pfliportfolio m ldl td · 2020. 10. 30. · around the same time, professor w.crum, also of harvard...

Charteris Treasury P f li M L dPortfolio Managers Ltd

C l Th M t iCycles – The Mysterious Forces that trigger events

Fund presentation

May 2016

For Professional advisers only. Not to be shown or given to any retail investors

PART 1 Introduction & Quotes from W.D.Gann

PART 2 Economic Trends & Analysisy

PART 3 Gold & Silver CyclesPART 3 Gold & Silver Cycles

PART 4 Gold & Silver Supply & Demand

PART 5 The Fund

For professional intermediaries only 2

Source: Port of London Authority


Quote 1“Time is the most important factor in determining market movements and by studying the past records of the averages ofTime is the most important factor in determining market movements and by studying the past records of the averages of commodities or individual stocks you will be able to prove for yourself that history does repeat and that by knowing the past, you can tell the future”

Q t 2Quote 2“Every movement in the market is the result of a natural law and of a cause which exists long before the effect takes place and can be determined years in advance. The future is but a repetition of the past”

Quote 3“There is a definite relation between time and price. Now, a study of the time periods and time cycles you will learn why tops and bottoms are found at certain times and why resistance levels are so strong at certain times and bottoms and tops hold around them”

Quote 4“Mathematical science, which is the only real science that the entire civilisation has agreed upon, furnishes unmistakable proof of history repeating itselfproof of history repeating itself

Quote 5“The most money is made when fast moves and extreme fluctuations occur at the end of major cycles”

Quote 6“The most important cycle is the 20 year cycle. The next most important is the 10 Year Cycle”

Q t 7


Quote 7“There must be a lesser, a greater and intermediate cycle or cycles with cycles – a wheel within a wheel”

Circa every 500 years, the economic power shifts from the West to the East

• Year 500BC – Year 0• Year 0 – 500 AD• 500 AD – 1000 AD• 1000 AD – 1500 AD• 1500 AD – 2000 AD• 2000AD – 2500 AD

Professor Raymond Wheeler, Dept Head of Psychology, Kansas University, 1930, became interested in the idea that history could be analysed in climatic terms. Art, Science, Literature, social/political behaviour moved together in certain warm times. People’s behaviour differed when it was warm or cool. The world’s great faiths work on a 500yr rhythm, as do civilisations causing people to cast out whatever had been dominant previously together with a shift in the dominant culture from East to West. The West has been paramount, now its the turn of the East.

For professional intermediaries only 6Source: Riding the Business Cycle, William Houston

More peoplepeople live inside

Countries inside the black zone are inside

the red circle

zone are in recession / low circle

than outside

growth

outside the i l

Rest of the world is ok

circle

For professional intermediaries only 8Source: ezilon.com

The two basic components of GDP Growth are: 1) Productivity Growth & 2) Workforce size growth

For professional intermediaries only 9Source: United Nations

Gross Domestic Product is so-called because in order to increase GDP, one has to produce more

If a Country grows at 10% compound growth for 7 years, its economy will double in size over that period.y g % p g y , y pIf the growth rate then drops to 7%, it will double again in 10 years, therefore the economy will quadruple in size over 17 years

Annual Growth Rate Base Value Average Units created p/aua o a e ase a ue e age U s ea ed p/a

Base 100 10% 7 years = 200 10

Base 200 7% 10 years = 400 14

Base 400 5% 14 ½ years = 800 20

1996 Base 1002013 Base 400

CHINA

1996 Base 1002013 Base 1202013 Base 120


FRANCE

ADD unfunded Public Sector PensionsTotal USGDP ADD unfunded Public Sector Pensions

Est. $50 trillion (not included in chart)GDP$18.2 TRN

Total US Debt$64 Trillion


Source: US-Debt-clock

FACT – USA Total Population = 350 Million 50 Million US Citizens now on Food Stamps


FACT USA Total Population 350 Million 50 Million US Citizens now on Food StampsTotal working Age Population = 200 MillionAdults of working age without a Job – 96 Million – NOT 5%

(as at February 15)


MV PTMV = PTM is Money Supply (M0 M1 M2 M3 M4?)M is Money Supply (M0, M1, M2, M3. M4?)

