debt no jubilee7

8/8/2019 Debt No Jubilee7

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Debt: there is No Jubilee


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All material is compiled from sources believed to be accurate, but no accuracy can be guaranteed.The presentation is for information purposes only and is not a solicitation to invest.Unauthorized reproduction or distribution is strictly prohibited.

Gold & Silver Investment SummitMonday, 8th November 2010

Debt: there is No Jubilee

The world has too much debt.

In the book of Leviticus (Old Testament),a Jubilee year is mentioned to occurevery fty years, in which slaves andprisoners would be freed, debtswould be forgiven.

Today there is no Jubilee.


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DeleveragiNg: growth, austerity, DevaluatioN or Default

Capitalism without failure is like religion without sin. Charles Kindleberger, Manias, Panics and Crashes

How do you get rid of debt without Jubilee?

Deleveraging:1. Grow your way out: US post WW2, Japan post 1989

2. Belt-tightening: Scandinavia 1990s, S Korea, Malaysia post 1997

3. Currency devaluation: US 1934 Gold Reserve Act, UK 1949, 1967, (2008?)

4. Explicit default: Russia 1998, Argentina 2002 - 08


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Debt supercycle eNDs:No Normal DeleveragiNg

Real GDP growth

DELEVERAGING PROCESS

Debt GDP

1 Deleveraging driven by off-trend growth is not linked to a recession.

Source: International Monetary Fund; McKinsey Global Institute analysis

Average annualreal GDP growth, %

Belt-tighteningn=16

High Inflationn=8

Massive Defaultn=7

Growing out of debtn=1

Totaln=32

10 years

1

2

3

4

10-year historic trend

4.7

4.3

4.3

7.9

4.6

0.6

-1.7

-1.8

0.8

-0.5

-0.6

-1.4

-3.0

-1.3

4.8

4.1

5.7

5.1

3.2

4.2

4.8

2.3

3.8

1-2 yearsEconomicdownturn startsas economy stillleverages up

2-3 yearsDownturncontinues duringthe first years of deleveraging

4-5 yearsEconomicbounce-back whiledeleveragingcontinues

10 years10-year trendpost-deleveraging

Recession

Deleveraging

12.8 1


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global Debt reDuctioN:what you shoulD Do?

1. Slash expenditure on entitlements2. Reduce marginal tax rates on income and corporate pro ts to stimulate growth

3. Raise taxes on consumption to reduce de cits

4. Deliver by writing down liabilities in line with fall in asset prices

5. Structural reform law and taxation changes


6/55



global Debt reDuctioN:what actually happeNs

Financial Oppression:1. Oblige (enforce) commercial banks to hold government debt and condemn bond investors

to negative real interest rates

2. Central banks cut interest rates beyond market rate

3. Explicit default on debt commitments to politically weak groups or foreign creditors

4. Implicit default in ate vis a vis quantitative easing and currency devaluation

5. Revalue risk assets higher vis a vis qualitative easing eg UK Asset Purchase Program


7/55



excessive Debt that caNNotbe repaiD iN full

Most developed countries had debt levels going into the Great Financial Crisis far beyond theirmeans to service them.DEBT BY COUNTRY 2008 % OF GDP

0

50

100

150

200

250

300

350

400

450

500

U K

J a p a n

S p a

i n

S o u

t h K o r e a

S

w i t z e r l a n

d

F r a n c e

I t a

l y U S

G e r m a n y

C a n a

d a

C h i n a

B r a z i

l

I n d i a

R u s s

i a

Source: McKinsey Global Institute

Financial Institutions HouseholdsNon-financia l bus iness Government


8/55



peNsioNs: off balaNce sheet liabilitiesReal situation is much worse than perceived. Pension liabilities will explode public sector debtlevels. Politically, cutting pensions is intolerable.

