1. 1. Episode I Investing in Gold and Silver Friday, the 22nd of August 2014 1
2. 2. Wealth? Definition of Wealth A measure of the value of all of the assets of worth owned by a person by Investopedia. Wealth is your time and freedom. Money is the container that stores your economic energy, Money is your token to trade your time for goods and services, But you must have freedom to choose when and for what to trade your money. 2 Rule I: Wealth is neither created nor destroyed but transferred from crisis to opportunity.
3. 3. Money is NOT Currency 3 Money Currency medium of exchange unit of account portable long-lasting mutually interchangeable stores value leaks value away based on intrinsic value based on faith Rule II: Stop calling Currency for Money
4. 4. Real Money Gold and Silver were formed long ago by supernova blast. Gold and Silver are permanent, do not go away and limited in quantity - can not be increased making it impossible to be printed. Gold and Silver were used for over 5,000 years as a medium of exchange. Gold and Silver were used as the basis for Bimetallic system at fixed ratio in weight. 4
5. 5. Coinage System Lydia is known to be the first city to invent coins made of gold at fixed weight and purity around the 7th century BC making them exchangeable. Athen exploded the use of coinage system in their active trade with surrounding cities. 5
6. 6. Currency System 6
7. 7. Currency System Before World War I, every printed currency note - Gold or Silver Certificate - stated clearly that it is backed and redeemable by deposited gold or silver. Each printed currency note was a claim cheque on deposited gold or silver. Taking the US as an example In 1913 the US debased its US Dollar notes to 40% backing by gold. In 1933 the US devalued its paper currency to US Dollar 35/- per one ounce of gold. In 1944 Bretton Woods system was born with an obligation for each country to maintain a fixed exchange rate of its currency to the U.S. dollar. In 1971 the US unilaterally brought Bretton Woods system to an end leaving all other currencies backed by nothing. 7 The Central Bank of China Promised To Pay the Bearer On Demand At Its Office Here Twenty Customs Gold Units
8. 8. Currency System 8 Rule III: No Fiat Currency Will Survive
9. 9. Currency System 9 Fiat Currency Fake Currency Real Money
10. 10. Currency System Currently there are three forms of money Commodity Money Paper Money Digital Money We are being fooled by the invention of Currency System. Currency System is just an illusion. Currency System does not really exist but it is only an idea living in our minds, and the same dream that we are dreaming. 10
11. 11. Financial System! Financial systems evolved from several incidents of Engineered Collapse. The cycle of devalued paper money and financial collapse is around 38 years. You must know the history of financial system, and how the financial system works in order for you to know the game you are playing. But if you dont know or try to educate yourself about the game that we are playing, then you will get dissolved and vanish. 11 Rule IV: for every crisis there is an opportunity.
12. 12. Nixon Shock 1971 12
13. 13. Economic Meltdown 2008 13
14. 14. Prices 14 Prices Currency Pool When currency pool expands, prices sucks them to inflate Inflation is the expansion in currency supply. Prices to rise Deflation is the contraction in currency supply. Prices to fall. Rule V: Value derives stability whereas prices always fluctuate.
15. 15. Determine your profile! Saver puts aside, on regular basis, small portions of income for long-term goal. But when savers make regular contributions in foreign currencies, they run the risk of getting their savings vanished when such fiat currencies go back to their intrinsic value Zero. Investor makes substantial contributions in one or more kinds of assets for medium- term goal of redeployment in a business idea. But when investors rely only on financial market, they lose their freedom of choice. Speculator trades - buys and sells - particular kinds of assets for economic benefit. They run the risk of convertibility and market exit. 15 Rule VI: Whichever one is your profile, you must firmly believe in your goal and stick to your chosen plan.
