Gold Is A Currency Of nations

What is gold really worth?

There are a lot of arguments regarding gold's true value. How can anyone justify that an ounce of gold is worth over $1100/oz? Do people even know exactly what an ounce of gold looks like?

Take a look:


Not very big, is it?

The fact is gold really does nothing but sit around and look pretty. And believe us, because of this, there are many anti-gold bugs out there who have been shooting darts at our faces for our continued belief in gold-related plays.

So let's clear the air once again. We are not gold bugs. But we do take advantage of the obvious. And the obvious is simple:

Gold is worth a lot of money right now

Gold, like the pieces of paper in our wallets we call money, is something that people can put value to. But there's one big difference: You can print as much money as you want. But you can't with gold. There's only so much.

And everyone wants a piece...especially the banks.

Last year, the world's central banks became net gold buyers for the first time in two decades and according to CPM Group, this trend could continue. Right now, central banks hold approximately 18 percent of the total gold ever produced.

A recent Bloomberg survey reported 15 of 22 analysts forecasting that gold would make further gains this year, with Goldman Sachs predicting $1,380/oz in the next 12 months and HSBC predicting a peak of $1,300/oz in 2010 and as high as $5000/oz in the next five years.

During the past decade, precious metals were the best-performing asset class, beating property and shares with returns of nearly 250 per cent. People who invested money in precious metals, such as gold, silver and platinum, during the ten years to December 2009 made returns of 242 per cent, the equivalent of a gain of 13.1 per cent a year.

It's no secret that gold, the most recognized of the precious metals, has taken center stage.

In past newsletters we told our readers to follow where the smart money goes (see Where the Billionaires Invest).

And it's still going into gold

Just last week, we mentioned why famed hedge fund managers such as George Soros and John Paulson are investing in gold, with billions upon billions already directly tied to gold through the GLD ETF (see Nothing We Can Do).

We understand that that their significant holdings in GLD is a hedge against their share class, but their bullishness in the gold sector remains. That's why Paulson started a new gold fund this year that invest primarily in the equity of gold mining companies and some derivatives on the price of gold. His gold fund's objective "is to outperform gold price in a rising gold price environment."

This past week, both George Soros and John Paulson made yet another bet on gold with a new investment of $175 million into Novagold, a company focused on gold exploration, development and mining and one that we have had on our watch list for quite some time. Yes, they were able to pick up shares at a significant discount to the market. But the fact remains, two of the biggest hedge funds in the world are investing in gold explorers and miners.

Practically all of us do not have the monetary capacity to invest like George Soros and John Paulson. We are not all able to pick up shares immediately at a discount to the market. That's why investors like ourselves need to beat the heat by looking at miners that have the ability to raise funds while building a strong portfolio of assets with strong gold resources. At the same time, they need to be under the radar enough that their shares are still undervalued so that we can pick them up at a discount to the market - without spending $175 million.

For months we have been placing bets on gold miners instead of the price of gold itself. Gold miners and juniors have the ability to significantly leverage the price of gold through many avenues. Not only can they achieve substantial gains in share value through the rising price of gold, they can also benefit from new discoveries and takeover/merger activities.

We're not saying to go out and buy every gold company with a resource because we do expect a strong market correction. But we are saying that over the next few years, we expect commodities to outperform.

Along with it, many juniors will make significant gains.

When all else failed last year, the resource sector remained strong with trading volumes and overall capital financing consistently high. Unlike other sectors where new money was scarce and plagued by light volume, the resource sector stormed through and bounced back stronger than any other sector.

Back in March of 2009, when analysts and economists were telling everyone to horde cash, we put it in the miners. Since then, the miners are up considerably against other indices. (see The Report That Shocked the World)

Of course, there is a possibility of gold trending downward.

However, even if gold were to hit $900/oz, gold prices are still strong enough where discovery and takeovers are going to be rewarded.

If you are going to invest in a junior, you have to think like a major

With the recent bids we have seen for juniors, it appears that the majors are using valuations of around $900/oz for their bid prices when looking at takeover targets.

