Sep 292016
 

A Crappy Way to Smuggle Gold

In a story that would fit right into a heist movie, an ex-employee from the Royal Canadian Mint has been accused of stealing gold nuggets from the government facility by hiding the precious metal in his butt. 😆 Talk about gold bottoming out. I guess you can say this alleged gold heist was an inside job, if you know what I mean. 😁

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35 year old Leston Lawrence sold multiple nuggets of gold called “pucks” to a local gold dealer in Ottawa, and then deposited the proceeds into his bank account. Each puck weighed about 210 grams (7.4 ounces.) According to records, he sold 18 of them in the span of 4 months. Investigators with search warrants also found 4 gold pucks in his safety deposit box. The combined value of all this gold is estimated to be $180,000. His job was to measure the purity of gold coins at the Mint, but he has since been fired in light of the accusations.

It was a bank teller who first raised the alarm. She could smell something was not right, 💩 noting the frequency of Lawrence’s deposits, his requests to wire the money overseas, and the fact that his account with the bank listed the Canadian Mint as his place of employment.

The bank teller notified her supervisor and the RCMP was soon involved. They even found a container of Vaseline in Lawrence’s locker. Prosecutors alleged that he smuggled the gold nuggets out of the Mint by concealing them in his anal cavity one at a time. This would explain why the handheld wand used as a security measure at the Mint didn’t detect anything on him. So despite the Mint’s sophisticated security system, it was still vulnerable to a backdoor exploit. ROFL. 😆

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Sep 262016
 

When Average Isn’t Enough

Everyone knows that exotic dancers are bad at investing. After all, they always end up losing their shirts. 😆 But they are not alone. Most people in general are simply not very successful at investing.

According to BlackRock, the largest financial management company in the world with nearly $5 trillion of AUM, the average American investor managed to make only 2.11% return per year over the past 2 decades. 😱

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The saddest part is how this number is even lower than inflation, lol. So in terms of real returns people actually lost money. 🙁 There are many reasons for this low performance. Investors’ sentiments, emotions, and personal goals are all factors. But the reason I want to discuss today is the improper use of investment tools.

Why People Are Generally Bad at Investing

Reason 1 – Not using tax sheltered vehicles

The Roth IRA is a great example of a tax savings vehicle that many American investors have overlooked. In Canada we have the Tax Free Savings Account (TFSA) which has similar benefits; Any investment gains realized within this account is tax free. 🙂

The first problem is that most people don’t use it. According to the CRA, in 2013 only 38% of eligible Canadians have opened TFSAs. The second issue is those who do have this account aren’t making the most of the tax savings. Data from RBC Royal Bank suggests that its clients tend to play it safe when it comes to their TFSA with 44% of holdings in high interest savings accounts. *Yawn* Another 21% is invested in GICs which are also producing rock bottom returns right now. This means only the remaining 35% of the money in TFSAs are actually used for proper investments that hold stocks, bonds, and other asset classes that have a decent chance at beating inflation.

This essentially means that only about 13% of TFSA eligible Canadians are using the investment vehicle correctly. But even less have taken maximum advantage of it because only 7% have fully maxed out their contributions. Of course everyone has different financials goals, which alludes to my post about the debt spectrum. So it may be perfectly suitable for a retiree to put all of his savings into a GIC if it suits his investment objectives. But in general 2.11% should not be the target most investors should aim for. 😉

Taxation is one of the costliest expense on investment returns. If more investors make better use of tax advantaged accounts they can leave more money in their own pockets. 🙂

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Random Useless Fact:

33% of Harvard University students get the following question wrong.

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Mar 072016
 

Canada Says Farewell to Gold

One upon a time most currencies were backed by gold. But in 1971 president Richard Nixon took the U.S. off the gold standard switching to a floating currency instead so its Central Bank can exert more influence over the currency, and other countries followed suit. Today, everyone uses fiat currency and gold is no longer relevant on the world’s financial stage.

Canada use to have more than 1,000 tons of gold in the 1960’s as part of our foreign exchange reserves. But Ottawa has long forsaken the notion that gold can be a useful diversification tool for a country’s monetary interest. For decades Canada has been slowly selling off its gold reserves, and according to the Finance Department, it only has 77 ounces of gold coins remaining today, which is worth about US $100,000. That’s nothing more than a rounding error compared to the US $80,000,000,000 of total foreign exchange reserves we have.

