Friends Helping Friends

By Michael Checkan

Next year I will celebrate  my 45th year of active engagement in the international foreign currency and precious metals markets.

I began my career as a specialist in these markets in 1965, working in the international department of the largest bank in Washington, DC, the Riggs National Bank. In 1967, I was recruited by Deak-Perera (the oldest and largest non-bank foreign currency and precious metals firm in the world at the time) and I worked there for 16 years.

In 1982, I joined with my best friend, Glen O. Kirsch, to found Asset Strategies International.

I have been blessed to meet many wonderful people throughout the world over these 45 years. Now, I would like to introduce some of these personal and business friends to you.

In 2007, I traveled with 20 delegates to Australia, including an eye-opening tour of huge stacks of gold stored at the Perth Mint in Western Australia.  Earlier this year,  another 20 delegates traveled with me to the awesomely lovely country of Switzerland.

In 2010, I plan to take a group of 50 delegates on an Argentine Advantage Expedition in March.  In May there will be an Austrian Advantage Expedition.  And in September we will return to Switzerland for another Swiss Advantage Expedition.  

The Expeditions will primarily be a learning experience about the country and the investment and business opportunities unique to that country. They will provide an opportunity for me to introduce you to my friends in these various locations. Of course, these trips are not going to  be “all business, no pleasure.”  We will stay in five star hotels and have fun with special opportunities not available to most travelers.

The Gnomes of Switzerland

I just returned from the Swiss Advantage Expedition and would like to share with you some information about Switzerland and one of the cities we visited. This Expedition started in Geneva and continued on for eight days to Neuchatel, Interlaken, Luzern and eventually to Zurich.  We visited with private bankers, asset protection attorneys and asset managers. The business visits in Geneva, Neuchatel and Zurich were organized by three hosts who are my long-time friends.

I chose Switzerland because it is one of the best countries in Europe to hold offshore assets. History has taught us not to keep all of our assets in one country, one currency or one investment. Switzerland is such a unique country in so many different ways. Most importantly, Switzerland is safe, with a special culture and way of doing things. In Switzerland, you will find people of distinct cultures who speak different languages and successfully and peacefully work and live together. This is a model for the world.

Year after year, international studies show that Switzerland ranks well above many other countries in such qualities as proverbial stability...as work ethic (low absentee rate, high productivity, low unemployment and no strikes), no political, social or economic upheaval; plus, a strong currency, excellent communication, and a beautiful country to visit and to spend some of your money.

Geneva: Investment Management Capital of the World

Some 35% of the world's private and institutional assets are managed from Switzerland, compared with 21% in the United Kingdom and 12% in the United States. Geneva is both the cradle and the capital of international asset management. The internationalization of the phrase “private banking” underscores the fact that the quality criteria applied in Geneva -- the birthplace of the private bank -- are a benchmark for the profession all over the world.

It is in Geneva that the two major Swiss banks and Europe's foremost fund managers have the largest proportion of their assets under management. Geneva is also the city selected by an increasing number of foreign banks as the base for their international asset management operations. Geneva is home to 54 Swiss banks and 108 foreign banks. The synergy generated by such competitiveness is further enhanced by the activities of hundreds of finance companies and independent asset managers, as well as the portfolio management departments of leading international accountancy firms and stockbrokers.

Geneva's bankers are famous for their skills in developing strategies for the allocation and management of assets on a global scale. They have been thinking internationally and diversifying their investments since the 17th century. This emphasis on risk diversification and hedging remains a cornerstone of Geneva's banking expertise. Global asset management means more than simply managing a client's international investment portfolio. The city's experts can also advise on inheritance planning, international tax arrangements and the creation and administration of trusts, family foundations, corporations or holding companies. They will develop customized solutions to meet your particular needs.

"To Travel Is to Live"

The personal one-on-one visits to meet my friends in different parts of the world will not be all work. In fact, you will find that your fellow travelers are like-minded individuals looking for solutions and opportunities outside of the traditional paths. In Switzerland, we learned from the experts how to internationalize some of our assets. There is nothing like meeting in person, in their home country, with Swiss financial and legal specialists, to get the expert advice you need.

