Review of "American Hard Assets: The Silver Issue"

It took a while for me to start to do this review of American Hard Assets ("The Silver Issue") because of my unusual recent schedule, but I now have the time, even while down here in Peru.  As most of you know, I like silver (not as much as gold though), and once again I put out the call for someone to write a Guest Post on silver!

Before I get to American Hard Assets (from here on now referred to as "AHA"), here are a pair of pictures from just 30 minutes or so ago on some Peruvian hard assets, 10 pallets of KBC bearings arrived a little while ago!  This first picture shows José and Nestor opening up the boxes (José is working the pallet-jack):

This next photo shows one pallet, there are 40 boxes of 6007-RS bearings (our top seller, for Daewoo Tico), there are 60 pcs per box, so 2400 bearings here.  These pieces will fly..., the closest thing we have to "instant money"!

Note how well the Koreans pack their boxes, there was a triple-wall paperboard top and walls covering each pallet, see packing of another pallet at the extreme right.

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OK, now down to business.  Managing Editor Ryan Kasmiersky starts by describing why some of the writers believe that silver is now the way to go.  He also mentions that their website is now more useful, take a look:

www.ahametals.com

I must mention again that AHA is written for a high-end readership.  Lots of the ads and articles are aimed at the wealthy, but are of interest to everyone who wants financial protection and/or alternative investment ideas.

The "World News Updates" section has six short articles, the first mentions that gold ranks highest as most smuggle item (by value) into India.  The second mentions that Silver Eagle sales continue to shatter records (recall that the magazine comes out every two months), the third writes that Mexico's silver production is down (and looks to be for the whole year 2013) down 10%, a lot!  Two other short articles on gold (for those who do not "watch the pot waiting for it to boil", lol...) and finally an article mentioning the Royal Canadian Mint is taking orders on its various special bullion coin pieces, the kingpin is a PROOF 1 kilo gold coin, only 18 pieces will be made...

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Author Mark O'Byrne writes "Silver Likely to Surge to more than $100/oz. in the Coming Years".  Yow!  I'll take it!

He believes that silver is just in one of its typical hard bull-market drops (silver is the Queen of Volatility"), and that the silver bull will be on the march again as the public becomes more aware (and acutely feels) coming inflation.  He also points to declining silver production (see Mexican production mentioned earlier) even as industrial demand has risen and looks likely to continue to rise.  In particular he points to increasing medical use (silver kills germs) and hi-tech use,  He finishes by saying that physical silver will likely rise to an inflation-adjusted $130 in the coming years.  He is NOT a fan of paper silver...

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Nicholas Forrest writes an article titled "The Art of Silver".  I see relatively little (compared to the past) gold jewelry and art objects, but silver still is still used in (expensive!) art.  He quotes British artist Damien Hirst:

"...  In ancient times artists drew with a stick of silver -- it has a slightly graphic feel.  Textures and edges feel crisper than bronze.  It's dreamy, other-worldly but also sensuous and sexy -- natural to make sculpture with.  I think I may have just begun to tap into its potential.  Silver seems to magically throw out more light than it absorbs."

FINALLY I have some writers saying some really nice things about silver!  Forrest then goes on to show and write about some of Hirst's silver sculptures, and then writes that Picasso and (American sculptor) Alexander Calder both loved working with silver.

So, there it is.  Many serious sculptors are into silver, not just us "stackers"!

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Tate Williams writes an interesting article about how many are trying to recover precious metals from electronic scrap ("Urban Mining").  Apparently some $21 billion worth of PMs went into electronic items in 2012, but only about 7.7% of that gold was recovered (he did not mention how much silver, probably not very much).

Recycling PMs from electronics is a dirty business in the sense that there are many toxins used and left behind.  A big part of this business is that there are so many different kinds of electronic items that assembly-line style work cannot be done.

More regulation has recently been enacted with more to come, including bans on certain kinds of electronic waste exports (I have read about some really dirty work being done in China recycling raw materials from old electronics...).

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Gabriel Benson writes an extremely interesting article on "The Commercialization of Space", which at first does not discuss precious metals at all.  But, there is real progress being made by private companies (like Boeing, Richard Branson's Virgin Galactic, Elon Musk's SpaceX, Deep Space Industries, Planetary Resources, Bigelow Aerospace and others).