V is Velocity of Circulation (the amount money changes hands)

P is Price (Average Price Level)

T is Total Output (Volume of transactions of Goods & Services)


(as at 1 Jan ‘16)(as at 1 Jan 16)(as at 1 Apr ‘16)

This Fall in 2000 reflects the retirement of the “Baby Boomers”

For professional intermediaries only 15(Source: Federal Reserve Bank of St. Louis)

• QE so far has not produced CPI Inflation – so far due to capital constraints on Bank Lending & a cash rich Corporate sector with no need to borrow – so the liquidity created via QE is simply being lent back to the relevant Central Bank – this situation will not last forever as the commercial banks will gradually rebuild their capital base(s) over time - eventually the liquidity will be progressively lent out (especially if a broad based recovery in property occurs) & then inflation not deflation will become the issuerecovery in property occurs) & then inflation, not deflation will become the issue.

• Velocity of circulation cannot fall indefinitely, at some stage it will start to turn upwards. The conventional view is that this is a banking story, not a real economy story and it is the lack of bank capital not a lack of liquidity that is the problem. However, velocity has been falling since circa 2000, whereas the rationale attributed by main stream economists has only been in place since 2008.

• At that point the Central Banks have a major problem on their hands as the vast amount of liquidity• At that point, the Central Banks have a major problem on their hands as the vast amount of liquidity created (QE) since 2008 starts to find its way via the banking system into the real economy. This is especially true if the Property cycle is in up mode, the result will be inflationary.

• At the moment, the FED is paying money for Banks to deposit excess liquidity, it could be argued that the FED is paying Banks NOT to lend

P l ti th i A i & Af i l d t i ld l ti d h i ld• Population growth in Asia & Africa leads to growing world population and hence growing world economy over the next two decades with Asia & Africa growing much faster than the traditional western economies. The EU will remain a slow/no growth area for the foreseeable future with or without QE. Also, the Euro area is subject to a huge internal conflict


is subject to a huge internal conflict

*as at May 2016

18 1/3 Year Cycle in Real Estate Activity 1795-1958 17 3/4 Year Cycle in Cotton Prices1740 - 1945

54 Year Cycle in European Wheat (Kondratief) y p ( )1513 - 1856 41 Month Cycle in Stock Prices (Kitchin) 1868 - 1945


9.6 Year cycle in Water Depth of Lake Michigan, Atlantic Salmon abundance & UK Gilt Prices

Head & Shoulders

The Kitchen Cycle is named after Professor Joseph Kitchen of Harvard University following its discovery in 1923. Kitchen examined monthly statistics on Bank clearings, commodity prices and short term Interest rates both in the USA & UK from 1890-1922.

Around the same time, Professor W.Crum, also of Harvard University, examined Interest rates in the commercial paper market and found a cycle that averaged approximately 40 months.

Prior to that, H.S.Jevons (1909) had noted a tendency for British business activity to oscillate with a period of approx 3.5 years.

Professor Joseph Shumpeter another Harvard Professor was the most famous of the “cycle economists” and developed a Cycle model with 4Professor Joseph Shumpeter, another Harvard Professor was the most famous of the cycle economists and developed a Cycle model with 4 main cycles (Kondratieff 54 Years) (Kuznets 18 Years), (Juglar 9-11 Years) and the Kitchen cycle 3 1/3 years .

The Main Authority on Cycles is the Foundation for the Study of Cycles. Founded by Edward Dewey in 1940. It is a Research Institute in the USA, which was set up as a Non-Profit Institution with Charitable status .


Professor Raymond Wheeler of Kansas University in 1930 discovered a 500 year cycle where the economic power on Earth switches from West to East (and visa versa) every 500 years. E.g. Period 1500 AD to 2000 AD West dominant – now 2000 AD – 2500 AD East to Dominate ?

• 40 Month Kitchen Cycle

• 10 Year Cycle is three Kitchen cycles of 3 ½ years

• 20 Year Cycle is two 10 Year cycles

• 40 Year Cycle is four 10 Year cycles – previous low 1975 + 40 = 2015

• 120 Year Grand Super-Cycle (last bottomed October 1894)

• Next low end 2014/15 subdivided into three 40 Year cycles lows made• Next low end 2014/15, subdivided into three 40 Year cycles, lows made in 1934, 1975 & 2014/2015?


• Since the formation of the Dow Jones Index in the 1880’s, every year ending in “5” has seen an upward move in the DJIA without exception

For professional intermediaries only 21Source: Edgar Lawrence Smith

• Every Autumn of every decade (bar 1920s) has seen a crash/wobble in the DJIA

(as at April 16)

For professional intermediaries only 22Source: Bloomberg

Yield

40 Years

10 Year Yields close to the lowest for 300 Years10 Year Yields close to the lowest for 300 Years

TsunamiEnd of Cycle move?

