Gregor Gregersen – What to Look For With Offshore Gold & Silver Storage (FreedomFest 2018 Breakout)

Gregor Gregersen – What to Look For With Offshore Gold & Silver Storage (FreedomFest 2018 Breakout)


To start off I thought we arrange this into
three portions. The first portion so better overview why even buy gold or
silver in today’s environment. Second one is what we do which is different from
just about everybody else. And the third portion is some of the
things that we are first most new type of items like electric vehicle metals
and why that make sense so I’ll start off with a visualization of
debt you know we hear billions being spent here trillions of deficits per
year and so on. For the most part we don’t really know we can’t really
visualize that what does that mean it’s a billion different from a trillion a
lot of people don’t really see such difference. So we spent a little bit of
money in order to help visualize what how much money that is. So you see here a
$100 bill. Take a hundred of those you get ten thousand. You take a hundred of those,
you get a million take a hundred of those and you get a 100 million dollar
palet. Of course we would like to have one of these but if you put it up to
scale, you see your palette (is so small). Now these big towers here, that’s one
trillion dollars. Now this graphic is a little dated but essentially in seven years
between 2010 or so on to 2016, the United States doubled the amount of official
debts that they have. As did many other
countries. So to some degree I think I’m preaching to the choir here since you’re
aware of this but nonetheless nowadays the amount of debts that have gone up a
lot more. The amount of gold reserves that the United States has more or less is
covering one month of governmental expenses now and you’re probably all
aware unfunded liabilities tend to be three or four times it’s all estimates
but three to four times what the official debt is. So when we’re all said and
done you might be looking at a hundred trillion
worth of monies that the government is supposed to have but doesn’t have
whether it’s deficit or questions on how to pay Medicare and Medicaid, Social
Security and so on. And in many ways so early recipients of these things have
done pretty well. The later ones well are sort of in trouble. I myself I paid
into Social Security for three or four years I know I won’t be getting anything
because I need to pay 60 years to get anything. I paid into the German Retirement System
not getting anything there. I’m paying the Singaporean one though, that one actually
works pretty well because I can use that money to pay my mortgage and if I leave
Singapore they pay it out to me so… but overall we have a big problem and I
think we are all aware of this here. The other big point that I want to
point out is I used to work as a on the structure product desk of a bank with
quants building derivatives. I was in the early part of my career I used to very
much like finance and derivatives have just exploded when I was doing this and
we have over 1 quadrillion worth of derivatives. And this is graphic here,
this little dot here at the Statue of Liberty when we talk about quadrillions, that’s
the amount of dollar bills you know we’re talking about they’re such huge
numbers that it’s almost impossible to comprehend and these represent the
interdependence between banks and our financial system. And interdependence is
a problem because if one of these banks start failing, it might cause other banks
to fail and that creates a contagion in the ripple effect and the whole house of
cards basically falls together. Warren Buffet he called them weapons of mass distruction and he’s right.
In 2008 Lehman Brothers went bankrupt and in 2008 I was working as a senior
data architect for Germany’s second biggest bank CommerzBank. At the time I
pretty much got to see how the financial system almost came to a standstill. When
Lehman Brothers went bankrupt, there was a German bank which transferred about
fifty million dollars just three or four hours before they declared bankruptcy. The
money was gone. They were declared Germany’s stupidest bank and nobody
wanted to copy that. So nobody in Germany will want to transfer money
to any other banks because some might go bankrupt as well and then you’re
labeled the stupidest trader in the world so the system came to a halt.
You have to understand when banks don’t trade with each other everything comes
to a stop. So at the time Lehman Brothers as we all know and bankrupt. But look at
all the other companies who needed a bail out Fannie Mae, Freddie Mac, AIG. A lot of
people have life policies with AIG. These policies are worthless as they go bankrupt.
Bank of America, Citi, JP Morgan. I spelled out the numbers 25 billion for
JP Morgan, Wells Fargo 25 billion. GMAC made and so on. So it just
shows how we went from a system which seemed to work fine almost overnight to
a point with a financial system almost collapsed. And that was 2008. In
2008 I saw people get out and start buying precious metals. Traders, other
people and I thought geez it might be a good idea why don’t I go and buy
something. And gold & silver at that time kept on going lower. I
remember I wanted to buy silver. Silver went down to nine dollars
per ounce. It’s not great you know makes sense let me go to store and buy some.
Problem was the store was only buying back so it wouldn’t sell me any. I
thought well that’s a funny story. Let’s go to a proper store. So I went to a different store. That
was in Frankfurt back then – Germany’s financial capital basically.
