Two months ago, when gold prices were on the rise, I had a conversation with Kristoffer Inton, director of equity research for basic materials, at Morningstar.
He said something that really gripped by attention. The current gold price is propped by investor demand—gold held in ETFs is at an all-time high. This is risky because today’s investment demand is tomorrow’s recycled supply when investors decide to pivot away from the safe-haven investment towards other investments.
Which brings me to a very pertinent question. As a valuation-driven investor, how must I value gold? Normally, one would buy assets that are demonstrably below a reasonable estimate of their fair value and enjoy the benefits of long-term cashflow generation.
What is gold actually worth?
I reached out to Dan Kemp, Morningstar Investment Management’s CIO, EMEA. He was quick to assert that he does not consider gold to be an investment asset. “An investment asset is one which generates a positive cashflow to the owner and hence can be ascribed a ‘fair value’ through fundamental analysis. Prices move above or below this fair value in the short term. But over the long term, prices tend to move towards it providing a consistent measure against which its current attractiveness can be judged,” he explained. I get the point. There is no fair value to serve as a base to enable an investor make a buy or sell decision. At which price do you determine that gold is undervalued or overvalued? To add to it, gold generates a negative cashflow. Should you buy actual bullion, you need to pay for storage (like a bank locker) and insurance. Or, as Dan Kemp reminded me, the cost could also be due to the opportunity cost of lost income (interest if the value was held in a bank deposit or bond, or rent if it was commercial real estate). This reminds me of a quote by Warren Buffett that neatly encapsulates the views of Kristoffer and Dan.
Gold is a way of going long on fear, and it has been a pretty good way of going long on fear from time to time. But you really have to hope people become more afraid in a year or two years than they are now. And if they become more afraid you make money, if they become less afraid you lose money, but the gold itself doesn’t produce anything.
In a Fortune article in 2012, Buffett tackled the subject of gold as an investment. He first categorised investments:
- Currency based investments
- Investments in productive assets (businesses, farms, real estate)
- Investments in assets that will never produce anything (art, gold, tulip mania in the 17th century)
So why are non-productive assets purchased? With the buyer’s hope that someone else will pay more for them in the future.
This type of investment requires an expanding pool of buyers, who, in turn, are enticed because they believe the buying pool will expand still further. Owners are not inspired by what the asset itself can produce — it will remain lifeless forever — but rather by the belief that others will desire it even more avidly in the future.
Gold has some industrial and decorative utility, but the demand for these purposes is both limited and incapable of soaking up new production. If you own one ounce of gold for an eternity, you will still own one ounce at its end.
What motivates most gold purchasers is their belief that the ranks of the fearful will grow. Beyond that, the rising price generates additional buying enthusiasm, attracting purchasers who see the rise as validating an investment thesis. As “bandwagon” investors join any party, they create their own truth — for a while. Today the world’s gold stock is about 170,000 metric tons. If all of this gold were melded together, it would form a cube of about 68 feet per side. At $1,750/ounce — gold’s price as I write this in 2012 — its value would be about $9.6 trillion.
Call this cube A.
Let’s now create pile B costing an equal amount. For that, we could buy all U.S. cropland (400 million acres with output of about $200 billion annually), plus 16 Exxon Mobils (the world’s most profitable company, one earning more than $40 billion annually). After these purchases, we would have about $1 trillion left over for walking-around money (no sense feeling strapped after this buying binge).
Can you imagine an investor with $9.6 trillion selecting cube A over pile B?
Beyond the staggering valuation given the existing stock of gold, current prices make today’s annual production of gold command about $160 billion. Buyers — whether jewellery and industrial users, frightened individuals, or speculators — must continually absorb this additional supply to merely maintain an equilibrium at present prices.
A century from now the 400 million acres of farmland will have produced staggering amounts of corn, wheat, cotton, and other crops — and will continue to produce that valuable bounty, whatever the currency may be. Exxon Mobil will probably have delivered trillions of dollars in dividends to its owners and will also hold assets worth many more trillions (and, remember, you get 16 Exxons). The 170,000 tons of gold will be unchanged in size and still incapable of producing anything. You can fondle the cube, but it will not respond.
Admittedly, when people a century from now are fearful, it’s likely many will still rush to gold. I’m confident, however, that the $9.6 trillion current valuation of cube A will compound over the century at a rate far inferior to that achieved by pile B.
