Review Of American Hard Assets -- June/July 2014 Edition

American Hard Assets ("AHA") is out with their June/July issue, they call this "The American Issue" in that they have several articles analyzing hard assets mostly pertaining to Americans.  Before I get to the magazine itself, I wanted to stroll around their website:

ahametals.com

as I have seen various Bitcoin ("BTC") articles linked by Justine Hermosa (a member of a Facebook Bitcoin Group).  Ms. Hermosa is closely following AHA's coverage of BTC and posting new articles from their website.  Why would AHA (purportedly following gold and hard assets...) be devoting part of their website (as well as two articles in this issue of their magazine)?  It looks like a combination of the below two concepts:

1)  AHA apparently feels that there is at least some merit in BTC

2)  AHA perhaps has gotten feedback from readers who want BTC articles...

At AHA's website, there are SIX current articles (3 days or less since published) on BTC.  I should ask them if they would take BTC for a subscription, smile,,,

Here is an interesting article that they post from the UK (in which they look at some fundamentals of 20  stockmarkets):

http://www.ahametals.com/20-top-contenders-world-cup-investing/

Nor has their website forgotten about gold:

http://www.ahametals.com/shanghai-start-international-gold-trading-4q/

There are six other gold-related articles linked at the above as well.

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In AHA's "World News Updates" section, I noted an interesting table originally from Knight Frank Wealth Report (of London).  The below shows their view of the preferences of the very rich on cities where they will choose to live:

Rank	2013	2014	2024
1	London	London	New York
2	New York	New York	London
3	Singapore	Singapore	Hong Kong
4	Hong Kong	Hong Kong	Singapore
5	Geneva	Geneva	Shanghai
6	Shanghai	Shanghai	Beijing
7	Dubai	Miami	Dubai
8	Miami	Dubai	Miami
9	Paris	Beijing	Geneva
10	Beijing	Paris	Mumbai

Note Beijing (in red) moving up, despite pollution, and their prediction that Mumbai (India) will move into position 10.

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Also in "World News Updates" is their short piece on BTC (as a bad investment this year, but recall that AHA's BTC info is always late), a nice article on the richest billionaire in each of some 49 countries (um, where are the Rothschilds?), as well as The New York Times own Paul Krugman calling Bitcoin "evil" (?, that's, "The Old Gray Lady" has jumped the shark...).  Granted, Krugman's article popped up just when BTC exchange Mt Gox crashed & burned...

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Author Amber Ness is a regular there at AHA.  She pens a piece "Birth of the Modern Gold Bug" in which she looks at modern history of physical gold buyers, notably gold purchases picking up since The Great Recession.  Also interesting is her observation that gold owners are NOT just TEA Party members, that even more Democrats are buying gold...

She goes on to cover familiar (to us!) ground: why investors should consider having 5% - 20% of their wealth in gold.

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Jason Walter Vaile writes a nice article outlining the history of the American Gold Eagle coin.  He starts with a quick overview of gold coins (Lydia was first, 550 BC), and then goes on to describe the design and production of the Gold Eagle.  The obverse ("heads") side is inspired by the design of Augustus Saint-Gaudens and the reverse side designed and sculpted by Miley-Tucker Frost.

Vaile has a handy chart (data from Zero Hedge!) showing sales of Gold Eagles since January 2009.

All gold in the Eagles is mined from the USA.

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Richard Alexander Rogers writes "Good Delivery: Good for You".  "Good Delivery" bars are required for many LARGE buyers of gold bullion, in the USA Comex has their standards, outside of the USA the standard is LBMA standards for gold delivery.

LBMA (London Bullion Market Association) standards include gold bars of at least .995 fine, bar weight between 350 and 430 oz (troy) with fineness and refiner's stampings.  Both Comex and LBMA insist on a "Chain of Integrity" (gold stored at recognized warehouses), else, the bars have to be assayed...

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Amber Ness writes "Closet Preppers: Quietly Arming for Doomsday"!  Apparently prepping is catching on all over the USA.

