SAN FRANCISCO -- Just departed Papa Chuck trotted out an old med-joke once or twice before he left us.
"Well, if God wanted to give the world a royal flush he'd tip in the tube at (fill in blank)." I think Papa actually said Wells, Nevada, -- or something like that, at the time.
If we substitute an industry instead, of course it would be metals equities getting the douche this spring 2013.
Still, all these reports about publicly traded gold trusts (ETFs) that sailed, then sank the precious metals ship, should we care?
I used to -- before they existed.
I reported day by day about the World Gold Council's efforts to get the QQQ of gold going. That was in the early 2000s, and I interviewed everyone at the Gold Council: from Chris Thompson on down. One of the earliest reports, May 2002, zeroed in on an actual physical holder of gold (and silver), Central Fund of Canada (CEF in USA and TSX: T.CEF.A in Canada). See that report.
The article set off what my fellow researcher Robert Moriarty at 321gold.com called a sheet-storm.
The MarketWatch report came when gold was below $300 an ounce and there was a slight premium on Central Fund, which holds gold and silver in Canada vaults and not paper equivalents. The fund, tiny at the time, roared to a 23 percent premium.
The slingshot came when CEF's size was tiny at the time, maybe $25 million worth of assets. Folks were quoted saying "it's like holding gold under the mattress." Also, not being an authority on anything except what I can see with my own eyes (and still getting it wrong on property site visits), I included professional voices such as Ian McAvity, a technician who was on the CEF board, and still is, and James Turk, an economist who was and is working on his own forms of gold money.
I recall Stefan Spicer, whose family long has run Central Fund, telling me he was "surprised by the ferocity of the move." I followed with reporting and a few rally cries of my own -- such as Where Is The QQQ For Gold?
A few of those articles even were cited for patents on electronic gold products, which nine or 10 years later is now common place. The NYSE-traded GLD from State Street Advisers, the largest fund and also known as SPDR Gold Trust, started trading in 2004 and until February of this year 2013 recorded monthly "in-flows."
The marketing agents, the derivative managers, the ETF advisers all did exactly what they set out to do -- get hundreds of billions of fresh capital (probably more than $100 billion at one point into GLD alone) into the gold asset class.
Many others followed. A few were there earlier -- one in Australia that also had World Gold Council backing. Metal Securities Australia Ltd., its new name,started with a few million Aussie dollars and is now worth more than $500 million. See original reporting.
I was at the time the only writer, English-language, tracking the conception and pregnancy of this new paper-gold. You can see all the reporting via this Google search. And this MarketWatch search: Thom's reporting.
There are so many versions of paper gold now, and the managers, benefiting from mere 0.5 percent or so yearly management fees -- State Street, iShares, Nomura -- party hardy with their crazy-ass salaries and San Francisco, Boston, London homes.
Bravo for them.
TCR subscribers: The takeaway is that the Gold Council and other precious metals believers succeeded in making gold ownership more than just a jewelry affair, or a coin-collector's hobby. Or a dental alternative to ceramics.
The bankers and the precious metals jefes broadened ownership worldwide by as much as half-a-trillion dollars over that nine years. Now, some of the money is coming out of what is a small asset class compared with other commodities, such as oil, or copper, or natural gas.
If we are correct in our TCR projections and fair-value estimates, investments such as Central Fund one day will see thick premiums. CEF trades as a closed end fund.
The one that attracts me right now in the ETF world is that platinum and palladium one from Sprott.
Surprise: The Sprott physical metal investment (NASDAQ: SPPP) is a closed-end fund, like CEF. It owns both metals and does not attempt to keep the price of the net asset value aligned with the security's price.
Sprott's Rick Rule in California became the point man on this one, Sprott Physical Platinum and Palladium Trust. The trust raised almost $300 million in January 2013 at $10 a share.
Canada and California's Sprott Asset Management also runs gold and silver physical funds. These are, for Americans, anyway, a better tax proposition that ETFs are.
This is because, weird as this seems, electronic funds such as GLD tend to hold paper and other derivatives and their ownership is treated as owning "collectibles." So in the USA, at any rate, no matter how long you own an electronic fund, you pay a higher tax rate on ETFs than if you owned a closed-end fund (for longer than a year).
I do not own the platinum-palladium SPPP trust that Sprott runs, not yet anyway. I do own Central Fund of Canada.
I also own a whack of Ivanplats (TSX: T.IVP), which Mr. Arthur "Rick" Rule publicly, and to me personally, says he is purchasing. I owned IVP as a private investment for nine years. It went public seven months ago and owns copper, platinum, gold, zinc and nickel holdings in South Africa and the DRC Congo.
Attached photo: Thom Calandra at GATA.org London conference two summers ago. Thom supports Gold Antitrust Action Committee. Stay tuned for the location of GATA's next conference.
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Thom Calandra lives in Tiburon, California. His investments are listed under tcalandra at Stockhouse portfolios. TCR currently costs $75 yearly. Our audience is a family and inclined toward the extremely speculative border or the investing spectrum in natural resources. Which means right now, we are getting shellacked.