As mentioned above in the article written by Warren Buffet, the price of gold early 2012 was $1,750/ounce; it is now around $1,683.
So what is the reason people narrow down on gold? Dhaval Kapadia, Director and Portfolio Specialist for Morningstar Investment Adviser India, looks at the most common reasons.
-Hedge against inflation: Traditionally gold has been viewed as a hedge against inflation and significant economic and financial market uncertainty. Currently, inflation isn’t a concern in most major markets and hence it’s role as an inflation hedge is limited. Hedge against depreciation
-Hedge against depreciation: Gold can act as a currency hedge. The price of gold is determined in international markets in foreign currency and converted to the price offered in domestic markets. Other things remaining the same, if the local currency depreciates vs the US dollar, the price of gold in the domestic market would rise.
-Interest rates: Gold tends to perform well in low interest rate scenarios as the cost of carry is low.
Summing it up
While there are undoubtedly periods when gold performs very well and its inclusion would benefit the short-term returns of a portfolio, these periods tend to be unpredictable due to the lack of the fair value anchor.
Individuals have various claims as to why gold must be part of the portfolio. The aspects they really need clarity on is:
- When to buy
- When to sell
- The exact allocation in the portfolio
- The vehicle (bullion bars, gold coins, ETF, gold mining stocks, jewellery)
Navigating The Changing Business And Foreign Investment Landscape In 2021 – Government, Public Sector – Canada – Mondaq News Alerts
2020 has redefined the Canadian legal and business landscape.
Many of the Canadian governmental public health measures created to
limit the spread of COVID-19 have disrupted several areas of
business and investment. Companies investing in Canada will need to
consider the potential implications of the following trends:
- A tightening of Canada’s foreign investment approval
- An updated approach to dispute resolution; and
- An increased focus on companies’ environmental and social
Securing foreign investment
Canada has traditionally prided itself on being an open trading
economy; foreign investment and international trade have always
been determining factors in the health of the Canadian business
economy. Having said that, Canada was one of the first
jurisdictions to establish a formal foreign investment review
process, now contained in the Investment Canada Act (ICA)
and so has had considerable experience in the regulation of FDI
compared to other jurisdictions such as the EU and UK, which have
more recently instituted screening of certain types of foreign
investments. Foreign investors must now grapple with new barriers
to entry due to increasingly stringent governmental approval
mechanisms, consequently pushing them to become progressively more
agile in deal planning and execution.
The global shift towards protectionism in major parts of the
global economy in recent years has been exacerbated by the current
health crisis resulting in uncertain foreign investment
opportunities. As in many countries, the extraordinary
circumstances around COVID-19 led to fears (substantiated or not)
that Canada’s financial markets and economy were exposed to
opportunistic acquisitions of sensitive Canadian targets.
Accordingly, on April 18, 2020, the Ministry of Innovation,
Science and Industry issued a policy statement indicating that
certain foreign investments (primarily but not exclusively those
involving state influenced or owned investors) that fall under ICA
would be subject to enhanced scrutiny in the aims of supporting
Canada’s economy during and after the pandemic: “the
Government will also subject all foreign investments by state-owned
investors, regardless of their value, or private investors assessed
as being closely tied to or subject to direction from foreign
governments, to enhanced scrutiny under the Act”.1
For instance, there are more significant concerns around Chinese
foreign direct investment, which have taken on broader geopolitical
dimensions. In addition, the federal government also enhanced
its scrutiny of foreign acquisitions of Canadian businesses engaged
in the supply of critical goods and services to Canadians or in
activities related to public health. This was in addition to
its already broad powers under the national security review
provisions of the ICA.
Onshoring and supply chain diversification have accelerated in
2020, and are expected to be longer term trends over the next few
years. The intensification of trade protectionism worldwide has
increased, seen in the number of trade remedy disputes (i.e.
anti-dumping, anti-subsidizing disputes). Canada falls in line with
this trend, having increased its use of trade remedy measures and
making legislative and policy changes to favour their effectiveness
and enforcement. As a party to the newly enacted USMCA, Canada now
has a functioning state-to-state dispute settlement mechanism, a
key change from the former NAFTA.
