Thomas Kaplan of Tigris Financial

A Billionaire Goes All-In on Gold

Tigris Financial’s Thomas Kaplan, in his New York office this past week, on his investment focus: ‘I feel the only asset I have confidence in is gold.’

Gold is setting records again, boosting the holdings of central banks, Armageddon worrywarts, and ordinary people who own gold bars, coins and jewelry.

But few individuals stand to benefit as much as low-profile billionaire Thomas Kaplan. A New York-born commodities magnate who earned a doctorate in British colonial history at Oxford, Mr. Kaplan oversees an empire devoted largely to gold.

Many fund managers and high-rollers have allocated small percentages of their portfolios to gold as a hedge against inflation. But Mr. Kaplan is the bull of bullion. He has gone further than perhaps any other major investor, betting the majority of his wealth on gold and other precious metals. And it reflects his deeply held conviction that global economic instability could bring rising demand for gold.

Through his firm, Tigris Financial Group, and affiliates, Mr. Kaplan has loaded up on bullion and bought up properties in 17 countries on five continents, where geologists are exploring for more. Tigris subsidiaries have taken stakes in mining companies, including tiny firms that have yet to produce an ounce.

Though he won’t disclose how much physical gold he owns, Mr. Kaplan, who is 47 years old, controls up to 30% of the shares in some so-called junior miners. Together, his holdings amount to a nearly $2 billion bet on gold, more than the Brazilian central bank’s bullion is currently worth.

Thomas S. Kaplan
Chairman and chief investment officer of Tigris Financial Group

47 years old

Doctorate in philosophy from Oxford University

Doctoral Thesis Title: ‘In the Front Line of the Cold War’: Britain Malaya and South-East Asian Security 1948-1955

Gold Holdings: nearly $2 billion

Family: married, with two children.

“I’ve reached a point where I feel the only asset I have confidence in is gold,” Mr. Kaplan said in an interview at Tigris’s midtown Manhattan headquarters.

Mr. Kaplan’s views are shaped by a concern, shared by many investors, that heavy government spending hasn’t contained the woes facing the financial system. Gold hit an exchange record of $1,242.70 a troy ounce at the Comex division of the New York Mercantile Exchange on May 12, days after euro-zone leaders announced a nearly $1 trillion bailout for ailing member states.

He has experience with how supply and demand can drive the price of raw materials. His doctoral thesis studied Britain’s involvement after World War II in Malaya, home to prized rubber and tin. That taught him how far people and governments will go to secure natural resources.

Wanting to apply his insights, he went to Israel to advise hedge funds. His nose for finding valuable resources was developed at firms he started that explored for silver and natural gas, which helped him make his fortune.

On Demand and Supply

Gold miners are struggling to make major discoveries and it takes years to bring new finds into production. If people want to stock up on gold in a hurry, it will be hard to ramp up production enough to satisfy them, Mr. Kaplan believes.

“You’ve got a perfect storm with no apparent solution,” he said. “If the world does well, gold will be fine. If the world doesn’t do well, gold will also do fine … but a lot of other things could collapse.”

Mr. Kaplan is known in the mining industry for his all-in approach. “When he likes something, he dives in with both feet,” Egizio Bianchini, a banker at BMO Capital Markets in Toronto, said of Mr. Kaplan, whom he has worked with in the past.

In his charitable endeavors, Mr. Kaplan works similarly. In 2006, he co-founded Panthera Corp., whose “single-minded pursuit” is preserving the world’s endangered wild cats, he wrote in an open letter on the group’s site in which he cited inspirational quotes by Winston Churchill, Edward R. Murrow and Marcus Aurelius.

Mr. Kaplan is also president of the board of directors at New York’s 92nd Street Y, a prominent cultural organization that is a magnet for New York’s elite. And he is a benefactor of Eternal Jewish Family, a group dedicated to uniform rules governing conversions to Judaism whose leader resigned last year amid an alleged sex scandal.

In some cases, Mr. Kaplan has invested in gold miners that have also attracted the attention of fellow billionaires, such as George Soros and John Paulson.

