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The ABC Bullion Group

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ABC Bullion's Chief Economist covers off why precious metals are a good option in times of economic uncertainty.

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The ABC Bullion Group

  1. 1. Marc Simpson Growth & Synergy Consultant The ABC Bullion Group
  2. 2. The ABC Bullion Group Australia’s largest private bullion refinery Incorporated into group in 2012 Australia’s largest private bullion co. Founded 1971 Sydney Head office – Hong Kong – Perth* High-tech private vaulting facility Secure discrete storage Opened 2013
  3. 3. EBS Refinery Australia largest private bullion refinery Ingot casting, minting, alloys Acquired 2012 to compliment integration plans National Assoc of Testing Authorities accred pending London Bullion Market Assoc. accred 2015
  4. 4. ABC Bullion Australia’s largest private bullion company 41-year history Over $1 billion turnover 2012-13 ABC Bullion bars recognized nationally & Asia Exclusive distributor of PAMP brand in Australasia
  5. 5. Custodian Vaults Sydney’s newest, high security private vault Easy accessibility – CBD location, extended hours State-of-the-art physical and electronic security Discrete, personalised & professional Store - bullion, jewellery, data, valuable items
  6. 6. Disclaimer This presentation is for educational purposes only and does not constitute financial advice, either general or specific. It does not consider any particular persons investment objectives, financial situation or needs. Accordingly, no recommendation (expressed or implied) or other information should be acted on without the appropriateness of that information having regard to those factors. You should assess whether the advice is appropriate to your individual financial circumstances before making an investment decision. You can either assess the advice yourself or seek the help of a financial planner.
  7. 7. Topics We’ll Be Covering • The GFC and unresolved challenges facing the developed world • Protecting wealth and the outlook for traditional assets • Defining gold • Why the bull market in precious metals is unlikely to be over • A portfolio example of gold protecting wealth
  8. 8. GFC: 50 years in the making
  9. 9. Demographic challenge Social Security: Workers per Beneficiary
  10. 10. Welfare state unaffordable 71% 127% 224% 235% 0% 50% 100% 150% 200% 250% GDP Social Security Medicaid Medicare Projected Growth v Mandatory Spending - 2007 to 2032
  11. 11. Government won’t stop spending
  12. 12. Total faith in central bankers? • “I don’t buy your premise. It’s a pretty unlikely possibility. We’ve never had a decline on house prices on a nationwide basis” – July 2005 • “The impact on the broader economy and the financial markets of the problems in the subprime market seems likely to be contained.” – March 2007 • “The Federal Reserve is not currently forecasting a recession” – January 2008 • “The GSE’s are adequately capitalized. They are in no danger of failing.” – July 2008 • “The Federal Reserve will not monetize the debt” – June 2009 • Question: “You have what degree of confidence in your ability to control inflation?” • Answer: “100%” – December 2010
  13. 13. Global economy weakening!
  14. 14. Outlook for Traditional Assets CASH & TERM DEPOSITS EQUITIES BONDS / FIXED INCOME PROPERTY
  15. 15. Shares are not without risk 0 5 10 15 20 25 30 35 40 45 50 1881 1891 1901 1911 1921 1931 1941 1951 1961 1971 1981 1991 2001 2011 Shiller S&P 500 Price Earnings History -67% -78% -61%
  16. 16. Bonds are near all time highs 0 2 4 6 8 10 12 14 16 1945 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 US 10 - Year Borrowing Costs (%)
  17. 17. Property already expensive
  18. 18. The low rate magic is over
  19. 19. Physical Gold & Precious Metals
  20. 20. Gold is Money “Nations, differing in language, religion, habits and on almost every other subject susceptible of doubt, have, during a period of near four thousand years, agreed in one respect: that gold and silver have, uninterruptedly to this day, continued to be the universal currency of the commercial and civilized world.” – Albert Gallatin “Betting against gold is the same as betting on government – He who bets on governments and government money bets against 6000 years of recorded history” – Charles De Gaulle
  21. 21. Which is why we store it Gold has a Unique Stock to Flow Ratio
  22. 22. Sovereign Gold Reserves Country Gold Holdings % of Foreign Reserves United States 8,133.50 71.6 France 2,435.4 66.5 Germany 3,390.6 68.6 Italy 2,451.8 67.0
  23. 23. Gold excels in times like these
  24. 24. Opportunity cost is low Yields 1980’s US Cash 19.10% US 10 Year Bonds 16.00% Australian Cash 13.40% Australian Property 9.50% Australian Shares 9.00% Today Outlook 0.25% Staying Down 2.00% Debt at all time highs 4.45% Heading Lower 4.00% Near all time highs 5.10% Valuations Extreme in banks
  25. 25. Gold market corrections
  26. 26. Reallocation potential is huge Fixed Income 53% Equities 37% Cash + Alts 10% Gold's Share of Total Financial Assets Source: World Gold Council, World Federation of Exchanges, Credit Suisse
  27. 27. History says gold is still cheap
  28. 28. A Repeat of the 1970’s
  29. 29. The 4 most dangerous words in investing are “This time it’s different” Sir John Templeton
  30. 30. Portfolio Construction $1 million portfolio 10 year time horizon Paul 100% Utopia 0% Gold Bob 75% Utopia 25% Gold Asset Class Return Projections* Utopia Alternative Scenario Market Crash Australian Equities 9.50% -60% Global REITS 8.00% Government Bonds 3.10% Diversified Growth Mix 7.70% Physical Gold -50% +600%
  31. 31. Market crashes do happen Asset Classes Largest Losses Australian Equities -55.0% Small Caps -60.9% International Equities -48.7% Emerging Markets -44.1% Infrastructure -46.9% REITS -70.6% Australian Bonds -22.5% Gold +2500%
  32. 32. Protection pays dividends Paul Bob Difference (Bob vs Paul In Utopia, Bob ends up with $8 for every $10 Paul has In Market Crash, Bob ends up with $4.50 for every $1 Paul has Market Crash $400,000 $1.80 million $1.40 million Utopia $2.10 million $1.70 million -$400k
  33. 33. Gold and your portfolio • Proven portfolio diversification benefits • Currency hedge • Cheap by historical standards and perfect economic environment • Only asset without third party risk or an attached liability • Highly liquid • Simple and easy to trade

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