That means a lot of the juniors are still attractive to the majors at a lower price point. Conversely, if gold continues to rise, it can not only add substantial value to the juniors with strong resources, but makes their projects that much more viable as people scram for more gold.

Of course, exploration is a negative cash flow business so it's imperative that companies are able to raise money. That's why we will continue to follow and invest in companies with ounces in the ground, cash in the bank, and enough management power to raise the funds necessary to advance. Equedia

Arlene Dickinson self-made millionaire on CBC's Dragons' Den

When Arlene Dickinson first heard about Twitter two years ago she decided to give it a pass.

"My first reaction was that it was for people who didn't care about content," says the 53-year-old entrepreneur, motivational speaker and marketing maven.

But, hanging out with her four adult children in her Calgary home, Dickinson noticed they had their eyes glued to their computer screens and smart phones, not the television. When she peeked over their shoulders, she saw they were on Facebook and Twitter.

Gradually it dawned on her: "Wait a minute, this is how they have a conversation."

She became a convert.

A Twitter devotee since 2008, Dickinson was the first of the self-made millionaires on CBC's Dragons' Den to send out tweets about the show.

"I egged them on," says Dickinson, interviewed in the board room of her trendy Toronto office on John St. It is decorated with antique and junk store finds, including a pair of old skates, a carousel-style horse and a '50s-style kitchen table where staff have "beers and cheers" on Thursdays.

"The point, for me, of social media is for you to control the narrative. If you're not the person talking, others will do the talking for you."

Dressed in a light grey suit she wore for a guest appearance on another CBC television show earlier in the day, she calmly answers questions while occasionally touching the startling white streak running through her long, flame-colored hair. That streak is her signature – unique and memorable.

As CEO of Venture Communications, a company with a staff of 75 in Calgary, Toronto and Ottawa, Dickinson has made her millions controlling the narrative for her clients, which include Toyota, Sport Chek and Red Rose Tea.

But there's also Dickinson's own narrative – something she refers to as "My Story."

It is a compelling one.

The single parent of four young children overcame a lack of training and education to forge a spectacularly successful career. She graduated high school at 16, was married at 19 and divorced at 28, when her eldest child was only 7.

She struggled to find work in Calgary, discovered a talent for marketing and joined Venture as a partner in 1988. Ten years later, she was its sole owner.

It is a story of hardship, ambition and mistakes.

She builds and reinforces her story in speeches and television appearances, in blogs and tweets, and in the way she runs her company.

"I'm a big believer in storytelling," she says. "I love to sit and talk face to face, engage people. When I'm on Twitter, I have 5,000 different conversations."

Recently, she told her followers about her trip to the Olympics where she saw the Canada-Russia hockey game and Canada's gold in ice dancing. She gushed about meeting retired Lt.-Gen. Romeo Dallaire and revealed she hurt her knee skiing on a double black diamond run.

"It's not about the money for me, it is about being successful," Dickinson says of her growing profile during a break taping the CBC's Steven and Chris show. In a segment where she talks about negotiating price, she points to her green flower ring that her daughter got for $6. The original price was $10.

The cheap ring is a homey touch that draws the audience to her. In spite of the designer clothes, Dickinson comes across as warm and friendly. The ring was no accident. Preparing for the show the night before, she picked out the prop.

In another segment about knowing your net worth, she once again keeps the examples everyday and accessible to the audience of students and middle-aged women. She warns them that people are often unaware they owe more than they own. The audience groans in recognition.

That happened to her 20 years ago in Calgary when a customer went under, stiffing Venture and leaving her with a $90,000 printer's bill.

"There was nothing left to mortgage," so Dickinson went to the printer and arranged to pay their bill month by month. It took six months but taught her a valuable lesson. "The people were kind. We continued to work together. It felt good that we didn't walk away from the debt."

Women and children have always been her causes and on Dragons' Den she will sometimes support a single parent's project because "they need a hand." That is something she didn't get. "There's a lot of despair when you are a single mom," she says.