400%

200%

0%

-200%

-400%

-600%

-800%

-10,00%

-1,200%

-1,400%

-1,600%

-1,800%

Italy Germany France Portugal UnitedStates

UnitedKingdom

Spain Ireland Greece

Source: EU Commission, Eurostat, CBO, IMF, Morgan Stanley Research

TOTAL DEBT & LIABILITIES AS % OF GDP

Cost of ageing Structural deficit Initial debt level


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ageiNg society: fewer taxpayers, more peNsioNers

A third of expenditure for governments is age and health related costs, which will surgeas generation of baby- boomers retires and dependency ratios worsen (next 15-20yrs).

OLD-AGE DEPENDANCY RATIOS POPULATION 65+ / WORKING AGE, %

70

FRANCE

60

50

40

30

20

10

0

1995

Source: CBO, European Commission, National Institute of Population and Social Security Research

2005 2015 2025 2035 2045

GERMANY

ITALY

SPAIN

SWEDEN

UK

EU-25

US

JAPAN

CHINA


10/55

Source: Citi Investment Research and Analysis, IMF, OECD. Projections taken from IMF Staff Position Note SPN/09/21.

PRIMARY BALANCE REQUIRED TO STABILIZE DEBT/GDP AT 60% BY 2030

10

2030

JAPAN

US

UKGERMANY

202020102000199019801970

5

0

-5

-10

-15



goverNmeNts will be uNableto reDuce Debt levels

Long term stable level of govt debt to GDP approx. 60%, the aging population negateslikelihood of this target by 2030: Govts need to run a consistent primary surplus(ex-ante interest) of > 4%, ie achieving a run of 15 yrs at best surplus years ever to meet target.


11/55



sovereigN Debt: crowDiNg out All countries are trying to borrow at the same time.

LUXEMBOURG

0 50 100 150 200

GOVERNMENT DEBT OUTSTANDING (2010 FORECAST, % GDP)

CHINA

AUSTRALIA

SLOVAKIA

SLOVENIA

FINLAND

CYPRUS

SPAIN

NETHERLANDS

AUSTRIA

MALTA

GERMANY

CANADA

U.K.

FRANCE

PORTUGAL

UNITED STATES

EURO AREA

BELGIUM

IRELAND

ITALY

GREECE

JAPAN


12/55



sovereigN Debt rollover riskMost countries have very low average maturity levels, exposing them to rollover risk.

Any increase in interest rates will raise borrowing costs.

AVERAGE MATURITY IN YEARS OF SOVEREIGN DEBT

0

2

4

6

8

10

12

14

H u n g a r y

F i n l a n

d U S

N o r w a y

A u s

t r a

l i a

P o l a n

d

C a n a

d a

J a p a n

N e

t h e r l a n

d s

B e l g i u m

G e r m

a n y

C z e c h

R e p u

b l i c

S w e

d e n

P o r

t u g a

l

S p a

i n

S w

i t z e r l a n

d

I r e l a n

d

F r a n c e

A u s t r i a

I t a

l y

G r e e c e

D e n m a r k

U K


13/55



the market kNows the game is overGovernments are now held in such low regard by investors that in many countries corporatebonds trade at tighter spreads than their parent sovereigns. Corporate CDSs are tighter than

sovereign CDSs.COMPANIES VS SOVEREIGNS CDSs

40

60

80

100

120

140

160

180

A p r - 1

0

A p r - 1

0

A p r - 1

0

A p r - 1

0

M a y - 1

0

M a y - 1

0

M a y - 1

0

J u n - 1

0

J u n - 1

0

J u n - 1

0

J u l - 1

0

J u l - 1

0

J u l - 1

0

J u l - 1

0

A u g - 1

0

A u g - 1

0

A u g - 1

0

S e p - 1

0

S e p - 1

0

S e p - 1

0

S e p - 1

0

O c t - 1

0

O c t - 1

0

O c t - 1

040

60

80

100

120

140

160

180

SovX Country CDS Index Itraxx Main CDS Index


14/55



wheN Does the game eND?Either you cannot service your debt or your lenders lose con dence in your ability to serviceit at a particular rate.

