Gold is still a core asset

1. The Golden Opportunity:
Beginning of the End or the End of the Beginning?
T

2. Page
|2
T
TERA
MANAGEMENT
LLC
–
TOCQUEVILLE
BULLION
RESERVE
• Tocqueville Asset Management is a New York-based, SEC registered
investment advisor formed in 1985.
– Contrarian, fundamental investor that specializes in undervalued assets;
– $11B of client assets under management as of 11/30/12, of which
– $3B is invested in gold-related strategies.
• Eidesis Capital is a New York-based specialty asset manager formed in
1998.
– Expertise in macro and systemic risks and special situations;
– Since inception, principals have raised and deployed over $2.5B of capital;
– Launched an institutional partnership for holding physical gold in 2011.
TOCQUEVILLE
BULLION
RESERVE,
INSTITUTIONAL-­‐GRADE
VEHICLE
TO
OWN
GOLD
GLOBALLY,
OUTSIDE
THE
FINANCIAL
SYSTEM

3. Page
|3
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PROSPERITY
THROUGH
“WEALTH
EFFECT”
–
NEW
AND
IMPROVED
APPROACH
ARE
THINGS
EVER
REALLY
“DIFFERENT
THIS
TIME?”

4. Page
|4
T
CORPORATE
DEBT
OUTSTANDING
IS
AT
ALL-­‐TIME
HIGH
Leverage
feels
great
while
debt
service
is
cheap
and
earnings
strong.

5. Page
|5
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RETURN-­‐FREE
RISK
-­‐
YIELDS
ON
THE
SUB-­‐CAA
BONDS
ARE
AT
ALL-­‐TIME
LOW
BETWEEN
17%
AND
43%
OF
SUB-­‐CAA
BONDS
DEFAULT
WITHIN
12
MONTHS.
BETWEEN
57%
AND
83%
OF
SUB-­‐CAA
RATED
BONDS
DEFAULT
WITHIN
60
MONTHS.
2011
Moody’s
Default
Study

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|6
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US
DEBT
TO
GDP
IS
AT
THE
POST-­‐WW
II
HIGH;
INTEREST
TO
GDP
IS
NEAR
THE
LOW
Since
1975
US
Debt
to
GDP
tripled
but
Interest
to
GDP
is
UNCHANGED.
Feels
like
a
free
lunch…
for
now.

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|7
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MANIPULATED
DATA
ARE
NO
MORE
INSIGHTFUL
THAN
RORSCHACH
TEST
CARDS
Rorschach
is
based
on
biases,
not
facts
driving
data
interpretacon.

8. Page
|8
T
Age-­‐old
wisdom
is
universal
because
it
disclls
common
sense
He who laughs last, laughs best
Wer zuletzt lacht, lacht am besten!
Rira bien qui rira le dernier
Ride bene chi ride l'ultimo
Хорошо смеется тот кто смеется последний
SOMETHING
THAT
DOES
NOT
MAKE
SENSE…
DOES
NOT
MAKE
SENSE

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|9
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WHAT
DOES
COMMON
SENSE
TELL
US
ABOUT
CURRENT
SYSTEMIC
RISKS?
• TBTF
banks
geeng
bigger
since
2008
cannot
mean
the
risk
got
smaller.
• Princng
currencies
without
limits
cannot
be
good
for
their
value
over
cme.
• It
is
a
fact
that
historical
record
of
financial
engineering
is
very
poor.
• In
history,
unrestrained
debt
accumulacon
has
never
led
to
a
posicve
outcome.
• Cash
flows
at
the
lowest
discount
rates
possible
cannot
be
a
good
deal.
• Mispriced
risk
has
never
NOT
resulted
in
misallocacon
of
capital.
• If
interconnectedness=systemic
risk,
and
it
does;
risk
has
never
been
higher.
• EU
pushing
to
expropriate
Cyprus
deposits
means
“bail-­‐in”
is
a
new
policy
tool.
Whatever
happens,
structural
systemic
risks
must
be
addressed
by
all
prudent
investors.

