Why Buy Gold and Silver Now? 5 Reasons Investors Should Know

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0:38Yep, we said free. Oh, and did we mention the cafe? So what are you waiting for? Come see all that's in store. Visit the Wayfair store today at Edens Plaza and Wilmette. Way fair, every style, every home This is the Rich Dad Radio Show The good news and bad news about money Here's Robert Kiyosaki Hello, hello, hello, Robert Kiyosaki The Rich Dad Radio Show The good news and bad news about money Today we have a very, very important show Like all our shows are important But we also have a very important guest His name is Rick Rule And when Rick Rule speaks, I listen because he and I are the more senior citizens left in this industry.

1:24And, you know, Rick, anytime he speaks of gold or resources or uranium or copper, silver, I listen. It's called commodities. And since you and I are the senior citizens let it go, why we do it. And I think the why today is we'll get, hopefully people motivated to make some changes if you haven't started investing in precious metals or commodities. Anyway, welcome to the program. Welcome, Rick. And I just want to say really happy to have you on the show. And one thing I love about you is you are a wealth of information and not just resources, but a lot of things. And people are going to want to listen to this show many, many times because I know there's going to be a ton of information, but you're also an investor and you've also got your own portfolio.

2:08And we talk about real teachers and fake teachers. You're a real teacher because you're doing what it is you're talking about. And we so appreciate that. flattery will get you everywhere young lady i try i try so so rick i want to give you a little bit of my background and our actually our background is i started getting into silver when i was like 1964 when i saw that copper tinge go around the dime so i bought my first precious metal at 10 cents you know because i started changing the the copper dimes and for real dimes. Then I was buying quarters and then half dollars. And I still have that bag until my mother spent it.

2:49And then I was flying in Vietnam in 782, the year Nixon took the dollar off the gold standard. And I flew behind enemy lines in Vietnam to a gold mine. I was reading the maps, you know, helicopter pilot and said, oh, they have gold here. And so I went behind enemy lines who talked to his gold dealer, a little tiny Vietnam Amaze woman with red teeth. And I said, she wanted, I think it was a 50 bucks, approximately gold and floated from 35 to 50 after Nixon took the dollar off the gold standard. I tried to get a discount. You don't do that. You know, I know you're laughing at that one. And you get a discount from a gold dealer.

3:31That's not, not heard of. And she told me this one word, spot. What is spot? But ever since then, and then I went over to Hong Kong, I bought my first Krugerrand. This is an important point for many people to understand about silver and gold. I bought that Krugerrand in Hong Kong in 1974. I had to smuggle it in. And I want you guys to hear this, as Rick will understand where I'm going with this thing. You know, they made me smuggle it in because it was confiscated, I think in 33 or something. And today, because of what Nixon did and the Fed and all this stuff, and I think that's why the why is, why you'd better start buying some gold and silver or uranium or copper, getting into things that what Jim Rickers call things that last.

4:26So with that, and one more thing is that Kim and I own no equities. We're about 95 % private. So we don't own ETFs and all that stuff. We own the gold mine. So we took, Kim and I purchased, secured a gold mine in China, the biggest gold mine in China. And they confiscated it. That's like they took, that's like Roosevelt took the gold. I think you had a similar experience in California, Rick. Yeah, we could do a whole show on political risk. So there's more to gold and silver than just what the moving average is and all that stuff. And the last thing is, but then we found a gold mine in Argentina and then Kim and I sold it to Yamana.

5:15So we don't have public shares, we have private. With that said, I hope I've teased your mind as to why the heck Kim and I are fanatical, gold, silver, and today a little bit of Bitcoin. simply because I don't trust the Fed, I don't trust the Treasury, and I don't trust the government. So, Rick, welcome to the show. Have at it, Rick. Yeah, I mean, you've summed it up very well. I think perhaps given your history, we do need to do a little how. I wouldn't suggest that anybody who's listening to this commandeer helicopter fly behind enemy lines and try and do a private transaction with the gold dealer with, you know, battle-stained teeth, nor normally is it good practice to attempt to buy a gold mine in a country that has even more fascist communist leanings than our own.

6:10I actually like public shares because if I make a mistake, which is not uncommon, I can address it very quickly with the quick click of a mouse, painfully, painfully, but quickly. But let's get back to your question as to why. Precious metals have moved up in price over the years for many reasons, most of them not good. It has functioned for years as a medium of exchange and a store of value. And that's important to know. Most mediums of exchange that we use are abstractions, floating abstractions. Our mutual friend, Doug Casey, once said that the dollar is an I owe you nothing. and the euro is a who owes you nothing.