Excessive interest payments Coupon payments too high to be serviced

Excessive reliance on foreign capital Foreigners tire of lending to you

Governments will indulge in defcit fnancing


15/55

uk: a case stuDy iN howto reDuce your Debt

Major King: How I learned to Stop Worrying and Love In ation




16/55



uk: poster boy of the creDit crisis As I have said before Mr Deputy Speaker:

No return to boom and bust UK Chancellor, Gordon Brown 1997 and 2006

Extended business cycle caused by rates too low too long.

Stability breeds instability.

Rising house prices masked household debt to asset ratio reality.

Housing ATM and cheap money enabled unprecedented consumption boom.

Government nominal spending doubled (1997- 2010). Govt. spending is 45% of GDP.

Government did not reign in unfunded liabilities as life expectancy extended beyond retirement age.

PEOPLE BELIEVED THEIR OWN BULLSH*T.


17/55



uk householD leverage was oN a highHousehold leverage measured by debt relative to disposable income illustrates the obscenely largeincreases that took place from 2000 to 2008

HOUSEHOLD LEVERAGE MEASURED AS DEBT/INCOME INCREASED IN MOST COUNTRIES

155

9 52 73 25 88 33 -10 -14 44 75

Total household debt% of disposable income

Canada includes non corporate business, which exagerates its relative size compared to other countries

Source: Hever Analytics; McKinsey Global Institute

Increase

%

Switzer-land

UnitedKingdom

SouthKorea

Canada Spain UnitedStates

Japan Germany France Italy

180

105

160

81

140

111

139

69

130

96

128 124

112 11498

48

69

34

60

2000

2008


18/55



uk: Nice DecaDe turNs Nasty Who would be prepared to lend with the fear of being

repaid in depreciated currencies always before his eyes? Georges Bonnet, the French foreign minister of the 1930sNICE (Non-in ationary consistent expansion) turned nasty 2008

UK household debt as % of disposable income 160%; at worst US was 130%

UK overall debt is nearly 5 x GDP; excluding unfunded liabilities,10 trillion debt incl. unfunded liabilities, or 170,000 for every man woman and child


19/55



uk goverNmeNt, wheN iN Doubt speND671bn Total Government spending in the nancial year 2009-2010

Govt support for Britains Banks 850 bn + 100 mm on nancial advice

280bn Insurance cover for bank assets

250bn guaranteeing of wholesale borrowing by banks

200bn indemni cation of BoE against losses for liquidity support

76bn purchase of RBS shares

40bn loans and funding to Building Society and Financial Compensation Scheme

Source: National Audit Of ce


20/55



most growth iN the uk gDp is comiNgfrom goverNmeNt

Public sector is plugging the gap emanating from an ongoing deleveraging private sector.Governments effectively socialised private sector losses.

UK NOMINAL GDP: PUBLIC AND PRIVATE(September 1961 = 100)

-

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

M a r - 6 1

M a r - 6 3

M a r - 6 5

M a r - 6 7

M a r - 6 9

M a r - 7 1

M a r - 7 3

M a r - 7 5

M a r - 7 7

M a r - 7 9

M a r - 8 1

M a r - 8 3

M a r - 8 5

M a r - 8 7

M a r - 8 9

M a r - 9 1

M a r - 9 3

M a r - 9 5

M a r - 9 7

M a r - 9 9

M a r - 0 1

M a r - 0 3

M a r - 0 5

M a r - 0 7

M a r - 0 9

19%

21%

23%

25%

27%

29%

31%

33%

Private GDP Public GDPPublic/Private (RHS)


21/55



uk fiscal balaNce:the Deficit Does matterMajor King says UK faces a SOBER decade: Savings, Orderly Budgets,and Equitable Re-balancing

EUROPE: DEFICIT/SURPLUS % GDP

-16

-14

-12

-10

-8

-6

-4

-2

0

2

I R E L A N D

B R I T A I N

S P A I N

U N I T E D

S T A T E S

F R A N C E

J A P A N

E U R O Z O N E

I T A L Y

C A N A D A

G E R M A N Y

Now 1 Year Ago


22/55



uk biggest overall Debt iN g20The UK has a debt problem much worse than the USs. We are the most leveraged countryin the world per capita.