The issue for each jurisdiction is to determine the value and
effect of each new economic endeavour on protected business
sectors. Canada remains open to investments that benefit Canadians
while taking the necessary measures to help protect its national
security and its economic integrity.
Foreign investment, industries and regions on the rise in
Investment from the United States, Canada’s strongest
trading partner, will continue to grow in 2021. There will also be
opportunities in the European market through Canadian trade
agreements, now largely in place across the continent. In the
aftermath of Brexit, The U.K. will be looking to secure
international trade agreements as well, making Canada a natural
trade and investment partner moving forward.
Canada has been gaining recognition as a growing foreign
investment destination for technology by successfully creating
industry city hubs in areas such as R&D, AI and biotech.
However, these same industries pose potential national security
concerns. Foreign investors will have to look at these
considerations if they are looking to engage within the Canadian
COVID-19 has accelerated changes in consumer behaviour by
encouraging virtual shopping. Companies that have aligned
themselves with these trends in the digital economy will do well in
2021. For example, Shopify’s online merchant platform offering
overtook the Royal Bank of Canada to become
Canada’s most valuable public company, signalling
substantial growth in this area.
Canada’s largest financial institutions are rapidly
expanding their online digital capabilities and their use of
artificial intelligence including buying or partnering with smaller
successful Canadian or foreign technology developers. New fintech
companies have had tremendous success and growth in 2020 with
strong user-friendly online financial services offerings anchored
in a robust digital marketing strategy. This trend will surely
continue in 2021.
Finally, the cannabis industry is an interesting area to watch
as a potential comeback story in 2021. It has been a tough time for
the industry over the past year, but legalizing cannabis in Canada
allowed the country to emerge as a global player by building a
strong base of expertise in this sector. The opportunity for
cross-border activity with the U.S. has also presented itself
through favorable voting related to de-criminalization of cannabis,
in the recent U.S. elections.
ESG practices as a prerequisite to doing business in
Investors interested in Canadian business right now must be
cognizant of environmental social governance (ESG), and ESG-related
issues, as they are becoming important focal points to access
Canadian capital. Large institutional investors that have
established ESG criteria as an important prerequisite to investment
are driving this trend. ESG will be a critical issue to consider
for any business looking to raise capital in Canada. To demonstrate
how important this has become in the Canadian economy, Brookfield,
one of Canada’s largest real estate infrastructure asset
managers, recently appointed Mark Carney, former governor of the
Bank of England and the Bank Canada, as its Vice Chair and Head of
Impact Fund Investing. We have also recently seen an important
increase in large green bond offerings by some of the large major
banks. Both examples are clear signs of the importance of ESG for
business in Canada moving forward.
Improved disputes environment and future implications
Canadian courts have been relatively resilient in their response
to the pandemic following an initial period of uncertainty in early
March. Most courts pivoted operations to virtual hearings within a
matter of weeks to ensure a seamless continuation of services. If
faced with litigation in Canada, companies can be assured that
Canadian courts are open for business, albeit with some limitations
on efficiency and operations. Some courts, such as the Commercial
Court in Toronto, and all arbitration venues, were able to course
correct rapidly. They determined early on that commercial courts
and arbitration venues could not simply close, as parties with
important business disputes would continue to require adjudication
and resolution to ensure business continuity and limit business
disruption during this uncertain time. Recognizing that business
will continue to require dispute resolution services, the courts
adopted new virtual procedures for court hearings. Virtual hearings
are now available for chambers appointments, motions, applications,
trials and appeals, in most provinces. Parties are able to file
court materials electronically and counsel can appear before the
courts through virtual platforms such as Zoom.
The pandemic has, in some ways, reduced the time that counsel
spend waiting for court hearings, and also enabled parties across
the country to participate in proceedings without incurring the
costs of travel. These changes have improved the efficiency of the
court process and improved access to justice. Recognizing the
improvements made, a number of Canadian chief justices have stated
that many of these changes will remain in place moving forward.
Key considerations for businesses to adapt and prepare for the
evolving Canadian landscape
The impact of the pandemic on business has not been entirely
negative; some sectors have experienced unprecedented growth.
