Wednesday, August 15, 2018

Fin (The End)

When I started writing at BullionBaron.com in 2010, more than anything it was a place to collect my thoughts. I was often commenting about finance / property / precious metals across various forums and found myself repeating many of the same points, so the blog was a way of centralising these ideas for reference. Later as my readership increased it became a platform to share my ideas, investment decisions, opinions and research.

Looking back at some of the posts, there were many predictions made, many terribly wrong, some very right. I hope I provided interesting commentary that prompted you to think for yourself and consider the role alternative assets might play in your portfolio.

A lot of my spare time over the past couple of years has been absorbed by a startup I co-founded (not related to the topics I write about here). It's not likely that my time will free up to come back and write again in the foreseeable future.

Over the last couple of years I have posted much less regularly and at this point it has been ~9 months since my last post. I won't rule it out, but it is unlikely this site will see a resurgence of posts (even with the return of a bull market in precious metals), so I have decided at this point to retire it. I am not sure what that means just yet, I might make the entire blog private or I might unpublish posts that are irrelevant or that I disagree with today and leave up some of the timeless pieces. This will likely occur within a few weeks.

I expect to continue tweeting from @BullionBaron, so feel free to connect there. I am considering to drop the pseudonym and tweet under my real name sometime soon.

A contrarian might be inclined to see the site closure as a sign of a bottom in precious metals. Let's hope that might be the case ;)

Cheers,
Bullion Baron

Tuesday, November 21, 2017

An Honest Look At USI TECH

Disclosure: Most articles which publish 'reviews' of a MLM scheme are in fact not honest, but rather a sales pitch dressed up as an independent article. This is not the case here. You will not find any referral links (hidden or otherwise) to USI TECH in this post.

I have no problem with people advertising a service or product that they don't own and taking a cut, referral fee/bonus or affiliate commission when a genuine product is being sold and the process is fair and transparent. This is typical in the sales industry.

There are some multi-level marketing (MLM) sales systems which take this a step further and allow you to not only take a single cut of a products sale, but also allow you to bring in other participants where you would take a small cut of their sales too and of those they recruit (typically receiving a smaller share with each level down the chain).


At this point such a sales system can start to become risky and detrimental to the end buyer. The more people who are receiving a cut, the more profit you need to pad into the price. So chances are the end buyer is not receiving a very good deal if the cost of the product they purchase is paying a commission to a number of parties further up the chain (see image above). Also the end buyer is often recruited into the structure to try and sell the product themselves. It is not very different to a pyramid scheme, however there is a product or service involved even if it doesn't represent good value.

Have you heard of cryptocurrencies (referred to from here on as cryptos)?

Cryptos already have a number of very real risks for investors:
  • Their performance can be very volatile with regular 30%+ falls.
  • Exchanges have collapsed taking investor funds with them.
  • Code has gone wrong making it impossible to sell cryptos in a wallet.
  • If you forget your private key the value is lost forever.
  • Many of them are poorly coded or offer no real advantage over their peers.
And this is barely scratching the surface of the risks involved with buying or owning them (though I do believe the technology will be used in everyday life down the track, so there are reasons to speculatively own some).
Now imagine an MLM sales system was applied over the top of this highly speculative financial sector (cryptos). There are a number of 'opportunities' popping up in this space (another example is BitConnect), including one that seems to be increasingly popular in Australia, USI TECH. I have now been approached by at least half a dozen individuals to check this out and thought I'd take an opportunity to share some research I have done and my thoughts. I also welcome your comments below if there is anything I have missed or misrepresented (I am only using publicly available information).

What does USI TECH offer? Earlier in the year and last year they were selling a software package for automatic FX trading, but in March 2017 started offering 'Bitcoin Packages'. Effectively my understanding is that you transfer 50 Euro worth of Bitcoin (the first crypto) to their system and then they start trading it on your behalf. The claim is that their trading can return 140% return on capital at ~1% per day (advert spotted at a supermarket):


Typically such a return would be indicative that it is a HYIP (high-yield investment program), basically a type of ponzi scheme.