And they told me the same thing basically once a crisis starts you
cannot find physical gold or silver. And the premium for these started to go way up and
I tried to go to 14 different bullion dealers and banks trying to get my
little silver bar which I wanted to buy. And the more I was told that they don’t
have it the more I realized that when’s the next crisis happens, I want to make
sure I own some silver and some gold. I finally got a 1kg kilo bar at the gift shop
of the European Central Bank. It ended up being quite funny I told the story to the person… he said come back in three days indeed he got me Heraeus silver bar. I paid
19 percent tax in Germany. Took it to Singapore paid 7% in Singapore just to
figure out how it all works. And then going from there, ended up building a
bullion dealership and all the other things. But that was basically the beginning of
it. It was a realization that when the next crisis comes, counterparty risk
having your money in a bank and so on is something you cannot control and you
might not have access to that money anymore.
And taking something physical or such as gold or silver to some degree cash as
well keeping it at your place or putting in a safe place that’s a fundamental
quick caution everybody needs to take because we’re going to have another
crisis and when this ither crisis comes this time around, I don’t think we’re
going to have bailouts. I think nowadays the attitude towards banks has changed
very much I think politically bailing out banks again is going to be much more
difficult the government’s also don’t have much
money left we’ve been having very low interest rate for a long time. As Jim
Rogers puts it, there’s no powder left so this time around we’re going to have
bail-ins and there was a G20 meeting in Brisbane back in 2014 which pretty much
made an accord between the G20 members to say said this time around
next time the crisis happens it’s going to be the depositors and
unsecured creditors of the Bank would have to pony up and basically
takes the losses so it won’t be so government bailing out the banks it’s
going to be if you are a customer of Bank of America
Bank of America might end up taking some of that money in order to survive
that’s the idea of what a bail in is and in order to organize all of this, we have
the Financial Stability Board which actually coordinates between regulatory
agencies in each country to make sure that once we have systemic risk coming
up big banks basically going to failure mode, that accounts are frozen in time to
prevent people from withdrawing their money. And as they are frozen, they can in a more
systemic way decide who gets how much money how much is going to be given to
banks and so on and so on we have an example of this happening in Cyprus that
was back in 2013. In Cyprus about everybody above $100,000 in the bank
lost 48% if you lost more than 3 million euros you get a free citizenship of Cyprus.
so so it might be worthwhile actually but it’s a deal
and the way it works is that money it’s not really just taking it’s converting
into bank equity into bank shares but because the bank is you know on the way
down they might be worth very little and or nothing. If the bank survives and
maybe you can get something back but you have to assume that we’re going to have
bail-ins the next time not bail-outs. Now if things go really bad and some
people don’t believe in this some people are more open to this idea there is a
possibility of a currency crisis at some point. As we all know we’ve been United
States has been printing huge amounts of money. We’ve got about four hundred fifty
percent increase in the monetary stock the amount of debt that has been created
et cetera and it’s all based on trust ultimately.
If we take 1920s Germany it’s the problem was not really that Germany
printed too much money. The problem was that people lost faith in the money
itself. There was a lot of money printing during the war and it took several years
for people to realize because they used to just hoard the money and save it for a
rainy day but since slowly as prices started to go
up they started realizing well maybe I ought to spend some of that money and
buy a little bit more bread to keep for a rainy day or something I can
store for a longer a period of time and then the stores they would realize oh
I’m actually selling out of most of my stuff I better start increasing prices
and as people saw prices getting up they will spend more some money to get these
items and we’ll basically create this self-reinforcing trend. And as this continued
it eventually took almost incredible proportions. You will see here this is a
conversion table. This was done back in 1930s or so when Germany went out of
hyperinflation and it showed how much at any point in time your debt was worth. The
the way Germany got out of this was they essentially created a new currency
which was backed by all assets of the the government had because it didn’t
have gold. They had to give that to the French for the most part and then later
they managed to go back on the gold standard. And when they were on the gold
standard, people trusted the currency again. And since they had to have a way of
saying how much is my gold worth in a new gold currency compared to my old
paper currency… the Weimar marks. And this was official list so by 1918 one of the
new gold coins was worth 1.25 Reichsmark. You could see that by July 1922, it
was 105 and then by November 1923 was 115 billion.
But just think what’s that means there were people who spent most of her life
putting some money into a life insurance. That life insurance at the end of the day was
not enough to buy a coffee. It was worthless. People on pensions, they
basically did not have any money. A lot of people died during World War I. Old folks
f they basically committed suicides en-masse
because they didn’t have food to eat. They didn’t have income. Money became
virtually worthless I have some of these bills
it’s just printed on one side. On the other side, it didn’t it wasn’t worth
printing on both sides basically. And then they came up with a stamp… a times 100
stamp. You use the stamp and your bill is not on a 5000 but it’s
now five hundred thousand Reichsmark. That’s how crazy this whole thing became.