Her article is very good, quite comprehensive!  She covers most of the bases:

-- cash, both at a bank and/or at home (eight months worth)
-- gold & silver coins (including "junk silver" - pre-1965 US dimes & quarters)
-- a plan as to what family members are to do...
-- food (short-term and long), gardening
-- guns & ammo (yep, she says get them)
-- tools and similar supplies (a very long list)

But, she writes that doing SOME of the above is better than doing nothing!

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Gabe Benson wonders in his article whether we can make money in Classic Cars (not just old ones).

Ah, not for me...

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While we all read that manufacturing is nearly dead in the USA, Jason Walter Vaile advises in his article "American Artisans" that there are a wide variety of Americans producing high quality products (vodka, knives, guitars, woodworking, marbles and hats).

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"222 Year History of the U.S. Mint" (by Douglas Kale) is a nicely done history of our Mint, from before we even HAD one (Alexander Hamilton proposed it in 1791, official coin production started in 1793).

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AHA has recently featured pieces from authors from JustLuxe (justluxe.com, as website of luxury products and services for the wealthy, very weaalthy).  And this month, AHA features five articles from JustLuxe.

JustLuxe author Courtney Driver contributes a piece on polo, about an elitist sport as I can imagine.  She discusses the sport with Nic Roldan, an important American player.  Polo requires a variety of abilities, riding a horse in stressful conditions is but one...

JustLuxe author Noah Joseph writes a piece on the current fastest car, the Hennessey Venom GT (a highly modified Lotus Exige, this is now the world record-holder at 270 MPH...

Susan Kime (who has contributed to AHA before) writes a nice piece about World View Experiences, a company hoping to offer balloon & glider trips to take tourists to the edge of space (over 100,000 feet) by 2016...  At that height, you can experience the "Overview Effect" where you see the curvature of the Earth as well as the light coming up from the sun before sunrise there at the edge of space...  I hope they are able to make that happen!  Cost: $75,000 per trip.

Jared Paul Stern writes about a new lavish new "coffee table book" about American yacht maker Hinckley Yachts.  Billionaire David Rockefeller takes his Hinckley out for cruises from Southwest Harbor, Maine.  Martha Stewart owns one too!

Mila Pantovich (the fifth author featured in AHA's current issue) writes about costume design (movie costumes).  She focuses on costume designer Judianna Makovsky, who did much of the costume work for the new "Captain America" movie and has dome other work including for "The Hunger Games" and "Harry Potter".

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Watch expert Ed Estlow follows up on his earlier article with more information on the re-emerging American watch makers.  "American -- No Really -- American Watches" looks at Shinola Watch Company ("Built in Detroit") and goes on to look at other American watches (none look inexpensive nor traditional) such as Devon, Keaton Myrick and RGM (Roland Murphy).

OK, I am happy to see more "American Artisans" making quality products that appear to succeed in this highly competitive world we share, but NONE of these are "vertically intergrated" yet, they import at least some important parts (from Switzerland and perhaps other places).

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Michael Haynes (CEO of respected precious metals dealer APMEX) writes "American Eagle First Strike: Gold and Silver with Zing", about coins that are minted while the dies (that stamp the metal coin planchettes into their Eagle designs) are brand new, and (whose coins) are submitted by collectors and dealers to the grading companies PCGS or NGC.  These grading companies then "slab" the nicest pieces into the plastic, (hopefully) tamper-proof holders with a grade ("MS-70" is the highest possible grade: NO blemishes on the coin).

There DOES appear to be demand for these extremely high quality bullion pieces.  The MS-70 population of Eagles (silver and gold) commands prices well above "spot Eagle" prices (regular Gold Eagles typically already cost some 5% or more than spot price of gold).  In the case of the 2011 Gold Eagle, a "First Strike, MS-70" Eagle commanded a price of around $2400 (April, 2014) or around an $1100 / oz premium vs. gold spot price.

I did not know that these "numismatic quality" God and Silver Eagles went for so much more!

[Ed. Note: Beware of fakes!  China is making fake "slabbed" pieces...]

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John Maben writes "Top Ten Tips for Buying Precious Metals".