Dickinson recently promoted Jennifer Cioffi to president at Venture, splitting that job from the CEO position. Dickinson hired Cioffi, a former Microsoft executive, five years ago after receiving an inquiring e-mail from her late one evening.

She quickly called Cioffi, who had just had her third child (and a very short maternity leave) and was looking to come to Canada with her husband. Within three days, there was an interview and a job offer. She makes quick decisions every day, says Cioffi.

"The pace is relentless. My friends were like, good for you, you're going to a little company. But it was like shock and awe. It is fast, furious and smart. I've learned a ton."

The two executives balance each other, says Cioffi, adding, "She is usually over the moon and it is up to me to be the Chicken Little."

Now divorced, Cioffi says Dickinson has always understood the demands of family and trusts that the work will get done even if a parent has to run out of the office to handle an emergency.

Dickinson didn't get to see as much of her children as she would have liked when they were young. Today, three work for her in Calgary – none report to her – and all take family vacations together, including the three grandchildren.

"She has a good dose of empathy," says Cioffi, who is based in Calgary but spends one third of her time in the Toronto office, which will soon be moving to bigger space on Wellington St.

Interviewed in April 2009 for the on-line magazine techlife, Dickinson was asked for her advice during the recession. She said, "Don't be afraid."

This wasn't hollow advice. She bought two companies in March, 2009, Lifecapture Interactive, a company that specializes in interactive web development, and Motorcycle Productions, a video and digital production house.

This allows Venture to provide all marketing services under one roof, and expands the company's multi-media reach.

At its core, the company, with an estimated $45 million in gross sales, tells client stories, says Dickinson. One such narrative is a Sport Chek commercial featuring a woman running on a leaf-strewn track in a campaign called The Power of Sport. She's fit, determined, concentrated. You can see the muscles in her legs as she runs and the voice-over says, "When you're in the zone, concentration is complete and you realize your mind can carry you farther than your legs." It is designed to connect the emotions of sport with the company.

The runner isn't Dickinson, but she could be. Dickinson took up running two years ago.

In Toronto, she runs near her Annex home early in the morning before she goes to work. She's been "in the zone" when it seems "as if time stands still" – that's why she had the commercial shot in slow motion.

"You feel one with what you are doing."

For Red Rose Tea, Venture pushed the idea of creating tea party "sisterhoods."

Unilever's Jan Mollenhauer, marketing director of the division that includes the tea, loves that Dickinson responds to messages right away, even though she is "is so popular now."

The women bonded over the fact they both have four children, says Mollenhauer, who "got up off the couch" when she read that Dickinson was preparing for a half-marathon. Now, she's training too.

"She inspired me," says Mollenhauer, an avid watcher of the Dragons' Den. She says that Dickinson is the "strong, silent type. She is the humblest of them all. She is the most empathetic and sensitive."

After years of the demands of a young family and then a growing business, Dickinson is ready to write a new chapter in her story.

"I feel like the cat that has had nine lives. At different points in time in my life, I have been a different person. I don't know what's next, but life is just beginning for me. I hope I'll be able to do something meaningful."

That won't be in politics, she hastens to add, but she may throw her formidable marketing talents into charities.

She's particularly interested in Dallaire's Child Soldiers Initiative and spent three hours with him in Vancouver discussing the non-profit agency, which wants to prevent the recruitment of child soldiers. Because it involves children, it is a natural fit for her, she says.

"All I ever wanted to be was a wife and mother. If I hadn't got divorced, that's what I would be today."

The motherly ambitions seem at odds with Dickinson's glamour.

She recently invested in a couple of "blo" franchises in Toronto – hair salons that offer quick washes and blow dry for about $30. She now uses the service to tame her tangle of curls into a long, sleek mane.

But she has no intention of getting rid of that Cruella De Vil streak – her trademark that prompts daily questions about its origin. Her hair started going grey when she was in her 30s and Dickinson decided to go with it. It's the rest of her hair that is now dyed.