So it is possible it happened before and what also happened before is gold
nationalizations. When a government has its currency questioned, it
has a huge problem because how you pay your army, how you pay your civil
servants, how do you pay for expenses. So it is quite natural that a government
will go back and nationalize gold if such a crisis happens. In 1933 the
nationalization happened because it was the gold standard in the US and the
government needed to print more money. And if it would have allowed citizens to
convert printed money into gold then there would have been a problem because
people might have converted all of this. So the solution was just to make it
illegal to own gold and that allowed Roosevelt back then to basically build the
Hoover Dam and all these other things. Nowadays the government is printing as
much as they want and it’s all based on the full faith and credit of the United
States. Nothing else. So why will they nationalize
now? Well if you have a currency crisis and people don’t trust in the US dollar. And you have a similar effect as what happen in Germany maybe not a
severe but say it’s starting. In order to stop that so would have to back it with
something solid. Hence gold, hence the idea of going back to it. And I would
like to say the system overall is unstable in the sense that imagine
people being at a movie theater and watching a movie. And one guy starts
running out towards the door. In general people will just say well that’s the
crazy guy he must be running to the toilet or something but doesn’t care
much. But now assume three people are running towards the door. People get a
bit nervous assume seven people are running I bet you an eighth person is
also going to run out and then a 9 to 10 11 12 13 and suddenly everybody is
rushing towards the door. So that system has gone from stable to unstable. And
there’s that critical number, might be 7 might be 8 that basically gets it to
switch very fast. And that’s something that… we is a possibility that might happen and
hence the need to store some gold or put some of your wealth outside of the
financial system in general. Because the egg basket can
all go that way. So that was basically a quick overview of why
gold and silver in general coming from a systemic point of view. Now a little bit
about what we do. Essentially we we store gold, we store silver. We now store
nickel and cobalt which are electric vehicle metals. But we store it in a way
which as we like to say is the safest way in the world and I kind of say
that’s a challenge because I like people to challenge me about it, kind of tell me
what is we can do better. In the last nine years I spent almost all the time
listening to people giving improvement ideas or seeing how we can improve it.
And it’s quite difficult to explain all the different things we do in a compact
way. And I’ve been trying to refine the way we do that over the years. And so
basically four points which I think are the most important. The first thing is
when you are buying some gold and you’re storing it for somebody and by the way
why do you want to store it with somebody if you can just keep it at your
house? Well you can do that for certain amount but if you really do have a gold
nationalization as that in 1933, your gold becomes like cocaine. You can get
arrested if you have it. So it becomes difficult to use your gold and convert
it back into cash. You put it in a different jurisdiction where it’s legal,
can somebody convert it for you and send you back cash and so on? So it makes
sense putting some gold with somebody else. But you might have all heard the
saying ‘if you can touch it you don’t own it’? That’s a very true thing because in
most cases you really do not own your gold . And that’s one of the first points
I’m bringing up here. If you store gold with somebody make sure you’re an asset owner,
not a creditor. And how do you do that because there’s a lot of confusion out
there on what that means. And before we go into this we we basically built our
own vault in Singapore in order to enable all these things. This a short video to show
you what it’s like. This is John, he’s here
by the way. He’s the director of The Safe House. The Safe House is a storage facility
in Singapore. We are storing up to 600 tons of gold and silver and it’s protected by
Singapore auxiliary police. This is fully owned and run by us.
We have safe-deposit boxes small ones can store up to $650,000 worth of gold or 500 ounces. It can be fully insured, two hundred thousand dollars
insurance comes with a box. The additional one is 90 basis points per year.
We also have very big boxes two hundred and five kilos which is quite useful for silver.
You can see here this is the entrance of the main silver vault.
Right now we’re storing around over 200 tons of silver. They are being stored in these
pallet cages. As we can see here each one is about 900 kilos or so and what’s
relevant here each parcel belongs to a single customer.
We have our gold vault which is inside the silver vault itself. And you are
storing the gold in safe deposit boxes. We are also testing bullion. There’s an integrated
testing lab. We do X-ray Spectroscopy. We are doing ultrasound. We’re doing electrical testing as well. The
bullion then goes into parcels like these with unique IDs. The parcels go inside the pellet cages and the pallet cages go into the racks. These are then locked with seals and it gets
audited by PwC once per year, three times per year by Bureau Veritas.
The facility is a tax-free facility from Singapore customs, ISO 9001 certified and we
have one of the best insurance in the world. We shall be covering that (in the presentation) pretty soon. Now this facility allows us to do things
differently and so one of the things which we do is what I was alluding at
earlier which is how do we ensure that you’re an asset owner not a creditor.
