For the last ten years or so, Robert Kiyosaki, a strong advocate for creating wealth, had been stressing the importance of gold investing or silver investing and the need for owning physical bullion. However, in the last many months or so, he seemed to have “gone off” gold and silver; if nothing else he seemingly stopped promoting it.
I found this interesting as the fundamentals for investing in silver or investing in gold had not changed, if anything they had gotten better:
- the Fed has continued to print money while our national debt continues to expand with no end in sight,
- unemployment and jobless counts remain high,
- inflation continues to rise across the board as the economy still continues to struggle forward even with all the government’s efforts to stimulate and prop it up…
So I found it strange that Kiyosaki, having touted gold since it was only $250 an ounce (now almost $1600/ounce) and silver when it was only $3 an ounce (now over $36/ounce), no longer seemed to be an advocate for the precious metals (though to be clear he has never advocated against gold and silver either).
But then I attended one of his seminars (where he discusses the importance of financial education and creating wealth) recently and heard something shocking that I think pretty much explains why…
Kiyosaki on Creating Wealth
During his seminars, Kiyosaki usually uses some of his own antidotes and personal experiences to illustrate his points and show examples of what he means. He has always been a strong advocate of accumulating assets, more specifically investments and businesses and such that put money into his pockets each month (versus investments others like to make purely or mostly for capital gains, ie, flipping homes, buy low to sell high, etc a much riskier way to invest, especially today).
Over the past year or so he has made reference to investments in large resort properties in Arizona, large apartment buildings in the South, oil and gas drilling and wells, along with a gold mine in China…
Each of these investments again was made due to the great investment fundamentals each showed, in that each asset had the ability to provide a large cash flow once the asset was “put into production” so-to-speak (apartment units all constructed and rented out; wells pumping out gas and/or oil; mine producing tons of gold, etc).
And then it came out at this recent seminar at the very end during a question and answer about investing in gold or investing in silver. You could tell Kiyosaki was thinking carefully about how to formulate his response. This question brought out some real passion. He answered the question saying that although he liked the Chinese as a people on a personal level, and that the people of China make him a lot of money (from all his books and games perhaps?), he would NEVER AGAIN do business with the Chinese (you’ll see what he meant shortly).
That was quite a shocking statement, both in it’s delivery and in the message itself. Kiyosaki usually makes short statements like these and then expounds on them further to allow the message to sink in and really get the lesson across. It was clear from his experience that Kiyosaki HIMSELF had just learned a very important lesson…
He then went on to explain how his gold mine that he had been investing in and developing in China for a few years now – a venture you could tell he was very excited about whenever he mentioned it previously – had recently struck gold. The problem is that as soon as he struck gold the Chinese took the mine – it was no longer his! He lost out, everything gone, finished. No more gold mine, no more gold… He went on to say how China will become the most powerful country in the world very soon and that we should all prepare for that accordingly.
This isn’t the first time an asset or business has been taken over in a country. China has a history of this and today has major influence or control over many important resources, namely rare earth minerals (material necessary for the latest technology today, from iPhones and iPads to solar panels and Hybrid cars).
Yet the same thing has happened in other countries where the government simply takes over a business (Saudi Aramco Oil in Saudi Arabia – one of the largest oil companies in the world for example – used to be an American-owned oil company prior to the Saudi’s nationalizing it). Be on the lookout for this trend to continue in the future as resources around the world become scarce, as energy becomes more expensive and as the global economy continues to wobble…
From this relation by Kiyosaki and his recent experience specifically, you can fully understand and appreciate his deep hatred for communism. Yet, though we may view ourselves as capitalists here in the USA, he pointed out that we are heading down the same path in our country (he will not invest in California or New York for these very reasons). People are wanting the government to provide more and more yet expecting and demanding to work less and less. Take from the rich and give to the poor. More and bigger government. More entitlement programs. You name it. While Eastern Europe continues to fight off communism from the past, we in the USA appear to be fighting the emergence of communism.
Creating Wealth: Gold Investing? Silver Investing?
Kiyosaki finished his response to the question of gold investing or silver investing by saying that purchasing physical silver or physical gold of course does NOT produce any cash flow or generate any income. So in terms of creating wealth, just buying these precious metals in the physical form will NOT get you closer to financial independence nor will it increase your passive income…
However, it is prudent to have a good 6 months or so worth of savings set aside just in case – something very evident in today’s economy – but NOT in dollars (they are going down in value, fundamentals are very bad for US dollars as they are for all fiat currencies today) but rather in precious metals like gold and silver.
He finished by saying investing in gold or investing in silver is more a way of preserving your wealth, protecting your purchasing power, rather than as a method for creating wealth and that he would much rather save gold and silver than paper money today.
So given that gold and silver are more a means of protecting your purchasing power against the dollar and a way to hedge or protect yourself from inflation and the potential collapse of the monetary system, what then can you do today to move towards financial independence in terms of creating wealth?
Kiyosaki suggests building assets that produce cash flow. You want to improve your financial intelligence by increasing your financial education so that you are able to create passive income – income that comes in month after month whether or not you work. Once that level of passive income exceeds your personal expenses, right then and there you are financially free!