Robert Kiyosaki Is Wrong On Silver (ETF: SLV)

May. 4.06 | About: iShares Silver (SLV)
Robert Kiyosaki is now promoting silver. Kiyosaki lists five factors he feels are bullish for silver. He is able make cliches appear to have meaning and insight.

His thoughts and thinking process are typical of the cliches and noise traders piling onto silver use to rationalize their purchases:

1. Kiyosaki's first claim is that silver is a consumable precious metal, which makes it different from gold. This is specious. The bottom has fallen out of the industrial market for silver. Silver is the new lead. In 1970 lead has extensive uses: leaded gasoline for cars, lead paint for houses, and non corroding lead pipes for everyone. By 1985 each of these markets were gone. For silver the single biggest market was photography, but that market is disappearing at the same 15-25% YoY rate that the lead market shrank. Silver is being replaced in consumer photography, X-ray, and movie photography. It is also being displaced in the offset printing market. The imaging market is the industrial market for silver. In ten years the industrial market for silver will be mostly gone, and the market will consist of traders passing metal back and forth.

2. Kiyosaki then claims to have had a deep thought, that silver is a monetary metal, while "standing on a mountaintop in Peru, doing my due diligence on a gold mine." I deeply doubt Robert Kiyosaki has ever been in Peru doing due diligence on a gold mine. I further doubt that "For years, I [Robert Kiyosaki] have visited gold and silver mining sites all over the world," unless you consider Amway motivational seminars to be gold and silver mines.

3. For his third claim, Kiyosaki rehashes cliches about the meltdown of the dollar. He makes the profound statement "and the way you short the [dollar] is by going long on gold and silver." Which is false because buying gold is a fiat money vs. hard asset bet -- it is not a pure dollar vs. other currencies bet. The price of gold is based on the supply/demand for gold, not on the supply/demand for dollars. The price of gold fluctuates against all currencies together. Any pricing disparity between gold prices and exchange rates will be quickly destroyed by arbitrageurs. If you specifically wanted to short the dollar, then you would buy foreign currencies directly.

4. Kiyosaki's forth assertion is that "Equities (stocks) and commodities (gold, copper, oil, and silver) are counter-cyclical." and that magical 20 year cycles are the invisible hand that is lifting commodities. Therefore "around 2016 to 2020, start getting back into stocks and out of commodities." The claim that vast deterministic market cycles exist is baloney. The economy and capital markets are dynamic and ever-changing, their movements and behavior are not guided heavenly bodies that can be charted. The psychic friends network was not able to predict their bankruptcy in 1998

5. Finally, Kiyosaki claims that the iShares silver trust ETF (NYSEARCA:SLV), has made silver accessible to the masses. Kiyosaki ends his article with the deep thought: "I could also be wrong -- but at under $20 an ounce, silver is a good buy, in my opinion. I believe it's the last great affordable investment for the masses. And when the masses find out, another bubble will inflate and, of course, at some point burst."

The current ETF-fueled gold and silver bubble will end just as badly as all previous bubbles. Gold, like tulip bulbs or internet stocks does not produce income. Precious metals are only a speculative vehicle, a short bus for greater idiots. The only way to make a profit with gold is to find a greater idiot willing to pay a higher price than you paid.