Governments are cutting back (fair enough, but space spending programs were OK with me...), so private companies are moving in.  Recall that SpaceX sent is Dragon Spacecraft with 1000 lbs of supplies to the International Space Station in 2010.  SpaceX is hoping to launch its new "Falcon Heavy" craft in 2014, it will rival the Space Shuttle in cargo capacity.  SpaceX may IPO, but Musk is keeping very quiet...  But, good on ya, SpaceX!

These companies are working on a wide array of projects to do work in space, including mining precious metals and WATER on asteroids.  Benson's article alone is worth the price of the magazine alone (at Barnes & Noble)!

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Collector cars are not my thing, but they ARE very popular among a segment of US buyers.  John Gilbert writes a rather complete guide for interested newbies to vintage car collecting, although I confess I did not read the whole article.  The article has two cool photos of film actors James Coburn and Steve McQueen in old sports cars...

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Watch and jewelry expert Ed Estlow writes up a great piece on Rolex watches.  I used to own a Rolex a long time ago (when I worked in the oilfields from 1979 - 1981), I really loved my Explorer II...

The Rich, The Powerful wear Rolex!  They sure did when I was in the oilfields (most of the top honchos wore Rolex Presidents).  Rolex is fashionable without being trendy...  Here's a list of past and present Rolex watch owners:

James Cameron (film director)
Marlon Brando
Dwight Eisenhower
Ronald Reagan
Lyndon Johnson
Roger Federer (Tennis Champion)
Jack Nicklaus
Steve McQueen
Roger Waters (a founder of Pink Floyd)
Martin Luther King, Jr.
Pope John-Paul II
Muammar Gaddafi, Fidel Castro and "Che" Guevara
Hillary Clinton
Madonna

and many more...

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Amber Ness writes "Diamonds as Bullion" extolling the virtues of buying diamonds as an investment.  While I agree with her that diamonds might be a great long-term investment (and certainly are portable wealth!!), I would advise that only people who have done extensive homework or have a trusted expert invest in diamonds....

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As you might expect, there is a market for almost anything of quality...  Noah Joseph writes about the Richard Paterson Collection of of vintage bottles of Dalmore Scotch, from 1926 to the 1990s.

Hey!  Many rich guys drink scotch!

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Numistatist Fred Reed is back again this time with "Dollars & Sense", his Part Two of buying gold bullion coins.  The most common gold bullion coins (in 1 troy ounce size, 1 ounce of GOLD) are:

American Eagle (916 fine, so the coin weighs MORE than 1 troy ounce)
Krugerrand (same comment)
American Buffalo (9999 fine)
Canadian Maple Leaf (9999 fine)
Austrian Philharmonic (9999 fine)
Australian Kangaroo (9999 fine)
Chinese Panda (999 fine, NOT 9999 as in his table)

If you follow gold closely, you may already know most of what he writes, other than his important note about the Industry Council on Tangible Assets (ICTA) and their agreement with the IRS re reportable gold sales.  FOREIGN gold must be reported in 25 oz lots or larger, apparently American Eagles and Buffaloes are exempt from reporting...  My opinion, and this is NOT YET ESTABLISHED LAW!

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Mark O'Byrne writes another article for AHA this issue: Protect Your Wealth With International Bullion Storage".

He starts out with a quotation from Cervantes about not having all your eggs in one basket, and so goes on to recommend (to rich people who have a LOT of gold I hope...) that gold be stored by the various independent storage companies.

While that might be OK with folks with a lot of gold to do, I am more militant, if you don't have it in your own personal possession, you don't own it!

However, Mr. O'Byrne is a pro, I am just a fringe blogger...

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Michael Haynes returns to AHA's main subject: silver!  It's an excellent article on silver's price, demand and usage history from 2000 - 2012.  Bravo!

Despite silver's recent decline, silver has gone up 306% since 2000 (some 6% per year if I did the arithmetic right).

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Exotic wine fans will like Frank Martell's article on wines from the Black Sea are of Russia.  Among the cognoscenti, there is rising interest in these wines (remember, if something is really good, there is money chasing it...).

