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Why George Soros’ and John Paulson’s
                                                      #1 Position is Gold and Gold St...
Special Report

     Disclaimer
               This material is for informational purposes only and is being
             ...
Special Report

       Contents
               ๏ About Us
               ๏ The Thesis
               ๏ Where Did All the M...
About Us

       The Atyant Team
                                                     Vedant ‘VK’ Mimani, Managing Directo...
The Thesis

       Credit Mania  Credit Contraction
               Great credit manias have ALWAYS
               led to ...
The Thesis

       First Comes Credit Expansion…
         • Financial establishment invents           Current Credit Mania...
The Thesis

       …Then Comes Credit Contraction
         Stress in real estate mortgages, municipals’
              fina...
Where Did All the Money Go?

       Qualities of a Credit Contraction
               • Approximately 20 years in duration
...
Where Did All the Money Go?

       Best of Times, Worst of Times
                • In a credit contraction, liquidity
   ...
Where Did All the Money Go?

       Credit Contraction Has Already Started

                                              ...
Where Did All the Money Go?

       Credit Contraction Has Already Started

                                              ...
The Issue at Hand

       What’s the Problem? It’s the Debt Stupid!




                                                  ...
The Issue at Hand

       Do We Know How It Will Play Out?
               • What we DO know:
                      • Can a...
The Issue at Hand

       Possible Outcomes
               • Continued debt monetization:
                 hyperinflation
...
So What?

       Many Unknowns; What is Known?

                In every single prior credit contraction, the
            ...
Proof is in the Pudding

       Gold vs. Commodities

                                                                    ...
Proof is in the Pudding

       Gold vs. Stocks

                                                                        I...
Proof is in the Pudding

       Gold vs. High Yield Corporate Bonds

                                                     ...
Proof is in the Pudding

       Gold vs. Municipal Bonds


                                                               ...
Proof is in the Pudding

       Gold vs. Real Estate


                                                                   ...
Proof is in the Pudding

       Credit Crisis=Real Price of Gold Increases
               ✓                 Gold vs. Comm...
Game Plan

       Valuing Gold




               • Normal: Fair Value of Gold = 15-20% of True Money Supply = $950-$1250/...
Game Plan

       Gold is Good, Gold Miners are Better
               Miners are better because in a credit
              ...
Game Plan

       Focus on Gold Mining Sector
               Right now we like:

               • Majors – harder to find ...
Contact Us

       Thank You


                                                     Pratik Sharma, Managing Director
     ...
Cheat Sheet

       VK’s Top 10.5 Rules for PM Complex
           1.        Precious metal stocks are the most volatile as...
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Transcript of "Final why george soros' and john paulson's #1 position is gold and gold stocks 04192010"