6:56In fact, promises printed on a piece of paper. Gold isn't a promise to pay. It's payment in and of itself. It has value separate and apart from a medium of exchange, which is important to know. You mentioned trust. If you acquire gold that you are relatively certain is what it purports to be, you don't need to trust the counterparty. It isn't a promise to pay, it's payment. And when you use that - Rick, can we explain what a counterparty is real quick? A counterparty is the person who sold you the gold or who you sell it to. It's the other partner transaction. When you go to the grocery to buy bananas, the grocer is the counterparty.

7:39Right. Or if you lend money to your friend, they'll pay you back. That's the counterparty. Yeah. The important thing about gold and silver is that they aren't checks or they aren't fiat currency. They're payment in and of themselves. And in periods of time when there are various forms of turmoil, war would be an example. And social trust is very low. Precious metals do very well. Now, my own experience has been that the global perception of geopolitical risk, which is to say war, isn't a long term impactor on precious metals prices unless the war impacts you. If you were a Vietnamese person, wanted to leave Vietnam, got off on a boat, gold was worth a lot more to you than Vietnamese currency.

8:28I saw that too. They were buying the gold leaf and they were trading dollars for gold leaf. Why are they doing that? Because they're smarter than you. That's why. That's right. That's right. What does move precious metals prices in my lifetime has been investors and savers' fears of the depreciation of their savings and investment instruments denominated in fiat currencies, but particularly even on a global basis, denominated in U.S. dollars. during periods of time when there have either been negative real interest rates or the threat of negative real interest rates, either as a consequence of low rates or high inflation or both.

9:18Gold has done very well. And when you ask about why right now, I would suggest that there are five reasons why people need to be afraid of the maintenance of their purchasing power in conventional instruments and why I think that gold and silver are much more likely to do well than poorly. If I may, I'll list them. People often say to me, Rick, when will you sell your gold? Well, when the reasons to own it go away, the gold will go away. So I'm going to give you five reasons why I think gold will increase in price. And when those reasons are satisfied, then I'll sell my gold. It's a real simple answer.

10:03So let's do them. Quantitative easing, which is a real fancy word for counterfeiting. If you issued Kiyosaki's and went around and tried to spend them in Arizona or wherever you are, that would be a felony. They would plant you in a slammer. But if you were Congressman Kiyosaki, There you go. Then this would be a highly popular policy, something for nothing, and you would be reelected forever. Congressman sounds good. Listen, I'd be for it. I'd be for it. I think you'd be a ball there. At any rate, it has been estimated that 30 percent of all the U.S. dollars in circulation have come into circulation in the last 30 months.

10:50Now, clearly, this isn't to accommodate economic growth. The economy isn't 30 percent bigger. than it was 30 months ago. There wasn't need for liquidity to manage a buoyant economy. And when you increase the supply of something without increasing its utility, of course, you depreciate the value of the existing stock. There's just no arithmetic way around this. So quantitative easing is the first reason, I think, why investors are concerned about the the efficacy of their savings and conventional instruments. But it gets worse, of course. The next is debt and deficits. And this is arithmetic again, too.

11:32We have the dubious honor of having crossed$30 trillion in on-balance sheet liabilities. Admittedly, only$22 trillion net of counterfeiting. In other words, the Federal Reserve's balance sheet is$8 trillion. That was printed up. But let's use the$30 trillion. It's their number. But more importantly, Robert, and you and I are partly to blame, the net present value of off-balance sheet liabilities, entitlements, Medicare, Medicaid, Social Security, all that stuff. Not some cranky old libertarian, but rather the Congressional Budget Office suggests that the net present value off-balance sheet liabilities of the U.S.

12:10government, not state and local governments, just the federal government, is$120 trillion. dollars. That's 12 zeros. Okay. After the 120, I mean, it's a big, big, big number. And we propose to service that debt with a budget that's in a deficit,$3 trillion a year. I was taught as a young man, when you're in a hole, stop digging. But that is not what's happening. Many, many, many observers, Buffett included, has said, we're not going to pay this off. We're going to reschedule it. Any creditor, and I'm a creditor, who looks at a borrower, the U.S. government, that has debts that they can't service and they're continuing to refinance them, becomes concerned about their principal.

12:53An investor's principal is the savings, pardon me, the maintenance of the savings in U.S. dollar-denominated securities. But it gets worse. The worst is negative real interest rates. For the first time, Robert, in your life and mine, the government has made a promise to you that they're going to keep. And I'll explain that promise. If you lend the government money in the US 10-year treasury, the base security in the world, the most important security in the world, they promise to pay you 2%. And they will, because they can print it. They don't have to earn it. They can print it. They promise to pay you 2 % in a currency that depending on which government agency you read is losing its purchasing power at 6.5 % a year or 7.5 % a year.

13:40So they solemnly swear to reduce your purchasing power by 4 % compounded a year for 10 years. And they will keep that promise. If you give them money now, they will give you back less later. They're guaranteeing this and they will do it. Our mutual friend, Jim Grant calls this return free risk. And the whole concept of return free risk. The whole promise that the government make you less rich if you give them money is the real reason why people might own gold. There are two more reasons that are arithmetic too, and hopefully amuse you just as well. The first is that the market share of precious metals is the lowest that it has been in my lifetime.