The way this works is you might have heard the term “fully allocated” in the
industry you hear that a lot and often times people tell you fully allocated is
a good thing. But what fully allocated basically means is that if you have four
people on each one gives you say $10,000 you take these $40,000 and you buy a gold
bar. And then you say one quarter of the bar is yours, one quarter is yours, one quarter is yours. But legally only one entity can own that bar and who is that
entity? Well, that entity is the bullion dealer. And you are a creditor. So there’s
no way for you to own a partial bar you’re always going to be owed something,
not be the owner of it. And that creates a lot of problems once you start
thinking about it because there’s a big incentive for a dealer to maybe not
have all the gold there. Or even if all the gold is there, it can be encumbered –
it can be used, it can be leased out to somebody else. Or what happens a lot, is
it’s being used as inventory. In other words, if all that gold is there, I might as
well sell it to some other customers and I’ll just reorder some gold, you know,
from my suppliers and I just keep on going like this. Which basically means
the customer is subsidizing the dealer. Now if the dealer ends up going
bankrupt, you have a problem because you are a creditor. So fully allocated is
not a great system when its for a customer. It’s a very convenient system
for the dealer but not for the customer. So I didn’t want that because my goal is
not to be convenient for us, my goal is not to cut corners. My goal is to create
the most transparent system for and the system which is going to survive
with whatever that is going to be thrown at it within practicality. So what we’re doing is
segregated ownership and what that means is we as a company we own about two
hundred fifty thousand ounces of silver and about 2,000 ounces of gold. That’s
our own capital in the company and we parcelize it. I mean you buy gold
you’re basically buying it directly from us but most importantly it’s going into
a bag like this if it doesn’t have a serial number – as the serial numbers
uniquely identified. And you then get an invoice with which you buy that specific
bar or that specific parcel. That makes you the owner of that specific bar
under Singapore law. And we then have to make sure that we puts this bar in the
right place and somebody can find it again because when you come to the vault
and you want to say, “I want to have my three bars.”
We cannot just take the first three bars. We’re gonna have to find (the bar with) exactly your
numbers. PwC big auditing company which comes in, they will have a parcel ownership
list. They’re gonna check each one of these bars.
Now because we have so many is about 40% that’s being checked. That means we
cannot cheat. It also means if we were to go bankrupt, it is not going to affect
you because creditors cannot access that bullion. It’s not on a balance sheet. It’s
yours. There will a be solvency manager coming in making sure you get your gold
back. Now having said that we have zero debt, we
got 10 million dollars in equity with the company. We have enough money from
storage to run it indefinitely. So it’s not like we’re going through bankrupt
but it is a type of stuff which you ought to be thinking about if you’re
storing your gold with somebody else using fully allocated because of
company goes bankrupt you have a problem. Fully allocated does not mean ownership. The next point is exclusive Singapore
jurisdiction. And by the way all these things are described in much more detail
on our web page so you can easily if you are interested to find out more. And what
I mean with exclusive Singapore jurisdiction… this is the reason we built
that vault because when I started the storage system, I used to outsource to
big commercial vaults which pretty much everybody else industry is doing. And I
found a lot of problems with that. The only way to surmount these problems was to
build our own vault. And essentially the industry works like is. We’ve got
a bunch of dealers and these dealers will subcontract the storage to
international vaults. These are companies like Loomis, like Brinks,
Malca Amit and so on and so on… G4S. And these vaults will have locations in
multiple countries. They typically would have something in the United States
probably New York, also have something in London, maybe Dubai
Singapore, Switzerland, maybe Hong Kong. So they will basically be global entities. Now
typically people think or in the past people said well being global is good. It
means you’re big, it means you’re successful and so on. But it’s just like
having a passport and if you have a US passport you ever tried opening a bank
account outside of the US, you kind of realize that there are downsides sometimes
to having a passport of a jurisdiction. Because you’re unable to open a bank
account for various reasons. And it’s the same thing for these sort of vaults
because if you are a US-based company and you’re storing gold in
Singapore in a vault, or you have a lot of exposure back to
the US because you are operating vaults in the US. What are you going to do if the US
is going to nationalize gold? Are you going to follow US law or you’re not
going to follow US law? That’s a hard question I kept on asking
to these vault operators and they didn’t like that question. And normally I
will get answers saying, “Well, it depends on the lawyers… Ah, it won’t happen” and so on.
Sometimes I would find very straightforward people telling me well it
would go right back to the US. And ultimately that’s the truth because you
think about it, if a bank like BNP Paribas, a French bank which has been
dealing with Cuba. And the United States comes and says, “Oh you’re a bad bank, we
have sanctions against Cuba.” And the bank says, “Yeah but I’m a French bank. That’s
American sanctions.” The US says, “No, you’re going to be paying me two billion dollars
or whatever it is in fines.” BNP will pay the two billion dollars. Why? Because all
US wire transfers have to through New York. And the United States can basically
block BNP Paribas from doing business. So nowadays everywhere in the world is more
or less following what the US wants to do. Which is why we have FATCA. Which is why
we have all these other legislation, what data comes back to the US. So if a vault
is going to… if the US decides to nationalize and you’re storing your gold say in
Switzerland or in Singapore or in Hong Kong and you’re doing it with a company
that is internationally exposed like this? Chances are the gold is going to go right back.