Many of you, dear readers, already KNOW how to buy silver and gold.  But, Maben's article is of value to any new people considering buying precious metals.

[Ed. Note: Maben is really writing: "Do your homework."]

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AHA publishes several shorter pieces each issue on developments in the mining industry.  This issue's "Mining News" has an article on Transition Metals finding a likely good discovery of platinum at SUnday Lake (Ontario).

Another item in "Mining News" finds that Taseko Mining got rejected (second time) by the Canadian Minister of the Environment for a new gold-copper mine (Taseko will change their mining plan and try a third time).

"Streaming companies" are those who buy-in (one way or another) into receiving a percentage of a mine's or a refiner's output.  "Streaming Companies Break Records in 2013" explores three players in this space, the most well-known being Silver Wheaton (ticker: SLW -- whose stock has zoomed about 25% in the last month, see: http://stockcharts.com/h-sc/ui?s=slw).  But, many miners, including streaming miners, are losing money...

Other "Mining News items include pieces on Rio Tinto (ticker: RIO) cutting costs as well as Centerra Gold maintaining its Kumtor gold mine (the second highest -- altitude -- gold mine in the world, after Peru's Yanacocha) in risky Kyrgystan.

Finally the last mining item this issue is a very interesting report (a survey of 690 mining executives) from the Fraser Institute on friendly mining jurisdictions worldwide.  Sweden comes in at Number One!  That would not have been my guess.  Other highly rated (mining friendly) jurisdictions include Finland, Alberta (Canada) and Wyoming (in at Number Five worldwide), also considering mining friendly wre US states Nevada and Colorado.  LEAST friendly jurisdictions include Kyrgyzstan (um, Centerra?), Venezuela (duh), Argentina (no surprise either), Philippines, Zimbabwe, Ivory Coast Indonesia and Madagascar.

[Ed. Comment:  Buy the metals, not the miners, but that's just me...]

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John W. Garibald writes the Editorial at the end of each AHA issue.  "The Impact of Geopolitical Events on Gold" is a fine piece explaining why sometimes not much seems to happen even when alarming news arrives (he looks at Russia and Ukraine here).

He asks why the prices of precious metals are not rising higher on what appear to me (and others) to be ever-more bad news in the world today.  Garibald writes this gem of a sentence which sums this conundrum up rather well:

"As with most things in the financial markets, the answer is multi-faceted and nuanced, but there are at least some primary contributors to study."

These contributors include size of the physical and "paper" PM markets, Federal Reserve QE policy, real interest rates and inflation in general (including in different places).  He suggests that you NOT play the headlines when buying (or selling PMs), but instead to average-in your costs through time and think long-term.

Bravo, Mr. Garibald!

Spookier And Spookier...

It has been a long and strange week in the financial markets all over the world:

Gold and Other Precious Metal Prices Plunge

On Friday April 19 and Monday April 22 the price of gold (more accurately: "paper gold") plunged about $120 per ounce, the biggest percentage drop in decades.  This drop represented a paper loss of $720 billion:

6 billion oz of gold in the world * $120 / oz = $720,000,000,000

The other precious metals dropped sharply as well, the price of silver dropped even more on a percentage basis.  Platinum and palladium joined the ride down.

And yet buyers of physical precious metals were out in force all over the world, author included, lined up to buy gold.  I was only able to buy two ounces (total) in two visits to my local coin shop, that's it!  All that was available.  China and India had people lined up in buying frenzies.  Yet the "paper price" went down.

The "premium" (the extra price for a gold coin above the spot price: see the eBay/24hgold.com widget here at the home page: 24hgold.com at the bottom, currently the premium is about 14%, pretty high) on buying gold also went up.  The premium I paid earlier this week was about 7.2% (Gold Eagle) at the coin shop, high for them.

Silver is even harder to get (and with higher premiums).  Most of the popular silver products are not available at all.

Other Developments

-- Stocks had their worst week in five months.
-- The two bombings in Boston caused well over a billion dollars in losses there.
-- The relative media silence on the far deadlier Texas fertilizer plant explosion.