The one part of Dickinson's narrative that seems false, is real.

Carlo's slim Mexican telecom magnate tops list of world’s richest people

MEXICO CITY—Mexico’s Carlos Slim, the son of an immigrant shopkeeper who amassed a $53.5 billion fortune and bought a major stake in the New York Times, became the first person from a developing nation to be named the world’s richest person.

Slim, a telecom magnate, edged out U.S. billionaires Bill Gates and Warren Buffet to earn the top spot on Forbes’ list of the world’s richest people — the first time a non-American has topped the list since 1994. The jump in position comes following a year in which Slim’s cellphone holdings rebounded in value.

Canada’s David Thomson and family were ranked 20th.

Forbes’ employee Keren Blankfeld said that never before has someone from the developing world earned the top spot.

Arturo Elias Ayub — an executive at Slim’s Telmex telephone company and the billionaire’s son-in-law — expressed satisfaction that a Mexican businessman is now at the top of the list.

“The reaction is one of satisfaction, that this confidence in Mexico exists, and this confidence in our group’s companies,” said Elias Ayub, who frequently acts as Slim’s spokesman.

But he said the 70-year-old magnate is not breaking out the champagne.

“This is a number brought out by a magazine that doesn’t concern us, or worry us,” said Elias Ayub, echoing Slim’s 2007 comment about the top spot that had eluded him for years: a Spanish phrase — “me es impermeable” — that roughly translates as “I’m impervious to that.”

Slim is known for wearing inexpensive suits and rarely using the computers his companies sell, preferring old-style paper notebooks. A baseball fan, his indulgences are largely limited to cigars and diet soft drinks.

While he owns — either personally or through his foundations and museums — an impressive collection of art, including works by French sculptor Auguste Rodin, he works out of a set of somewhat dowdy, 1970s-style offices.

A civil engineer by training, he has bought up troubled or government-owned companies of all types, fixed them up and resold them for huge profits.

That kind of thrifty eye for undervalued businesses has served him well, especially after the market downturns in recent years.

“In periods of crisis, he has always invested, and now we are beginning to see the fruits of that,” Elias Ayub said.

Blankfeld said the 2010 top-ten list — which includes Slim, two billionaires from India and one from Brazil — reflects the increasing presence of developing nations.

Gates’ and Buffet’s donations also played a role in their decline to the number 2 and 3 spots. “A big reason for that is they are both very philanthropic,” said Blankfeld.

Kevin O'Leary: Canada's unrepentant Dragon O'Leary is breathing fire (and building his personal brand) on CBC TV's business reality show Dragons' Den

Kevin O'Leary, mean dragon, is nursing his first glass of Antinori Tignanello 2006 within the comforting confines of a striving Yorkville restaurant.

The "Ting," as O'Leary calls the Tuscan vino, is 56 bucks a glass. "Nectar from the nipple of Aphrodite," he says approvingly, which sounds like a bit of shtick, a practised line, to complement the cultivated persona of Kevin O'Leary, whose raison d'etre appears to be the non-stop development of the Kevin O'Leary brand.

"It's not a shtick," O'Leary says of his public self, identifiable by his caustic, sometimes belligerent, determinedly high-profile fire-breathing performance on CBC TV's hit reality show Dragons' Den. Also by his appearance each weeknight on the Lang & O'Leary Exchange, through which he gets to bat about his unbending economic/political views with Amanda Lang.

"The CBC was a platform for journalists," O'Leary says. "Now it's a platform for a right-wing Attila the Hun guy." He's referring to himself. "There's only one side with me. You get the right side. You get the correct version of the facts."

What you see is what you get.

O'Leary is explaining himself, sliding under the microscope in advance of a special Dragons' Den episode March 17 which ever so gently explores the back story of each of the five dragons who sit in judgment of always eager, sometimes anxious and occasionally weepy entrepreneurs driven to dig into the dragons' pockets in order to further their entrepreneurial dreams.