And most people not going directly with a vault say going through a dealer. The
dealers always looking for the lowest price. The the lowest prices are these
kind of companies. So if you’re buying the gold to protect yourself from a
nationalization you have to look more into this. What
they’re telling you is that if Burundi says that all gold has to be
nationalized, then in theory the vault can send the gold back to the Burundi
government and you are not to be able to sue them. Now of course nobody cares about
Burundi but what if it is the US that wants it? Which is why I did not want to outsource
the bullion storage. The only way to do that is to build your own vault. And
that’s basically what we did. Silver Bullion is basically a dealer. Our fully
owned subsidiary is The Safe House which you just saw a video. And we only have
Singapore jurisdiction. And that’s what I mean when I say exclusive Singapore
jurisdiction. We basically don’t recognize US authority. We had a case
where one of our US customers went bankrupt and some Texas court wanted to
requisition some of his assets. Well we just contact the customer and asked what do you want us to do?
If they don’t want to release it we just tell the US Court to
go through the Singapore system. And you know that takes a long time so we basically
only have to follow Singapore law. The reason we have to do that is because we
have no real exposure outside of Singapore and this is by design. And that’s
unique about us. And that’s why when a nationalization happens, I basically
trying to make sure that that gold is gonna be safe. Because I think it’s going
to have… that’s why we created this company – to be a safe haven basically. Now a lot of people might be interested
about reporting and so on. If you are going to store your gold or silver
somewhere. You know about FATCA. FATCA basically is US legislation which
requires just about every jurisdiction in the world with the exception of maybe
North Korea and Iran and so on to require its bank to forward all
transaction information as information about potential US citizens doing
transactions in that country. And if the bank does something which the US government doesn’t want, it can penalize the bank. If the US citizen doesn’t pay the taxes the bank
can be penalized for doing it which is why most foreign banks don’t want to
take US customers anymore because it’s too much of a risk.
I was talking with the head of compliance for ABN AMRO Asia,
he was saying unless the customers have like five million dollars, we don’t talk
about opening a US account. That amount of money we can afford having
somebody running after the customer but if it is below that, they no longer want
do it. Even Loomis which is the biggest vault
provider in Switzerland does not take US customers anymore because they’re
too scared of the consequences of having US customers. Now FATCA only
applies if you are an financial institution. So what makes you a financial institution?
Well the US definition of a financial institution is very vague, very large. It
says among other things if you’re dealing in commodities you can be a
financial institution. So the grocery stores selling an apple to somebody
could be seen as a financial institution under that definition. And in the
intergovernmental agreement between Singapore and the United States when it
comes to FATCA, Singapore did not agree to that definition. And they changed it to
say anybody dealing dealing in commodity futures. We are not dealing in commodity
futures we are only dealing in physical. Which is why we are not a financial
institution under Singapore law and under the treaty
between the United States and Singapore when it comes to FATCA. So on a good side
of news there is another piece of legislation in Singapore which is the
Personal Data Protection Act. Which actually makes it illegal for us to
release customer information. And can be charged up to $1,000,000 for doing so. So
essentially, we are an entity which is just under Singapore law and it is
illegal for us to release information back to the US. Now it that doesn’t means
that you don’t have to report something. Half of the tax advisors in the US told me that
if you open an account and store gold with us, you should be reporting it. The other half is saying you don’t have to. It’s a complex thing.
There’s some grey area in there. But there is one thing which is very clear which is if you put
in a safe deposit box, since IRS very clearly says it’s not a
financial account, so when you store with us there are two ways you can do that: you have
it stored in these parcels which allows you to buy and sell online you can take
a loan around it or you put it in safe deposit boxes in which case I’m quite
certain you don’t have to report it. But again that’s something for you to look at
because even so we are only falling under Singapore jurisdiction. If you’re US
citizen because you’re falling under US jurisdiction so you have to be aware of
what the taxation requirements and statutes are. That brings me to my next point –
insurance. The second clause which cost me to open(build) the vault is disclosed
here which used to be very common in vault statements. It basically says that
the vault shall not be liable under any circumstances whatsoever for shortage or
mysterious disappearance or unexplained loss from our damage of the goods said
to be contained in parcels. In other words, if your gold mysteriously
disappears it’s not insured. You know people will go what the heck?
Well there’s a reason behind it. Let me preamble. We got mysterious disappearance insurance but the reason why it’s a big deal to get this is look
at it from the insurance point of view if the insurance is going to insure your
for say 300 million dollars, if somebody comes in and steals it I have to go and
get a police report and the insurance will then look at the police report and say, ”
Ok yes, this just really happened. I’ll pay the claim”. If it was an inside job and we can
figure out what happened, same thing you have a police report. So it’s kind of
safe for insurance. But if it’s mysterious disappearance by definition
we don’t know what it is and it could just be that maybe you got
a shipment of a hundred bars of gold. And we didn’t do a good job counting it
and there were only 99 bars but we thought it was 100. And then two months later,
we go and we find out that is is only 99 bars. That’s a case of mysterious
disappearance. If you go to the police and we say, “Oh we thought there were a hundred, now there are only 99.” So police are going to say, “Well too bad.” It’s not going to file a police
report. So for the insurance to give you mysterious disappearance coverage, they
have to trust you very much. Because they have to insure any potential errors that
we do. And vaults normally don’t want to pay the cost of that or they don’t
qualify because their processes are not good enough. We are sort of a new vault.