Our experiences in Argentina will be different from those in Switzerland. We will start in  Buenos Aires, the city that has rightfully been called the Paris of Latin America.  There, we will learn from local experts about investments and business opportunities in the country. We will visit the Bolsa (the country’s stock exchange), to learn if any Argentine stocks are appropriate investments for us.

Then we will  travel to one of the most dynamic provinces in Argentina to learn about real estate opportunities. We will enjoy the natural beauty of this area with wine tastings in a colonial setting.

Our experiences in Austria will be special, too. In Vienna, we will learn about Austrian private banking and alternative investments in Eastern European funds and real estate. Spend the night in a castle in the wine region with wine tasting and learn about wine as an investment. In Vienna, also learn about the founding of the Austrian School of Economics and about art as an investment. 

If you believe, as Hans Christian Anderson once said, "To Travel Is to Live," I hope you will consider joining me on one (or more) of these exciting trips.  To receive more information, please call Kevin Drost at 1-800-831-0007.  Or email us at assetsi@assetstrategies.com.

I look forward to introducing you to three wonderful countries, and many new friends and business associates.q

Pure Opportunities in Pure Silver
By Michael Checkan

I’m not going to beat around the bush here … I expect the price of silver to rise, plain and simple.

From where I sit, there is absolutely no question that we remain in a long-term bull market for commodities in general and precious metals in particular – including silver. 

In 2008, the worldwide supply for silver was down 1% from the previous year – even though mine production increased by 2.5%. 

At the same time, demand continues to skyrocket.  Investor demand led to a 68% increase in coin and medal production in 2008.  We have seen an additional 70% increase from that level in the first quarter of 2009 alone.

And that’s not even the biggest source of demand.  That prize goes to the exchange-traded funds (ETFs) such as SLV, which have a voracious appetite for silver to satisfy their investors’ demand.

Although silver is down 29% down from its price peak last year, demand is at unprecedented levels, and less metal is being produced.  That spells higher prices to me.

Combine that with the ominous long-term depreciation of the U.S. dollar, plus the warning signs of increased inflationary pressures, and converting paper to precious metals makes a lot of sense to me right now.

Of course, silver is intoxicating but frustrating.  The lure of rapid appreciation can quickly give way to the uneasiness associated with short-term plunges in price.    Yet, for those with the stomach for it, silver can be an incredibly profitable asset to hold.

This Bull Run Is Still Going Strong

We are now in the 9^th year of the precious metals bull market that began in January of 2001.  At the time of this writing, gold has appreciated 253% from $268.00 per ounce to the current price of $945.30 per ounce.  Silver has appreciated 228% from $4.53 per ounce at the beginning of 2001 to its current price of $14.85 per ounce.

However, at their peak prices of this current bull run, gold was up 286%, while silver attained an appreciation of 362%!  The potential for this white metal is obvious.

Anyone will tell you that high yields are an indicator of equally high risk.  But a further analysis of silver over the past eight years reveals that, despite its volatility, silver has been on a very constant march upward.

In fact, for the past seven consecutive years, the average annual price of silver has increased from the year before.  In 2008, silver’s average price of $14.99 per ounce climbed 12% from 2007, according to The Silver Institute.

We expect this trend to continue for several years. If you don’t have exposure to silver in your portfolio, I suggest you give it strong consideration.

Two Good Ways to Own Silver Today

Silver Play #1: Physical Coins and Bars. You can purchase $1,000 and $100 face value bags of 90% U.S. silver dimes, quarters, or half dollars minted before 1965.  There is a ready market and reasonable premiums for this so-called “junk” silver.  That is also true for the 100-ounce Johnson-Matthey or Engelhard bars. Yes, premiums are higher than they used to be, but they are still much lower than owning current-issue silver coins from government mints.