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Convenconal
Market
Wisdom
Circa
April-­‐May
2013:
Central
Banks
are
firmly
in
control
and
will
succeed.
European
systemic
risk
has
been
taken
off
the
table.
The
Fed
is
nearing
an
“EXIT”
as
recovery
takes
hold.
“Inflacon”
has
been
and
will
concnue
to
remain
low.
The
“Safe
Haven
Trade”
has
run
its
course.
Gold
prices
dropped
sharply
=
gold
is
not
a
safe
haven.
Convenconal
wisdom
drives
momentum
but
is
notoriously
wrong
at
seeing
change.
Regardless
of
Inconsistencies,
Bullish
Bias
is
Driving
the
Markets

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• Supply
and
demand
are
driven
by
expectacons
and
need/want.
• In
the
absence
of
need,
expectacons
drive
demand.
• When
confidence
rises,
demand
for
safe
havens
should
decline.
• Gold’s
price
declined
as
confidence
rose,
which
is
what
should
happen.
• The
quescon
is
whether
confidence
is
misplaced.
and
needs
Insights
From
the
Gold’s
Selloff
–
Price
Accon
Made
Sense

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• As
the
Safe
Haven
Trade(rs)
rushed
to
sell,
Safe
Haven
seekers
rushed
to
buy.
• Traders
proved
to
be
“weak
hands”;
physical
buyers
–
“strong
hands.”
• Physical
gold
inventory
for
immediate
delivery
was
again
proved
cght.
• Many
products
were
quickly
sold
out;
the
same
happened
in
the
fall
of
2008.
• Whereas
liquidity
of
financial
assets
dries
up
in
crashes,
gold’s
surged.
• Absence
of
liquidity
risk
is
the
hallmark
of
a
genuine
Safe
Haven.
Key
Insights:
Weak
vs
Strong
Hands;
Physical
Scarcity;
Liquidity
Price
of
a
Safe
Haven
asset
can
be
volacle
but
it
is
always
liquid.

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If
Physical
Demand
Surged,
Why
did
the
Prices
not
Recover?
• drivers
of
supply
and
demand
are
expectaPons
and
needs

14. Page
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Futures
and
“Paper
Gold”
Data:
• LBMA
Daily
Volume
(2011)
$241
B
• CME
Daily
Volume
Record
(2012)
$84
B
• ETP
Annual
Demand/Outstanding
(2012)
$15
B/$140
B
• GLD
-­‐
Average
Daily
Volume
(2013)
$2
B
Physical
Gold
Data:
• Global
Annual
Demand
for
Bars
and
Coins
(2012)
$67
B
• US
Annual
Demand
for
Bars
and
Coins
(2012)
$3
B
CME
Group,
World
Gold
Council,
LBME
To
date,
the
gold
bull
has
been
driven
by
the
paper
traders:
Volumes
of
the
paper
markets
overwhelm
the
physical
market.
WHAT
DROVE
THE
GOLD
BULL
–
A
PAPER
CHASE
OR
A
GOLD
RUSH?

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What
is
a
“Safe
Haven
Trade”?
What
are
Safe
Havens?
What
qualifies
as
a
Safe
Haven
in
the
current
environment?
Choice
of
a
proper
Safe
Haven
depends
on
the
risks.
Parsing
the
Safe
Haven
Fundamentals

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“SAFE
HAVEN
TRADE”
AIMS
TO
PROFIT
FROM
MOMENTUM
AND
VOLATILITY
Tools
of
the
Safe
Haven
Trade
–
ETPs,
“paper
gold”
and
derivacves.
Momentum
follows
expectacons:
As
expectacons
of
inflacon
declined,
so
did
gold
prices.