It is very unlikely they will be able to return such a consistent figure over the long term. There is no magic automatic trading system that can make you a fortune like this.
"There seems to be a never ending stream of investing scams that are rolling out these days. Automated investing combined with FOREX seems to be the sweet spot. Add a dash of Bitcoin and the story is complete. Take something that few people understand and automate it. What could possibly go wrong?" USI-Tech Scam? Yes It Is In My Opinion! - Ethan-Vanderbuilt
In fact, Bitcoin has actually risen 6 fold since they launched their Bitcoin packages, so chances are you would have outperformed their system simply by buying and holding Bitcoin directly (at least over the last 9 months).

USI TECH attracts people to this platform not only through the return, but also by offering very attractive commissions to those who want to sell these Bitcoin packages (and a recently announced 'token') to others through their referral system.


The token they are selling is dubious at best. They intend on turning the token into an ICO (initial coin offering) in the future. They have dubbed it TechCoin (Code: UTC), despite there already being a crypto by that name and another using that code.

Typically when an ICO launches they will release a whitepaper beforehand, which will detail how they intend on spending the funds, why their particular brand of crypto is superior or what it is for. To date there has been no whitepaper released publicly by USI TECH. I read they were going to release it after 500 million of their tokens are sold... why wait? Why would anyone buy this token without understanding any value it provides or what it will ultimately be used for?

The way they have structured the token sale is to incentivise both a large purchase by the buyer as well as for the referrer to push for large sales as they receive higher commissions.


The largest package you see above is Diamond for a cost of 10 Bitcoins (roughly A$109,000 at today's price).

USI TECH is suggesting they have a lot of other activity going on in the background such as the purchase (or hire?) of crypto mining rigs that are generating them income and the patenting of a machine that is supposed to reduce their mining costs substantially, but scratch under the surface and this looks like absolute nonsense (via Scam Hilarity: Suspect ponzi claims to be mining bitcoin w/ perpetual motion engine):


Being presented by people who simply don't have the qualifications or public history to confirm they know what they are talking about.

Further red flags appear with the business being based out of Dubai:
"A PO Box corporate address in Dubai is provided by USI-Tech. However beyond laundering investor funds, it’s doubtful USI-Tech has any physical operations in Dubai." - USI-Tech Review 2.0: Forex auto-trading dropped for bitcoin Ponzi
They also have some questionable people involved, for example one of the founders:
"Jao Severino (JOƃO FILIPE FERNANDES SEVERINO) has been barred from financial activity in Portugal because he was involved with another scam called AMC INVEST. AMC Invest offered 10% interest per month on investments and it ended up scamming hundreds of people before it was taken down by the authorities. People were arrested for this scam."
To wrap up:

* As far as I can tell the people involved don't have the appropriate experience (e.g. equipment rental manager presenting ‘revolutionary power technologies’) or have been involved in HYIP/pyramid schemes in the past.

* They have made outrageous claims about the technology they own... think about it, if they really had a machine patented to reduce the cost of electricity for crypto mining as they've described, why would they waste their time with doing so when it would have real world applications that could be worth a lot more.

* They're selling tokens which will eventually be exchanged for coins.. so they say. Which exchange is going to accept them? What real value will these coins provide? How does it differ to other crypto out there? Which reputable crypto specialists do they have designing the coin? Where is the whitepaper?

* They are promising returns that simply can't be replicated over the long term. My expectation is that they are paying out any current returns from new investors' money or from money collected from selling the tokens and from their mining rigs. They are probably relying on a lot of investors "reinvesting" their returns. These schemes (HYIP) can operate as long as they have enough new money coming in to cover any money going out. If the incoming money stops/slows, it will eventually collapse.

* The smallest Bitcoin packages are not that expensive, but this TechCoin is trying to bring in investments of tens of thousands of dollars through the way they have structured the bonuses.