14:28Let's face it, we've lived through 40 years of pretty easy economic times. You as an apartment building owner, every five years get to refinance at a lower interest rate. The capitalized value of your rents relative to your cost of capital is certainly low. Sadly, that's over. We've learned in the last 40 years that we don't have catastrophes, so we don't need to own gold. The consequence of that is that the market share of precious metals and precious metal securities relative to other savings and investment assets in the United States is less than one half of 1%. Less than one half of 1 % of the value of savings and investment assets in the United States is in precious metals or precious metals securities.

15:12The three decade mean is between one and a half and 2%. So if demand was to return to mean, not go crazy like it did in the 70s, Robert, when you learned about the gold trade, if the demand for precious metals returned to mean, demand would triple or quadruple. And there's one more that a lot of people overlook. And that is that after 40 years of really beatific economic conditions, the biggest investors in the world, the pension funds, the endowments, the insurance companies operate on an asset skew that's roughly 60 percent equity, 40 percent debt. And that's worked well for them. The debt has been the stability.

15:55The debt has been the stable income. the debt component is a real, real, real anchor in a positive sense to the returns that they've promised their beneficiaries 20 or 30 years out. That's all different. But Rick, one quick, quick, quick, but when you say debt, are you talking about bonds? Bonds, mortgages, yeah, you know, debt instruments. Right. It could be bonds, mostly bonds in the case of these big, big, big institutions, but also fixed rate, long-term fixed rate mortgages. And this is really where the rubber meets the road. If you are a great big pension fund and 40 % of your portfolio is giving you a guaranteed negative yield, compounded, the ability that you have 20 years from now to meet your pension obligations or to service a whole life policy or to fund the maintenance of the Stanford University or Harvard University or the ability of Norges Bank to look after the well-being of Norwegian.

16:56citizens 20 years or 30 years from now is gone. It becomes an anchor in a pejorative sense. If you look at debt markets today, even the junk bond index, where you're taking real credit risk, is yielding 4.7 in a currency where the purchasing power is deteriorating by 6.5. It's almost as though you're guaranteed losses twice, once on the instrument and once on the currency. And I believe that you're going to see fairly massive disintermediation out of bonds and debt instruments by the largest institutional investors in the world because they have to do it to fulfill their mandate. I'm not suggesting that 40 % of their assets are going to go into gold.

17:43That's not going to happen. But if you are leaving an asset class that's called disintermediation because of your fear of inflation, it is logical that some of the money that you take out of one asset class goes into an asset class that has a millennium long track record for protecting you against the depreciation and deterioration of the purchasing power of fiat instruments. And those five reasons for me are the why. It's all arithmetic. I don't have to get into the sort of old hoary gold bug narrative. It's just simple arithmetic. So FYI, this is one of the books that we came out with is Who Stole My Pension?

18:27And with Ted Seidel, he's a whistleblower on public pensions. Went after UPS and United Airlines. You know, I think that's wonderful. We could do a whole different show on pensions. We don't have time for it today. They're in trouble. They're in trouble too. think about yourself, Robert. I mean, if I were a guy that was managing a big endowment right now, I'd probably quit. The idea that the people who fund the pensions and the endowments are assuming a seven or seven and a half percent return. First of all, the assumption doesn't work. It's not going to happen. And second of all, if you're succeeding in earning a seven and a half percent return, which most of them don't, you're only treading water.

19:15And on a net present value basis, if you tread water 20 years from now, you're drowning. And people need to understand that. And people, as you have schooled for years, people need to take control of their financial present and their financial future, because the big thinkers neither will or can. And so the real why around precious metals, I think is self-defense. Yeah, absolutely. Absolutely. So when we come back, we're going to part two with Rick Rule, but I want people to pay attention to this. Listen, there's more to precious metals like gold, so even Bitcoin that meets the eye. There's a reason why, and it's a very big reason.

20:01And also when we come back, Rick, I'd like to talk to you more about the macro and what you see in the macro world and what you specifically are doing and what people who are watching can do as well. That'd be great. Thanks. So we come back with more of a record. Why and what you can do.

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22:24And all of our programs are archived at richdadradio.com. We archive them because we don't sell anything. We just have an information education company. So if you have friends, family members, especially business associates, we need to hear this message. Go to richdadradio.com. Any comments again? Yes, well, I'd love to hear, Rick, I'd love to hear your take on the macroeconomics with everything happening in the world. We've got Ukraine, you've got Russia. Can I ask one real minor question real quick? Go ahead. I'll come back. As I said, you know, Rick, I told you, I don't own paper. I have nothing that's a derivative.