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In the "Mining News" section I note that junior miners are "just hanging on", Rio Tinto has decided to stay in the diamond mining business (including keeping the famous Argyle Mine in Australia that produces rare pink diamonds), Barrick as another Pascua Lama (Chile) gold mine delay [Ed. Note: as does Newmont & Buenaventura in Conga, Peru], and the likely-to-be-important World Gold Council's new standardized metrics for measuring "all-in" costs of mining gold (as there is a lot of gamesmanship in calculating miners' costs of gold...).

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As always, the slick advertisements actually ADD VALUE to AHA...

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Finally, Editor John W. Garibald writes his "HindSight" column to finish the magazine.  Here he examines the reasons why silver is a good buy despite the apparent manipulation.

I quote his last sentence:

"I am not leveraged long, but I will tell you one thing, friends, I am definitely not selling my physical."

[Ed. Note: I just put "not" in Mr. Garibald`s quotation, sorry for the error]

My thoughts exactly.

***

AHA looks like they are hanging in there, I believe this is their fifth issue (remember I am in Peru as I write this).  This is an interesting magazine for all people who want to look at other investments beyond the normal ones.

Korean Haiku?

Honoring our top two suppliers:

"Ameru Bearings from Korea" -- A haiku by Robert A. Mix

K-B-C, Iljin
In Peru, Korea rules.
Numbers One and Two!


At least for us, and NO, I have not been drinking...   :-)

Ameru's First International Sale

I am pleased to report that Ameru Trading del Peru S.A. had its first "international" sale today!

The brother of a man in Ecuador came by (Lima, Peru) and bought the below pieces from us, he will be taking them back to Guayaquil, Ecuador.  Check it out:

Cliente	Rodaje	Cantidad	Precio $	Dscto	Total
Ortega D.L.A.	02-6308/32AHL1DD	10	$13.05	18	$107.05
Ortega D.L.A.	02-B25-157	90	$6.37	18	$470.52
Total Sale					$577.57

Numbers are approximate as I had to convert Peruvian Soles to US$.

Both bearings above are used in Korean vehicles and are KBC brand.

KBC Visit

Going with the flow here in Seoul, I just went out and bought coffee.  Actually I did not even have to leave the hotel, there is one right there attached.  $5.00 for a small cup (to go) of Colombian Supremo...

***

I will write up an article on each of our two bearing suppliers here in Korea (and later our supplier MBS of Japan as well), but I will start with KBC as I have the information better organized.  I have to mention something else: each of the four guys (two KBC men here in this article as well as the two at Iljin) I talked with at length work 60 + hours per week, it is 5:34 PM Friday evening here in Seoul, I would expect that all four are still at work...

I have mentioned that KBC brand is typically very close to 50% of our sales volume.  KBC was a joint venture with large German bearing maker FAG, then FAG bought out the rest of KBC that it did not own, and then mighty Schaeffler (INA brand of German industrial bearings) then went and bought FAG out.  The bearing industry is consolidating, something like what the airlines and car makers are doing.  So, the brand is KBC, but the official name of our supplier is Schaeffler Korea Corporation.  Schaeffler, by the way, is owned by ONLY Mrs. Schaeffler (I believe she is widowed).  Her son helps her run that huge company (they also bought Continental, the German tire and auto parts maker).  I am guessing that Schaeffler is the second biggest bearing manufacturer in the world.

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The people with whom we work there at KBC (shorter than Schaeffler...) often switch jobs, but the man helping us now is Sung-Su Kim (Mr. Kim).  Here is a picture of Sung-Su Kim as well as Jong-Woo Kim (not related AFAIK), "Kim" is a very common last name here in Korea (something like 50% of Koreans have the surnames Kim, Park, Lee and Oh).

On the left is Sung-Su Kim and on the right is Jong-Woo Kim.  Hey guys, you're famous!  Just behind them is Jong-Woo's SUV, a Hyundai Santa Fe.