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The CBC of Canada has produced a special show "The Secret World of Gold".  You can watch it here (link is at): jsmineset.com (of April 19, 2013, in three parts).

The CBC report discusses a lot of interesting items:

-- Andrew Maguire's story, he was a precious metals trader in London who has attempted to blow the whistle on Morgan Stanley and their pretty obvious manipulation on silver and gold prices.

-- The American company Odyssey Marine's story of salvaging gold and silver from the Atlantic Ocean, including their losing their find to Spain...

-- The story of how France got their gold out just before the invading Nazis could capture it during World War II.

-- Canadian billionaire Eric Sprott (who runs a lot of gold & silver as well as gold & silver ETFs) as well as Sprott's employee John Embry.

-- Venezuela's taking their gold back.  Apparently when they wanted their 400 and something tonnes, that created a mild panic among the custodians (the UK, Europe and the USA) of their gold...  I wonder if Germany not getting much of THEIR gold over the next several years would be related to that...

-- Doubts among some that the US national gold at Ft. Knox has not been properly audited since 1954...  (Note: performing such an audit that would satisfy skeptics would be cheap and easy to do).


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The Obama Administration failed in its current efforts to advance their gun-grabs.  The Senate effort to adopt the UN treaty on small arms failed as did the effort to impose stricter gun law registration and gun checks.  The Administration and their D-Team allies in Congress want more laws, always more laws.

How about they enforce the ones we have now?

A parallel effort is underway to grant essentially an amnesty to illegal aliens.  It is not being painted this way, but that is the real goal.  Whatever the D-Team gets through now, they will ask for more later.  One of those "Camel's nose under the tent" things...

Again, the laws on illegal immigration are actively and deliberately not being enforced.

The above two efforts are clearly aimed at expanding government power at the expense of the citizens (gun-grabs) and at expanding the voting base of the Democrat Party to insure their dominance in the future.


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It was just this afternoon that we learned that Tamerlan Tsarnaev (the elder Boston Bomber) was apparently an Islamic extremist who went to Russia and Kyrgyzstan in 2010 for six months.  Was he trained by Chechen extremists?  Apparently our government was warned about Tsarnaev, and the FBI questioned him.  We were warned...

Diversification In Precious Metals

Long-time readers of my blog knew this one would eventually come...  While I still have not written a piece on Silver (I have long felt that I could draft someone else to do a "Guest Post" on silver...), I include a discussion here, as the dynamics of holding silver are different than holding gold.  And both platinum and palladium have their own dynamics as well.

I use the acronym "PMs" often in this article, short for "precious metals".

"Gold is the money of Kings
Silver is the money of Merchants (Gentlemen)
Copper (Barter) is the money of Peasants
Debt is the money of Slaves"

- "Traditional" (I did a quick Google search and could not find the origin of this saying, "Traditional" found here: http://corp.adjutant.com/about/favorite-quotes)


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An Extremely Brief History of Precious Metals Monetization in the USA

1)  The US Constitution says that money was to be ONLY silver and gold.

2)  They took away our gold in 1933 (Roosevelt's confiscation).

3)  They took away our silver in 1965 (clad dimes and quarters).

4)  They even took away our copper in 1982 (new pennies are mostly zinc).

5)  Will they take away our money in the banks soon (see Cyprus)?


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An interesting forum-style website covering ALL precious metals is pmbug:

http://www.pmbug.com/

Gold and silver are also much discussed at the famous Zero Hedge website (which talks about almost all things financial as well):

http://www.zerohedge.com/


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Gold

Gold has been considered the wealth-preserver of choice for some 6000 years.  Most gold is hoarded, relatively little of it circulates (even back in the days of gold coins as "money", gold did not circulate much).  Because of this primary role of wealth-preservation, gold's highest and best use is sitting very still, held through time, generation-to-generation.

(Re gold and the statement in blue above, I am a follower of FOFOA: fofoa.blogspot.com)

Indeed, gold traditionally HAS been the choice of kings as well as the choice of plunderers for millennia.  Most civilizations valued gold highly (one interesting case that did not were the Incas of South America, who made decorative plates (etc.) out of it, but it was not really hoarded by them, although it WAS called "Tears of the Sun" even by them).

