final why george soros' and john paulson's #1 position is gold and gold stocks 04192010

© Atyant Capital, 2010. Confidential & Proprietary© Atyant Capital, 2010. Confidential & Proprietary

Why George Soros’ and John Paulson’s

#1 Position is Gold and Gold Stocks

April 19, 2010

© Atyant Capital, 2010. Confidential & Proprietary 2

Special Report

This material is for informational purposes only and is being

furnished on a confidential basis to a limited number of prospective

investors only.

This presentation is not an offer to sell, nor a solicitation of an offer

to buy any security of any fund managed or sponsored by Atyant

Capital Partners LLC or its affiliates or any other investment product.

Offers to sell or solicitations to invest in any Fund shall be made only

by means of a confidential private placement memorandum and in

accordance with applicable securities laws. Investors should review

the confidential private placement memorandum (including, but not

limited to, the information therein as to investment strategy, conflicts

and risks) prior to making a decision on investment.

This material has been prepared from original sources and data

believed to be reliable. No representations are made as to the

accuracy or completeness thereof. An investment in a Fund involves

a high degree of risk and is suitable only for sophisticated investors.

Past performance is not necessarily an indicator of future

performance.

Disclaimer

© Atyant Capital, 2010. Confidential & Proprietary 3

Special Report

Contents

๏ About Us

๏ The Thesis

๏ Where Did All the Money Go?

๏ The Issue at Hand

๏ So What?

๏ Proof is in the Pudding

๏ Game Plan

๏ Contact Us

๏ Cheat Sheet

© Atyant Capital, 2010. Confidential & Proprietary

Vedant ‘VK’ Mimani, Managing Director, Atyant Capital• Co-founder of Atyant Capital and lead portfolio manager for the Global Opportunities Fund.

• Fifteen years of managing assets, with a focus on macroeconomic opportunities that can be magnified

through trading strategies.

• Former head of Vedant Mimani Trading. Over ten-year career grew capital base to 83 times initial

value.

• Graduate of Yale University with a degree in Economics.

• Champion of a new sport, El Punto Grande, a fast-paced combination of kickball, dodge ball, and

cricket.

• Connect with VK on LinkedIn and Facebook

4

About Us

The Atyant Team

Pratik Sharma, Managing Director, Atyant Capital • Co-founder of Atyant Capital and head of distribution and operations.

• Previously held key roles in the financial services practices at Deloitte Consulting and Meritage

Technologies. Specialized in optimizing operations and governance practices for Fortune 500

companies to protect and enhance shareholder value.

• Graduate of Boston University with a degree in Biomedical Engineering.

• Active in the community via service activities focused on healthcare for the underserved.

• Connect with Pratik on LinkedIn and Facebook

http://www.linkedin.com/pub/vedant-mimani/0/bb7/965

http://www.facebook.com/home.php?

http://www.linkedin.com/pub/pratik-sharma/3/a10/640

http://www.facebook.com/home.php?


Credit Mania Credit Contraction

Great credit manias have ALWAYS

led to great contractions:

1720, 1772, 1825, 1873, 1929, 2007

Qualities of a Credit Mania:

• Money and credit plentiful

• Inflation and commodity prices fall

• Consumer confidence high

• Stock and real estate in bull market

• Gold bullion and gold equities in bear market

• Financial fraud prevalent

• Debt reaches high levels

5

The Thesis

Cartoonist: David Brown for Institutional Advisors


First Comes Credit Expansion…

6

• Financial establishment invents

ways to satisfy investors’ appetite

for yields (best exemplified by

subprime/RMBS)

• Soaring prices for tangibles and

financial assets fosters

aggressive employment of

leverage

• Easy credit leads to diseased

credit

The Thesis

Current Credit Mania


…Then Comes Credit Contraction

7

Stress in real estate mortgages, municipals’

finances and sovereign debt are not

independent and isolated events

All part and parcel of the same

phenomenon

Unwinding of the

excessive use of credit

Cartoonist: David Brown for Institutional Advisors

“As far as we can project, barring some unexpected event, our

mortgage-backed securities fund should continue to yield about 35%

per annum forever.”

The Thesis


Qualities of a Credit Contraction

• Approximately 20 years in duration

based on previous contractions

• Money scarce

• Credit tight, interest rates rise

• Financial and economic dislocation

• International monetary system stressed

• Gold bullion and gold equities rise

• Mal-investments liquidated

8

Cartoonist: Hank Blaustein for Grant‟s Interest Rate Observer

Where Did All the Money Go?


Credit Default Swaps

Collateralized Debt Obligations

Mortgage Backed Securities

Small Business

Real Estate

Diamonds and Gemstones

OTC Stocks

Commodities

MUNI Bonds

Corporate Bonds

Listed Stocks

Government Bonds

Treasury Bills

Paper Money

Gold

Best of Times, Worst of Times

John Exter’s Inverse Pyramid of Liquidity9

Less

Liquid

More

Liquid

• In a credit contraction, liquidity

becomes paramount

• For orthodox investments:

nowhere to run, nowhere to hide

• „New Normal‟: prepare for a 4%

return world

Our View

Great Change =

Great Opportunity



Credit Contraction Has Already Started

10

• Astute market observers recognize private credit has started contracting


Credit Contraction Already Started


Credit Contraction Has Already Started

11

• US Treasury/Federal Reserve replaced private credit with sovereign credit

• Increased national debt by a significant amount

• Added to the leverage

US Treasury/Federal Reserve replaced

private credit with sovereign credit



What’s the Problem? It’s the Debt Stupid!