Some further questions to ask USI-Tech if you are considering an investment in their scheme:

Why are they using this patented power technology for such a low potential opportunity, why not just sell it for billions of dollars if it works as they describe?

Why can't they release the whitepaper for the ICO before launch like any reputable crypto operation?

What are the names of the crypto specialists working on TechCoin and how can they be contacted?

When can we expect an external audit of the trading they are doing?

USI TECH is likely to go the way of the last ponzi I covered on this site, Royal Silver Company. Buyer beware.

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Monday, December 26, 2016

MacroBusiness Censors Comments At Odds With Narrative

The comments section at MacroBusiness, once a lively space for robust economic discussion, now often acts as little more than an echo chamber.

If the response from readers is strong enough in disagreement with the site authors, then those commenting are belittled and ignored (as I wrote in MacroBusiness Persists with War on Cash in Australia). If there is an alternative view or statistics put forward which don't fit the MacroBusiness narrative, then they are ignored, name calling begins or in some cases the comments are edited or deleted altogether.

The most recent example of the latter was in the comments section of their recently released report 'Can the great “can kick” save Australia?' (paid subscriber only content). Basically the report amalgamates a range of charts and narrative which supports an outlook that several dark clouds on the horizon (end of car manufacturing, slow down in construction and mining, etc) will converge in a short space of time and crater Australia's economy. They have been writing to this script for a number of years now, slowly pushing out the timing as unexpected economic circumstances have impacted their predictions.

The report was released late Christmas Eve and I happened to be up at the time. After reading their report and having seen some statistics on manufacturing employment at Pete Wargent's blog around the same time, I decided to post these numbers under the report:

Click Image to Enlarge

The report posited that there is basically no hope that these converging economic headwinds might be offset by some other factor which hasn't been considered. I was simply suggesting that if the Australian Dollar is smashed to 50c or lower (against the USD), as has been predicted on MacroBusiness, then perhaps a resurgence in Australian manufacturing could be one positive factor to keep an eye on:

Click Image to Enlarge

My comment was met with a ridiculous level of hostility (particularly from David Llewellyn-Smith):


My original comment (first screenshot above) was later deleted along with a number of replies.

It's a real shame that the editors / owners of MacroBusiness feel the need to use personal insults and name calling to push their agenda. It's also ironic that they attack others for 'selective analysis' while censoring current or potential future positive economic developments (that they've ignored in their own analysis) from being posted in the comment section of their site.

Note: A number of my comments have been edited and/or deleted recently on MacroBusiness. To date I have only noticed edits which remove part of the content rather than add to it (this can still distort context). Be skeptical of my comments there if something looks amiss or I don't respond to your replies. You can always reach out via Twitter or email.

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Sunday, December 18, 2016

MacroBusiness Persists with War on Cash in Australia

I'm a regular reader, subscriber and intermittent commenter at MacroBusiness (less frequently since my comments started getting trapped in their spam filter or outright deleted when disagreed with). They often produce well thought out arguments on finance and economic topics, which aren't being covered adequately by the mainstream media.

However, these quality pieces containing mostly original content are interwoven with myopic 'filler' articles which often appear rushed, copy and pasting swathes of text from other sources, adding a few lines of comment and then posted to the site, acting as an aggregator of news. One such example recently had blogger Leith van Onselen writing about the elimination of large denomination bank notes, it ended on this note:
"Personally I believe Australia should phase-out both $50 and $100 notes. We are turning into a cashless society anyway, so phrasing-out these bills wouldn’t create much of a burden to the ordinary law-abiding person."
The article included a quote from UBS analyst Jonathan Mott, "Removing large denomination notes in Australia would be good for the economy and good for the banks" and this corker from Peter Martin, "Phasing out high denomination notes would be painless, for those of us with nothing to hide" (eerily similar to a quote often attributed to Nazi propagandist, Joseph Goebbels).