Mr. Kaplan put money into one firm, Gabriel Resources Ltd., in late 2007 after Mr. Paulson, who made billions of dollars betting against housing markets, mentioned how low the stock had fallen while they attended “The Nutcracker” at the New York City Ballet.

“I’m there,” Mr. Kaplan recalls was his response.

In early March, Mr. Paulson’s firm, Paulson & Co., and Quantum Partners, Ltd., an investment fund run by Soros Fund Management, invested $100 million and $75 million, respectively, in NovaGold Resources Inc., a Canadian miner, paying $5.50 a share. Their move came a year after Mr. Kaplan, who has $69 million invested in the company, acquired 30% of the firm for $1.30 a share.

Gold prices are up 7.4% this year, after rising 24% last year, which was the ninth straight up year for bullion. Mr. Kaplan thinks that greater gains are coming. “I wouldn’t even say we’re in a bull market yet,” he said.

But Mr. Kaplan has concentrated risk in a volatile sector, and he knows the potential pitfalls better than most.

In 2008, for instance, a company that Mr. Kaplan founded, Apex Silver Mines Ltd., went bankrupt, felled by the terms of a loan made after Mr. Kaplan left the company in 2004. The company emerged from bankruptcy last year, and now operates as Golden Minerals Co.

In January 2009, Mr. Kaplan received a so-called Wells notice from the Securities and Exchange Commission related to what the company said were “impermissible payments” of $125,000 to government officials by executives at a South American subsidiary.

The SEC delivers Wells notices to inform recipients that it may bring an enforcement action, providing an opportunity for the recipient to persuade the agency not to pursue charges. No charges have been filed against Mr. Kaplan. An SEC spokesman declined to comment.

Concentrated Risk

Mr. Kaplan’s current investments also carry risk. Gabriel Resources owns Europe’s biggest undeveloped gold deposit, in Romania, but has been waiting for government approval for years. He has $100 million at stake in the company.

Mr. Kaplan acknowledges the dangers involved in investing in small mining companies. “It’s not the kind of thing I would suggest for widows and orphans,” he said.

And, he added, he isn’t in a rush to cash in on his gold investments. “If I am right about the big picture,” he said, “I will be rewarded for my patience.”

Article Source

China again seen moving its chess pieces to secure critical commodities and resources.

Venezuela to double gold production

Caracas, May 18 (IANS/EFE) Venezuela Monday announced that it will increase its annual gold production from the current 4.2 tonnes to 10 tonnes next year.

The government has set the goal of raising annual gold production by more than double in the next year, said Jose Khan, Minister of basic Industries and Mining.

Production volume could triple and reach 15 tonnes by 2012, he told journalists, while showing Chinese officials the Capitan Eduardo Vera ore-processing plant.

Venezuela currently has gold reserves of 360.7 tonnes.

A Chinese delegation is in southern Venezuela with an eye towards forming joint ventures to exploit the region’s vast deposits of iron, bauxite and gold.

Venezuelan President Hugo Chavez said Sunday that Caracas and Beijing are working on establishing a ‘colossal strategy’ to ‘raise and strengthen’ the production of Venezuela’s basic industries, chiefly iron and aluminium.

Venezuela’s reserves of iron and bauxite amount to 14,000 and 6,000 tonnes, respectively.

If the Euro fails and it is proven that CDS “Wolfpacks” can take down sovereign bond markets and are rewarded for their activities, then its almost a sure fire bet the USD will indeed come under attack, its only a matter of time.

The question that keeps coming to my mind is, if the US Bond markets are taken out, what then will global currencies orbit?

I am at this point 100% certain it will be something tied to gold.

Roubini Says U.S. May Face Bond Market ‘Vigilantes’

By Jennifer Ryan

May 19 (Bloomberg) — The U.S. may fall victim to bond “vigilantes” targeting indebted nations from the U.K. to Japan in a potential second stage of the financial crisis, New York University professor Nouriel Roubini said.