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Hedges:
• Private
or
exchange
traded
financial
instruments
whose
value
is
expected
to
move
in
the
opposite
direcPon
of
the
overall
porcolio.
Insurance:
• Agreement
in
which
you
pay
a
company
money
and
the
company
pays
the
cost
if
you
have
an
accident,
injury
or
loss.
Convenconal
hedges
rely
on
counterparces
and
funcconing
markets.
Tools
For
Managing
Convenconal,
Idiosyncracc
Risks

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Structural
Risks
Can
Impair
Value
Realizacon
When
Most
Needed
￭
Crisis
of
2007-­‐2009
confirmed
that
all
“structural”
risks
are
highly
correlated:
– Financial
counterparPes
could
not
perform
without
government
bailouts.
– Liquidity
of
derivaPves
and
ETPs
mirrored
financial
markets,
not
the
physical
markets.
– Whenever
custodians
failed,
custodial
assets
were
lost
-­‐
Lehman,
MF
Global,
Refco.
– Prices
of
numerous
derivaPves
and
ETPs
diverged
from
the
underlying
assets.
– Listed
securiPes
were
subjected
to
sovereign
fiat:
margin
rules,
shorPng
bans,
trading
limits.
– Complexity,
opacity
and
limited
exit
opPons
exacerbated
the
losses.
“Structural” risks
exacerbate the “risk-off”
dynamic prevalent in
times of stress.

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High
Correlacon
is
the
key
driver
of
Catastrophic,
Uninsurable
Risks:
• War,
Riots,
InsurrecPon,
Floods,
Earthquakes
• Sovereign
Debt
Crises,
Currency
Reforms,
Depressions,
Market
Crashes,
etc.
“Jump
Risk”
is
the
hallmark
of
High
Correlacon:
• Most
catastrophic
events
occur
suddenly,
before
the
market
has
priced
in
the
risk.
CORRELATION
AND
UNCONVENTIONAL,
CATASTROPHIC
RISKS
Level
of
interconnectedness,
especially
in
finance,
has
never
been
higher.

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Only
real
assets
offer
proteccon
when
convenconal
financial
arrangements
fail.
Reserves:
• Cash,
or
assets
readily
converPble
into
cash,
held
aside
to
meet
expected
or
unexpected
demands;
resources
not
normally
called
upon
but
available
if
needed.
• Gold
bullion
is
the
ideal
reserve
asset
–
it
is
the
only
real
asset
that
is
always
liquid.
Safe
Havens:
• A
safe
or
peaceful
place
in
an
otherwise
dangerous
area,
e.g.
financial
system.
Gold
is
the
only
liquid
asset
that
can
be
pracccally
held
outside
the
banks.
Financial
instruments
are
concngent
promises
to
perform
in
the
future.
Reserves
and
Safe
Havens
are
REAL
and
ready
for
use
at
all
cmes.
TOOLS
FOR
OF
Managing
Unconvenconal,
Correlated
Risks:

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Higher
cost
of
invescng
in
Safe
Haven
Assets
is
the
cost
of
Systemic
Proteccon.
“SAFE
HAVEN
TRADE”
CANNOT
OFFER
AN
EFFECTIVE
SAFE
HAVEN
Safe
Haven
Trade
–
Profits
from
fear
but
loses
if
event
occurs.
§
Complete
reliance
on
funcPoning
capital
markets
and
counterparPes’
performing;
§
High
sovereign
risks;
§
Low
execuPon
costs,
high
liquidity
(so
long
as
financial
markets
funcPon).
Safe
Haven
Assets
–
Profits
from
fear
AND
if
event
occurs.
§
No
reliance
on
funcPoning
capital
markets
or
on
counterparPes’
performing;
§
Low
sovereign
risks;
§
Higher
execuPon
costs;
lower
liquidity
but
not
dependent
on
financial
markets.

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How
they
do
it:
Warning:
None.
Timing:
Over
a
weekend.
ObjecPve:
Stem
the
Pde
by
expropriaPng
value.
Stated
RaPonale:
Protect
the
public
against
speculators,
hoarders,
etc.
MY
SLIDE
ON
SYSTEMIC
RISK
FROM
THE
APRIL
2012
GRANT’S
CONFERENCE
Cyprus
events
were
predictably
“unpredictable”
and
caught
most
people
unprepared.
Vast
majority
gets
caught
due
to
complacency
–
“It
can’t
happen
here;
it
won’t
happen
to
me.”