The post on MacroBusiness generated hundreds of comments from readers who disagreed with the blogger. Many of them putting forward solid arguments against his conclusions, which included the following:
“..legalising all drugs would do much more to stamp out organised crime than removing large bills.”

“I don’t see why a digital record of every transaction I make should be kept and intercepted and stored by an all seeing government. There are some cases where cash makes sense and where you don’t necessarily want certain individuals to know what you’re buying, when and why. Not all of it is illegal.”

“How are banks held accountable in your cashless society? If banks (let’s say all of them), take undue risks, how is a depositor to “opt out”?”

“Let’s make it so no small market can exist. We can’t have farmers growing good food and selling it straight to people who want it. We MUST force everyone into the big supermarkets. Let’s make it so when all these mad elitist bastards want negative nominal IR’s there is no way to avoid their lunatic scheme for the world.”

“Moving to a cashless economy presently means that you must use a bank as an intermediate. The banks are private corporations that are so powerful they can’t be investigated.”

“..removing 50’s and 100’s has no impact on the black economy. It just becomes an inconvenience for everyone else.”

“We can’t trust the banks to give us financial advice, and we need a Royal Commission into them just to try and get them honest (unlikely to happen), but it’s okay to eliminate high-denomination notes and keep that money in banks instead?”

“..If we real see yields on bank deposits head to/below zero and stay there…….why would you keep your money in a bank in that environment”

“The problem with non cash transactions is the simply ridiculous amount of information (data) that’s being collected (and permanently stored) about individuals and what they buy, when and where. Big data is the corporate gold mine that industry is just starting to really use, most governments are still in the clueless category but they’re learning quick AND they are being sold different service packets by big-database owners. So it’s not simply about the government storing purchase information information about you tomorrows big data is a global corporation and provides a 100% clear picture of each and every individuals life, who they associate with and when and where this happens. Transactions are the glue that ties it all together, the purchase that links you personally with all the available data.”

“China only has 100 RMB notes (about $20 AUD). It didn’t stop tax evasion. It didn’t stop money laundering. It didn’t stop drug dealing’. Of course, having high denominations will make it easier, but to say all of this will magically disappear when the $100 is phased out is wrong.”
Eliminating cash eliminates the option of using cash to protect oneself in various difficult circumstances – some legal, some quasi-legal and some no doubt illegal…. but all *ethical*. The most obvious one is trying to survive when your government falsely believes you are a criminal. This happens all too often now and is probably only more likely in future. Removing cash without providing an alternative for people who might face these challenges is a VERY F*CKING BIG DEAL.
Leith's response in the comments included praising India for their recent demonetisation of "large" denomination notes (value of which are in the vicinity of A$10-20), calling those who disagreed with him tin foil hatters, suggesting that removal of the $100 note would "certainly interrupt the black economy" and finally bowing out of the comments without addressing many of the valid arguments raised by his readers.

I had considered writing this post after this first article, but thought I would give Leith the benefit of the doubt, perhaps his brain fart would not be repeated and he would not broach the subject again. I was wrong. In the last week Leith published a follow up article supporting comments from Kelly O’Dwyer (oft referred to as Kelly O'Liar in MacroBusiness headlines when she says something they don't agree with), vilifying the $100 note. Leith failed to address any of the reasoned comments which followed his last article.

The article generated more comments worthy of consideration, which included the below:
"What on earth is wrong with people holding cash if they choose to? As many have noted – criminals will readily find some other way of settling their transactions. Opposition to cash usually boils down to the latest efforts by the private banks and their minion neoliberal cheerleaders wishing to extend the already virtual private monopoly over money creation to a complete monopoly."