“Bond market vigilantes have already woken up in Greece, in Spain, in Portugal, in Ireland, in Iceland, and soon enough they could wake up in the U.K., in Japan, in the United States, if we keep on running very large fiscal deficits,” Roubini said at an event at the London School of Economics yesterday. “The chances are, they are going to wake up in the United States in the next three years and say, ‘this is unsustainable.”

The euro slid to the lowest level in more than four years against the dollar today as a German ban on some speculative trading fueled concern the European debt crisis will worsen. Roubini suggested the public debt burden incurred after the 2008 bank panic may now cause the financial crisis to metamorphose.

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When I read this, I have a image pop into my mind:

Picture Buzz Lightyear shouting “Quantitative Easing..To Infinity..and Beyond!”

Ask yourself the question:

Is it more likely or less likely that individual US States will be bailed out?

If you answered, “more likely”, then you and I are in agreement.

Finally and perhaps more importantly, ask yourself if you have a plan to deal with what will be the guaranteed results of such bailouts (massive Quantitative Easing).

Got gold yet?
By Alison Vekshin

May 18 (Bloomberg) — The U.S. Senate rejected an amendment to financial-regulation legislation aimed at preventing taxpayer bailouts of state and local governments that have defaulted or are at risk of defaulting on debt.

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The big hoopla around the net is the recent announcements that Germany is banning “Naked Short Selling of Credit Default Swaps” (CDS)

The part I find amusing about all of this, is that no one seems to be asking the question “Ok, how are you going to do that across jurisdictions?”

One of the biggest conundrums that bankers globally have tried to figure out since the mid 70’s…with little luck, is how to regulate the “Eurodollar” market, and its progeny, OTC derivatives of all sorts.

The reality is, talks have been underway for DECADES on how to regulate this stuff, and the problem has always been, how do you regulate across borders?

In the words of a Swiss Banker personally involved in one such deliberation, “If we regulate it here, it will simply move someplace else”.

In terms of regulating the CDS market that is currently eating sovereigns and currencies for lunch all I have to say is, “Good luck with that”.

Germany to Ban Naked Short-Selling at Midnight

By Alan Crawford

May 18 (Bloomberg) — Germany will temporarily ban naked short selling and naked credit-default swaps of euro-area government bonds at midnight after politicians blamed the practice for exacerbating the European debt crisis.

The ban will also apply to naked short selling in shares of 10 banks and insurers that will last until March 31, 2011, German financial regulator BaFin said today in an e-mailed statement. The step was needed because of “exceptional volatility” in euro-area bonds, the regulator said.

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Over 10,000 customers a day pack a local gold market in China.

Video:

New video posted. This video is 47:49 minutes long, but in my opinion is well worth it to understand what you are up against when trying to trade todays markets.

Quants, and High Frequency Trading (HFT) Video

Larry Kudlow asks Rick Santelli about the gold rally, and gets a whopper of a response.

If you are not yet familiar with Chris Martenson’s work in the “Crash Course”, I highly recommend taking the time to review it.

Over a period of three years I spent over 3000+ hours trying to wrap my mind around what my gut feelings were telling me was something very wrong in the economy.

It nagged at me for years, but I could not put my finger on it.

What I learned in that three year period is summed up by Chris in a way that is simple to understand, and eloquently presented.

His video series the “Crash Course” is in my estimation far more valuable to the average person in terms of understanding what is happening in the global economy than a 4 year degree in economics. And whats even better is it doesnt take you 4 years, or 3000+ hours of study to figure it out, his videos are a series of short presentations you can watch over time if you like, the whole thing is less than a few hours.

You can find a copy of one of his recent posts below:

The Financial Crisis Is Far From Over

If you are a central bank, and no one wants to buy the bonds of a nation because no one believes they will be able to pay it back, then you can always print money and create a market for them yourself.

This practice, aka “Quantitative Easing” has been shown throughout history as a often-precursor to hyper-inflation and currency destruction.