Silver Play #2:  Perth Mint Certificates (PMCs). Under this program, silver you purchase is stored and insured by an agency of the Government of Western Australia.  The Perth Mint Certificate program is undoubtedly the safest, most flexible, and most cost-effective method of owning silver for the medium- to long-term. 

Yes, it’s a bit more cumbersome to buy and sell silver through an offshore certificate program than owning bullion you hold or the equities listed above.  Clearly, Perth Mint Certificates weren’t designed to be a short-term trading vehicle. But the lack of fabrication charges, shipping charges and storage fees for unallocated bullion make PMCs the method of choice for a worry-free way to own, store, and later sell your silver.

My recommendation: Buy some silver now to take advantage of the continuing bull run and stave off the likely rise in inflation and the weakening dollar. q

The Risks of Confiscation

By Glen Kirsch

Last month’s HARD STUFF article (“Some Golden Rules”) described some structure that can be applied to a precious metals purchase.  This issue will discuss precious metals and their use in weathering the current world-wide economic storm.

Over the years most precious metals buyers have shared a common trait:  Protection.  They satisfied that need by taking possession of gold and storing it themselves.  They wanted to see it, touch it, and, in some cases, bury it in the backyard.  That was the ultimate in security.

Ironically protection in today’s economic storm is 180^o in the opposite direction.  The US has a history of confiscation.  Therefore, there is tremendous vulnerability in storing your precious metals in the US.  A small amount for gold possession here is appropriate, to bridge a short-term gap; any more could present a problem. 

Let me explain … and to do that we must look back to understand how to plan for the future.

In 1933, under the direction of President Franklin D. Roosevelt, gold was confiscated from Americans.  The right to own gold would not be restored until January 1, 1975.  To encourage compliance, the government appealed to a citizen’s patriotism by saying, “For the good of the country, turn in your gold.”  The Presidential Executive Order #6102 was specific and did not require congressional approval.  It stated, “Americans owning gold, in the U.S., must turn it in.”

It said “Coins of numismatic value could be kept,” but, it did not define numismatic.  As a result, any coin could potentially have a collector’s premium and, therefore, could be kept despite the mandatory confiscation of gold.

In ’33 there was an official price for gold ($20.64/oz.).  Mr. John Q. Public had a window in time to turn in his gold, after which it became contraband, subject to seizure for no compensation, with the owner fined for non-compliance and possibly facing imprisonment.  Pretty onerous! 

No question the world is different today and so is the profile of the gold buyer.  One characteristic, however, remains … the need for protection.  But protection today must be viewed from a different perspective if confiscation again rears its ugly head.

If the government found it desirable to confiscate gold again, you can bet they would close any known loopholes in the old Executive Order.  I doubt the government would rely on a patriotism theme for compliance.  Gold buyers today are not that naïve.

It also seems more likely the recall would be world-wide, not just domestic.  Even though world-wide would be difficult to enforce, that wouldn’t stop the government from trying.  There now is a definition of “numismatic” in the FEDERAL REGISTER.  To qualify the market price of the coin must be 100% over its intrinsic value.

So not only is the gold buyer different, but so would the confiscatory rules we may encounter.  And to make it even more complicated, the gold price today vacillates minute-by-minute.

I see the likelihood of confiscation growing, but I see it preceded by “exchange controls.”  This is where you are not permitted to exit your money from a country.  We have first-hand experience with “exchange controls” in Russia, Brazil, Argentina, Italy, and even the United Kingdom.

Envision the U.S. as your yard.  The government wishes to build a fence around your yard because you have a dog that will run away.  The dog is the U.S. dollar.  First, they control the borders.  The next step is to control the investments in your yard … confiscation.

In the scenario I have presented, physical gold, in a safe deposit box, or, in the backyard, could be a problem.  Potentially there will be only two choices, turn it in or lie about it.  A Perth Mint Certificate will give you some choices that physical gold will not.