DEBT BY COUNTRY 2008 % OF GDP

0

50

100

150

200

250

300

350

400

450

500

U K

J a p a n

S p a

i n

S o u

t h K o r e a

S w

i t z e r l a n

d

F r a n c e

I t a

l y U S

G e r m a n y

C a n a

d a

C h i n a

B r a z i

l

I n d i a

R u s s

i a

Source: McKinsey Global Institute

Financial Institutions HouseholdsNon-financia l bus iness Government


23/55



uk curreNt accouNt:caN thiNgs oNly get better?Domestic Private Sector Financial Balance + Govt Fiscal Balance Current Acct Balance = 0

The underlying principle ows from the nancial balance approach: the domestic private sector and the government sector cannot bothdeleverage at the same time unless a trade surplus can be achieved and sustained. Yet the whole world cannot run a trade surplus.

Rob Parenteau (2010) But the UK will have a damn good go at exporting its way to growth.

UK CURRENT ACCOUNT

-16

-14

-12

-10

-8

-6

-4

-2

0

2

M a r -

9 3

M a r -

9 4

M a r -

9 5

M a r -

9 6

M a r -

9 7

M a r -

9 8

M a r -

9 9

M a r -

0 0

M a r -

0 1

M a r -

0 2

M a r -

0 3

M a r -

0 4

M a r -

0 5

M a r -

0 6

M a r -

0 7

M a r -

0 8

M a r -

0 9

M a r -

1 0

Q u a r t e r l y

-50

-40

-30

-20

-10

0

10

R o

l l i n g

1 2 m o n

t h

Current Account (Quarterly) 12 month


24/55



gilty pleasures: psNbr exploDes After bailing out banks government borrowing is still rising. PSNBR is 140bn on atwelve month rolling basis. This is a rise by almost a factor of 4 from 12 months ago.

PUBLIC SECTOR NET BORROWING (bn)

-40

-20

-

20

40

60

80

100

120

140

160

S e p - 9 4

J u n - 9 5

M a r - 9 6

D e c - 9 6

S e p - 9 7

J u n - 9 8

M a r - 9 9

D e c - 9 9

S e p - 0 0

J u n - 0 1

M a r - 0 2

D e c - 0 2

S e p - 0 3

J u n - 0 4

M a r - 0 5

D e c - 0 5

S e p - 0 6

J u n - 0 7

M a r - 0 8

D e c - 0 8

S e p - 0 9

J u n - 1 0


25/55



boe: pluggiNg the holeThere is not enough foreign demand for the amount of gilts issued. Sterling is not a reservecurrency. No one needs to own denominated bonds.

FOREIGN HOLDINGS OF GILTS AND YOY CHANGE IN ALL GILTS OUTSTANDING

45,000

95,000

145,000

195,000

245,000

M a r - 9 6

M a r - 9 7

M a r - 9 8

M a r - 9 9

M a r - 0 0

M a r - 0 1

M a r - 0 2

M a r - 0 3

M a r - 0 4

M a r - 0 5

M a r - 0 6

M a r - 0 7

M a r - 0 8

M a r - 0 9

-10%

0%

10%

20%

30%

40%

50%

60%

Foreign Holdings ( mns) (LHS)Foreign Holdings as % of Gilts OutstandingYoY Change in All Gilts Outstanding


26/55



real speNDiNg cuts: wheN lessis Not moreNominal Spending will not reduce over projected horizon of 2014/15, as Treasury/OBR will notmaintain spending in line with in ation. In ation assumptions used are 3.2 to 4.2% not the BoEtarget rate of 2%. And there you have the INFLATIONARY dynamic!

