Rich Dad’s Guide to Investing in Gold & Silver Book Review

Guide to Investing in Gold and Silver
Guide to Investing in Gold and Silver is a strong book

Rich Dad’s Guide to Investing in Gold & Silver:  Protect Your Financial Future
By Michael Maloney
Hachette Book Group 2008
206 pages.  $16.99

Michael Maloney’s book – Guide to Investing in Gold & Silver – unfolds in four distinct parts.  The four parts are:  Yesterday; Today; Tomorrow; and How to Invest in Precious Metals.

The section entitled Yesterday, as one would expect, covers the history of “economic cycles, paper currency, and their effect on gold and silver.”  Maloney differentiates between currency, money and fiat currency.  He provides easy-to-understand definitions of each term, along with simple explanations of inflation and deflation, which, are misunderstood by many laymen in today’s world.

From there, he moves on to historical examples of money being replaced by currency.  In each example, the outcome was the same – economic calamity.  And as he points out, the parallels between his historical examples and America of the 21st century are much the same.  Maloney traces the immediate problem to the creation of the Federal Reserve Bank.  And he ends the section with a striking exegesis of the implosion of the late 1990s.  “The frenzied speculation sucked in so much capital that it eventually became a pyramid scheme, requiring an ever increasing mountain of currency to maintain its upward trajectory.”

The subject of Part 2 is Today.  In it, Maloney examines America’s current economic situation.  He begins by saying “Since the end of the Bretton Woods system in the 1970s, the dollar has been a dirty, double-dealing, back-stabbing liar, and it still is today.”  He goes on to show how and why this assertion is true.  A series of graphs are provided in support of his contention.  Maloney also bluntly states that the CPI (consumer price index) is a lie.  In reality, according to Maloney, the CPI’s rise has been meteoric.  This factor, along with the U.S. trade deficit and China’s “neutralizing the dollar,” has created the perfect economic storm, in Maloney’s opinion.

The way to survive – and even profit from – this storm is through gold and silver investments.  Maloney presents three possible economic scenarios.  His conclusion is simple:  “There is no possible scenario in which gold and silver do not rise.”  Yet in the next breath, he states his belief that both gold and silver are being manipulated.  By manipulation, he means Central Banks and derivative markets are creating “phantom supplies.”

Yours truly – the reviewer – stopped to think about that.  If true, what is to prevent these entities from continuing to do so?  For this would seem to suggest that the price of gold and silver never accurately reflect their true worth.  And that one’s return on investment is, at best, a mirage.

Maloney continues, saying, “All this paper silver that has been sold has depressed the price of silver even further.”  To Maloney, this means it’s time to buy silver, because it is so cheap.  And it won’t be that way for long.  Under these circumstances, Maloney declares “silver really is a precious metal.”

It’s a good inference, but it might not be good enough.  For if the market is indeed being manipulated, it hints at uncertainty for those not doing the manipulating.  And uncertainty hurts more than ignorance.  Perhaps the reviewer merely failed to understand.  In which case, an expanded explanation would help.

Tomorrow is the topic of Part 3.  Here, Maloney speaks of market and economic cycles.  He believes we are entering a cycle in which hard assets are the smart play.  During this cycle, investments that were overvalued will become undervalued.  Gold and silver will go up, while stocks, bonds and real estate – all of which are overvalued – will go down.  To Maloney, the handwriting is on the wall.  “You now have a very rare chance to become very wealthy very quickly by simply taking advantage of economic cycles and the wealth transfer they create.”

The fourth part of Guide to Investing in Gold & Silver – How to Invest in Precious Metals – is a veritable fountain of helpful information for investors.  Maloney begins by telling investors what not to do.  He counsels against ETFs (exchange traded funds).  For he feels they are “good vehicles for trading,” but “unsound” for investing.  He also frowns on gold and silver ‘pool accounts’ and ‘certificate programs,’ because they don’t “go out and buy real money (gold or silver) and store it for you.”

Maloney advises against ‘leverage.’  Simply put, it is too risky.  Leverage is for professionals only.  And gold and silver purchased on margin is “a double-edged sword.”  If the stock falls, you will find yourself being sliced and diced in a Ronco Chop-O-Matic.  As far as numismatics is concerned, he suggests “If you’re going to buy numismatics, you should do it as a hobby.”  In other words, they are not a good investment vehicle.

He then proceeds to reporting requirements.  Essentially, his advice is this:  don’t get fancy.  Follow the rules and after you sell “get proper tax advice.”

Developing a gold and silver investment plan is next up.  It should be noted that Maloney’s plan revolves around physical ownership of gold and silver.  Investors are going to buy it and store it.  His “preference for both gold and silver is U.S. Eagles.”  Not only are they recognizable, but there are no reporting requirements when you sell.  To Maloney, a strong portfolio consists of 50 to 70 percent physical assets, 20 to 40 percent metal stocks, 5 to 10 percent energy stocks and other commodities, and 5 percent cash.

Guide to Investing in Gold & Silver is a strong book.  Maloney’s style of writing is amicable and his information is organized in an appealing manner.  The only blemish is the book’s singular scope.  It’s a brief for owning physical gold and silver.  To that end, it’s not about ‘investing’ in gold and silver, which implies mining stocks and other similar vehicles.  Instead, it would be more accurate to say it’s about ‘protecting’ one’s wealth by seeking sanctuary in precious metals.

Which means the primary thrust of the book is to be discovered in its subtitle:  Protect Your Financial Future.

4-star On the Read-O-Meter, which ranges from 1 star (not very good) to 5 stars (superior), Guide to Investing in Gold & Silver harbors 4 stars.