This is just the latest in a decades long competition in the “race to the bottom” aka “competitive devaluation” of currencies. Only now, these nations arent competing so much because of concerns over the ability to compete in exports, but because nation-debtors are on the verge of defaulting the world over.

It is now clear that not only the US Central bank has lost its mind, but this phenomenon of Keynesian cult belief systems will continue – pretty much guaranteeing the destruction of paper currencies the world over.

Ultimately, the only currency left standing could be gold. I hope you own some.

ECB Plans to Buy European Bonds to Ease Greek Crisis

By Gabi Thesing, Jana Randow and Simon Kennedy

(Bloomberg) — Stephen Green, head of China research at Standard Chartered Bank in Shanghai, talks with Bloomberg’s Susan Li from Beijing about China’s economy and yuan policy. (Source: Bloomberg)

The European Central Bank said it will buy government and private bonds as part of an historic bid to stave off a sovereign-debt crisis that threatens to destroy the euro.

The ECB wants “to address severe tensions in certain market segments which are hampering the monetary policy transmission mechanism and thereby the effective conduct of monetary policy,” the central bank said in a statement at 3:15 a.m. in Frankfurt. The announcement came less than an hour after European finance ministers unveiled a loan package worth almost $1 trillion to staunch the market turmoil.

Resorting to what some economists have called the “nuclear option,” the ECB may open itself to the charge it’s undermining its independence by helping governments plug budget holes. Four days ago, ECB President Jean-Claude Trichet said bond purchases hadn’t been discussed when members of the bank’s 22-member Governing Council met to set interest rates in Lisbon.

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By MICHAEL GRAY

Federal agents have launched parallel criminal and civil probes of JPMorgan Chase and its trading activity in the precious metals market, The Post has learned.

The probes are centering on whether or not JPMorgan, a top derivatives holder in precious metals, acted improperly to depress the price of silver, sources said.

The Commodities Futures Trade Commission is looking into civil charges, and the Department of Justice’s Antitrust Division is handling the criminal probe, according to sources, who did not wish to be identified due to the sensitive nature of the information.

The probes are far-ranging, with federal officials looking into JPMorgan’s precious metals trades on the London Bullion Market Association’s (LBMA) exchange, which is a physical delivery market, and the New York Mercantile Exchange (Nymex) for future paper derivative trades.

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Ignore the drama headline and just read the facts:

The notional value of derivatives held by U.S. commercial banks increased $8.5 trillion in the fourth quarter, or 4.2 percent, to $212.8 trillion.

Derivatives activity in the U.S. banking system continues to be dominated by a small group of large financial institutions. Five large commercial banks represent 97 percent of the total banking industry notional amounts and 88 percent of industry net current credit exposure.

The precious metals (silver) derivatives of all maturities increased by 37 percent, from $9.29 billion to $12.8 billion. This came principally from increases in the less-than-one-year maturities where the JPM holdings increased 34 percent to $6.76 billion and HSBC holdings increased 58 percent to $4.7 billion. (Despite the radically different percentage increases, interestingly the increases at JPM and HSBC were identical in dollar amounts at $1.7 billion.)

Why is this important to you? Do you remember the 2008 near collapse of the financial system? It was caused by derivatives. The 5 investment banks that comprise 97% of the new derivatives being created are NOT making it less likely we will suffer another massive heart attack in the financial system, they are increasing exposure by an amazing $8.5 TRILLION DOLLARS A QUARTER.

http://www.occ.treas.gov/ftp/release/2010-33a.pdf

Got gold yet??

On April 14th 2008, I was contacted by the staff of Larry Kudlow because he had read an article I wrote “M3 Money Supply & Inflation”  on why gold was the solution to reckless money creation and he wanted to interview me.

I didnt hear much more after that, perhaps because he was posting his interview with Senator John McCain the next day, and I am just not that important (with this I agree). Also, at the time Larry Kudlow was still somewhat poo-poo’ing gold.

Interesting however Mr. Kudlow’s quote today on his personal blog:

“The real winner today? Gold. It’s up about $25, to $1,200. People want real money. They do not trust the debt-laden currencies of Europe and the United States. Or for that matter Japan. Gold is fast becoming, once again, a reserve currency of choice.”