For professional intermediaries only 23{Source: DMO / Bank of England}

(as at 22nd Oct 15) Source: Bloomberg

The Bloomberg commodity Index which has traced out an almost perfect Elliot Wave ABC formation. Wave C is the killer wave as it obliterates almost all the stale bulls & ends with a huge (hedge fund?) short position & massive and irrational bearishness which takes no account of the ultra low prices which are way over discounting the bad news. When Wave C finally ends then wave 1 of a new bullmarket will start (very often driven by heavy short covering in the 1st instance) - All sounds familiar, this price & sentiment action is exactly what we have witnessed in the commodity markets in the last year or so I only use EW analysis very rarely and only with the


exactly what we have witnessed in the commodity markets in the last year or so. I only use EW analysis very rarely and only with the really big waves when the picture jumps out at you – like this one,

Source: Bloomberg


(as at 29th Apr ‘16)Last Price 1,292.99

Source: Bloomberg


(as at 29th Apr ‘16)Last Price 17.8470

Source: Bloomberg


(as at 29th Apr‘16)

Source: Bloomberg


Peaks in the Gold/Silver ratio – correlate to 10 year cycle in SILVER

10 – 10 ½ Yearly Cycle


Source: Bloomberg

(as at 9th May 2016)


Source: Bloomberg

G ld C lGold Cycles

Year Month Weekly Day

40 480 2080 14600

20 240 1040 7300

10 120 520 3650

5 60 260 1825

3.36 40.4 173 12123.36 40.4 173 1212

2.7 33.6 404 2828

Bold print denotes the cycle under which it is commonly known as


Bold print denotes the cycle under which it is commonly known as.

• IF we are witnessing the end of the approx. 40 Year inflation/deflation cycle, that last bottomed in 1974 or even the 120 Year cycle that bottomed in 1894, the Following opportunities would seem to present themselves. This cycle low would seem to pp p yinvolve lows in Commodities and highs in Fixed Income. Equities seem relatively unaffected this time around

• Fixed Income – UK Gilts are now around their lowest Yield level for 300 years (highest in Price) . If this is indeed the top, a Bond Bear market of unimaginable proportions will commence UK Gilt Market low was exactly 40 Years agoproportions will commence. UK Gilt Market low was exactly 40 Years ago.

• Gold & Silver – the opposite of Bonds. Gold and Silver, the 7 year intermediate f 120cycles look to have bottomed – If the 120 year mega cycle has also bottomed, the

upside potential is on a par with the downside in the bonds

• Equities – should do very well for the next two years (see 10 Year Equity cycle slide 6) on the assumption that this cycle is as accurate as it has been in the past


Source: World Silver Survey


Approx. 1 Billion ounces per annum

E.g. 2006 Solar Demand –7 Million ounces

E.g. 2015 Solar Demand –60 Million ounces


Re-smelteredSilver Approx. 125m Ounces

Total supply1 Billion Ounces1 Billion Ounces

As Anglo American & Glencore (& others) close down all their old dinosaur (& Unprofitable ) Lead & Zinc mines it will take a huge amount of Silver supply off the market ‐ to the benefit of the primary silver producers –

According to various specialist Industry analysts Silver is already in a supply deficit ( estimated 50 million ounces for 2016 )even before this occurs . Forecasts of the cutbacks vary from analyst to analyst dependent on how much capacity is closed (& how quickly ) but estimates of 100Million to 150Million ounces are being openly discussed


(& how quickly ) but estimates of 100Million to 150Million ounces are being openly discussed. This is out of a total Silver mine output of 870 million ounces.

S d t t l F d i th IA S i li t S t 1st Q t 2016• Second top mutual Fund in the IA Specialist Sector 1st Quarter 2016

• Up 105.86% in 17 weeks from 31 Dec 2015 – 29th April 2016* *(Source FE)

• Fund has 67% Exposure to Silver Miners & 33% Exposure to Gold Miners *(as at 29th Apr 16)

• We understand that NO other UK Fund has such high Silver Exposure

83% t C di Mi i i Oth d i il i l d UK USA & A t li• 83% exposure to Canadian Mining companies. Other domiciles include UK, USA & Australia

• ZERO exposure to South Africa


• The quality of the company i.e. Quality of Management etc

• The Quality of the Asset Base i.e. Proven & profitable Gold and Silver Reserves

• The “Beta” to a given move in the underlying commodity i e Cost of• The Beta to a given move in the underlying commodity i.e. Cost of production relative to the current price of the metal