Because I so rarely wear a tie, and recently shaved off the mustache that I had worn since I was 24 years old, I thought some of you might like this of me and Jong-Woo Kim:

Sung-Su Kim runs about 1/3 of the export business of KBC (he covers the Americas (ex. USA) and India and Sri Lanka as well).  He has been working directly with Ameru for perhaps a year now, he briefly worked with us in the past as people were moved around (I have to assume that all that buying and re-organizing by the German owners has kept the pot stirred there).  Sung-Su Kim was very patient with me as we explored a variety of issues, even some delicate ones...  He was one of the two guys who really filled me in on the Korean character, that is, how Korea rose from being as poor as anybody in Africa after the Korean War (South Korea was essentially destroyed in the war) to becoming a mighty manufacturer not only of bearings and cars, but high technology (Samsung smart phones, LED big screen TVs, semiconductors, etc.) as well.  Korea is AHEAD of the USA in battery and magnet technologies.

I met Jong-Woo Kim at their Changwon Plant 3 (I am not going in chronological order for the moment, as I wanted to put up the above pictures first).  Jong-Woo Kim was educated in the USA for six years and his English is very good.  He is a material scientist, and works for their R & D unit.  He took us on a tour of their R & D facility, which impressed me a lot.  They have MANY rooms with LOTS of equipment that I have learned to appreciate (even though I am not an engineer) through the years.  He wants to take a look at the fake KBC bearings (Chinese bearings being marked and packaged by counterfeiters in Peru) that I brought here with me.  KBC even makes some of their own machines...  And some for their parent company Schaeffler in Germany as well.

I met Sung-Su Kim after Iljin's two guys turned custody of me over to him late Tuesday (in Changwon, a city in the extreme south of Korea, very industrial but very clean).  Here is a "drive-by" picture of a piece of heavy equipment I saw when while being driven around Changwon:

And a bridge near Changwon (another "drive-by" photo):

On Wednesday, Sung-Su took me over to Changwon Plant 1, where they make most of the pieces that we buy from them, here is the entrance:

If you look carefully at the right part of the first archway you can make out the KBC brand name.

Unfortunately, neither KBC nor Iljin would allow me to take pictures inside their plants.  I have to assume, then, that each has proprietary technology that they do want leaked out to the world (and to their competitors).  Personally, I feel it is a real pity that I could not take pictures of such amazing factories.  I have NEVER seen anything like that in any other factories I have visited (OK, I have NOT visited REALLY hi-tech plants like semiconductor plants).  But, in comparing these factories to the one I visited in Spain some 12 years ago, I was extremely impressed with the automation and quality control I saw...

But, they did have display cases, just for for visitors who turn up, like me!  The below picture is the rear axle of the famous (in Peru!) Hyundai H-1 "Grand Starex", you can see the Grand Starex in my article not long ago about vehicles they have in Peru but not in the USA.  The below photos are not very high quality because all pieces were in display cases, and I could not get really close.

That axle uses six bearings (one double row type on each wheel and a pair each of tapered bearings on the pinion and the differential).  In my earlier article as well re the bearings we sell in Peru, I show two of the pieces we sell for the Grand Starex, one of them is the double-row type here, the other piece is a "Generation 2" type made by Iljin.

The below picture shows ball bearings:

You can see part of the outer ring cut away on the big piece at the right.

KBC tapered roller bearings:

Again, the pictures are not very good, sorry...

I spent that Tuesday night in a hotel in Changwon, in a district that was pretty lively...  Do Koreans ever sleep?

The next day, Sung-Su Kim and I flew back to Seoul (rather than endure a 5 hour road trip, security by the way pretty relaxed for domestic flights in South Korea, they let me bring my bottle through in my hand luggage...).  He put me up in a hotel near to the dead center of the city of Seoul, that afternoon I went out and took some more pictures of Seoul (earlier article, just scroll down the page).

On Thursday, I had a nice long and productive meeting with Sung-Su Kim in a conference room there at their HQ in Seoul.  I noted on the way in a congratulatory picture and note from Mrs. Schaeffler and her son, recognizing the fact that Schaeffler Korea sold over 1 trillion Won last year (about a billion dollars).  The conference room had those white boards that you write on with the erasable markers, it was my first shot at doing that...  I filled out three of them in great detail, I think Mr. Kim would agree, as he took several photos for his later reference (we covered a LOT of ground).  I even briefly met his boss (Kun-Soo Han) too.