On occasion, LARGE transactions were often transacted in gold.  There is a (an apocryphal?) claim that in Weimar Germany during their hyperinflation that ONE OUNCE of gold bought an apartment building...

Gold is available from 1 gram - 400 oz (troy) sizes.  It is relatively EASY to buy gold coins (Gold Eagles are my choice) in one oz size, but Eagles also come in smaller sizes too (1/2 oz, 1/4 oz and 1/10 oz coins).  Gold Eagles are almost always available at "the largest coin shop in town", the retails price is typically about 6% over spot (6% premium) for Eagles, for certain other gold coins (Krugerrands, Austrian Philharmonics, etc.), the premium is typically less.  LARGE bars of gold (1 kg (31.2 troy ounces) for example) are a little harder to get, especially the 400 oz bars (seen movies...) -- a 400 oz bar would run you some $640,000 now...  One kilo gold bars are typically available at www.tulving.com.  Here is a picture from tulving, showing a typical 1 kilo gold bar: http://www.tulving.com/bullion/kilo_gold_bars_johnson_matthey_jm_kilo_bar.htm

Gold is the only metal stored by the central banks as monetary reserves (most central banks also use US dollars and other currencies as part of their reserves as well).  The central banks and the central bankers may be evil, but they are not stupid...

In my opinion, gold is most suitable for:

-- the already wealthy looking to hold it as a "store of value"
-- those with a long-term horizon (family holdings, to be passed down the generations)
-- those who may want to trade it at some point for other high-valued items (land, fine art)
-- those who might want to transfer a large amount of wealth with them...

Gold is less suitable for:

-- those who cannot afford it (a 1/10th oz Eagle costs about $190, which is not that much)
-- those who plan to "spend it" (for food, etc.) in a SHTF
-- those who do not have children or other heirs they love...

As of the date I write this piece, gold's spot price is about $1605 per ounce.  The price of gold has been range-bound for over a year now, ranging from the mid-$1500s to $1900 per oz.


Silver

The famous economist Milton Friedman has written that silver has been used for money much more often throughout history than gold, indeed his assertion is correct if you define "money" as something that circulates (although the definition of "money" is very slippery, see FOFOA's (very long) blog pieces on money).

One reason why I have not written much about silver is the huge amount of conflicting information about the metal as well as how much the price is manipulated.  In my opinion, there is no question that the price of silver (and gold to a lesser degree, probably...) are manipulated, but how much...?

Silver, it turns out, has a myriad of industrial uses.  I have seen claims that silver is used in more  different industrial applications than any other metal (though usually in very small amounts).  Silver is used (50 lbs worth?) in every Tomahawk missile (and not recycled) as well as iPhones and iPads.  A lot of silver is recycled, but a lot is not.  The fact that a LOT of silver is used by various industries means that its price is influenced by the general economic climate.  "Moar stuff, moar silver is used"

I have seen claims that the amount of the world's above ground (tradeable) inventories of silver are about the same as for gold (about one billion oz each), a claim I cannot verify to my satisfaction (LH!  I need an article from you on silver!!!)

Here is some reading material for those interested in silver (I do not include much information about silver here at my blog, there IS extensive information on gold and platinum here):

http://lhmarketwatch.blogspot.com/

https://silverbulletsilvershield.com/

Silver is also easy to get (although Silver Eagles have been hard to get at certain times since 2008, the US Mint apparently cannot keep up with demand for silver from investors), typically in one ounce coins, there are MANY options, I choose Silver Eagles as they are made in the USA and so well-recognized.

Silver is most suitable for:

-- those who want to buy an ounce for less than $40...
-- spending in a SHTF, yes silver would be better than gold for that
-- those who are betting on silver "running out" (a common theme among silver bulls)
-- fabulous gifts that are not too expensive...
-- speculation..., there WILL be spectacular movements (up & down)
-- protection from germs ("a silver spoon...") and vampires...
-- jewelry (notice how hard it is to find GOLD jewelry nowadays?)

