Monday, February 10, 2014

Review Of American Hard Assets: Jan/Feb 2014

The latest issue of American Hard Assets ("AHA")is out and focuses mostly on precious metals, offering up predictions from various serious players in that financial sector.  This issue kicks off its second year of publishing here in the USA.  Their focus remains the same: examining various kinds of "hard assets" mostly focuses on the core metals, and aiming particularly at a high-end readership.

The publisher noted that this issue is their best one yet.  I agree!

It is important to remember that AHA comes out every two months, the information is meant to be more reflective in nature...  Quicker information is better derived from a multitude of internet sources (which I follow nearly every day).

In their "World News Updates" section there are articles about a rare coin auction (netting $23 million).  Also there is an interesting article on Antwerp (Belgium) and how that city is the heart of the secretive world diamond trade (I have previously advised to take extreme care in playing in the diamond business).

For me the most interesting article was their piece "Is Russia (Finally) Running Out of Palladium", some experts are saying yes, the Russian government stockpiles are running out, on the other hand, that fact may not wind up influence palladium pricing this year.

Other "World News Updates" items include an article on Dubai hosting a $7 billion expo in 2020, an article on Bitcoin (getting much more attention..., later in the issue is another BTC article), and Elemetal's subsidiary Ohio Precious Metals being added to the LBMA's Good Delivery List (more comments on Elemetal below).

***

Eavan Moore writes up an article "Going for Gold in Alaska" on mining for gold in Alaska, perhaps capitalizing on the popularity of a couple of "reality shows" on cable TV about small miners giving that a go...  There are many small players (including individual miners, "panning for gold" (placer mining in streams) -- 450 of them are "permitted miners", as well as various other small players).

But he writes the small miners face high obstacles.  Alaska has a sort "mining season" for them, as the rivers freeze in October...

Regulatory compliance in the small sector space is light -- for now.

But, the larger quantities of gold come from real gold mines.  This is now getting harder to pull off even in fairly mining-friendly Alaska (where there is already considerable production).  The "Big Enchilada" of Alaskan gold would the the Pebble Mine, but due to environmental fears (the EPA looks to release a negative assessment of environmental impact of the mine) as well as local opposition, this world class gold mine is, at best, on hold -- Anglo-American walked away, even with a huge deposit, world scale...

***

Numerous times I have mentioned that this magazine is aimed at the wealthy.  "Investing in Film" (by Gabe Benson) would further evidence of my point.  Film (movies) is not really a "hard asset" but is definitely only for those who can place money at risk.  But, the rewards can be there: successful: films that had early investors include "My Big Fat Greek Wedding" (over $360 million in ticket sales) as well as "The Blair Witch Project" ($248 million), so it can be done.  As always with these kinds if investments:

"Have a professional you trust advise you, or you may lose it all."

***

Luis Golino writes an article aimed at buyers of gold and silver coins who want a pretty coin ("American Coin Designs").  It seems that the classic designs of the past have been much better accepted by collectors.  Yet, the US Mint knows that they must move forward with new designs that people like, most modern designs for special coins have not been, well, beautiful.

The resolution to this may depend on how much freedom the Mint gives their artists as well as careful judgement in choosing the designs for coins.

***

Both silver and gold are previewed for 2014.  Brad Yates writes "2014 Silver Preview".  Yates provides an overview of silver, interest rates and actions by the Federal Reserve in 2013.  He writes that the consensus is that the Fed will continue its "Taper" in a gradual way.

Yet he is somewhat cautious, perhaps bearish, on silver prices if the economy grows and the Fed does not mess anything up...  He explains that silver (and gold) are diversification.

***

The time has come for me to start looking and researching Elemetal, LLC.  Elemetal is a major advertiser in AHA and is the owner of a number of companies involved in segments of the precious metals sector.  A quick glance at http://elemetal.com/About.html shows the below companies they own and their participation in the precious metals industries:

-- OPM (Ohio Precious Metals), a refiner in Jackson, OH that specializes in refining recycled gold and silver.  They have just become LBMA-certified for gold (mentioned above).  They make a 1 kg gold bar that looks very attractive, and it is "green" -- recycled gold.

-- NTR Metals, which offers precious metals recycling and processing services in 12 countries, they have some 20,000 companies who are customers.

-- Provident Metals, a leading internet seller of precious metals, check out their OPM 1 kg gold bars apparently now in stock: http://www.providentmetals.com/ohio-precious-metals-opm-1-kilo-gold-bullion-bar-9999-fine.html.

-- Echo Environmental, a large-scale processor of hazardous and non-hazardous products containing precious metals.