Source: The BBC


27/55



boe: moNey priNtiNg Neverfelt so gooDThe Bank of England has been more aggressive than any other central bank in expandingits balance sheet.

EXPANSION OF MONETARY BASE FOR BOJ, BOE AND FED0 ON HORIZONTAL AXIS = MARCH 2000 FOR BOJ;

MARCH 2008 FOR BOE AND FED

75

100

125

150

175

200

225

250

275

300

0 6 12 18 24 30 36 42 48 54 60 66 72 78 84 90 96 102 108 114 120 126Months from 1 year before QE was implemented

C h a n g e

i n M o n e

t a r y

B a s e

( 0 M o n

t h s =

1 0 0 )

QE Starts Here BoJ Fed


28/55



boe becomes the gilt marketBoE bond purchases have been over 200 bn. BoE owned almost a third of all conventionalGilts outstanding last year. BoEs proportion of Gilt holdings have gone down slightly,

only because it has paused its buying while the DMO has been issuing new gilts like theyare going out of fashion.BANK OF ENGLAND GILT HOLDINGS AS A % OF OUTSTANDING

0%

5%

10%

15%

20%

25%

30%

35%

M a r - 0 9

A p r - 0 9

M a y - 0

9

J u n - 0

9

J u l - 0 9

A u g - 0

9

S e p - 0

9

O c t - 0 9

N o v - 0

9

D e c - 0

9

J a n - 1

0

F e b - 1

0

M a r - 1 0

A p r - 1 0

M a y - 1

0

J u n - 1

0

J u l - 1 0

A u g - 1

0

S e p - 1

0

O c t - 1 0

March 09 is when the BoE's AssetPurchase Facility (ie QE) began.The BoE now holds close to a thirdof all conventional gilts.


29/55

UK NOMINAL GDP: PUBLIC AND PRIVATE

100,000

150,000

200,000

250,000

300,000

350,000

400,000

M a r - 9 0

M a r - 9 1

M a r - 9 2

M a r - 9 3

M a r - 9 4

M a r - 9 5

M a r - 9 6

M a r - 9 7

M a r - 9 8

M a r - 9 9

M a r - 0 0

M a r - 0 1

M a r - 0 2

M a r - 0 3

M a r - 0 4

M a r - 0 5

M a r - 0 6

M a r - 0 7

M a r - 0 8

M a r - 0 9

M a r - 1 0 25,000

35,000

45,000

55,000

65,000

75,000

85,000

95,000

Total GDP Govt GDP



uk - its the level stupiD Its the level, stupid its not the growth rates, its the levels

that matter here Mervyn (Major T.J.) King (Kong)


30/55

UK RPI Vs CPI

-4%

-2%

0%

2%

4%

6%

J u l - 0

0

J a n - 0

1

J u l - 0

1

J a n - 0

2

J u l - 0

2

J a n - 0

3

J u l - 0

3

J a n - 0

4

J u l - 0

4

J a n - 0

5

J u l - 0

5

J a n - 0

6

J u l - 0

6

J a n - 0

7

J u l - 0

7

J a n - 0

8

J u l - 0

8

J a n - 0

9

J u l - 0

9

J a n - 1

0

J u l - 1

0

RPI - CPI RPI CPI



Nice oNe merv: iNflatioN is DoiNg its JobUK Debt to Nominal GDP is falling. UK Nominal GDP is at new highs.

Debt is xed, while GDP grows nominally. The real burden of debt is eroded as in ationrises unexpectedly.


31/55


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too much Debt leaDs to iNflatioNUK implicit default risk high as in ation arises potentially from debt monetisation.

