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Robert Yahoo! Kiyosaki

Mark Edwards
02-07-2006

I really find it hard to believe that Robert Kiyosaki is even comfortably well off given how absurd his "investment advice" is. Then again, perhaps he does not follow his own advice?



According to his biography on Yahoo!, "get a good job, work hard, save money, get out of debt, and invest for the long term -- is obsolete and flawed"

finance.yahoo.com/columnist/bio/richricher



What is his alternative? He has a bunch of platitudes and content free statements like:

"Don't work for your money, make your money work for you!"



He loves throwing in quotes by Warren Buffet to give an imprimatur to his stories. Warren has said a lot of stuff but I doubt that he had Kiyosaki's methods in mind when he said them.



So how does Robert Kiyosaki prospose you can outwit all those hard working savers?



From one of his articles on Yahoo! Finance Tuesday, March 7, 2006



"I'm very suspicious of stocks, bonds, savings, and mutual funds, especially if they're U.S. dependent. 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.

Today, I invest in assets with tangible value, especially assets that go up in price as the dollar's purchasing power sinks. Today, I have large positions in gold, silver, and oil."



So the path to riches now is commodity speculation? Anyone who followed this sage advice must be feeling like a real fool now that commoditiy prices (gold in particular) have moved south.



Another one pushing the same barrow from Tuesday, March 21, 2006



"In the late 1990s, when people were pouring money into the tech and dot-com stocks, my dollars moved into oil, gold, silver, and real estate, when prices were low. Today, because the dollar continues to drop in value, I keep moving my money into those same asset classes, although much more cautiously."



Now maybe it's just my bad memory, but I don't recall Robert Kiyosaki talking about buying commodities in the early nineties. Back then he just talked about property investment, and how to get a good deal by finding people down on their luck that you could take to the cleaners on a distressed sale.



My guess is that he is talking about some minor coincidence (like buying a gold chain for his wife and filling his SUV with petrol) rather than a determined investment strategy to pour significant money into commodities having determined that their prices were going to go through the roof as they have done since. I very much doubt that he bought significant quantites of any commodity. Like most of Robert Kiyosaki's stories, they sound good but are always light on facts and figures that can be verified.



SPLIT HERE.



He is pretty keen to see as many people as he can in commodities though. This from Tuesday, May 2, 2006:



"Currently, I've been recommending that people look at oil, gas, gold, and silver (see "Investing: Go for Gold and Silver, Not Green" and "The Coming Oil Crisis"). I'm excited about silver because as I write, it's relatively inexpensive. I'm also excited about silver because -- unlike real estate, which can require a lot of money, some finance skills, lots of due diligence and property management skills to do well -- silver is affordable to the masses, and management skills are minimum. Just buy some silver, put it in a safety deposit box at a bank, and your management nightmares are over."



There are some really basic things about commodities that Robert Kiyosaki either does not grasp or does not want his readers to grasp.



1. Historically, the price trend for commodities has been down.



2. With the exception of oil, our current high commodity prices are due to short term production shortfalls to meet an increase in demand.



3. When prices are high, users tend to use less of the commodity thereby reducing demand, if they can't use less of it they use something else thereby reducing demand.



4. When prices are high, producers increase production by any means necessary and uneconomic sources of supply suddenly become economic increasing supply when they come on stream and decreasing prices.



Rather than reading Robert Kiyosaki's articles, which I find about as funny as a Dilbert cartoon, you should perhaps read some sound investment advice. Yahoo! Finance also features articles by Jeremy Siegel Ph.D.



Ironically, at the same time that Robert Kiyosaki was suggesting you get into commodtities, Jeremy Siegel was explaining why you should not.



From his article of Friday, May 19, 2006:



"Let's look at some very long term data. If an individual purchased an ounce of gold in 1802, it would have cost him about $20. Today, that ounce is worth over $700, a return that is well under 2% a year. Twenty dollars put in the bank at compound interest would be worth almost $100,000 today. And if our investor bought $20 of stocks in 1802 and reinvested the dividends, those stocks today would be worth over $200 million! That is a return of over 8% per year. Gold doesn't measure up in the very long run.



Even over the past 50 years, which starts during a period when gold was kept by the government at an artificially low price of $35 per ounce, stock returns have trounced the precious metal by more than 4% a year.



In fact, over the long haul, gold and other precious metals have only given investors a return that is just a tad over the rate of inflation. In other words, commodities in the long run may preserve your purchasing power, but little else. Stocks do far better.



One of the reasons why commodities do so poorly is that there is no return from holding commodities except price appreciation. While most stocks pay dividends and bonds pay interest, commodities yield nothing. In fact buying commodities outright involves storage and insurance costs that in the long run turn out to be a big handicap."



Thanks for the tips Robert, but I think I will takes Jeremy Siegel's advice over yours.

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