So, there it is.  A really good meeting with our KBC counterparts.  Sung-Su Kim is really a great guy, a family man too...  But, probably still at work as I finish this piece at 7:05 PM on a Friday here...

What Do 12 Pallets Of Bearings Look Like?

Ameru Trading del Peru S.A. had our latest order from Korea arrive just yesterday.  This cargo arrival, however, had a glitch that almost caused us great pain.

We buy from Korea, our supplier turns over the load to a freight forwarder there in Busan (major port).  The forwarder then arranges shipment, and gets them aboard ship.  Three weeks later the ship arrives to Callao (Peru's big port).  Our bearings ride in a 20' container with other people's stuff (a typical order from us maybe fills 25% of a container).  Upon arrival, the container is "stripped", papers presented to Peruvian Customs, some processing goes on and typically a few days after arrival to port, we get our bearings delivered to us, most of this is handled by our Customs Agent / freight forwarder.

This time we had an unusual problem come up that would have been nasty had we not help resolve it fast.  Turns out that someone in the shipping chain (forwarder-shipping line(s)-Customs Agent) had not been paid.  So, our bearing order was "embargoed" (blocked, frozen).  So, even though our bearings CLEARED CUSTOMS OK, they would not deliver because someone up the food chain had not been paid.  This happened to EVERYTHING (my understanding)  that arrived on that ship!  Many millions of dollars of products in total.

And the most painful part WOULD have been that provincial customers of ours had already paid us to be getting the Daewoo Tico bearing first, before we run out (KBC never sends us enough...).  Gaining trust of customers in the provinces is difficult in a low-trust environment like Peru.  Someone in provincial Peru pays us a week before THEY get their bearings?  <--- That trust has to be earned.

We were told to write emails and put on every pressure imaginable to get the reprobate debtor pay up to get our goods.  So we did!  I wrote one of the toughest notes I have ever written to EVERYONE, yeah, with whatever you can do with words, I wrote it!  Fortunately, it looks like our supplier put the squeeze on their forwarder (and I imagine LOTS of pressure was put on by many others) and we got our bearings released and finally delivered yesterday.

We received 12 pallets of bearings.  We unload by hand (we do not own a forklift, labor is too cheap re the machine).  It took our six able-bodied men about 30 minutes of intense physical work (it is smart to unload a truck fast in a place like Lima (lots of street crime), we do not have a warehouse entrance or loading dock).  Also, we did not have room inside (we have a lot of space taken up by recent big (volume of space occupied) Chinese bearing arrivals.  So, we had to store them in our interior patio...  See the pictures:

You can see the sun shining down on our boxes of bearings there stacked in my in-laws' carport.

Below are five of our employees, who had to work like dogs getting the bearings off the truck and into our place, left to right are Nestor Cardenas, José Clavo, Roberto Arce (our versatile Sales Manager), Raul Quispe (Warehouse Manager) and César Rodriguez (General Manager):

You can see one of our delivery vehicles behind José, a Suzuki Carry (economical, Peru is a place where people and companies work VERY hard to keep capital expenses down, not much capital to invest).  Pretty snappy t-shirts, huh?  It is summer now in Lima.

UPDATE!

Lily sent more pictures taken this afternoon!  These are pictures of us preparing boxes for delivery.  Because our customers in the provinces paid in advance, they are the first to get them.  We take their bearing orders to the bus companies that run from Lima to every corner of Peru.  This first picture shows some of our employees locating bearings from this newly arrived order and checking the paperwork (Invoices).  The two pretty ladies in dark t-shirts are Lily (right) and her daughter Denise (just left of center).

Our guys preparing to load the various orders we received...  Note the dollies (hand trucks).  No forklifts for us!

And, loading up the vehicles!  Note that when we ship to our provincial customers, we strap the boxes with steel ribbon to strengthen them while in transit (bearings are HEAVY!).  The young guy in the white t-shirt is Lily's son Gonzalo.

Thank you Lily for the pictures!

Finally, take note that we came back to the USA about two weeks ago.  I got to escape all that work...