• Geographical Location of the Asset Base and Domicile of the Company

• No stock will represent more than 10% of portfolio


• Gold and Silver Shares traditionally outperform Bullion in a Bull Market due to the ti l i (i Fi d i fi d t i i t )

Positives

operational gearing (i.e. Fixed or semi‐fixed costs vs. rising revenue stream)

• Gold and Silver shares have the ability to pay dividends to shareholdersy p y

• Gold and Silver mining companies can make discoveries due to their exploration activitiesg p p

• Gold and Silver mining companies can be subject to take‐over activity from larger minersg p j y g

Negatives

• Gold & Silver Mines eventually run out of Gold/Silver

• Gold & Silver Mines can suffer from Flood Earthquakes Politics theft etc


Gold & Silver Mines can suffer from Flood, Earthquakes, Politics, theft etc


(as at 29th Apr 16)

(as at 29th Apr 16)

TsunamiEnd of Cycle move?

80 Year Relative Cheapness


This chart shows the Gold shares ratio relative to the Gold price, Gold shares have been the cheapest they have been in history.

Canada ‐ 85%

USA 6%Gold ‐ 33%

USA ‐ 6%

UK ‐ 8%

l %Australia ‐ 1%

South Africa ‐ 0%

Silver ‐ 67%

Fortuna Silver ‐ 8%

Tahoe ‐ 7.8%

MAG Silver ‐ 7.7%

First Majestic‐ 5.4%

Great Panther ‐ 4.6%

E d Sil 4 3%Endeavour Silver ‐ 4.3%

Pan American Silver ‐ 4.3%

Silver Wheaton ‐ 4.3%

Agnico Eagle ‐ 4 1%


(as at 29th Apr ‘ 16)

Agnico Eagle 4.1%

Silver Standard ‐ 3.9%

• Crum, W.L. 1923. “Cycles of Rate on Commerical Paper” – Review of Economic Statistics 5:17-27

• Jevons, H. S. 1909. “The Causes of Employment. III. Trade Fluctuations and Solar Activity.” Contemporary Review, August, 165-89

• Kitchin, J. 1923. “Cycles and Trends in Economic Factors” – Review of Economic Statistics 5:10-16

• Schumpeter, J.A. 1939, Business Cycles: A Theoretical, Historical and Statistical Analysis of the Capitalist Process. 2 vols. New York: McGraw-Hall

• Dewey, Edward. 1971 Cycles – “The Mysterious Forces that trigger events” Hawthorn Books Inc

• Houston, William, 1995 – Riding the Business Cycle – How Six Climatic and Economic Cycles are changing our lives.

• Droke, Cliff, 1997 – The Stock Market Cycles

• Murphy, John. J, - Intermarket Technical Analysis - Trading strategies for the Global Stock, Bond, Commodity and Futures Markets


Ian Williams – Chartered FCSI, Chartered Wealth Manager, Chairman and CEOIan has spent the past 35 years trading equities, commodities and G7 government bonds, covering sales, research, market making and proprietary trading. He was a member of the London Stock Exchange for many years before joining Chase Manhattan Bank (now JP Morgan). He then worked for Dresdner Kleinwort Benson and Guinness Mahon (now Investec) before becoming Chairman & Chief Executive of Charteris Treasury Portfolio Managers. Ian also manages the WAY Charteris Gold & Precious Metals Fund (which was the top Fund in the country across all sectors in its first four months of trading) a Charteris managed Gilt fund was the top UK Gilt Fund in 2007 & 2009 & 2013* & The Elite Charteris Premium Income Fund. Ian Williams awarded Trustnet Alpha Manager in 2011 & accomplished a CityWire A

i i 2009 2010 & 2011 H h b l ib h i l i d i l i i k i l di Bl b CNBC RT drating in 2009, 2010 & 2011. He has been a regular contributor to the national written press and various television networks including Bloomberg, CNBC, RT and Thomson Reuters.

Terry Farrow – Chartered MCSI, A.C.I.B. APFS C.F.P.Terry has over 40 years experience in the investment markets having worked for Barclays Bank and Standard Chartered Merchant Bank. Terry became an IFA in 1990. Terry is qualified at Level K10 Retirement options covering all types of pension advice Terry is also qualified both to G60 and G70 level to cover both Pension adviceTerry is qualified at Level K10 Retirement options – covering all types of pension advice. Terry is also qualified both to G60 and G70 level to cover both Pension advice and Investment Management. There are only a handful of Investment professionals in the UK that hold the G70 qualification.