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|23
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• Since
2008,
bailout-­‐based
policies
miPgated
tradiPonal
structural
risks:
• Depositors,
counterparPes
and
stakeholders
were
made
whole
and
expected
future
bailouts.
• Cyprus
was
not
a
“one-­‐off”
but
a
preview
of
the
new
resoluPon
policy:
• “Resolving
Globally
Accve,
Systemically
Important,
Financial
Insctucons”
–
a
12/2012
joint
paper
by
the
FDIC
and
the
Bank
of
England
laid
out
principles
for
handling
future
failures:
• “…losses
of
any
financial
company
placed
into
receivership
will
not
be
borne
by
taxpayers,
but
by
common
and
preferred
stockholders,
debt
holders,
and
other
unsecured
creditors…”
• “Uninsured
deposits
would
be
treated
in
line
with
other
similarly
ranked
liabiliPes
in
the
resoluPon
process,
with
the
expectaPon
that
they
might
be
wrilen
down.”
• “In
the
U.S.,
these
powers
had
already
become
available
under
the
Dodd-­‐Frank
Act.”
• All
customer
assets
held
within
financial
insPtuPons
will
be
exposed
to
losses
in
case
of
failure.
What
Happened
in
Cyprus
Won’t
Stay
in
Cyprus
Prudence
calls
for
a
“safe
haven”
liquid
reserve
outside
of
financial
insctucons
and
markets.
Gold
bullion
is
the
only
non-­‐financial
asset
that
is
liquid
and
pracccal
to
hold
outside
the
banks.

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Tocqueville Bullion Reserve
n n n
Unencumbered Ownership of Physical Gold
No Direct Correlation to “Structural” and Financial Risks
Choice of Vaults – East Asia, US, Switzerland
Expert Management and Institutional Controls

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|25
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Investors
Broker Dealer
Stock Exchange
Authorized Participants
ETF Trust
Bank
Investors
TBR
Non-Bank Vaults
ETF
vs
TBR
=
Complexity
vs
Simplicity
The ETF Model
Exchange-traded indirect claims against
an allocated gold bank account.
The TBR Model
Directly redeemable “warehouse receipts” fully
backed by gold held in non-bank vaults.
TOCQUEVILLE
BULLION
RESERVE
–
PROTECTION
AGAINST
SYSTEMIC
RISK

26. Page
|26
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• No
dependence
on
financial
counterparPes
or
infrastructure:
– TBR
does
not
use
leverage,
derivaPves
or
any
other
financial
instruments.
– TBR
uses
secure,
fully
insured
storage
within
non-­‐financial
vaults
around
the
globe.
– Direct
subscripPon
process
eliminates
the
risks
of
custodial
accounts.
• No
price
or
liquidity
divergence
between
L.P.
interests
and
physical
gold:
– TBR
account
value
directly
Pes
to
the
NAV
of
the
underlying
gold
bullion.
– L.P.
interests
always
represent
pass-­‐through
ownership
of
fully-­‐allocated
bullion.
– Liquidity
of
the
L.P.
interests
depends
on
the
global
bullion
markets,
not
financial
markets.
• Flexible
exit
opPons,
full
transparency
and
global
diversificaPon:
– TBR
offers
daily
liquidity
(24-­‐hour
noPce)
either
in
cash
or
in
gold
bullion.
– Transparency,
robust
insPtuPonal
controls,
reporPng
and
customer
service.
– Choice
of
mulPple
storage
jurisdicPons
in
close
proximity
to
acPve
bullion
markets.
– Ease
of
execuPon,
costs
and
liquidity
terms
are
compePPve
with
the
ETPs.
TBR Offers Pure Gold Exposure Without the Structural Risks

27. Page
|27
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A Global Team of Premier Service Providers
Cash Custody Secure Gold Custody Administration,
Accounting, Reporting
Legal Financial Audit
Full Value Insurance Inventory Audit
TBR
–
Adding
Value
Through
Global,
Insctuconal
Relaconships