Recall Stacey Kelley and her six-foot-high pet tethering device, which allows cats to securely roam and, bonus, escape up the pole to a small platform when a nasty neighbourhood dog approaches. "Why bother with a pole?" was O'Leary's curt query. "Put the cat outside. If it's not around in the evening, get a new one." (The device, by the way, can be viewed on Kelly's website, www.ihatekevinoleary.com.)

Kevin O'Leary tough guy. "I'm not a tough guy," is his response to the obvious characterization. "I'm just delivering the truth and only the truth and if you can't deal with it, too bad. Next. You're not an entrepreneur. You're a loser."

O'Leary is a winner, which is how he gets to be a dragon, though how much of a winner he is in financial terms is a mystery. "I think it adds to the mystique," he says of his refusal to quantify his net worth.

Certainly the O'Leary aura is burnished on next week's Dragons' Den episode in which he revisits the site of an Ottawa ice cream parlour where, as a young man, he was ordered to get down on his knees and scrape gum off the shop floor as part of his ice cream scooping job.

O'Leary refused and was abruptly fired. "I have never, ever in my life worked for someone again," he tells the camera before tearing up and dabbing his eyes softly with a tissue. "I can't believe I'm so emotional. S–t."

That I-will-always-be-my-own-man epiphany is book-ended by Softkey International Inc., a software company O'Leary co-founded in the basement of a midtown Toronto house with $10,000 in seed capital from his mother. The short story is that Softkey was transformed into the Learning Co. Inc. (LCI), making its mark as a seller of such educational software as Reader Rabbit.

LCI secured a listing on the New York Stock Exchange – an exchange that requires real assets prior to listing, O'Leary feels compelled to note. The listing provided the leverage to go on an acquisition binge, gobbling up the likes of Broderbund Software, which brought with it the monster gaming title, Where in the World is Carmen Sandiego? ("Ate 'em alive," is O'Leary's snappy description of the Broderbund takeover.)

What made Kevin O'Leary rich was the moment he calls the "massive liquidity event," that is the sale of LCI to toymaker Mattel Inc. for $4.2 billion (U.S.). O'Leary wasn't the company's largest shareholder, not by a long shot.

According to 1998 securities filings, Thomas H. Lee Partners, a Boston-based private equity firm, held nine million shares. The Tribune Co. was next up with five million. Bain Capital had 3.4 million. O'Leary, the company's president, had just over a million shares. O'Leary says he had more than that.

Within months of the deal, announced in December 1998, Mattel issued warnings of unexpected losses at LCI. In late October, 1999, the toymaker announced that the Learning Company division incurred an after-tax loss of about $105 million in the third quarter as opposed to what had been a projected profit of $50 million.

As much as O'Leary proclaimed that he would never work for anyone again after the gum-on-the-floor debacle, he was, at the time of the disastrous Mattel numbers, an employee of that company. As part of the merger, O'Leary signed a three-year employment agreement that included a base salary of $650,000, 1.7 million stock options to be converted to Mattel shares and a reporting line to Jill Barad, the first woman to ascend to the CEO's chair at Barbie Inc. O'Leary calls Barad "the best marketer I ever met."

O'Leary didn't make the three years. In November, a month after the earnings release, he was fired. "She just whacked me," O'Leary says of Barad, who followed O'Leary out the door three months later.

O'Leary, who blames the serial bad corporate news on a host of factors, including the pending tech meltdown of spring, 2000, received the maximum severance payment of $5.25 million. He says he didn't bother returning to his office on firing day. He packed no boxes. He headed to the Caribbean island of St. Bart's instead. To think.

Here's a thought: "Being an employee is a bad outcome," opines O'Leary. "You want to avoid that. Being an employee is never a good outcome. That's just an opinion."

It's an opinion that jibes nicely with Dragons' Den, a show whose very essence is to promote the entrepreneurial spirit. The hopeful ones pitch their business concepts to the five dragons and seek a fixed sum of money in exchange, commonly, for a piece of the business.

