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One of the most widely read books on money and investing has to be Robert Kiyosaki’s Rich Dad, Poor Dad, which is a unique economic perspective developed by Kiyosaki’s exposure to two “dads,” his own highly educated father, and the multimillionaire eighth-grade dropout father of his closest friend.

Kiyosaki has made a fortune in real estate and was able to retire at 47. Rich Dad, Poor Dad lays out the philosophy behind Kiyosaki’s relationship with money. Most reviews of the book stress that the book advocates “financial literacy,” which has never been taught in schools. The main principle is to acquire income-generating assets, always providing better results than even the best of traditional jobs. One of the main points is that assets must be acquired so that the jobs can eventually be shed.

What most investors hear time and time again is that “timing is everything.” This is an important factor for any investor and especially those who aspire to become truly financially independent. If investors knew that real estate had peaked in most places in the United States, would those investors be willing to use that timing to their advantage? It is something that is certainly worth considering very strongly, as Mr. Kiyosaki himself states quite simply: the real estate market is due to come down. It must be pointed out that this statement was made when real estate was peaking in most areas of the United States.

Mr. Kiyosaki, like all successful investors, knows there is a time to sow and a time to reap. Mr. Kiyosaki sowed when real estate was not the preferred investment class and has cautioned real estate investors against risky strategies such as “flipping,” or relying solely on the appreciation of the property, and properties with low, or no “cash flow.”

What does Mr. Kiyosaki like now? He is looking at the commodity markets, specifically oil and—sit down for this one—the precious metals. That is correct—yet gold and silver are investments that are still out of favor with most of the investing public.

Lately, at his live appearances, Mr. Kiyosaki has been inviting an increasing number of advisors and other guests on stage to speak on a wide variety of investment topics, including the precious metals industries. One of these guests is Mike Maloney of GoldSilver.com.

Mr. Maloney’s mission has been to introduce real estate investors to an extremely undervalued asset sector, the precious metals. It is Mr. Maloney’s belief that all things run in cycles and everything repeats. He believes that the bear market in precious metals, which ended in 2001, took gold and silver into such undervalued extremes, that even at today’s prices, gold and silver are still an incredible bargain.

He also claims that the new bull market in the metals has just barely begun and that this new bull will take the precious metals to price levels considered unimaginable by most. Mr. Maloney estimated a price target of $6,000.00 for both gold AND silver . . . and he follows that statement up with “and that’s only IF the dollar survives, and history gives that a very low probability.” When you consider the amount of paper currency that the governments of the world have printed since the last precious metals bull ended in 1980, could Mike Maloney possibly be right?

The point of this essay, however, is how well a real estate investor might do if a little proper timing is used during the investment process. Let us look back into history and see just what took place the last time we had a real estate boom, followed by an era of high inflation.

Chart 1 – Average House Price 1890 to 1990

Data from Paul Montgomery, Legg Mason, published in Silver Bonanza, 1993.

What we see in this chart is a real estate investor would have been well served to move some Real Estate profits (diversify) into the precious metals. Studying this chart you can see that Real Estate actually peaked in terms of silver in 1960 a full twenty years, before Real Estate bottomed in terms of silver in 1980. Using 20/20 hindsight is impossible, but as a thinking exercise it may be useful for several reasons, first it is good to know that precious metals lagged Real Estate the last time inflation became a very recognized problem but then quickly outperformed.

Secondly, the move in the metals came very quickly so the opportunity window was brief, but the general trend of silver outperforming real estate basically went from 1960 to 1980.

As you can see by the above chart it would have taken 16,000 ounces of silver to buy the median priced family house in 1970. The chart shows a sharp drop off from that point, meaning that houses are getting cheaper and cheaper in terms of silver. In fact at the peak in silver prices you could have bought the median priced house for perhaps 3000 ounces of silver.

Today's astute real estate investor might consider some diversification into the precious metals. There are several ways to do this, and we have been consistent with suggesting that people start with the real metal first. See who to trust when buying precious metals.

The best way to gain leverage is in my opinion through silver mining shares but these stocks tend to move in price as fast as San Diego condo so be advised!

This of course will bring many questions to mind, because most real estate investors are partial to the investment class that they understand and have experienced for some time. Real estate opportunities still exist, but the overall trend has shifted. We would like you to consider reading our website from time to time and educating yourself on the merits of precious metals. Real estate opportunities still exist, but the overall trend has shifted. In plain words, it will be far easier to make money in the precious metals over the next several years than in real estate.

Chart 2 will give a real estate investor something to ponder. At the top of the precious metals market last time (January 1980), it took a mere three thousand ounces of silver valued at $150,000 to purchase a median-priced single-family home. Today, three thousand ounces of silver is valued at about $40,000. Who wouldn’t be willing to pick up the median-priced house for $40,000? We are not talking the foreclosure market here; we are valuing houses in terms of silver bullion.

The ability of most investors to profit from differing sectors is key to really becoming a seasoned investor. However, it is human nature to stick with the winners, and most real estate investors, once successful, seldom look to other investment opportunities. This is not to say that a very astute real estate investor cannot do well as the housing market declines, but why swim against the tide?

If the same principals that made you a successful real estate investor were applied to the precious metals markets, you could reap huge rewards by selling silver when it was dear and buying back into the real estate market when it again is fairly valued.

In conclusion, most of life’s biggest lessons are learned by experience. History does repeat, but it never repeats exactly. The last time inflation really took off in a big way, the real estate sector was vibrant as a “tangible asset” but eventually became overvalued; as this was occurring, the precious metals were in the mid stages of being accepted by many individual investors, not only as a method of preserving wealth, but as a potential means of making large capital gains.

Today the world has changed significantly from the 1980s. We have instant communications from almost anywhere, stocks can be traded by the click of a mouse, the Internet is providing society with information overload, and the world economy is showing signs of large changes ahead. The future will favor those who can see ahead and take the appropriate action now. With the real estate market having a surplus in some of the major boom areas, and aboveground silver supplies dwindling dangerously low, having lost approximately 1.5 billion ounces of the 2-billion-ounce inventory since 1980, don’t you think chance favors taking profits on some of the more marginal real estate holdings and moving some of your assets into the precious metals sector?

Mr. Morgan has been published in The Herald Tribune, Futures magazine, The Gold Newsletter, Resource Consultants, Resource World, Investment Rarities, The Idaho Observer, Barron’s, and The Wall Street Journal. Mr. Morgan does weekly Money, Metals and Mining Review for Kitco. He is hosted monthly on Financial Sense with Jim Puplava. Mr. Morgan was published in the Global Investor regarding Ten Rules of Silver Investing, which you can receive for free. His book Get the Skinny on Silver Investing is available on Amazon or the link provided. His private Internet-only newsletter, The Morgan Report, is $129.99 annually.

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Information contained herein has been obtained from sources believed to be reliable, but there is no guarantee as to completeness or accuracy. Because individual investment objectives vary, this Summary should not be construed as advice to meet the particular needs of the reader. Any opinions expressed herein are statements of our judgment as of this date and are subject to change without notice. Any action taken as a result of reading this independent market research is solely the responsibility of the reader. Stone Investment Group is not and does not profess to be a professional investment advisor, and strongly encourages all readers to consult with their own personal financial advisors, attorneys, and accountants before making any investment decision. Stone Investment Group and/or independent consultants or members of their families may have a position in the securities mentioned. Investing and speculation are inherently risky and should not be taken without professional advice. By your act of reading this independent market research letter, you fully and explicitly agree that Stone Investment Group will not be held liable or responsible for any decisions you make regarding any information discussed herein.