28. Page
|28
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TBR GLD
Vehicle Type
Open-ended Private
Partnership ETF
Trading Commissions 0% YES
Share Bid/Ask Spread 0% YES
NAV Premium/Discount 0% YES
Mgt Fees/Gross Expenses 0.35%/0.50% (>$1mm) 0.30%/0.40%
Gold Transaction Costs 0% - 0.20% N/A
Redemptions in Gold Unrestricted
Via Auth. Participants;
100k shares minimum
Purchase/Sale Directly via TBR Secondary Market
Liquidity Daily, 24 hr Notice Market Hours
Evidence of Ownership Physical Electronic/DTC
Gold Custodians Brinks, ViaMat, Malca-Amit HSBC
Storage Jurisdictions
US, Switzerland,
Singapore, Hong Kong UK

29. Page
|29
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TBR
–
INSTITUTIONAL
FIDUCIARY
CONTROLS
AND
PROCEDURES
• Storage providers perform daily, weekly and monthly inventory checks and email daily
inventory reports reflecting any changes.
• Credit Suisse Administration Services (“CSAS”), TBR’s administrator, maintains independent
real-time access to the vaults’ inventory systems and receives daily inventory reports
independently from the manager.
• CSAS maintains each investor's capital account, calculates daily Net Asset Value (“NAV”)
and prepares and distributes monthly NAV statements indicating the level of gold backing.
• Inspectorate International Limited, an independent global provider of inventory control
services, performs quarterly inspections and full bullion count.
• Annual audits are performed by Rothstein Kass and Co., one of the largest U.S. providers of
audit and tax services to the financial industry.
• The manager conducts on-going monitoring and reconciliation of the inventory reports and
performs on-site due diligence visits and inventory counts.

30. Page
|30
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Those
who
establish
reserves
can
withstand
a
range
of
outcomes.
Those
without
reserves
can
only
afford
a
happy
ending.
Successful Wealth Preservation Requires Resiliency
Human
history
is
not
a
Hollywood
film;
it
is
the
story
of
the
ebbs
and
flows
of
great
civilizacons
and
fortunes.

31. Page
|31
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TacPcs
without
strategy
is
the
longest
path
to
victory.
Strategy
without
tacPcs
is
the
noise
before
defeat.
Sun
Tzu
Q:
Why
do
we
not
remember
great
fortunes
made
in
the
1920?
A:
Because
majority
of
them
were
lost
in
the
1930s.
Wealth Preservation Project is a Not a Momentum Trade
Only
32%
of
the
459
families
listed
in
the
Hamptons
Blue
Book
in
1927
were
scll
listed
in
1940.
Nick
Colas,
CovergeX
(via
Zero
Hedge)

32. Page
|32
T
PROTECTION
Is
cheap
whenever
consensus
under-­‐escmates
Probability.
GETTING
TECHNICAL:
HOW
MUCH
SHOULD
ONE
PAY
FOR
PROTECTION
Price
of
Proteccon
=
Expected
Loss
Expected
Loss
=
Event
Probability
X
Potencal
Loss
Severity
Since
Potencal
Loss
Severity
in
systemic
events
is
catastrophic,
Consensus
about
Event
Probability
is
the
key
determinant
of
cost.

33. Page
|33
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• Price
of
lifeboat
seats
to
cruise
passengers
is
irrelevant.
• Value
of
lifeboat
seats
on
Titanic
was
immeasurable.
• In
an
environment
perceived
safe,
gold
price
is
debatable.
• In
the
1978
Vietnam,
7oz
of
gold
bought
a
ccket
to
freedom.
of
supply
and
demand
are
expectaPons
and
needs
What
is
the
value
of
a
gold
hoard
vs
an
expropriated
Cyprus
account?
Safe
Haven’s
Price
Should
Not
be
Confused
with
Value

34. Page
|34
T
AS
UNSOUND
POLICIES
FAIL
TO
DELIVER
RECOVERY,
SYSTEMIC
RISK
WILL
MANIFEST
ITSELF
WITH
A
VENGEANCE
DRIVING
INVESTORS
TOWARDS
REAL
SAFE
HAVENS.
THEN,
WHAT
HAS
BEEN
A
SPECULATIVE
“PAPER
CHASE”
WILL
TURN
INTO
A
REAL
GOLD
RUSH.
What about the Golden Opportunity?

35. Page
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