Although there is a degree of commercial activity that continues to
take place, namely big ticket M&A, the reality is that the
pandemic along with regulatory requirements have made the
investment climate particularly tricky. Although transactions will
continue to happen virtually, they will be unpredictable in the
near future. Nonetheless, the ability to engage in virtual dispute
resolution will be indispensable in dealing with the quickly
changing foreign investment landscape in Canada. It is critical for
foreign investors to get a handle on the regulatory and business
landscape in their initial planning and to be prudent with business
advice when considering how to approach potential investments into
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
Eat Beyond Welcomes Downstream Marketing Strategist Michael Owen to its Investment Committee – Canada NewsWire
Michael Owen brings over 30 years of expertise to provide hands-on support to drive the growth of the Eat Beyond portfolio companies
VANCOUVER, BC, Nov. 26, 2020 /CNW/ – Eat Beyond Global Holdings Inc. (CSE: EATS) (FSE: 988) (“Eat Beyond” or the “Company“), an investment issuer focused on the global plant-based and alternative food sector, is announcing that Michael Owen has joined the Eat Beyond investment committee.
Mr. Owen has over 30 years of experience and is a senior marketing and sales executive. He has held leadership positions in a range of companies focused on consumer packaged goods, with leadership experience in marketing, sales, and supply chain. He spent over 10 years as a partner at Crombie Kennedy, a leading Canadian sales agency, which was acquired by Advantage Solutions in 2010. With Advantage Solutions, Mr. Owen played an instrumental role doubling EBITDA as VP Business Development, responsible for creating innovative sales and supply chain solutions for leading brands across multiple categories during the 5 years post-acquisition.
Prior to this, he held marketing and sales positions with Robin Hood Multifoods Inc., Unilever, Nestle, and Mars Incorporated, where he was CMO of the Uncle Ben’s Rice U.S. division. Previously Mr. Owen has enjoyed entrepreneurial success including ownership of the Duncan Hines brand in Canada and participation in several food company startups. Mr. Owen is also an advisory board member for Nature Bio Foods, India’s largest exporter of organic foods and ingredients.
“Eat Beyond is focused on an area that I consider to be one of the most exciting in the consumer packaged goods, and food space in general. Consumers are seeking healthier, smarter, plant-based, and non-traditional products,” said Michael Owen. “I believe that my extensive operating experience in sales and marketing can add tremendous value and insight to the Eat Beyond portfolio.”
Mr. Owen joins Lloyd Lockhart, Diane Jang, and Allen Linder on the investment committee, rounding out the team with his marketing and sales expertise. The investment committee works to scout and select companies for the Eat Beyond portfolio, and is also hands-on, working closely with the Eat Beyond portfolio companies to support their success.
“We are active in supporting our portfolio companies, helping them to navigate growth and connecting them to industry contacts and resources,” said Patrick Morris, CEO of Eat Beyond. “Mr. Owen is a terrific candidate for the investment committee, with his exceptional track record and breadth of experience in marketing, sales, and growth for consumer packaged goods. We are thrilled to welcome him to the team.”
The Company further announces a grant of 100,000 stock options of the Company to Mr. Owen, exercisable at $0.71 expiring 5 years from the date of grant, subject to regulatory approval.
The Company is also pleased to announce that its common shares were accepted for listing on the Frankfurt Stock Exchange (FSE) under the trading symbol (988). The Company’s common shares are now cross-listed on the Canadian Securities Exchange (CSE) and the FSE.
About Eat Beyond Global Holdings
Eat Beyond Global Holdings Inc. (“Eat Beyond”) (CSE: EATS) (FSE: 988) is an investment issuer that makes it easy to invest in the future of food. Eat Beyond identifies and makes equity investments in global companies that are developing and commercializing innovative food tech as well as plant-based and alternative food products. Led by a team of food industry experts, Eat Beyond is the first issuer of its kind in Canada, providing retail investors with the unique opportunity to participate in the growth of a broad cross-section of opportunities in the alternative food sector, and access companies that are leading the charge toward a smarter, more secure food supply. Learn more: https://eatbeyondglobal.com/
For media inquiries, please contact: [email protected]
For investment inquiries, please contact: [email protected]
SOURCE Eat Beyond Global Holdings Inc.
For further information: please contact Cindy Chiu at [email protected] or (236) 521-6499
Red White & Bloom Announces Participation in Upcoming Investment Conferences – GlobeNewswire
TORONTO, Nov. 25, 2020 (GLOBE NEWSWIRE) — Red White & Bloom Brands Inc. (CSE: RWB and OTC: RWBYF) (“RWB” or the “Company”) is pleased to announce they will be in attendance at two invitational investment conferences this month.