Source: Reinhart and Rogoff, Banking Crises, An Equal Opportunity Menace

INFLATION AND EXTERNAL DEFAULT: 1900-2006

50

45

40

35

30

25

20

15

10

5

01900 1904 1908 1912 1916 1920 1924 1928 1932 1936 1940 1944 1948 1952 1956 1960 1964 1968 1972 1976 1980 1984 1988 1992 1996 2000 2004

P e r c e n

t o

f C o u n

t r i e s

Year

Share of countries withinflation above 20 percent

Share of countries in default Correlations:1900 2006 0.39

excluding the Great Depression 0.601940 2006 0.75


33/55


34/55



Deficit levels relative toexpeNDitures before hyperiNflatioNKing monetized 100% of the UK budget de cit. This makes the UK a prime candidate forhyperin ation. Unfortunately we dont have any gold to protect us.

Source: Monetary Regimes and In ation, Peter Bernholz

BUDGET DEFICITS BEFORE FIVE HYPERINFLATIONS

30%

-4 -3 -2 -1 0 1

20%

40%

60%

FRANCE

80%

100%

Years prior to money reform

% o

f S p e n

d i n g m o n e

t i s e d

BOLIVIA

BRAZIL

POLAND

GERMANY


35/55



JapaN: moNetary mikaDo

Japanese debt is like a bundle of Mikado sticks, try to remove one and the wholelot could collapse...


36/55


37/55



hyperiNflatioN, baburu keizai eNcore?Japans debt levels are now at levels only seen historically in hyperin ationary countries. By 2010 gross debt to GDP will be over 200%.

Net debt is 110% of GDP, which is better, but the asset side is owned by private sector, so does not help government nancing even if theyattempted con scation.

To understand Japan debt dynamics click here: http://www.hindecapital.com/reports

Z i m b a b w e

J a p a n

L e b a n o n

J a m a i c a

S i n g a p o r e

I t a l y

G r e e c e

S p a i n

B e l g i u m

300

GOVERNMENT DEBT / GDP

250

200

150

100

50


38/55


39/55



laND of risiNg suN sets sooNerJapan has a history of 180 degree turns:

Isolation to engagement and militarism to paci sm.

Meji Restoration restored Imperial rule in 1868 and disposed of Shogunate rule enablingcapitalism on Western scale instead of feudalism.

Yoshida Doctrine post WW2 paci sm and economic development, in spite of USencouragement for rearmament.

PM Yoshida: Japan renounces war as a sovereign right of the nation and the threator use of force as means of settling international disputes.


40/55



a golDeN Jubilee 2010...Ms. Watanabe sells her bonds as Japan re ates, rearms and purchases gold.

900 tln yen worth JGBs is 10.588 tln USD at 85 yen

At $1,300 troy oz gold = 8.14bn ounces or 253,000 tonnes (8.14bn/31250) gold

But if gold at $13,000, Mrs Watanabe only needs 25,000 tonnes


41/55



bubbles: NasDaq aND sovereigN boNDs?Public debt, actually, has always had a Ponzi-like characteristic.

The global nancial system continues to be unsound in the same way that a Ponzi scheme is unsound: there are not enough cash ows to ultimately service the face value of all the existing obligations over time. A Ponzi scheme may very well be liquid, as long as few people

ask for their money back at any given time. But solvency is a different matter relating tothe ability of the assets to satisfy the liabilities.

John Hussman

Source: Behavioral Investing, James Montler

250

200

150

100

50

0

-50

-100

-150

-20096

Equity fund inflows Bond fund inflows

97 98 99 00 01 02 03 04 05 06 07 08 09 10


42/55



Debt is moNey, golD was moNey, will be moNey...1914 Federal Reserve Act: Fed could create currency and reserves as long as FederalReserve kept a minimum of 40% gold reserve against FRN (dollars).

US Money Supply Backed by Gold = US Gold Reserves x Gold Price ($/oz)US Monetary Base

Theoretical Gold Price ($/oz) = (US Monetary Base x 0.40)US Gold Reserves


43/55



golD: the curreNcy of First resortSolving our equation for additional monetary base of $600bn by June 2011, using 40%rule implies a fair value gold price of U$4,000 / oz.