So there’s a word or two to the wise.  Call us at 1-800-831-0007 to learn more about how to protect your wealth with a Perth Mint Certificate. q

Platinum: The Shiny Metal with a Bright Future

By R. Michael Jones

The global financial crisis and ensuing recession has created a significant opportunity for investors in hard assets. Platinum and platinum equities are just such an opportunity. Like silver, platinum offers investors exposure to a potential economic recovery while at the same time acting as a store of value in uncertain times. Platinum has been particularly volatile with the price falling from a high of over $2,000 per ounce in May of 2008 to below $800 per ounce in December of 2008. The price has recently stabilized at or near the marginal cost of production. With industrial demand recovering and investment interest remaining strong the future for platinum appears bright.

The platinum market consists of roughly 6 to 7 million ounces of production per year. Supply is highly concentrated with over 80% sourced from the Bushveld Complex in South Africa. The auto industry consumes approximately 50% of annual platinum supply. Catalytic converters are legislated globally and contain platinum that helps curb harmful emissions. Interestingly enough, as American car sales have plummeted, the demand in the developing world continues to be robust. In January of 2009 China exceeded the United States in monthly car sales for the first time ever. Monthly car sales in China regularly exceed one million units and along with the other BRIC nations (Brazil, Russia, India and China) represent the undisputed growth market for automobiles going forward. Developing nations have started adopting emission control standards similar to those in developed nations and catalytic converters are for the most part legislated. Platinum also has multiple industrial uses in the electronics, fuel refining and glass manufacturing industries. Jewelry and investment account for remaining platinum demand.

Most industry analysts agree that the marginal cost of production in the South African platinum complex is approximately $1,100 per ounce and moving higher. Current prices provide little room for profit, or error. The electricity crisis that paralyzed the South African economy in early 2008 and severely impacted the mining industry continues to be a concern. The next generation of platinum mines will be deeper, higher cost and more power intensive due to the need for refrigeration and ventilation. Any hiccup in power supply will severely impact production and could lead to much higher platinum prices in the foreseeable future.

A vibrant investment market for platinum has emerged. There are two Exchange Traded Funds (ETFs) currently available. One is listed in London and managed by ETF Securities Ltd. and the other is based in Zurich and marketed by Zurich Kantonal Bank (ZKB). Combined, they presently hold approximately 500,000 ounces of physical platinum. ETF Securities Ltd. recently declared its intention to list a platinum ETF in the United States leading to hand wringing from both suppliers and industrial consumers. A U.S. listed platinum ETF has the potential to tip the supply and demand balance creating a significant degree of volatility. The market for platinum coins and bars continues to be robust with shortages and significant premiums to spot prices being the norm. Platinum has taken its rightful place alongside gold as a viable investment asset for both individual and institutional investors.

R. Michael Jones is the President and CEO of Platinum Group Metals Ltd. (PLG:NYSE and PTM:TSX). Platinum Group Metals is developing a large scale platinum asset on the Western Limb of the Bushveld Complex in South Africa. For more information visit www.platinumgroupmetal.net or call 1-866-899-5450 or email info@platinumgroupmetals.net. q

 
Who's Kevin?
By Michael Checkan

"With Age Comes Wisdom"

ASI was fortunate to welcome our newest colleague, Kevin C. Drost, this past January when he joined the ASI team as Manager of Preferred Client Relations. Kevin has years of experience in this capacity, having lived in Europe and assisting international clients both inside and outside the U.S. for many years.

Before joining ASI, Kevin, who speaks German fluently, traveled internationally as a client relations manager for Swiss Trust Bank.  Kevin specialized in establishing re-insurance structures for high net worth individuals.

Kevin now works with ASI's clients to find solutions for their international diversification needs. His professional and customer-friendly manner has already endeared him to many of our clients.

He holds a Masters Degree in Social Work from the University of Washington, Seattle and a Diploma in Psychology and Education from Karl Eberhardt University in Tuebingen, Germany.

I suggest you give Kevin a call to welcome him as an important member of the ASI team. Also, feel free to seek out his knowledge about the international financial markets. He can be reached by calling ASI toll-free at 1-800-831-0007 or simply email him at kdrost@assetstrategies.com. q

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