  1. 1. Why George Soros’ and John Paulson’s #1 Position is Gold and Gold Stocks April 19, 2010 © Atyant Capital, 2010. Confidential & Proprietary
  2. 2. Special Report Disclaimer This material is for informational purposes only and is being furnished on a confidential basis to a limited number of prospective investors only. This presentation is not an offer to sell, nor a solicitation of an offer to buy any security of any fund managed or sponsored by Atyant Capital Partners LLC or its affiliates or any other investment product. Offers to sell or solicitations to invest in any Fund shall be made only by means of a confidential private placement memorandum and in accordance with applicable securities laws. Investors should review the confidential private placement memorandum (including, but not limited to, the information therein as to investment strategy, conflicts and risks) prior to making a decision on investment. This material has been prepared from original sources and data believed to be reliable. No representations are made as to the accuracy or completeness thereof. An investment in a Fund involves a high degree of risk and is suitable only for sophisticated investors. Past performance is not necessarily an indicator of future performance. © Atyant Capital, 2010. Confidential & Proprietary 2
  3. 3. Special Report Contents ๏ About Us ๏ The Thesis ๏ Where Did All the Money Go? ๏ The Issue at Hand ๏ So What? ๏ Proof is in the Pudding ๏ Game Plan ๏ Contact Us ๏ Cheat Sheet © Atyant Capital, 2010. Confidential & Proprietary 3
  4. 4. About Us The Atyant Team Vedant ‘VK’ Mimani, Managing Director, Atyant Capital • Co-founder of Atyant Capital and lead portfolio manager for the Global Opportunities Fund. • Fifteen years of managing assets, with a focus on macroeconomic opportunities that can be magnified through trading strategies. • Former head of Vedant Mimani Trading. Over ten-year career grew capital base to 83 times initial value. • Graduate of Yale University with a degree in Economics. • Champion of a new sport, El Punto Grande, a fast-paced combination of kickball, dodge ball, and cricket. • Connect with VK on LinkedIn and Facebook Pratik Sharma, Managing Director, Atyant Capital • Co-founder of Atyant Capital and head of distribution and operations. • Previously held key roles in the financial services practices at Deloitte Consulting and Meritage Technologies. Specialized in optimizing operations and governance practices for Fortune 500 companies to protect and enhance shareholder value. • Graduate of Boston University with a degree in Biomedical Engineering. • Active in the community via service activities focused on healthcare for the underserved. • Connect with Pratik on LinkedIn and Facebook © Atyant Capital, 2010. Confidential & Proprietary 4
  5. 5. The Thesis Credit Mania  Credit Contraction Great credit manias have ALWAYS led to great contractions: 1720, 1772, 1825, 1873, 1929, 2007 Qualities of a Credit Mania: • Money and credit plentiful • Inflation and commodity prices fall • Consumer confidence high • Stock and real estate in bull market • Gold bullion and gold equities in bear market • Financial fraud prevalent • Debt reaches high levels Cartoonist: David Brown for Institutional Advisors © Atyant Capital, 2010. Confidential & Proprietary 5
  6. 6. The Thesis First Comes Credit Expansion… • Financial establishment invents Current Credit Mania ways to satisfy investors’ appetite for yields (best exemplified by subprime/RMBS) • Soaring prices for tangibles and financial assets fosters aggressive employment of leverage • Easy credit leads to diseased credit © Atyant Capital, 2010. Confidential & Proprietary 6
  7. 7. The Thesis …Then Comes Credit Contraction Stress in real estate mortgages, municipals’ finances and sovereign debt are not independent and isolated events All part and parcel of the same phenomenon “As far as we can project, barring some unexpected event, our mortgage-backed securities fund should continue to yield about 35% per annum forever.” Cartoonist: David Brown for Institutional Advisors Unwinding of the excessive use of credit © Atyant Capital, 2010. Confidential & Proprietary 7
  8. 8. Where Did All the Money Go? Qualities of a Credit Contraction • Approximately 20 years in duration based on previous contractions • Money scarce • Credit tight, interest rates rise • Financial and economic dislocation • International monetary system stressed • Gold bullion and gold equities rise Cartoonist: Hank Blaustein for Grant‟s Interest Rate Observer • Mal-investments liquidated © Atyant Capital, 2010. Confidential & Proprietary 8
  9. 9. Where Did All the Money Go? Best of Times, Worst of Times • In a credit contraction, liquidity becomes paramount Credit Default Swaps Less Liquid Collateralized Debt Obligations Mortgage Backed Securities • For orthodox investments: Small Business nowhere to run, nowhere to hide Real Estate Diamonds and Gemstones • „New Normal‟: prepare for a 4% OTC Stocks Commodities return world MUNI Bonds Corporate Bonds Our View Listed Stocks Government Bonds Treasury Great Change Bills Paper Money = Great Opportunity Gold More Liquid John Exter’s Inverse Pyramid of Liquidity © Atyant Capital, 2010. Confidential & Proprietary 9
  10. 10. Where Did All the Money Go? Credit Contraction Has Already Started Credit Contraction Already Started • Astute market observers recognize private credit has started contracting © Atyant Capital, 2010. Confidential & Proprietary 10
  11. 11. Where Did All the Money Go? Credit Contraction Has Already Started US Treasury/Federal Reserve replaced private credit with sovereign credit • US Treasury/Federal Reserve replaced private credit with sovereign credit • Increased national debt by a significant amount • Added to the leverage © Atyant Capital, 2010. Confidential & Proprietary 11
  12. 12. The Issue at Hand What’s the Problem? It’s the Debt Stupid! Cartoonist: unknown • Real debt cannot be paid with combination of growth and taxes. • Going forward elections and policies will matter less as math takes over. © Atyant Capital, 2010. Confidential & Proprietary 12
