AIS Capital Management LLC

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  • 1. AIS Capital Management LLCGold Strategy Presentation For Presentation in Calendar Year 2010AIS CAPITAL MANAGEMENT LLCA Registered Investment Advisor187 Danbury Road, Suite 201Wilton, Connecticut 06897(203) 563-1180 [email protected]

2. Definitions and DisclaimersDefinitions Gold, Gold Bullion, Dollar Index, Government Bonds: The spot market price. (Source: CSI Data) Price Ratio: The spot market price of one market divided by the spot market price of anotherDisclaimers Any decision to invest in any AIS product must be made solely on the information provided in the necessary documents to effect the transaction which will be provided upon request. All of the material presented here is either historical fact or AISs opinion of the future. As such, any characteristic of AIS products portrayed on an individual basis or in combinations with other AIS products or other more common traditional investments, including the ability of AIS products to mitigate volatility, declines in account value, or even make positive returns are historically based and may or may not continue into the future. One must invest in AIS products with the knowledge that any opinion presented is just that, an opinion of AIS and not a statement of fact. AIS is confident about its research and ability to continue to add investment value going forward and its principals back this belief by having sizable personal investments in AIS products, however, markets continually change and the ability for AIS to add value going forward is uncertain. In fact, it is possible that an investor may lose all of his or her investment in any AIS product either gradually or suddenly. Past performance is not necessarily indicative of future results.The material presented here is only relevant when combined with the Definitions and Disclaimers page included in this presentation. 3. ContentsPage AIS Capital Management 4 AIS Gold Net Returns 5 AIS Gold Strategy6 AIS Gold Strategy Equity Selection Process 7-9 Declining World Gold Supply10-13 Economic Environment :Why Gold Now?14-23 Summary24 Biographies25-263 4. AIS Capital Management, LLCRegistration:Registered Investment Advisor (1992)Featured Product:AIS Gold Fund LPInvestment Structure Available:Individualized PortfoliosThe material presented here is only relevant when combined with the Definitions and Disclaimers page included in this presentation. 4 5. AIS Gold Strategy Performance Net of All Fees250%200% 189.5% 150% Yearly Return (%) 100% 62.4%67.4% 67.8%42.9%50% 0% -7.4% -50%-71.4% -100%20032004 2005200620072008 2009 Compound Annual Return - 3 yr6%Compound Annual Return - 5 yr27%Annualized (since inception 12/31/2002)26%The material presented here is only relevant when combined with the Definitions and Disclaimers page included in this presentation. 5 6. AIS Gold StrategyGoals:Outperform U.S. gold equity indexes and gold bullion Use leverage by combining futures positions and equity positions Ability to be long or short precious metals futures Invest in individual mining companies Protect assets during gold market declines by being flat or shortTo outpace inflation and avoid dilution of wealth Rising market: long futures and equities, leverage available, no hedges Declining market: hedges in excess of positions creating short exposureThe material presented here is only relevant when combined with the Definitions and Disclaimers page included in this presentation. 6 7. AIS Gold Strategy: Equity SelectionEquity Selection Process: Fundamental selection of individual companies Screen universe of mining companies for minimal hedge activity Select companies based on numerous criteria including size, quality and location of reserves among other factors Adjust holdings between companies as relative valuations shiftDiscretion to choose net exposure through use of hedgesPortfolio exposure ranges from 300% net long to 100% net shortThe material presented here is only relevant when combined with the Definitions and Disclaimers page included in this presentation. 7 8. Opportunities in Gold Research Bottom-up, fundamental research is critical AIS focuses solely on companies (among other variables):In safe haven areasIn mining-friendly jurisdictionsWith higher-grade depositsWho do not hedge productionWith low production costs per ounce, to maximize cash flow Portfolio companies must have attractive valuations Majors RangeAIS At Purchase Enterprise Value To Company$200-$500+ $40-$200 Reserves & Resources 8 9. 