As Canada gets out of the gold game, others are buying more. According to the World Gold Council, central banks around the world added a net of 336 tons to their reserves in the second half of 2015, representing a 25% increase from the previous year. Russia and India have increased their holdings. And since the start of this century China has bolstered its gold reserves by 350% from 400 tons in 2000 to nearly 1,800 tons today. Even individual investors have helped take gold off the Bank of Canada’s hands. A couple years ago I blogged about buying a 1 ounce limited edition gold coin for CAD $1,389. It’s easily worth 20% more today given the current spot price of gold. 🙂

Here’s a look at the biggest holders of gold by country. (source)

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Based on the chart above, we can see that the U.S. central bank holds the most gold by a wide margin. The 8,133 tons of gold held by the U.S. make up 72% of its foreign exchange reserves. The next 3 countries in the list, Germany, Italy, and France also holds more than half of their reserves in gold.

It’s interesting how other central banks seem to be holding or even increasing their gold reserves while Canada has done the exact opposite, lol. I’ll write about the possible reasoning behind these two diverging ideologies around gold in a future post, but it has to do with the nature and purpose of Foreign Exchange Reserves, which requires a rather lengthy explanation.

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Nov 182014
 

In the world of finance, the word “arbitrage” refers to buying something in one market, and simultaneously selling it in another, profiting from a temporary price difference. According to Investopedia, this form of profit is considered practically risk free for the investor/trader. 😀 Well I have recently found such an arbitrage opportunity in the gold bullion market.

Introducing the 2014 Howling Wolf 99.999% Gold Coin

Several days ago I went out to buy the 1 oz. pure gold 99.999% – 2014 Howling Wolf coin made by the Royal Canadian Mint. The Howling Wolf gold coin cost me $1,389 CAD to purchase. The slight premium over the spot price of gold is due to the spread charged by the broker and the unmatched purity of the coin (most bullion is only 99.99% pure gold.) Details below with proof of purchase.

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If you live around Vancouver you can buy it from the VBCE, which is where I bought my coin. The current quoted price on their website is about $1,400 CAD. In Calgary albern.com currently sells it at $1429 CAD. In Florida, gainesvillcoins.com sells this coin for $40 over spot per oz. If you live around Toronto you can visit the Canadian Bullion Services to buy the coin. You can also order it online and pick it up in their store or have them mail it to you. In fact many of these companies I mentioned ship worldwide. There are hundreds of dealers across North America so this coin is relatively easy to obtain.

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Nov 082014
 

Precious metals don’t provide a steady stream of income and sometimes require an annual storage fee. However, it could still make sense to invest in them for several reasons. First, the demand for gold in China and India is huge, and central banks all over the world buy them to hedge against political turmoil, hyperinflation, invasion, economic warfare, and environmental disasters – things that can happen at any time. Gold is a proven long-term wealth asset that’s useful when the market is sliding deep into crisis.

Gold is also bought as insurance against fiat currencies. When investors lose confidence in the dollar, gold prices go up and vice versa. Currently the price of gold is wavering at around $1,150 – $1,180 per ounce. Fifty years ago an ounce of gold could be traded for about 13 barrels of crude oil. Back then oil was under $10 U.S. a barrel. Today in 2014 oil costs more than $80 a barrel because the U.S. dollar has lost a lot of value. However an ounce of gold today is still worth about 13 barrels oil. 🙂 People often discuss the strength of one currency against another. But in the long run no fiat currency can keep up with real money and hard assets.

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One way investors can get exposure to gold and be paid in precious metal dividends is through physical dividend programs. Dividend programs that involve precious metals allow companies to pay shareholders with physical gold and/or silver rather than cash.

Physical dividend programs usually allow stockholders of participating companies to tailor-fit the dividend payouts. The dividends can be purely precious metals payment, or mixed with cash. Investors may change their dividend payout preference whenever they desire. Endeavor Mining Corporation is one of the mining companies that can pay its investors with physical gold. Neil Woodyer, the company’s CEO, said that paying shareholders with the precious yellow metal is part of Endeavor Mining Corporation’s “crusade in rebuilding investor confidence in the gold sector.”

Physical dividend programs sound interesting. I wonder if there are any companies in Canada that offers it.

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Random Useless Fact:

1 ton of discarded cell phones contain more pure gold than 1 ton of newly mined gold ore. (source)