1. 1. Episode III Investing in Precious Metals of Physical Market Friday, the 6th of February 2015 1
2. 2. Who Are We? Four Metals Market is a trademark of ISC sarl, and registered with Ministry of Economy and Trade in Lebanon. Four Metals Market is the Online Store that facilitates commercial activities over the internet between retail shops and individuals in Lebanon. The Online Store is not a trading platform but a normal online shopping cart. Four Metals Market Club was formed to focus on educating club members on the industry of precious metals. ISC sarl is the exclusive agent of NBH (National Bullion House) in Dubai, UAE for Lebanon covering wholesale market and trading activities in the physical market. ISC sarl acts as an Introducing Broker for NBH in Lebanon to whoever interested in operating a Trading Account. 2
3. 3. We believe in "value" not in "price". We believe that gold and silver maintain "value" whereas currency raises "price". We believe that gold and silver worked without a fail for more than 5,000 years whereas paper money was newly invented and failed several times. We believe in the fact that gold and silver are real money with intrinsic value, and can not be produced infinitely whereas paper money is nothing but a printed promissory note or IOU that can be printed unlimitedly. 3 What is New?
4. 4. Precious Stones Coming Soon! 4 What Else?
5. 5. 5 Are you free economically?
6. 6. Wealth! What is the definition of Wealth? 6
7. 7. 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. Freedom is the practice of the right to choose a particular productive activity, and set the time to spend practicing that chosen activity in order to generate Economic Energy, Such Economic Energy is stored in a container called Money, Money acts as a token to trade the stored Economic Energy for goods and services. 7
8. 8. Facts of Wealth The law of Conservation of Energy states that the total energy of an isolated system cannot be changed. Similarly The law of Conservation of Wealth states that the total wealth of an isolated economic system cannot be changed by 4MM. Wealth can neither be created nor destroyed, but transferred from one state to another - crisis to opportunity - either voluntarily or involuntarily. Life is not fair and even The Economic System which brings inequality in wealth concentration. Wealth concentration is a process by which newly unearthed wealth, under two factors, can become concentrated in the possession of few individuals or entities. Factor I: an unequal initial distribution of wealth. Factor II: unequal knowledge of the mechanics of the economic system. Freedom is to choose when and for what to trade your money. 8
9. 9. Money vs Currency 9 Money Currency medium of exchange unit of account portable long-lasting mutually interchangeable stores value leaks value away intrinsic value faith finite infinite
10. 10. Your Money! If your Money is the currency created by nations What is the nations Money? 10
11. 11. Your Playground! 11
12. 12. Nations steal wealth from people! Nations reward the domestic economic energy by paper money known as fiat currency. Fiat Currency is a currency declared by a government by law to be a legal tender within its territory, and backed solely by faith. Fiat is the Latin word for "it shall be". The risk which people are running is that such fiat currency will become one day or another worthless due to hyperinflation and loss in faith. Result is that the economic energy will ultimately vanish (Wealth Destruction). 12
13. 13. Prices 13 When currency pool expands, prices sucks them to inflate. Inflation is the result of expansion in currency supply. Deflation is the result of contraction in currency supply.
14. 14. Motivations for Investing! What are your motivations to invest in precious metals? 14
15. 15. Motivations for Investing! Motivations for investing in precious metals: Financial Concerns: When the financial system becomes unstable or faith in a currency becomes questionable. Inflation: When cost of living skyrockets or purchasing power evaporates. Unstable Political Environment: When the political environment becomes unstable because of war, civil war or breakdown of political system. 15
16. 16. Case of Switzerland On September 6th 2011 the SNB (Swiss National Bank) sets a floor for EUR/CHF exchange rate at 1.20 The SNB will enforce this minimum rate with the utmost determination and is prepared to buy foreign currency in unlimited quantities. SNB Press Release on December 18th 2014 The SNB reaffirms its commitment to the minimum exchange rate of CHF 1.20 per euro, and will continue to enforce it with the utmost determination. SNB Press Release on January 15th 2015 The Swiss National Bank (SNB) is discontinuing the minimum exchange rate of CHF 1.20 per euro. 16 Do Central Banks lie?