We’ve been around nine years now only. So I figured we’re kind of like Avis. We
have to try harder. We have to get that insurance and we did. So how can you tell if somebody has it
because we found out that quite a number of dealers which are claiming to have it
but actually don’t have it. One way is most dealers nowadays should have an
insurance certificate. Insurance certificate will say what is covered. This is ours. In
this case, it will say mysterious disappearance among other things
including sabotage and terrorism actually. We keep going trying to add
more items. But you should be aware that what typically happens is people never
get to see this document. Instead when you ask a dealer and you ask for
insurance they will tell you, “Oh don’t worry.
It’s got All Risks insurance.” Now All risk insurance is a technical term it means
‘all risk included unless excluded’. So it doesn’t mean anything but often times
customers go okay yeah always interesting I don’t have to worry about it it’s safe.
It’s not and sometimes the dealers themselves don’t know that.
So you have to look at the exceptions. If somebody has mysterious disappearance
you’re pretty much covered. That’s the hardest one to get and it covers
everything that’s not explainable. Explainable stuff is easy to cover. So
another thing you should be aware of… if you go to a dealer and you tell them, “I
want to see my gold. I want to see my silver.” If he tells you, “Oh we cannot (allow that) because of
security.” Most likely they are trying to hide something because security is determined
to a large degree by the insurance. Because the insurance is the one who’s
gonna have to pay if something goes wrong. And I’ve been building the vault. I’ve
been dealing with insurance companies. I’ve been getting insurance which must
be somewhat more than others. So I know security. And the insurer never had a problem for us
to show customers the (vault) location. So when somebody tells you oh we cannot see it
because of security, they’re trying to hide it. Because the gold might not be
there because it might be stored in a way which it’s not very pretty
or maybe they are outsourcing it and they just have a hard time getting
clients to be able to see the gold that’s the reality. So don’t take the
argument about security and just think of it this way if the dealers are telling you
nobody should know where the vault is, well all you have to go to the
airport, follow the Brinks truck and see where it goes and you would know where
the vault is. In certain media stunts, where a reporter goes to the vault and
they were blindfolding him and turning him around and driving them around the block.
And then unfolding them inside the vault. and then the reporter writes about how
good security is and so on. And it’s just a marketing stunt. So vaulting is
not as James Bond-like as it seems. There are much more base reasons why people do
certain things. Don’t let people tell you that security is the reason you cannot
see the gold. Ultimately all the stuff doesn’t do you any good if the gold
is fake. So very early on and we’ve tried to figure out how can we make sure
the gold is real. We essentially are using… there’s a very interesting tool which
came out maybe six years ago which is x-ray spectroscopy. It is the basically a gun
that shoot x-ray on a surface, bounces back the spectrometer which
analyzes the results and can tell you surface composition to a very high
level of certainty. By itself is not enough you have to look what’s inside
the bar so you can use ultrasound or you can use a electrical conductivity
measurement. In order to do that you will then do a density test as well and
essentially what we created is tolerance database for about 300 different bullion
products. And when we get bullion in which is transferred from a customer say
we would go through the testing process they’re all be on a CCTV camera. It will
then be parcelized into tamper evident bags and the test results will
be going online. The tolerance database will basically say it’s
okay or not okay. If it’s not ok, we will basically send it back to the customer
along with a video showing how we opened it and tested it. Now it went back. But to
make a long story short it’s making us unique because in reality in this industry
nobody ever checks the gold. If you’re dealing with a dealer who outsources,
the dealer never gets to see the gold. The vault on the other hand doesn’t want to get
into the issues of figuring out if it’s real gold or not.
For them it’s said to contain basis you’re telling me it’s gold, I’m
assuming it’s gold. So people when you ask this question will tell you there is a
chain of integrity, we know where it is coming from it it’s true to some degree. But
it’s also true that bullion dealers buy back gold from somebody or that gold might
be transferred in from another location. Then you don’t really know. That’s why
you need to test. In our case you can actually transfer your gold say you’re
having gold at Gold Money or Bullion Vault, somewhere else you can transfer
it to us. It will go through the (testing) process. Once it is through it, you have
full liquidity with it. You can buy it you can sell it, you can take P2P loans
and so on and so on. So those are essentially the four things that we’ve
created which are different from just about everybody else. Here’s a quick
summary, if you are storing with us, you’re always the owner of it under Singapore law.