• Real debt cannot be paid with combination of growth and taxes.

• Going forward elections and policies will matter less as math takes over.

12

Cartoonist: unknown

The Issue at Hand


Do We Know How It Will Play Out?

• What we DO know:

• Can authorities continue on current path

indefinitely? NO

• Bond market will restrict ability to

monetize the debt

• What we DON’T know:

How will the Federal Reserve

and US Treasury react when

bond vigilantes return?

13

Cartoonist: Hank Blaustein for Grant‟s Interest Rate Observer

The Issue at Hand


Possible Outcomes

• Continued debt monetization:

hyperinflation

• Default and restructure: deflation

• Revalue currency: devaluation

14

No single outcome is baked in the

cake. It ALL depends on how the US

Treasury and Federal Reserve react

to bond market’s demand for higher

rates

The Issue at Hand


Many Unknowns; What is Known?

In every single prior credit contraction, the

real price of gold, as measured against

ALL asset classes, increases.

The “Financial Crisis of 2008” followed

historical precedent.

15

So What?


Gold vs. Commodities

16

Gold Bull Market

Intermediate term

correction

Is this the turn and gold now

ready to outperform all asset

classes?

Proof is in the Pudding


Gold vs. Stocks

17

Gold Bull Market

Intermediate term

correction



classes?



Gold vs. High Yield Corporate Bonds

18

Gold Bull Market

Intermediate term

correction



classes?



Gold vs. Municipal Bonds

19

Gold Bull Market

Intermediate term

correction



classes?



Gold vs. Real Estate

20

Gold Bull Market

Intermediate term

correction



classes?



Gold vs. Commodities

Gold vs. Stocks

Gold vs. High Yield Corporate Bonds

Gold vs. Municipal Bonds

Gold vs. Real Estate

Credit Crisis=Real Price of Gold Increases

21

The “Financial Crisis of 2008” followed historical precedent.

✓

✓✓✓


✓


Valuing Gold

• Normal: Fair Value of Gold = 15-20% of True Money Supply = $950-$1250/oz

• If Market Considers US Government Bankrupt: Fair Value of Gold = 100% of

True Money Supply = $6282 per oz

• True Money Supply is a dynamic figure and could increase by augmenting

the monetary base or decrease via large scale defaults and writedowns

22

Game Plan


Gold is Good, Gold Miners are BetterMiners are better because in a credit

contraction, the real price of gold increases.

Significance of this:

• Operating costs fall, relative to gold, thereby driving

increased earnings, while earnings for most sectors remain

under pressure from falling prices

• Rise in real price increases valuation of deposits and makes

marginal projects economically viable

• Relative relationship cannot be altered by government

policy

Miners are making money when

few others are

23

Game Plan


Focus on Gold Mining SectorRight now we like:

• Majors – harder to find financing to build a mine than to find a geological

anomaly

• Marginal producers – margin expansion will result in exponential increase

to the bottom line

• Proven winners working on projects - exceptional results come from

exceptional people

• Project developers that restructured their businesses in 2009 to focus on

gold – shows us management understands the situation

24

Game Plan


Thank You

25

Contact Us

Pratik Sharma, Managing Director

Phone: +561.953.8939x101

Fax: +561.953.8940

E-Mail: [email protected]

7040 W. Palmetto Park Road, Suite 4-821

Boca Raton, FL 33433

www.atyantcapital.com

mailto:[email protected]

http://www.atyantcapital.com/

http://www.atyantcapital.com/


VK’s Top 10.5 Rules for PM Complex1. Precious metal stocks are the most volatile asset class in the world because there is a community that thinks gold

is functionally useless and a relic (governments and bankers) and a community that thinks only gold is money and money is gold (the gold bugs and 3 billion Asian peasants). Both are right.

2. The key to trading gold stocks is the same as successful risk/reward management: knowing the 60/40 end of a winning proposition, money management and knowing thyself.

3. Regular Technical Analysis will not work in the gold stocks market. In order to survive the market, you must learn which strength to sell and which weakness to buy.

4. The precious metals complex goes up a set of stairs and comes down an elevator.

5. One of the beauties of the gold market is you do not have to wait long to find out if you are trading the market right or wrong.

6. Gold stocks always lead the metal. Repeat gold stocks always lead the metal.

7. The gold market has lots of tells. Learn to read the tape and trade around the big picture forecasts.

8. The gold market is a manipulated market. It has been since the beginning of governments. Accept this fact and learn how to trade the market instead of complaining about it.

9. Silver is more manic depressive than gold.

10. When the gold conferences start filling up with suits and beautiful women start selling.

10.5 The precious metals complex is going a lot higher. What we have seen thus far was Phase I – the Insider’s move. The upcoming Phase 2 will be the Professional Money move and Phase 3 will be the Retail move. Will you be able to hang on for the ride? The only way is to trade around the complex’s vicious volatility.

26

Cheat Sheet

final why george soros' and john paulson's #1 position is gold and gold stocks 04192010

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