"I’m still in Vietnam at present and took cash with me to exchange while here for spending money. Every money exchanger I have come across has $100 notes, I only brought $50 notes as I withdrew them from the ATM. How many other money exchangers and foreign banks have pools of Aussie $100 for exchange purposes across the world? Maybe instead of blaming criminals they should be considering this?"
The second comment in particular makes a lot of sense and explains one reason we may be seeing an increase in demand for high denomination notes, for tourists traveling to our country (in the 12 months to October 2016, the annual number of arrivals increased by 11.1% relative to the corresponding period of the prior year):


A recent RBA Bulletin (The Future of Cash) points to similar reasoning:
..liaison with major cash industry participants indicates that increases in overseas demand are a fairly usual occurrence when the Australian dollar depreciates. Part of this demand is likely to stem from the increased attractiveness of Australia as a destination for tourism and education, with both of these groups of visitors tending to be large users of cash.
The bulletin highlights that due to the anonymous and untraceable form of cash, it is impossible to calculate how frequently cash is used in facilitating illegal activities:
A potential source of currency demand that has attracted international attention recently is the use of cash, particularly high-denomination banknotes, to avoid reporting income to the authorities, or to finance illicit activities. Cash may be valued by those engaged in such activities because it is anonymous and untraceable. By definition, however, this also means that it is not possible to assess the demand for cash for these purposes accurately.
However, it does highlight that phasing out the $100 note is unlikely to be disruptive to criminal elements:
As noted, it is not possible to estimate the extent to which cash, or any particular banknote denomination, is used in illegal activities. However, liaison with AUSTRAC (Australian Transaction Reports and Analysis Centre) and the Australian Crime Commission suggests that it is the $50 denomination – rather than the $100 – that tends to be preferred by criminal elements because of its ubiquitous use in legitimate transactions. This suggests that to the extent that the $100 banknote is being used for nefarious purposes, any phase-out may not be particularly disruptive to those engaged in such activities.
This directly contradicts Leith's claim that getting rid of $100 notes would "certainly interrupt the black economy".


And if you thought about it rationally, a lot of the transactions occurring to avoid tax (e.g. tradies performing 'cashies') or buy illegal goods would continue unimpeded using smaller notes as the transaction would typically be only a small handful of notes regardless of whether using $50s or $100s.

The RBA highlights there are many legitimate uses for cash:
Demand for cash in the economy stems from its roles as a means of payment and a store of value.

As a means of payment, cash has a number of attributes that may be valued by end users.

It has near-universal acceptance, facilitates simultaneous exchange and instantaneous settlement, is convenient for person-to-person payments and can still be used at times when electronic payment methods are unavailable due to internet or electricity outages.

Cash transactions are also anonymous and, with low rates of counterfeiting in Australia, fraud may be less of a concern than when using alternative payments.

Cash can also be used as a store of value and, for this purpose, its attributes come to the fore in times of economic/financial uncertainty. In particular, in circumstances in which the viability of banks is under question – as was the case in many countries during the 2008–09 financial crisis – cash may be considered a superior store of value to money held in the form of bank deposits. That is, claims on the central bank are preferred to claims on a commercial bank.
And let's face it, a move to reduce large denominations is really a nudge toward a cashless society, which would have it's own problems as recently highlighted by the BIS:
There are academics and politicians advocating the abolition of cash. What do you think of that?

Negative nominal interest rates, especially if persistent, are already problematic. Quite apart from the problems they generate for the financial system, they can be perceived as a desperate measure, paradoxically undermining confidence. Getting rid of cash would take all this one big step further, as it would signal that there is no limit to how far into negative territory nominal interest rates could be pushed. That would risk undermining the very essence of our monetary economy. It would be playing with fire. Also, it would be quite a challenge for communication, even in simply economic terms. It would be like saying: "We want to abolish cash in order to tax you with lower negative rates in order to - tax you even more in the future."
All things considered phasing out $100 (or large denomination) notes would be a pretty awful policy direction for Australia to take. It would:
  • Make it more difficult to keep spending private (from government / corporations / banks)
  • Limit options when trying to protect oneself from risky banks (ironically something MacroBusiness highlights often)
  • Inconvenience those needing to use cash regularly in transactions, a majority of which would be conducted legally.
And all despite lack of evidence or reasoned argument that doing so would reduce the so called "black economy".

