< PreviousNext >>
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