-- Elemetal also has some kind of relationship with DGSE Companies, Inc. (ticker DGSE, so I imagine that Elemetals does not own all of DGSE).  DGSE owns some 30 brick & mortar stores that deal in precious metals, coins in general and high-end watches., most of their stores are in Texas, Georgia and a few more in other southern states and a store in Illinois.

Elemetal, even though they have advertised for sometime in AHA has been relatively opaque.  They appear to be privately owned.  About a year ago, I made an inquiry with them as to how to buy a 1 kg gold bar, I was not able to get a straight answer, but they appear NOT to have owned Provident at that time.  Provident WAS recommended to me after I made a number of calls to OPM and NTR.  It may be that Elemetal was working on consolidating their businesses, they look to being a major presence in their niches in the prcious metals world.

I hope to make better contact with Elemetal and write more about them in the near future (so be waiting for my calls guys...).

***

Mark O'Byrne founded GoldCore, a precious metals seller and provider of PM storage services.  Mr. O'Byrne is prominent among gold fans who read Zero Hedge (GoldCore is a "Contributor" to ZH almost every day) as well as 24hgold.com.  Here is GoldCore's website: http://www.goldcore.com/.

In this issue of AHA he writes at length on the dangers of bail-ins and other deposit confiscation ("Bail-Ins and Deposit Confiscation Makes International Gold Ownership Essential").  He goes into detail about what happened in Cyprus (bail-ins, oh, except for the very rich who got advance word) and the various proposals being floated in Europe and to a lesser degree in the USA.  His article is excellent, and goes into great detail, he has clearly done his homework.

Bail-ins are clearly a real risk today.  O'Byrne is a believer in diversification, a concept I have pounded the table about for a long time (forever?).

***

"At the Crossroads: Gold in 2014" (Mike Getlin) describes gold's prices in 2013 (the first down year in the last 12) and discusses at length various factors in gold price (including, of course, Fed interest policies) as well as detailed discussions on both supply and demand for gold.

He writes that gold supply will likely not change much (almost irrespective of price), and so gold's prices will likely be decided by demand.  Recently, other investments have done better than gold, so gold has underperformed and there appears to be subdued demand for physical gold (except for China).  His guess is that gold prices will not move very much in 2014.  But, Getlin writes at the end of his article:

"The real question is not if gold prices will rise in 2014.  It's whether gold is more likely than other asset classes to provide low downside risk and high upside potential.  Looking at all these factors together, I believe the answer is a resounding YES!""

***

Further evidence that AHA is aimed squarely at the wealthy is Jason Walter Vaile's piece "Fountain Pens: The Most Elegant Weapon".

Collecting fountain pens, while esoteric, is a real hobby.  Many of these pens have rocketed in price and are very expensive.  An example is the "Montegrappa's Chaos Pen" (est. price: $69,500), designed by Sylvester Stallone, this pen made an appearance in his recent film "Expendables 2".

Nice pictures in the article as well, AHA does go the extra mile to publish very pretty and high quality pictures in its magazine.

***

Platinum, ah, platinum...  Perhaps my favorite precious metal of them all.  Custom jewelry designer and writer Ed Estlow ( a frequent contributor to AHA) at long last writes "Platinum: The Metal of Kings" (although I have seen gold referenced as "the metal of kings" as well).  Estlow makes a reference to France's Louis XVI claim that it was the only metal fit for royalty.

He provides a history of platinum (first referred to in 1557 and first discovered in Colombia) from discovery through its adoption by royalty and large discoveries in Russia and South Africa (the latter produces some 75% of world production).  He also notes some of platinum's physical properties (a higher much melting point than gold, greater density than gold (but Pt is about 11% denser than gold, not 60%, densities: Pt: 21.45, Au: 19.30), and it is considerably harder than gold -- making it suitable for gem settings in rings for example).  Estlow notes that Pt is used in some high-end watches (what a surprise) such as Patek Philippe and a few Rolexes.

An excellent article.

I would note that one of my new internet contacts ("Silver Rhino" from Zero Hedge) once posted that he was interested in related metals like osmium and iridium.  Both of these metals have densities of approximately 22.56, and are the densest (stable) materials in existence...  These two would be very hard to fake.  Even platinum is very hard to fake without having to use iridium or osmium, and THAT would not be as easy as "salting" gold bars with tungsten...

***

"AHA" sat down with Michael Haynes, CEO of precious metal and coin market-maker APMEX, "Market Predictions".  Haynes sees uncertainty in PM prices, and believes that diversification of assets is important (that of course would include precious metals).

***

Susan Kime writes "The Bitcoin Controversy", a useful article for beginners (but developments happen very quickly in Bitcoinistan™...).

She wrote the article when BTC price was some $200 each.  I got my first BTC at $350 and have bought small amounts all the way up to $800 or so.