  13. 13. The Issue at Hand Do We Know How It Will Play Out? • What we DO know: • Can authorities continue on current path indefinitely? NO • Bond market will restrict ability to monetize the debt • What we DON’T know: How will the Federal Reserve and US Treasury react when bond vigilantes return? Cartoonist: Hank Blaustein for Grant‟s Interest Rate Observer © Atyant Capital, 2010. Confidential & Proprietary 13
  14. 14. The Issue at Hand Possible Outcomes • Continued debt monetization: hyperinflation • Default and restructure: deflation • Revalue currency: devaluation No single outcome is baked in the cake. It ALL depends on how the US Treasury and Federal Reserve react to bond market’s demand for higher rates © Atyant Capital, 2010. Confidential & Proprietary 14
  15. 15. So What? Many Unknowns; What is Known? In every single prior credit contraction, the real price of gold, as measured against ALL asset classes, increases. The “Financial Crisis of 2008” followed historical precedent. © Atyant Capital, 2010. Confidential & Proprietary 15
  16. 16. Proof is in the Pudding Gold vs. Commodities Intermediate term correction Gold Bull Market Is this the turn and gold now ready to outperform all asset classes? © Atyant Capital, 2010. Confidential & Proprietary 16
  17. 17. Proof is in the Pudding Gold vs. Stocks Intermediate term correction Gold Bull Market Is this the turn and gold now ready to outperform all asset classes? © Atyant Capital, 2010. Confidential & Proprietary 17
  18. 18. Proof is in the Pudding Gold vs. High Yield Corporate Bonds Intermediate term correction Gold Bull Market Is this the turn and gold now ready to outperform all asset classes? © Atyant Capital, 2010. Confidential & Proprietary 18
  19. 19. Proof is in the Pudding Gold vs. Municipal Bonds Intermediate term correction Gold Bull Market Is this the turn and gold now ready to outperform all asset classes? © Atyant Capital, 2010. Confidential & Proprietary 19
  20. 20. Proof is in the Pudding Gold vs. Real Estate Intermediate term correction Gold Bull Market Is this the turn and gold now ready to outperform all asset classes? © Atyant Capital, 2010. Confidential & Proprietary 20
  21. 21. Proof is in the Pudding Credit Crisis=Real Price of Gold Increases ✓  Gold vs. Commodities ✓  Gold vs. Stocks ✓  Gold vs. High Yield Corporate Bonds ✓  Gold vs. Municipal Bonds ✓  Gold vs. Real Estate The “Financial Crisis of 2008” followed historical precedent. © Atyant Capital, 2010. Confidential & Proprietary 21
  22. 22. Game Plan Valuing Gold • Normal: Fair Value of Gold = 15-20% of True Money Supply = $950-$1250/oz • If Market Considers US Government Bankrupt: Fair Value of Gold = 100% of True Money Supply = $6282 per oz • True Money Supply is a dynamic figure and could increase by augmenting the monetary base or decrease via large scale defaults and writedowns © Atyant Capital, 2010. Confidential & Proprietary 22
  23. 23. Game Plan Gold is Good, Gold Miners are Better Miners are better because in a credit contraction, the real price of gold increases. Significance of this: • Operating costs fall, relative to gold, thereby driving increased earnings, while earnings for most sectors remain under pressure from falling prices • Rise in real price increases valuation of deposits and makes marginal projects economically viable • Relative relationship cannot be altered by government policy Miners are making money when few others are © Atyant Capital, 2010. Confidential & Proprietary 23
  24. 24. Game Plan Focus on Gold Mining Sector Right now we like: • Majors – harder to find financing to build a mine than to find a geological anomaly • Marginal producers – margin expansion will result in exponential increase to the bottom line • Proven winners working on projects - exceptional results come from exceptional people • Project developers that restructured their businesses in 2009 to focus on gold – shows us management understands the situation © Atyant Capital, 2010. Confidential & Proprietary 24
  25. 25. Contact Us Thank You Pratik Sharma, Managing Director Phone: +561.953.8939x101 Fax: +561.953.8940 E-Mail: pratik@atyantcapital.com 7040 W. Palmetto Park Road, Suite 4-821 Boca Raton, FL 33433 www.atyantcapital.com © Atyant Capital, 2010. Confidential & Proprietary 25
  26. 26. Cheat Sheet VK’s Top 10.5 Rules for PM Complex 1. Precious metal stocks are the most volatile asset class in the world because there is a community that thinks gold is functionally useless and a relic (governments and bankers) and a community that thinks only gold is money and money is gold (the gold bugs and 3 billion Asian peasants). Both are right. 2. The key to trading gold stocks is the same as successful risk/reward management: knowing the 60/40 end of a winning proposition, money management and knowing thyself. 3. Regular Technical Analysis will not work in the gold stocks market. In order to survive the market, you must learn which strength to sell and which weakness to buy. 4. The precious metals complex goes up a set of stairs and comes down an elevator. 5. One of the beauties of the gold market is you do not have to wait long to find out if you are trading the market right or wrong. 6. Gold stocks always lead the metal. Repeat gold stocks always lead the metal. 7. The gold market has lots of tells. Learn to read the tape and trade around the big picture forecasts. 8. The gold market is a manipulated market. It has been since the beginning of governments. Accept this fact and learn how to trade the market instead of complaining about it. 9. Silver is more manic depressive than gold. 10. When the gold conferences start filling up with suits and beautiful women start selling. 10.5 The precious metals complex is going a lot higher. What we have seen thus far was Phase I – the Insider’s move. The upcoming Phase 2 will be the Professional Money move and Phase 3 will be the Retail move. Will you be able to hang on for the ride? The only way is to trade around the complex’s vicious volatility. © Atyant Capital, 2010. Confidential & Proprietary 26
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