Source: Thanks to EIV Investments, LLC : Dr. F. Conrad Engelhardt IV

$10

$100

$1,000

$10,000

1920 1930 1940 1950 1960 1970 1980 1990 2000 2010

P r i c e o

f G o

l d ( $

o z

)

100% of Monetary Base = $7,700/oz40% of Monetary Base = $3,100/ozz

Current Theoretical Gold Price (end 2009)

Actual Gold Spot Price = $1,355/oz

40% of Monetary Base

100% of Monetary Base

US GOLD RESERVES AND GOLD PRICE


44/55



wheN are we wroNg?Korean and Vietnam American War saw surge in US money supply.

In 1971 using a 40% ruling the price of gold should have been $119 troy oz. It was $35.It was xed. This discrepancy led to Nixon breaking the gold window and voting for gold.

Source: Thanks to EIV Investments, LLC : Dr. F. Conrad Engelhardt IV

US GOLD RESERVES AND MONEY SUPPLY

0%

20%

40%

60%

80%

100%

120%

140%

160%

1920 1930 1940 1950 1960 1970 1980 1990 2000 2010

G o

l d R e s e r v e s a s

P e r c e n

t M o n e y

S u p p

l y

$0

$300

$600

$900

$1,200

$1,500

$1,800

$2,100

Gold Reserves toMoney Supply Ratio Low

(Gold Undervalued)

HistoricalRange of Gold

Reserves to MoneySupply Ratio

Gold Reserves to MoneySupply Ratio High(gold Expensive)

Money SupplyDoubles


45/55



a crisis of coNfiDeNce: golD is theDefault choice When you run these big debts, the problem is not with your children or your grandchildren, it s in our lifetime.

Kenneth Rogoff 2010Sovereign countries rarely default alone. The world may survive a Dubai, Greek or Latvian default but what happens if a major G7 countrydefaults such as Japan or...?

Source: Reinhart and Rogoff, This Time Is DifferentYear

P e r c e n

t o

f C o u n

t r i e s

60

1800 1810 1820 1830 1840 1850 1860 1870 1880 1890 1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000

50

40

30

20

10

0

SOVEREIGN EXTERNAL DEBT: 1800-2006PERCENT OF COUNTRIES IN DEFAULT OR RESTUCTURING


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Gold is the hedge against political instability and government default

(A Gold Warrior, 2010)


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hiNDe golD fuND: a uNique iNvestmeNt A long bias gold bullion fund with close adherence to USD spot gold price

A managed gold investment in three share classes EUR, GBP or USD

A potential return in excess of the spot gold price

A cheap method of owning physical allocated gold

A secure method of owning physical allocated gold

An investment in growing gold ounces vis a vis up to 25 % small cap mining holding

A liquid investment, no subscription or redemption fees, and same month dealing


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Allocated Gold Bullion (stored at secure vaults in viable jurisdiction)

Unallocated Gold Bullion

Comex & Tocom Futures(warning potential hotspot)

Physical Bullion ETFs(warning hotspot)

Swaps & Derivatives

Other

Wealth Store

Default Risk

Safer

Increased Risk

hiNDe golD fuND: a highly secureiNvestmeNt

ETFs and other vehicles for gold investment have inherent risk investors may be unaware of. An investment should hedge out all possible credit risk. Hinde Gold Fund achieves this byinvesting in allocated gold held in a reputable Swiss Private Bank.

Default Risk

Wealth Store

Increased Risk

Safer


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hiNDe capitalHinde Capitals structure ensures the rms operations are thoroughly audited and transparent.


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hiNDe golD fuNDHinde Gold Fund is a managed gold investment. It aims to outperform the gold price,while smoothing any downside volatility.