As I write today Bitcoin trades around $660 each.  Earlier today, there was a "flash-crash" in BTC as one of its large exchanges (Mt. Gox) has serious problems and may wind up losing various of its customers serious money.

Yet with all of its problems, the amounts of BTC being created and traded are very large numbers.  Here is some other information from today:

Hash code for $27,000,000 BTC transaction today:

369e26689af06471241a827a8a46332a1191f2c25ad8fbf3b643b2d8c9b07c4c

Here is some information of a huge mining block (over $36,500,000) won by "BTC Guild" (a mining pool) just today as well:


(block 285155)

Ignoring Bitcoin may be an error...

***

Author Susan Kime writes another article (an interview) for AHA about the success of homebuilder-for-the-wealthy  Joe Farrell ("Real Estate Star Joe Farrell on Giving People the Homes They Want").  Farrell started building homes in the Hamptons (eastern Long Island) in 1995.  His target price range is typicall int he $3 - $6 million dollar range.

Farrell has been criticized as "building McMansions", but he defends his houses as giving buyers what they want.  Farrell has his own home up for sale, price: $43 million.  His house has contremporary art by Andrew Wyeth, Roy Lichtenstein and Peter Max.

***

I turn the page, and the next article is "What to Expect From the Art Market in 2014"!  Nicholas Forrest has a large photo of Balloon Dog (Orange) by Jeff Koons.  Lucky Koons just had a record set, his Balloon Dog (Orange) just sold for $58.4 million, the most expensive work by a living artist ever.  Art had a good year in 2013.

Forrest then goes on to discuss hot issues in the world of modern art:

-- Indonesian art (hot!)
-- Paris (more art businesses setting up there)
-- Digital art (hmm...)
-- Art Title Insurance (tropical storm Sandy caused some $300 - $500 million in claims)

***

Numismatist Fred Reed is back with another article on valuing coin collections.  He suggests working with a well-regarded (ethical) pro to properly value coins.

Don't be in a hurry to sell.  SOme coins are worth a LOT!

***

The concept of "Vintage Sports Memorabilia" is back!  Matt Markey writes "Discovering Baseball Gold", another article on baseball cards (what is it about baseball cards???).  The story is about an Ohio family that found a treasure trove of valuable baseball cards among their grandfather's old things in the attic...  Cousins Karl Kissner and Karla Hench even made it onto "The Today Show", and their lucky trove (the cards were sold at auction) was split up among some 35 family members -- at least that story ends nicely.

***

The "Mining News" section starts with a short article on the failure of Taseko's new copper and gold New Prosperity mine in BC (Canada).  Taseko was planning on spending $1 billion on the mine.  I would note that this is the THIRD big proposed gold mine to get rejected (New Prosperity here, the huge Pebble mine as well as the huge Conga mine in Peru).  This points yet again to the damages done to the industry by their own past actions.  Either they have ruined the local environment that locals depend upon or they did not offer the locals enough money (or both).  At some point, there WILL be less gold mined...

Another article in "Mining News" is the news that Cliffs Natural Resources (ticker: CLF) is going to quit its planned Ring of Fire project in remote Ontario after encountering several roadblocks...

The unhappy news in "Mining News" continues with an article noting that Mexico will raise variuos taxes on the miners.  The miners are unhappy...

"Mining News" finishes with two short items, a diamond mine has gotten preliminary approval to start in the Northwest Territories of Canada, but the local Native Americans are unhappy with that.  The other note is about changes at the top at Barrick Gold (ABX), which has seen a lot of turmoil over its many years.

***

John W. Garibald writes another of his editorials ("Last Word") at the end of each issue of AHA.  This time around he makes some "Anti-Predictions".  Because of the complexity of our economic system, he makes some anti-predictions (that is, predictions of things that will likely NOT happen) for 2014.  Here are a few to give you an idea [with my occasional comment]:

-- The bankers that largely contributed (to our financial problems) while amassing fortunes will NOT suffer any real personal setbacks, much less go to jail [I agree].

-- This commentator (Garibald) will NOT sign up (successfully) for Obamacare

--  Congressional approval will NOT improve to 15% [I agree].

-- Twitter and Snapchat (and anything else like it) will NOT turn a profit

-- Miley Cyrus and Justin Bieber will NOT... [oh, never mind, who cares?]

-- Janet Yellen will NOT grow a beard in homage to the previous Fed Chair [does that mean s/he could?].

You get the idea...

***

The new publisher (Brad Hastedt) promised that this was the best issue yet of American Hard Assets.  I would agree.

2 comments:

  1. Thanks for that good read. I have to agree about platinum. I've been interested in getting some (in the form of 1oz bullion coins, like I've been doing with gold) for a long time now. I've been looking at it again recently, and I'm shocked at how cheap it is now, compared to gold. It used to be almost double the price, as recently as 5-6 years ago!

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