Gerald Lowes – ACSI A former stockbroker of over 30 years standing specialising in UK equities and traded options. He also has experience involving discretionary management of both

Nick Taylor – Chartered FCSI & Head of Research,

y g p g q p p g y ginternational bond and retail equity portfolios in conjunction with risk management for hedge funds and proprietary trading clients. His career has seen him hold important positions, both on the institutional sales side of the business and dealing with private client portfolios at Redmayne Bentley, Charles Stanley, Phillips & Drew (now UBS) and Societe Generale.

Nick Taylor has 38 years of international investment management experience, gained at Morgan Grenfell, Invesco, and was Managing Director at Cigna International Investment Advisors and Matheson Investment Management. An award‐winning manager, Nicholas has run equity portfolios for a broad range of investors, including institutional pension funds, such as the Cadbury Schweppes Pension Fund alongside running several million pounds of private client portfolios and investment trusts. Nick is also a Chartered Fellow of the Chartered Securities Institute.

Richard Fremantle – DipPFS, AIFPRichard has worked in the financial services industry for nearly 40 years. Richard worked initially in the treasury department of Lloyds Bank, then in advising directors and senior executives of the corporate clients at Noble Lowndes (a leading firm of employee benefit consultants and actuaries); subsequently he was appointed a senior manager in the personal tax department of Deloitte & Touche, and then manager of the South East region of the financial services decision of merchant bank,

48For professional intermediaries only

Guinness Mahon (latterly Abbey National Benefit Consultants) before co‐founding his own practice. Richard is a member of the Personal Finance Society and an Associate of the Institute of Financial Planning.

IA Sector : IA UK SPECIALIST SECTOR

Bloomberg Ticker Code : WCHGERI LN EQUITY (Retail Inc): WCHGERA LN EQUITY (Retail Acc): WCHGEII LN EQUITY (Inst Inc): WCHGEIA LN EQUITY (Inst Acc): WCHGEIA LN EQUITY (Inst Acc)

Thomson Reuters Codes : LP68043027 (Retail Inc): LP68043026 (Retail Acc): LP68043029 (Inst Inc)

LP68043028 (Inst Acc): LP68043028 (Inst Acc)

ISIN number : GB00B600VY23 (Retail Inc): GB00B3NGYG95 (Retail Acc): GB00B3ND2W21 (Inst Inc): GB00B3PSGY57 (Inst Acc)

SEDOL number : B600VY2(Retail Inc): B3NGYG9 (Retail Acc): B3ND2W2 (Inst Inc): B3ND2W2 (Inst Inc): B3PSGY5 (Inst Acc)

CUSTODIAN : STATE STREET BANK & TRUST

Authorised Corporate DirectorAuthorised Corporate Director {ACD} and Registrar: : Fund Partners Limited

Auditor : Deloitte’s

AMC 1 5%


: AMC 1.5%: INSTITUTIONAL AMC 1%

Gibraltar Office66a Main Street

London Office8-9 Lovat Lane,

Exeter OfficeTel: +44 (0)1392 88 11 00

GibraltarFor Enquiries [email protected]

London, EC3R 8DWT: +44 (0) 20 7220 9780Fax: +44 (0)20 7929 6925Fax: +44 (0)20 7929 6925

For all enquiriesIan WilliamsE. [email protected]. +44 (0)20 7220 9780

You can find us on Twitter, LinkedIn, Facebook and YouTubeAuthorised and regulated by the Financial Conduct Authority


Authorised and regulated by the Financial Conduct Authority & the Gibraltar Financial Services Commissionwww.charteris.co.uk

This presentation is issued by Charteris Treasury Portfolio Management Ltd which is authorised and regulated by the Financial Conduct Authority & the Gibraltar Financial S i C i iServices Commission

• Past performance is not a guide to future performance and investors may not get back the full amount invested

• The price of shares and any income from them may fall as well as rise

• On redemption of holdings investors may not receive back the full amount invested. Management and other fees may reduce the capital investedManagement and other fees may reduce the capital invested

• The information provided does not constitute advice or a personal recommendation for which the duty of suitability would be owed by us and you should seek your own advice as to the suitability of any investment matter mentioned heresuitability of any investment matter mentioned here

• Professional advisers should be aware that this document is intended for their use only and this document is not to be shown or given to any retail investors

• The presentation is made on the basis of our current understanding of United Kingdom Tax laws, which may be subject to change in the future


pfliportfolio m ldl td · 2020. 10. 30. · around the same time, professor w.crum, also of harvard...

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