HGF RELATIVE PERFORMANCE: GOLD (Last 12 Months)

-5%

0%

5%

10%

15%

N o v - 0

9

D e c - 0

9

J a n - 1

0

F e b - 1

0

M a

r - 1 0

A p

r - 1 0

M a y - 1

0

J u n - 1

0

J u l - 1 0

A u g - 1

0

S e p - 1

0

O c t - 1 0

Monthly Relative Outperformance

Cumulative Relative Outerformance(RHS)


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hiNDe golD fuNDHinde Gold Fund has performed well against other assets since its inception.

HGF COMPARATIVE PERFORMANCE: SINCE INCEPTION

40

60

80

100

120

140

160

S e p - 0

7

N o v - 0

7

J a n - 0

8

M a r - 0 8

M a y - 0

8

J u l - 0 8

S e p - 0

8

N o v - 0

8

J a n - 0

9

M a r - 0 9

M a y - 0

9

J u l - 0 9

S e p - 0

9

N o v - 0

9

J a n - 1

0

M a r - 1 0

M a y - 1

0

J u l - 1 0

S e p - 1

0

Inception to Oct 2008 - Fund Benchmark: 50% Equity, 50% BullionNov 2008 to Present - Fund Benchmark: 100% Bullion

Hinde Gold FundMSCI WorldGDM


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our golDeN secret to success:a brilliaNt computer moDel...


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Hinde Capital10 New StreetLondon EC2M 4TPUnited Kingdom

Email Ben Davies, CEO: [email protected]

Email Mark Mahaffey, CFO: [email protected]

Phone +44 ( 0 )20 7648 4600

www.hindecapital.com

hiNDe capital:coNtact iNformatioN


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hiNDe capital: DisclaimerHinde Gold Fund Ltd is an open-ended multi-class investment company incorporated in the British Virgin Islands.

This document is issued by Hinde Capital Limited, 10 New Street, London EC2M 4TP, which is authorised and regulated by the FinancialServices Authority. This document is for information purposes only. In no circumstances should it be used or considered as an offer to sell

or a solicitation of any offers to buy the securities mentioned in it. The information in this document has been obtained from sources believedto be reliable, but we do not represent that it is accurate or complete. The information concerning the performance track record is givenpurely as a matter of information and without legal liability on the part of Hinde Capital. Any decision by an investor to offer to buy any of thesecurities herein should be made only on the basis of the information contained in the relevant Offering Memorandum. Opinions expressedherein may not necessarily be shared by all employees and are subject to change without notice. The securities mentioned in this documentmay not be eligible for sale in some states or countries and will not necessarily be suitable for all types of investor. Questions concerningsuitability should be referred to a nancial adviser. The nancial products mentioned in this document can uctuate in value and may besubject to sudden and large falls that could equal the amount invested. Changes in the rate of exchange may also cause the value of yourinvestment to go up and down. Past performance may not necessarily be repeated and is not a guarantee or projection of future results.The Fund is categorised in the United Kingdom as an unregulated collective investment scheme for the purposes of the Financial Servicesand Markets Act 2000 and their Shares cannot be marketed in the UK to general public other than in accordance with the provisions ofthe Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, the Financial Services and Markets Act 2000 (Promotionof Collective Investment Schemes) (Exemption) Order 2001, as amended, or in compliance with the rules of the Financial Services Authoritymade pursuant to the FSMA. Participants in this investment are not covered by the rules and regulations made for the protection of investorsin the UK. Participants will not have the bene t of the rights designed to protect investors under the Financial Services and Markets Act2000. In particular, participants will lose the right to claim through the Financial Services Compensation Scheme. The securities referencedin this document have not been registered under the Securities Act of 1933 (the 1933 Act) or any other securities laws of any other U.S.

jurisdiction. Such securities may not be sold or transferred to U.S. persons unless such sale or transfer is registered under the 1933 Act oris exempt from such registration. This information does not constitute tax advice. Investors should consult their own tax advisor or at torneywith regard to their tax situation.

debt no jubilee7

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