The team at MacroBusiness need to think this one through a little better.

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Tuesday, September 20, 2016

Gold Exposure For Superannuation Without An SMSF

I have written on gold exposure in superannuation without the need for a Self Managed Super Fund (SMSF) in past articles here, for example some funds allow direct equity investment. IOOF Employer Super (previously know as Spectrum Super) is one such fund and has a fairly extensive list of direct shares and securities (including gold miners and PMGOLD).

As mentioned in a recent post I have added gold related positions to my super the last couple of years with Silver Lake Resources (SLR), Medusa Mining (MML), Norther Star Resources (NST) and since then Regis Resources Limited (RRL), but not everyone wants to expose themselves to the risks associated with miners. Not everyone wants a level of involvement in their super investments such as that which is required to pick miners or work out what allocation they should have to gold.

What is a conservative allocation to gold in your superannuation fund anyway? 5%? 10%? How does 25% sound...
"The Permanent Portfolio is an investment strategy developed by Harry Browne in the 1970s that advocates splitting your money equally across four assets – cash, gold, equities and bonds – and rebalancing back to that split whenever they diverge too much. Mainstream financial planners would probably balk at a 5% allocation to gold, let alone 25%, but how does such a strategy perform in reality and could you get your financial planner to consider it?

For Australian investors hard numbers on the Permanent Portfolio strategy can be found by looking at the Cor Capital Fund, run by Davin Hood. His latest Quarterly Report is out and his fund’s performance, as summarised in the chart below, I think justifies giving the strategy some consideration."
The above written by Bron Suchecki in 2015 was paired with a chart which I have taken the liberty of updating for this article:

Click Chart to Enlarge
Bron continues:
"It is important to note that the blue line is the theoretical performance of the strategy before the fund started and the white line is its actual performance. What is clear from this chart is the low volatility of the fund’s performance – yes, you don’t get big gains (as the Australian Equities line shows in 2006 & 2007) but nor do you get the big losses (as happened in 2008). For those looking for a consistent and safe investment plan for the long run, this chart shows that the strategy has merit.

Part of the performance comes from not just the choice of asset classes to allocate to but the disciplined rebalancing between those asset classes. Unless you are willing to hold all of these asset classes, and sell those which are up and buy those which are low, the strategy probably will not work as indicated.

Unfortunately, if you are looking for someone else to be that disciplined investor for you, Cor Capital is currently limited to sophisticated/wholesale investors, which means, for example, an initial investment of $500,000."
It has been highlighted to me that this fund is now far more accessible for Australian investors, particularly for those with an interest to buy in through super. You can allocate as little as $1000 to the Cor Capital Fund if you have at least a $5000 super account balance.

As briefly described on the ABC Bullion website:

1). Open a brightday Complete Super Account
2). Transfer some or all of your Superannuation to brightday
3). Invest in the Cor Capital Fund


They have a more in depth brochure available here.

On seeing this, my first thought was to take a look through the Cor Capital Fund PDS (cynical I know). A number of risks associated with gold were listed (price risk, government risk e.g. change in laws), but interestingly saw no mention of custodian risk and the only mention of how the gold was held, "Physical gold is held in professional bullion vaults on our behalf."

I sent an email to enquire how the gold is stored and received a prompt reply from the Portfolio Manager (Davin Hood): 
"The Fund precious metals allocation (25% approx.) is currently 99.8% in physical gold and we keep about half in Perth at the Mint and half in Sydney at Custodian Vaults (ABC)."
I do like that the fund has a conservative approach even with the storage of it's gold, diversifying across the two companies and locations.

I don't have any intention in the near future to move a portion of my super into this fund, however it looks like a reasonable option to consider for those who want to have exposure to gold as part of a diversified portfolio in their super.


 
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