2020 Cantor Fitzgerald Virtual MSO Cannabis Summit
Presentation: Wednesday, December 16th, 2020 – 3:00PM ET
For more information or to schedule a one-on-one meeting with RWB’s management during these events, please contact Red White & Bloom’s Investor Relations at IR@redwhitebloom.com.
About Red White & Bloom Brands Inc.
The Company is positioning itself to be one of the top three multi-state cannabis operators active in the U.S. legal cannabis and hemp sector. RWB is predominantly focusing its investments on the major US markets of Michigan, Illinois, California, Arizona, Oklahoma and Massachusetts with respect to cannabis, and the US and internationally for hemp-based CBD products.
For more information about Red White & Bloom Brands Inc., please contact:
Tyler Troup, Managing Director
Circadian Group IR
Visit us on the web: www.RedWhiteBloom.com
Follow us on social media:
Neither the CSE nor its Regulation Services Provider (as that term is defined in the policies of the CSE) accepts responsibility for the adequacy or accuracy of this release.
FORWARD LOOKING INFORMATION
This press release contains forward-looking statements and information that are based on the beliefs of management and reflect the Company’s current expectations. When used in this press release, the words “estimate”, “project”, “belief”, “anticipate”, “intend”, “expect”, “plan”, “predict”, “may” or “should” and the negative of these words or such variations thereon or comparable terminology are intended to identify forward-looking statements and information. The forward-looking statements and information in this press release includes information relating to the new team members expertise and how the Company will benefit from their ability to assist the Company implement its business plan. Such statements and information reflect the current view of the Company with respect to risks and uncertainties that may cause actual results to differ materially from those contemplated in those forward-looking statements and information.
By their nature, forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements, or other future events, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include, among others, the following risks: risks associated with the implementation of the Company’s business plan and matters relating thereto, risks associated with the cannabis industry, competition, regulatory change, the need for additional financing, reliance on key personnel, the potential for conflicts of interest among certain officers or directors, and the volatility of the Company’s common share price and volume. Forward-looking statements are made based on management’s beliefs, estimates and opinions on the date that statements are made, and the Company undertakes no obligation to update forward-looking statements if these beliefs, estimates and opinions or other circumstances should change. Investors are cautioned against attributing undue certainty to forward-looking statements.
There are a number of important factors that could cause the Company’s actual results to differ materially from those indicated or implied by forward-looking statements and information. Such factors include, among others, risks related to the Company’s proposed business, such as failure of the business strategy and government regulation; risks related to the Company’s operations, such as additional financing requirements and access to capital, reliance on key and qualified personnel, insurance, competition, intellectual property and reliable supply chains; risks related to the Company and its business generally. The Company cautions that the foregoing list of material factors is not exhaustive. When relying on the Company’s forward-looking statements and information to make decisions, investors and others should carefully consider the foregoing factors and other uncertainties and potential events. The Company has assumed a certain progression, which may not be realized. It has also assumed that the material factors referred to in the previous paragraph will not cause such forward-looking statements and information to differ materially from actual results or events. However, the list of these factors is not exhaustive and is subject to change and there can be no assurance that such assumptions will reflect the actual outcome of such items or factors. While the Company may elect to, it does not undertake to update this information at any particular time.
THE FORWARD-LOOKING INFORMATION CONTAINED IN THIS PRESS RELEASE REPRESENTS THE EXPECTATIONS OF THE COMPANY AS OF THE DATE OF THIS PRESS RELEASE AND, ACCORDINGLY, IS SUBJECT TO CHANGE AFTER SUCH DATE. READERS SHOULD NOT PLACE UNDUE IMPORTANCE ON FORWARD-LOOKING INFORMATION AND SHOULD NOT RELY UPON THIS INFORMATION AS OF ANY OTHER DATE. WHILE THE COMPANY MAY ELECT TO, IT DOES NOT UNDERTAKE TO UPDATE THIS INFORMATION AT ANY PARTICULAR TIME EXCEPT AS REQUIRED IN ACCORDANCE WITH APPLICABLE LAWS.
Record residential real estate transaction in Westmount! – Canada NewsWire
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