It’s basically private property. The information of you buying it we don’t
have to report it to anybody. It is the safest place in my opinion in case of a
nationalization. Singapore is the safest place I don’t have time to get into it
but I’m happy to talk about it at our booth. We have the best insurance money
can buy and we test the bullion and guarantee it. Because if for some reason
is not true(real), we will make up for it. Now I don’t think anybody else has a clause
like this in their User Agreement. Which brings me to what we actually can do
or what you can actually buy through us. Gold. Silver. Now we have a new product,
cobalt and nickel. These are electric vehicles (battery metals). Again these are two very unique products, almost nobody is doing these. It’s a recent addition and it’s basically allows
you to participate in the electric vehicle boom which is coming. I know a
lot of people may not have read much about it but it’s a real thing. China is
producing loads of these cars and they are going to have shortages of cobalt. They already have. Cobalt (price) has gone up 300 hundred percent over the last two years. And
these batteries gonna need more and more nickel because nickel is what keeps the
charge. Anyway I’ll get into more detail of it soon.
These are the parcels that you can buy. About gold, why would you buy gold? I always say
gold is a wealth insurance. Gold is money. Gold is something which for five
thousand years has maintained its value and if you look at gold back in 1913, I’m
using 1913 because that was when the Federal Reserve was created. Back then
gold was $18.92. If you would have kept it for the last hundred and five years or so, today it’s $1250. On average, you would have gained
4.2 percent per year in nominal terms in US dollar terms. At the
same time, a dollar bill from 1913, it’s still worth one dollar nowadays but it
lost over ninety six percent of its purchasing power. So you don’t want to
keep large amounts of money in cash because it’s a depreciating asset you
are guaranteed to lose due to inflation. And on average in 1913 you lost four
point two percent. Right now it might be less, at some point it might be higher again
but why not just buy gold because you’re going to
on average have a gain of four point two percent. So it’s an insurance but it’s
also an insurance which doesn’t cost you much because it tends to go up over time. Silver. So instead of going into why buy
silver, I’d like to bring up this silver and gold ratio. Silver and gold they kind of
tend to go up down in price and over time if you measure silver not in terms
of dollars but how many ounces of gold you need to buy that silver or the other way
around, then you will find an interesting relationship where sometimes silver is
very cheap. Sometimes silver is very expensive. And if you were to follow our
rule that you would buy gold when the ratio is around 50, when you need 50
coins silver coins to buy one gold coin, and sell the gold for
silver when it goes up to 80. And you do this over say years you’ll be doing
extremely well and we have a little calculator on our website where you can play
around with his numbers. But for example if you start in 1985 when you buy a gold
coin and then by the late 80s you sell it over here you would have eighty
ounces of silver. You then kind of wait for the ratio to go down which
would have been back in 1998 or so you use your 80 silver coins to buy gold now you
got 1.6 ounces of gold. You then wait for it to going up again
and you go back into silver so you got 136 ounces of silver.
You go down here you got 2.7 ounces of gold now. 221 447 358 and
right now you would have 4.57 ounces. Basically, this graph is
straightforward – when silver is very cheap compared to gold, buy silver. When gold
is expensive compared to when when when silver is expensive compared
to gold, then buy gold and sell silver and if you do that say it was 30 years
you just make four trades or so. Then you will basically be doing very well here. Okay. EV(electric vehicles) now I’m being told time is
running short. So I won’t be able to talk as much about EVs as I want but essentially
as a quick summary battery prices have fallen 80 percent over the last eight
years or so. Partially because batteries are getting a lot better which means as
these electric cars, where before there were golf carts, are now becoming
increasingly powerful. Yesterday we were driving a (Tesla) Model X it had an acceleration of 2.9 seconds to 60 miles an hour. These cars are getting faster. Range is
getting better and so on. Now China is very much pushing this. Thery are
basically requiring 12 percent of new cars to be EV and they wanting to sort of
leapfrog to become the world’s supply of EVs. There are 400,000 EV buses
already. An electric car only needs one sixth or so in fuel costs to run because the
electricity is much cheaper. It’s 10 times more efficient than a combustion engine.
The only problem is the battery. The better the battery, the better
the car is going to work. To make the battery better you need to put more
nickel in because the nickel is what keeps the charge. You need cobalt to
prevent the battery from exploding or burning up. So cobalt is six times more
expensive than nickel so the goal right now is to increase the amount of nickel
which is going to drastically reduce the cost as we’re reducing the costs, there is a
projection here of when electric power trains are going to match
ICE(Internal combustion engine). Meaning when electric cars going to cost the same as a combustion engine.
In the US, we expect that to happen in 2024 or so. In the EU, because of different
economics it’s probably going to be 2021. But when that happens, you can expect a
lot more people going into EV and this is without subsidies by the way.