In the dragon lineup, the CBC casts O'Leary as the "ruthless" one with a knack for one-liners. "You can't cry your way to success," is catchy. "I'm the merchant of truth," is heard a lot. "You can't regulate a soul into a business," is O'Leary's rejoinder to the corporate social responsibility movement. "I'm not trying to make friends, I'm just trying to make money," speaks for itself.

In this way O'Leary plays against Brett Wilson, the dragon who made his fortune financing oil and gas deals and Arlene Dickinson, a marketing guru. Both Wilson and Dickinson evince a soft spot for, or at least an interest in, the people behind the pitches. For O'Leary it's about the money.

On that point, there appear to be few deals that O'Leary actually likes. "What can I say? Kevin is tight with his wallet," says Tracie Tighe, the show's executive producer. "But he's come through every year and has closed a deal or two. This year he did the Dig It ladies."

The Dig It ladies are Wendy Johannson and Claudia Harvey, based in Etobicoke and creators of a company that sells, among other items, gardening gloves specially designed with pillow-topped nail protectors to preserve expensive manicures. In November, Dragons' Den aired the episode in which the ladies sought $50,000 for a 10-per-cent stake in their company. The episode was actually shot in May, during one of the marathon filming sessions the dragons are subjected to.

O'Leary liked the gloves and was willing to invest, with one whomping condition; he wanted a 3 per cent royalty payment on sales of the gardening gloves in perpetuity. The ladies said yes, causing Wilson to rebuke O'Leary thusly: "You are a crook," a sentiment echoed by Dickinson with the less pejorative, "You suck."

The Dig It ladies were not born yesterday. "I knew that what you shake on on the show doesn't really mean anything," says Johannson. "I had done my research about what the closing rate is and what the due diligence process is after the fact." (Tighe says the six handshake deals in season one resulted in a single deal closing. Of the approximately 40 deals struck this year, 10 have survived the due diligence process.)

Johannson says she fully expected O'Leary to drop the royalty demand once he became informed of the full range of Dig It product, including Eye Dig It safety sunglasses. In the end, O'Leary did let the royalty go in exchange for 10 per cent of the whole company rather than the one gardening glove. The size of the deal? Fifty grand.

Meanwhile, O'Leary featured Dig It, ladies in tow, on the Lang & O'Leary Exchange the night after the Dragons' Den airing. At heart, O'Leary is a marketer, in this instance downgrading what is supposed to be a high-octane business show to the shilling of gardening wear.

"What we can tell you is when we say to people Kevin O'Leary is our business partner, their ears perk up and they're much more likely to come on board as one of our retailers or business partners," Johannson says.

The Dig It gardening gloves are now in approximately 120 retailers across the country, a fourfold increase from just before the televised exposure. Johannson says a prominent retail chain is close to an agreement to carry the product nationally.

Who's the smartie? As it happens, that 50 grand was extended in the form of a line of credit. On that line of credit Johannson and Harvey have drawn not a single penny. Question for Johannson: "So it's conceivable that O'Leary won't have to pay anything for that 10 per cent?" Johannson: "Correct."

Of the myriad deals he has not touched O'Leary has no regrets. "Once I pass on them, they're dead to me," he says.

You sense that it really doesn't matter. What does matter is the televised exposure of Kevin O'Leary. He's unquestionably pleased and somewhat surprised by the brand-building power of TV. It'll come in handy. Two years ago, O'Leary launched the O'Leary Funds, which today has 10 investment funds, run out of Toronto.

O'Leary is chairman – he does not manage the funds himself. Assets under administration: $860 million. The company's branding line: "Get paid while you wait." Investment philosophy: never buy a security that doesn't have yield. (O'Leary's mother had one hard rule about money: never touch the principal.) End game: take it public. Target market: you.

"I have a very simple objective in life," says O'Leary, relaxing now into his second glass of Tignanello. "I want to go to bed richer than when I woke up. It's that simple"