23:01I know I'm 90 % in hard assets, gold, silver, real estate, things I control. And when I start, when I have gold, we bought the gold mine. So we owned the whole damn thing. And then we sold one. But then I talked to other guys who are more paper asset guys, like financial planners and all that. And there's this one famous guy, I won't mention his name on our air because he's always on our program. He says, you gotta buy US treasuries. And I'm going, what? And so with your background, with your banking background and all that, or bonds, should I say, funny what you call those things, I don't like them.

23:41When somebody is being told by either a financial planner or some experts say to buy bonds, treasuries and all that, because they're safer and all that, what do you say? I think you have to segregate, first of all, when you're buying bonds between long-term bonds and short-term bonds. The long-duration bonds, the idea that you would subject yourself to negative real interest rates is stupid. You forego consumption in favor of somebody else, and you take the credit risk. And in return for that, they give you back less money than you gave them. This is not a force of nature. It takes Congress to do this, right?

24:12Short-term debt is something very different. It's liquidity. I have had periods of time in my life, Robert, when I had no cash, and I've had periods of time in my life when I had a lot of cash. And I was happier and slept better during periods of time when I had a lot of cash. I consider cash to be a soporific, and I like to sleep. from the point of view of a financial plan, cash, liquidity gives you the means and might give you the courage to take advantage of a circumstance where there was a liquidity shortage. Going back to 2008, late 2008, 2009 were very good investing periods for me because of the liquidity crisis.

24:57I maintained a lot of liquidity going into that, and I was able to buy assets because I had the ability. And because I had the ability, I had the courage. The consequence of that is that ever since, I've been running fairly high cash balances, even though the cash guaranteed diminished returns in the near term on my purchasing power. I consider the negative real interest rate that I suffer to be an option premium because the cash gives me the tools and the courage to take advantage of any future crisis in confidence or crisis in liquidity. And I actually think that a crisis, while not a certainty, is a probability.

25:40So I understand that on my cash holdings, I'm losing four or 5 % a year in purchasing power. But I think the circumstance might come about in the next two or three years where the consequence of having that cash is 50, 60, or a hundred percent returns on capital employed by deploying that cash. So, so, so let me, so poke holes in my theory. Like I said, that little Vietnamese woman in 72, and she wouldn't sell me the gold at a discount. I couldn't believe that, you know, I was just asking for$5 discount. She wouldn't do it. I saw the Vietnamese running with a gold leaf, not US dollars. And then I go to Hong Kong and I buy my first Krugerrand.

26:25I still have that Krugerrand, I paid 50 bucks for it. It's in Switzerland now, but that Krugerrand is now worth approximately 1900 bucks. So I'm always saying to Kim, I want to poke holes in my logic. I don't save cash, I save gold and silver. And if I ever need the cash, I think gold and silver are liquid. Is that erroneous or? No, gold and silver are extremely liquid. They're one of the most liquid asset classes in the world. I'm a lender and I love lending against gold and silver, particularly gold and silver where I control rather than the borrower controlling the collateral. They're enormously liquid.

27:04I live in a circumstance that even given the problems that we face today is substantially more civilized, more benevolent than the young Vietnamese woman who, you know, the choices that she had in terms of her savings and her business were limited compared to the choices that you and I exhibit. Also, because of the asset classes that I deploy capital into include what you would call derivatives, what I would call securities, having access to cash to access securities markets without having to sell my gold or silver is convenient for me. interestingly because as an example i'm the largest shareholder of sprot a large financial services concern which is built around gold or silver a financial planner would tell me that i didn't need to own any gold that my life was already leveraged to gold but again uh owning physical gold uh makes me sleep better and the i i consider like you do gold and silver to be cash good cash, but it's volatile cash.

28:15The problem breaks down with some in your audience, Robert, because if they own gold and there was a liquidity crisis and the price of gold temporarily fell, they would be less inclined to sell the gold and turn that into an asset, which they could then use to buy another asset. Many people, although they own gold, don't regard it as liquidity. They don't regard it as cash. Let's say that their average which cost in gold is$1 ,800, and the price falls to$1 ,500. The price of another asset that they want to buy fell by half, but they feel this strange compulsion not to accept a small loss in cash to take advantage of a bigger opportunity.

29:00So in that sense, psychologically, for many people, precious metals aren't cash. I don't suffer that same circumstance. For me, it's good cash. It's volatile cash. I, like you, have had some precious metals for a very long time. And it's lovely to see my savings appreciate as opposed to depreciate. Right. Yeah. So the other thing, because we're real estate guys. I'll get in there. But if we need cash, we borrow money. Understand that in the wrong set of circumstances, Robert, And I hate to attract your core thesis. If the government decided that they didn't like the use that you were putting your real estate to, you would find that you didn't own it, that rather you had a conditional use permit.