Once you add subsidies that’s being moved forward. So there’s going to be a
lot of EV supplies that’s going to come. We have a video in which explains all
about this. I’m going to skip it because we do not have time. I would very much invite you to go to our website and look at it. And that brings me to the last
portion which I really wanted to share with you. Three years ago. Four years ago
I had a customer asked me I have gold with you, I need money. I don’t want to
sell my gold. Can you give me a loan? We had to say no as we are not a financial
institution we cannot do that. But then we worked on it and we realized that we
could actually do it by allowing one customer to lend money to another
customer using the gold as collateral. And under Singapore law that is legal.
We’ve gone through the Monetary Authority of Singapore which basically
approved the system. And the way it works is you are our customer, you have cash.
You basically can do a lending offer you can say I have $50,000 I’m willing to
lend it at 4.25 (percent p.a.) for this example. A borrowing request is somebody who
has gold and he has at least $100,000 worth of gold.
He might say yeah 4.25 (percent p.a.) is too high. How about 3.5 (percent p.a.). So it’s a bid and ask system.
Now they might eventually agree to say I do a deal at 3.75 (percent p.a.) and suddenly the
contract is made between the two and we will lock the bullion and forward the
cash which we already have from the lender to the borrower. When the loan duration is
up, the borrower would return the funds and we return it to the lender plus interest.
You would have 200% worth of collateral which makes it very safe if during the
duration of the loan the collateral where to go down to 125 percent we sent
a margin call. At 110 percent we liquidate the gold. That ensures that the
lender always is covered for interest and principal. And the interest rates
as explained above are basically on a bid ask system so people
decide amongst themselves. Right now these are the latest numbers. We had
about 50 million USD in loans so far. About 2400 (matched loans).
Some loans might be $4,000. Some loans might be $400,000. Interest rate for one
month (loans) are 2.46 p.a. meaning on an annualized basis. So you’re actually paying 0.2% for
one month. 6 months 3.58%. 12 months 4.16%. 24 months 4.55%. People just like to
have a high interest rate if they lend out money for longer period. And if you
go into the system the collateral is basically the bullion stored with us. This
is the type of information you get as a lender for the collateral being being
used of collateral. You will see the photo you will see basic information when it
arrived at our vault. You will see here that the valuation right now in US dollars is
$8200 and that alone is being sought for it for about four thousand. So that’s pretty much the
peer-to-peer side and here’s a short video which kinda explains the process. Now there are some interesting tax
implications here too because say your gold has gone up and say your reporting
this. You can just take a loan and pay interest on it and you don’t have to
pay capital gains tax because you never sold the asset.
Some customers they actually lend out some money to pay for the storage fee. So they are
storing gold with us, lending some funds to somebody else so
they don’t have to pay the storage fee. It evens out. Some customers might buy some gold as they think
it is going to go up a lot more and they take a loan of 50% to buy more nickel with it. You can do whatever you want with the loan because we have the collateral. We are not worried
about you defaulting on it. That’s why we have the 110% rule. If you’re late
paying back we actually have what’s called a sweeper fund, meaning we have
about half a million dollars which is there to make a micro loan to the party
which was late to make sure that it’s counterparties are getting the money on time. Can
think of it like an insurance to prevent late payments.
The reason I don’t want late payments is because you can easily roll over loans
with this. So if your loan is one year and after one year you want to just renew
it, you can easily do so. The loans always start on the 1st, 8th, 15th and 22nd of the month. And so I don’t want to have late fees or things being delayed. If somebody is paying late, we have a 1% late charge
which basically then goes into the Sweeper Fund and it makes the Sweeper Fund
grow. So it’s a self-adjusting process essentially. We have about 2400 loans (matched). We
had no late payments yet. I mean some people have been late but the Sweeper Fund basically covers it. So it has been very reliable. If you look at it from a counterparty
point of view, you’re lending money to somebody who has 200% worth
of collateral stored with us. There’s also security because it’s fully
insured. As a financial system goes belly-up, that loan is still good.
It’s outside the financial system and our problem is we have too many
lenders. We have too many people wanting to lend out the money. We don’t have enough
borrowers. Because in some ways you’re having a very… we are too careful
basically you know. You have to have $200,000 worth of gold to get a $100,000
loan but at the same time, we’re doing this because we don’t want to be in a
situation where you have to liquidate your bullion. And if we have a big crisis
coming, things can move very quickly. So we always try to be very
conservative, low risk and that’s basically what’s the Peer-to-Peer system is. Here you are seeing the lending and borrowing requests.
Once something is agreed with then everything goes by itself. It’s
highly automated. Yeah.
So I wish to talk to you about a lot things. I didn’t really get to talk much
about EV (electric vehicle metals).
If you come to our booth outside, I’m happy to kind of explain
about more details. Our website has pretty much summaries of all of these as well.
We have reports from McKinsey which is a very well-respected consulting company
especially on EVs and nickel. I highly recommend you to read it.
It has a very good risk reward sort of setup and it’s something we are
very excited about. I’m sorry I cannot take any questions.
But please come to our booth and then we can go from there. Thank you very
much.

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