16. 16. Do you want to be RICH? 16
17. 17. Existing Options Cast bars are normally produced directly by pouring the melted metal into a mould with appropriate dimensions. Minted ingots are cut from cast bars with a die to create blanks that have the required dimensions and weight at high purity. Minted ingots come as bars and rounds produced to serve as investment grade products at low premium. When rounds take the backing of the government of a particular country and get the consideration as legal tender, they become coins with face value of a particular currency. Coins exist starts as investment grade products but with time they develop into numismatic products. 17
18. 18. Standard Weights Each weight available in the market of a particular product will make your chosen ticket size. Kilo-bar is more used extensively for trading and investment. Ounce-bar (31.105 grams) is used by most individuals for saving and investment purposes. Other sizes exist to match different types of budgets: In grams: 1, 2.50, 5, 10, 20, 50 and 100 grams. In fraction of an ounce: 1/2, 1/4, 1/10 of an ounce. 18
19. 19. Price Calculation The Karat system is used to reveal the pure gold found in a product. Mass of pure gold in a product: Pure gold weight of a product = product weight x (product purity / 24). The fineness like 0.9999, 0.995, or 0.917 replaces the (product purity / 24) in the above equation. Product Value = spot price of one ounce / 31.105 x the pure gold weight of a product. Product Price = Product Value + premium. Premium is defined as a fixed markup covering cost of production, transportation, insurance and profit margin. The same working is being used for pricing Silver, Palladium and Platinum products. 19
20. 20. Counterfeited Products Rounds of british full/ half sovereign gold coins are in circulation. They are of 21 karat of purity counterfeited locally, while the original british gold sovereigns are of 22 karat purity as assured by Act of Parliament of Britain and produced by Royal Mint in Great Britain. They are being bought by Retail Shops from public as scrap gold, and, then, sold back on premium, where as original british gold sovereigns are considered legal tender and have weight assurance by Act of Parliament of Britain. Replica of foreign brand ingots/ casts are also in circulation. No Good Delivery Standard available in Lebanese market and non of local minting companies was accredited such status. 20
21. 21. Your Action Plan Define your profile and economic goal. Determine your target date/age for your economic goal, put in place a plan that you can follow even in difficult times, and set your start date. Turn off your emotions/ panics and stick to your plan. Have firm belief in what you are doing and NOT in what others are saying. Keep yourself ready to adapt to changes but dont lose focus. Be flexible to adjust your plan without changing your economic goal. Finally, whatever happens keep going! 21
22. 22. Way Forward Choose the market place. Learn the rules of the market that you are intended to play within. Determine the kind of commodity, its properties and your suitable ticket size. Pick a reliable delivery channel and a trustworthy counter-party. Online Retail Shop - Four Metals Market Online Trading Account - GLD1881 22
23. 23. What entertains me Market doesnt go into a straight line where speculation and manipulation create opportunities to make a buy. Gold and Silver are on sale these days. Who doesnt like to make a buy during a sale season? Low prices of Gold and Silver is not a symptom of market collapse but an indication of upcoming prices rebound because suppress prices make production of Gold and Silver less profitable leading a shortage of supply in the physical market. Cost of production of one ounce these days stand at US Dollar 1,250. A new Electronic Silver Auction process went live on 14 August 2014 and is being run by Chicago Mercantile Exchange and Thomson Reuters. A new gold pricing benchmark will replace the near century-old London Gold Fixing by end of year 2014. 23
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25. 25. Questions and Answers Value isnt utility? Value is the ultimate result of your economic energy stored in a particular container. This value has to be expressed in numbers - unit of account - to ease the exchangeability and trading your value for goods and services. Value is what makes a particular object worth possessing. Value can not be a utility because it has a bigger role to play in making objects worth to be held or exchanged. 25
26. 26. Questions and Answers Do you believe in technical analysis for price Gold expectation? Personally I dont believe in technical analysis of gold prices because they are perceptions not concrete fact. They are predictions which motivate people to go into a particular direction. Warren Buffet says be greedy when public is fearful and be fearful when public is greedy. No body knows more than what you are doing. 26
27. 27. Questions and Answers What about Real Estate? It is a very good option to preserve value if based on ready made properties not off-plan. The trick in real estate is that it is highly regulated by each jurisdiction. In other words, the ownership law in real estate of a particular country has to be studied and consulted well. For examples, some of the ownership laws say that ownership is on lease for 99 years, other laws define ownership on everything above the land but no ownership can be transferred to the land in case the built property gets demolished. Off-plan transactions are the worst options in the market because it is actually the risk of the developer. 27
28. 28. Questions and Answers Why is there economic meltdown every 38 years? The fact of the matter is that our system is a credit system. In other words, for every unit of money to come into existence in must be borrowed in order to be created. The system contradicts nature where value can only be transferred not created. The studies of events of financial collapse that happened in the past reviled that from time of bringing one unit of money into existence by creating it from nothing through the credit system, it takes around 38 years to go back to its intrinsic value which is the Zero. Whats the target of that? To bring balance back into the system. Even nature or wildlife balance themselves. Nothing will continue to go up and nothing will continue to drop. There will be a time when balance will come to play its role. Who does it? Politicians always come to engineer an exit from a meltdown by issuing more rules and regulations making companies to spend more economic energy on compliance leading to less profitable business and ultimate shutdown whereas the other few companies explode the gaps in such rules and regulations for their own benefits to become too big to fail. 28
29. 29. Questions and Answers Will the Lebanese Lira be devalued within the year? In my opinion, the Lebanese Pound is already devalued and its exchange price is artificial. Because the external debt is in foreign currencies, there are only two ways to pay back: Export where companies operating in Lebanon increase their export activities. Challenges are transportation cost, and quality of exported products. Incoming Remittances in foreign currencies from individuals living outside Lebanon. Lebanese Government is constantly refinancing its due debt because there is not enough foreign currencies available to pay back the external debt. Lebanese Economy is running substantial deficit in spending which is being covered by printed money. This is what we call it internal debt or issuing Treasury Bills 29