This was exactly what I was saying over two years ago. Well Larry, I guess I was right?

Debt-Deflation-Contagion Panic: It’s a Bloody Mess

By Larry Kudlow (visit his blog here)

Panic has gripped stock markets worldwide over the Greek debt crisis and the threat of a debt-deflation contagion through banks in Europe (primarily) and the U.S. that own the bonds of Greece, Portugal, Spain, and so forth. If these bond asset prices collapse totally, lending facilities would be badly crimped for both the short and long term. And that, in turn, would damage prospects for economic recovery.

The Dow closed today off nearly 350 points. Earlier in the day the Dow was down 850 points, though there is talk of computer glitches and technical problems that may have temporarily undermined trading. Either way, the market is getting creamed as a result of the Greek story.

The real winner today? Gold. It’s up about $25, to $1,200. People want real money. They do not trust the debt-laden currencies of Europe and the United States. Or for that matter Japan. Gold is fast becoming, once again, a reserve currency of choice.

Meanwhile, the EU/IMF bailout package for Greece, which does include draconian budget cuts, contains a 2 percentage point increase in the VAT tax that is anti-growth. Steve Forbes correctly said last night on CNBC that the Greeks should be slashing spending and should move to a flat tax, just like the countries in Eastern Europe. I gave him a Nobel Prize for that.

Market chatter, at least in Europe, is suggesting that the $150 billion bailout is not enough. But it may be that the left-wing union mobs in Athens have caused a major backlash throughout Europe and elsewhere. Despite the mob, the Greek parliament was able to pass legislative approval of the bailout package. This caused a small stock rally for a brief time this morning.

The German parliament will vote tomorrow on this package. Should it be voted down, all hell will break loose again in world stock and credit markets.

And then there’s Britain. The Tories may win a close election tonight and dethrone Labour. But if so, David Cameron & Co. will be a minority government.

I still believe that one of today’s key themes is a global revulsion toward the massive spending and debt programs put in place by the U.S., Euroland, the G20, and the IMF back in late 2008 and 2009. Unwinding these Keynesian mistakes is not an easy thing to do. But financial markets are now exerting discipline on this out-of-control spending and borrowing.

Financial markets don’t like these big-government policies at all. Neither do voters. The markets don’t trust the ability of these nations to service the interest payments on all this new debt. And voters are much opposed to the tax-hike implications of the debt.

In particular, the U.S. and the Western countries in Europe have lurched left in recent years. It’s bad for growth, it’s bad for credit quality, it’s bad for banks, and it smacks of credit-deflation bankruptcy. In short, it’s a bloody mess.

My take on this is that if the Euro ultimately fails, the rats will once again jump from one sinking ship to another..the USD…only to find the USD has bigger holes and is taking on water faster.

Ultimately this will eventually lead to the only sane conclusion left: Gold.

We now know the answer to Henry Kissinger’s question: “Who do I call if I want to call Europe?” Only one person matters. The Chancellor of Germany.

By Ambrose Evans-Pritchard

Berlin was Europe’s capital last week, basking in summer heat of 26 degrees. The heads of the European Central Bank and the International Monetary Fund (IMF) – both French, oddly – arrived as supplicants, pleading with Chancellor Angela Merkel and a stern finance committee of the Bundestag to save monetary union. Nowhere else mattered. The markets have stopped listening to Paris or Brussels.

If the aim of Helmut Kohl and Francois Mitterrand at Maastricht was to tie down a “European Germany” with the silken chords of EMU, they failed. Monetary union has delivered a “German Europe” after all.

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Ouch. Leave it to government it destroy entrepreneurial incentive.

I suspect that these folks aren’t the only geniuses who see a booming industry to loot. Hopefully this doesn’t gain much traction.

Take from those who produce, and give to those who do not. Recipe for disaster.

By  Rod Mcguirk, Associated Press Writer

CANBERRA, Australia – Australia would heavily tax the booming profits of its mining companies under a tax system overhaul proposed Sunday that also would invest in infrastructure to support mining operations and reduce corporate taxes.