17. 17. Big Casualties Alpari UK, which was the pioneer of the Forex industry announced insolvency. New Zealand based Excel Markets basically said that they will not be returning back to business. Citigroup lost $150/- Million. 17
18. 18. Case of Lebanon Banque Du Liban is announcing a stimulus package of US Dollar 1 billion to boost local demand where housing loans will capture the main bulk of loans in the 2015, by BusinessNews.com.lb dated 8-Dec- 2014. Moody's Investors Service downgraded Lebanon's government bond ratings to B2 from B1 and maintained the negative outlook, by BusinessWeek.com.lb dated 19-Dec-2014. The Ministry of Finance launched a medium term public debt management policy from 2014 to 2016. Increase borrowing in foreign currency until 2016 30% to cover the duties of the principal of debt and interest rates in foreign currencies (refinancing). 70% to cover the obligations in Lebanese Lira. by BusinessWeek.com.lb dated 8-Jan-2015. 18
19. 19. Lebanese Lira 1964 - Present the local exchange rate of the lira is partially covered by gold, and foreign currencies that are convertible to gold, 30% cover of cash and deposits, and 50% cover of cash. the local exchange rate of the lira is controlled through market intervention by Banque du Liban when needed. 19
20. 20. Art of Building Wealth Regular capital accumulation is the key to build wealth. Capital is the financial resource available to posses real assets. Capital is divided into: Constant capital: refers to value of physical assets in possession. Variable capital: refers to employed capital. Fictitious capital: refers to intangible representation of physical assets. 20
21. 21. Ownership! Ownership is the right to possess assets. Contracts in general facilitate the transfer of assets ownership between contracted parties. The devil CFD (Contract for Difference) was introduced by financial engineers to confuse people and breakdown the rules. 21
22. 22. Contract for Difference CFD is an arrangement made in a futures contract whereby differences in settlement are made through cash payments, rather than the delivery of physical goods or securities, by Investopedia. Where losses and gains are paid in cash where CFDs provide the benefits and risks of owning a security without actually owning it. he financial resources available to posses the said something assets. 22
23. 23. Risk Profile Suitable Profile: Saver: Regularly putting aside part of income directly into constant capital. Investor: Suitably employing capital in goods to produce other goods to build up the constant capital. Speculator: Preferentially burning available financial resources in fictitious capital to recover and generate other financial resources. 23
24. 24. Options Available What are the options available to invest in? 24
25. 25. Options Available Commodity ETFs (Exchange Traded Funds): claim on the performance of a particular fund, basically a company trading in contracts. Common Stocks: direct claim on the performance of companies dealing in precious metals. Futures and Options Contracts: offer the benefits of owning without the actual ownership. Certificates: offer actual ownership minus the hassle of insurance, transportation and storage. Bullion: offer actual ownership in addition to the hassle of insurance, transportation and storage. 25
26. 26. Starting Your Investment Remember Most unsuccessful investors are slaving the fear of misfortune by jumping into market when its skyrocketing and getting off when it is falling. Know your goals and risk profile in order to succeed. Be with markets as being with friends and deal with falling market as dealing with discounts season. Action Plan: Put an initial capital in action. Turn off emotions. Have a Action Plan with targets. 26
27. 27. Your Action Plan Define your profile Set your goal. Determine your target dates. Turn off your emotions and stick to your plan. Have firm belief in what you are doing and NOT in what others are saying. Make friendship with market. Stay resourceful. Finally, whatever happens keep going! 27
28. 28. Facts About Physical Market 28
29. 29. Your Strategy! When do you buy? How to you buy? What do you buy? Where do you buy? 29
30. 30. Usage of Precious Metals How to make payments in gold: gold can be put in vaults you transfer ownership of gold at nanogram grams and ounces the transfer goes from one account to another payment method can be by any mean like plastic card or paper receipt. 30
31. 31. Recommendations 31
32. 32. Things to remember! 32
33. 33. US Dollar Currency Pre World War I: Classical Gold Standard having 100% reserve ratio. $20 bill = $20 gold receipt. 1913: Gold Exchange Standard having 40% reserve ratio. $50 bill = $20 gold certificate. 1943: Bretton Woods System states that every currency of the nations will be backed by the US Dollar and the US Dollar will be fixed at $35 an ounce of gold. There was no reserve ratio established. 33
34. 34. US Dollar Currency The US continued printing its US Dollar at 0% reserve ratio. 1960: President Charles De Gaulle claimed that there was not enough gold with the US to back its currency and asked for the gold. 1960-1971: Phenomenon of rush on the US gold by France and other countries started resulting in loss of around 50% of the US gold reserve. 1971: the US had 12 times of printed US Dollar to the existing physical gold stock. The US created more receipts for gold that what they actually had of gold. 15th of August 1971: Fiat currency was born to avoid default on payments. 34
35. 35. Nixon Shock In 1971 the US was unable to meet its obligations to foreign creditors under the terms of global monetary system that was negotiated by world leaders and in place since the end of World War II. That system was based on the US Dollar redeemable in gold. President Richard Nixon unilaterally withdrew the US as a party to the agreement citing the actions of speculators as the reason for default rather than admitting the inability of the US to meet its obligations under the agreement because Vietnam War spending was bankrupting the country. 35
36. 36. Nixon Shock 1971 36
37. 37. De Gaulle 1965 37
38. 38. De Gaulle 1965 The french president was opposing the US monetary policy and having the belief that the base of the world monetary system must be gold. In 1965 he warned that the International Monetary System based on the US Dollar was a danger to the world. The danger he warned about 49 years ago is now too large to manage. 38 A monetary system based on a single nations currency is a danger to the world. Tacna | Dreamstime.com - Memorial Of General De Gaulle Photo
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