Silver is less suitable for:

-- holding in large quantity (this subjective, I know someone who has 5000 oz...)
-- those who prefer less price volatility...

Silver's price today is about $28.80.  Many consider this price grossly undervalued (a bargain).  The gold price to silver price (Au:Ag ratio) is about 55:1, relatively high by historical standards (this means that were the metals to revert back to their traditional 15:1 ratio often seen in history, that silver would outperform gold, although whether this will happen anytime soon is in much dispute...).

Interested in buying silver...?:  "DYOF Diligence"!


Platinum

Platinum has been recognized as a precious metal now for some 150 years or so (depends on who's counting...).  Platinum is used in diamond mounts (engagement rings, for example) as it is harder than silver or gold.

Platinum is much rarer than gold, there are approximately 10 ounces of gold for every ounce of platinum around the world.

Platinum is also used in industry (as catalysts and in alloys), and so is similar in that respect to silver.  The metal's price shows some of the same industrial demand dynamics as silver does.

Platinum is relatively more suitable for:

-- people who already have decent holdings of other PMs
-- people prepared to pay the price (roughly the price of gold per ounce)
-- those OK with price fluctuation (more volatile than gold)

If you do not have gold and silver, I would recommend starting with those two first.  But, if you are not the kind of person who takes advice from the likes of me, well, owning platinum is better than not owning any PMs at all.

Platinum is harder to get than gold and silver, but if you look around, it is there.  tulving (see above) has platinum coins.  But, not Platinum Eagles, which are VERY HARD to find now (except for "proof coins". which are collectible coins with a high premium over metal value).  Platinum from Canada, Australia and the UK is fairly easy to get.

Platinum is priced around $1580 per ounce, less than gold.  This is relatively rare, historically speaking, the ratio of Pt:Au typically varies from approximately 1:1 (now for example) to 1.3:1 (platinum more expensive).


Palladium

Palladium is the last of the PMs as accepted by most commentators...  Palladium (like gold, silver and platinum) are traded on the COMEX, and palladium is used for some jewelry (esp. in China and as one the accepted alloys for "white gold").  Palladium is also used in industry (like platinum), but in lesser amounts.

Palladium's price volatility is very high (it traded over $1000 / oz before crashing to under $200, wow did Ford Motors lose a LOT ($1 billion) on palladium when the Russians let 'em have it...).  Palladium is also even harder to get than platinum, but too can be found at tulving...

Palladium is now trading about $750 / oz.


Other metals (as investments) and comments

With Cyprus the being the "disaster du jour" lately, I have seen various comments on holding metals that are NOT PMs...

Perhaps the most common are people who are (and have been for over a year now) hoarding NICKELS (5 cent coins).  Nickels are 75% copper and 25% nickel.  The US Mint is likely to STOP making nickels very soon, as they cost some 10 cents to produce (transport of base metals is expensive...).  The metal value of nickels is around 4.9 cents now, lately it has been above and below 5 cents.  Metal value, of course, does not include the expenses of melting nickels to separate the two metals (now currently illegal).

Many people also are culling the copper pennies (1981 and before) pennies that are 95% copper from the modern (1982 on, although some 1982 pennies are copper...) pennies which are some 97% zinc with a copper coating...  The copper pennies are worth (metal value, although ZH-er DCFusor has informed us (at pmbug.com) that "penny alloy" is not considered desirable by recyclers of copper...  Also, is it really worthwhile to spend your time sorting PENNIES?!?!

Metal values of US coins can be checked at www.coinflation.com.


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The question probably will arise: "how much of each PM to hold?"  That, kind reader, is up to you!  In the above comments I have discussed suitability in a general sense.  In my own case, here is my $-value percentage holdings of the above PMs (values approximate):

Au:   78%
Ag:     3%    <--- lots of ounces (for "SHTF"), but my gold is worth far more
Pt:    18%    <--- I value platinum's "price density" (value per ounce)
Pd:     1%    <--- token speculative position only