The new 40 percent tax on resource profits targets industries that have grown rapidly as they’ve produced the raw materials that feed burgeoning Chinese and Indian manufacturing demand.

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The true problem here has been and will continue to be debt of government on both sovereign and state levels.

According to the guys over at the Austrian school of economics, once debt reaches 73% percent of GDP there is no going back, you have passed the “point of no return”.

All the players involved in this fiasco have debt levels spiraling out of control, which in turn triggers the CDS buying and the downgrades of credit, which destroys the bond markets and ultimately cuts the throat of government trying to fund keeping the lights on.

If you take out “Greece, Portugal, etc” and insert “California, Florida, etc” you can begin to grasp the nature of the true problem that may be hidden by the hoopla in Europe.

If you think this scenario can not, and will not replay itself with US States that are either bankrupt or nearing it, please look a little harder.

The only safe haven in this environment is gold. There is a reason the top fund managers in the world are buying it right now.

ECB may have to turn to ‘nuclear option’ to prevent Southern European debt collapse

The European Central Bank may soon have to invoke emergency powers to prevent the disintegration of southern European bond markets, with ominous signs of investor flight from Spain and Italy.

By Ambrose Evans-Pritchard, International Business Editor

Greece’s fortunes were dealt yet another blow as Standard & Poor’s slashed its credit rating to junk status – BB+ – the first time that has happened to a euro member since the single currency was created, pushing yields on 10-year Greek bonds up to a record 9.73pc.

The credit-rating agency also cut Portugal’s sovereign debt ratings by two notches to A-, as the swirling storm hit the country with full-force.

Sovereign debt crisis at ‘boiling point’, warns Bank for International Settlements

“We have gone past the point of no return,” said Jacques Cailloux, chief Europe economist at the Royal Bank of Scotland.“There is a complete loss of confidence. The bond markets are in disintegration and it is getting worse every day.

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It sure is a good thing that Lloyd Blankfein and Goldman is doing “Gods work”. He may just need the help of the Almighty to get out of this one.

By SUSAN PULLIAM And EVAN PEREZ

Federal prosecutors are conducting a criminal investigation into whether Goldman Sachs Group Inc. or its employees committed securities fraud in connection with its mortgage trading, people familiar with the probe say.

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You should not find this surprising.

Still dont believe commodities markets are manipulated?

Moore Capital, Morgan Stanley, UBS Settle CFTC Cases

By Whitney McFerron and Matthew Leising

April 30 (Bloomberg) — Moore Capital Management LP, Morgan Stanley and UBS AG’s securities division agreed to pay more than $39 million to settle separate allegations regarding trading on the New York Mercantile Exchange.

Moore Capital, the $15 billion hedge fund run by Louis Bacon, will pay $25 million to settle the U.S. Commodity Futures Trading Commission’s allegation that a former portfolio manager attempted to manipulate platinum and palladium futures during a surge in prices two years ago, the regulator said yesterday.

Morgan Stanley will pay $14 million and UBS $200,000 for a separate allegation that they concealed a block trade of crude oil from Nymex, the CFTC said in a separate statement yesterday.

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More expert maneuvering by the Chinese….focus on the human rights stuff if you prefer…the fact of the matter is 3.5 billion people who all want cars, tv’s, computers, refrigerators and microwaves is changing the entire supply demand dynamic of raw materials around the globe.

Jane Hahn for The New York Times

NIAMEY, Niger — For China, the transition seems smooth.
The New York Times

Mohamed Bazoum, a former opposition leader, says deals with China must be respected.

Just a few months ago, China was widely derided here as the financial backbone propping up an autocratic president, Mamadou Tandja, giving him the confidence to ignore international condemnation as he chopped away at Niger’s democratic institutions.

But now that Mr. Tandja has been overthrown, China appears to be settling into a new role: business partner to the good-government-preaching military officers who ousted Mr. Tandja under the banner of restoring democracy.

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