0 500 10001500 20002500 30003500 4000 9/30/011/30/025/30/029/30/021/30/035/30/039/30/031/30/04 5/30/049/30/041/30/05 5/30/059/30/051/30/065/30/069/30/061/30/075/30/07S&P TSE CDNX Composite Index 9/30/071/30/08 5/30/089/30/08 Index of Junior Mining Companies 1/30/095/30/099/30/091/30/105/30/10 9 10. Declining World Gold SupplyThe number of major gold discoveries made per yearis shrinkingNew finds are significantly smaller than earlier onesAverage gold grade of these discoveries has declined,and is now half of what it was in 1980In addition to this decline in discovery quality, overallproductivity is slipping: global mine production hasbeen steadily dropping since 200110 11. Major Gold Discoveries: 1997-2007 11 12. Declining Gold Discovery Grade12 13. Declining World Supply from Mine Production13 14. Economic EnvironmentsI IIIIImost likely scenario going forward Low/declining inflationDeflation/liquidity trapQuantitative Easing Creates Distortions Strong economic growth Economic contractionDepreciating currencyAccelerating raw material pricesProfit margins under pressure Examples:Examples: Examples: U.S. 1950-1965 U.S. 1930sU.S. 1970s1982-2000 Japan 1990s Germany 1920s Japan: 1970-1989 Argentina 2000s Characteristics: Characteristics:Characteristics: Expanding profit margins.Profits non-existent. Operating profits squeezed by costs. Expanding P/E ratios.Financial defaults. Rising physical asset value. Declining interest rates.Preference for liquidity. Hoarding and inventory profits common. Leveraged reward.Balance sheet de-leveraging.Leverage rewarded, but cash flows less certain. Strong dollar. Shrinking P/E ratios.Weak dollar. Investment opportunities:Investment opportunities: Investment opportunities: Equities CashSelect equities (pricing power) Long-term bondsHigh quality bondsGold Leveraged buy-outs Short selling Physical commodities Venture capitalSelect short selling: Dollar Equities w/limited pricing power. The material presented here is only relevant when combined with the Definitions and Disclaimer page included in this presentation.14 15. billions 0 500 10001500 200012/31/83 12/31/84 12/31/85 12/31/86 12/31/87 12/31/88 12/31/89 12/31/90 12/31/91 12/31/92 12/31/93Chart courtesy of AIS Futures Management LLCData Source: Federal Reserve Bank of St. Louis12/31/94 (Not Seasonally Adjusted) Through 12/31/200912/31/95 12/31/96 12/31/97 12/31/98Adjusted Monetary Base Y2K12/31/99 12/31/009/1112/31/01 12/31/02 12/31/03 12/31/04 12/31/05 12/31/06 12/31/07 12/31/08 12/31/09 12/31/10 15 16. The Impact of Government on Inflation Producer Prices (1720- December 2009)1000 Prior to 1951, price inflation occurred during wars and other times of shortage. After the event ended, prices deflated back to where they had been. Since 1951, our government has fought deflation at the cost of inflation. 100March 31, 1951 1011720 17401760 1780 18001820 1840 18601880 1900 1920 19401960 1980 20002020 The material presented here is only relevant when combined with the Definitions and Disclaimers page included in this presentation.16 17. Gold Priced in EurosData Through 12/31/09 900800700600500400300200 1977 19791981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009From 2001 2004 golds price strength was primarily tied to dollar weakness. However, since 2005 gold has been strong versus all major currencies. This may be signaling a more difficult environment for all financial assets.The material presented here is only relevant when combined with the Definitions and Disclaimers page included in this presentation.17 18. Ratio Chart: Gold Bullion / U.S. Treasury Bond 3/20/1968 12/31/2009 150 140 130 120 110 100908070605040302010 - 1966 1968 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 The material presented here is only relevant when combined with the Definitions and Disclaimers page included in this presentation. 18 19. Gold / S&P 500 Index Through December 31, 20096.0 Gold / S&P500 Index 1.55 Rising Relative Price to 12/31/09 (Gold Outperforms) 1.35 5.0 1.150.954.0 0.750.550.35 3.0 0.15199920012003 2005200720092.0 1.0 0.0 1968 1972 1976 1980198419881992199620002004 2008 2012The material presented here is only relevant when combined with the Definitions and Disclaimers page included in this presentation.19 20. Federal and Agency/GSE DebtHeld by Foreigners $5,000 $4.5trillion $4,500 $3.95trillion $4,000$3,500$3,000$2,500$2,000$1,500$1,000 $500 $019691971 19731975 19771979 19811983 19851987 19891991 19931995 19971999 2001 2003 20052007 FedDebtHBFAgency/GSEHBF 20 21. U.S. Gold Reserves versus Federal and Agency Debt Held by Foreigners 5,000.0140.0%4,500.0120.0% 4,000.03,500.0100.0% 3,000.080.0%2,500.0 60.0% 2,000.01,500.040.0%1,000.020.0%500.0 0.0% 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 FedDebtHBF Agency/GSEHBF USGoldResin$ USGld%DHBF 21 22. World Official Gold Reserves Relative to World Currency Reserves 100,000 Band (Dashed Lines): Uses World Official Reserves at Market Prices (1971-1980) Relative to World Currency Reserves.Band after 1980 Indicates Price Level of Gold Necessary to Support Foreign Currency Reserves, if 1971-198010,000 Relationship Reestablished. 1,000100 10 1969 1970 1971