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This week’s Off The Grid Radio comes to you straight from Belize. Bill Heid, founder of Off The Grid News sits down in Belize with Knut Andersen of Swiss Metal Assets to talk about investment opportunities and strategies for precious metals other than gold and silver. They also discuss the real difference between physical ownership of precious metals versus perceived ownership of precious metals.
Heid and Andersen start off the show by taking a look at the investment potential for metals such as bismuth, indium, and cobalt (just to name a few). Anderson talks about what these metals are being used for in today’s growing economy and explains their metal “packaging” structure.
Andersen goes on to talk about the fact that big banks manipulate prices and allow customers to purchase metals that don’t exist in a physical form. He talks about how a bank may have only 10% of the gold or silver on hand that they allow their customers to purchase so that in the event of a “bank run” 90% of their precious metals customers would be out of luck. His methods differ because they sell only the metals that they are able to house in a physical form allowing their customers to come pick up their metals at any point in time.
Off The Grid Radio
Release Date March 28, 2013
Bill: Okay, it’s Bill Heid. We’re in Belize and every year at Joel Nagel’s President’s Conference, they always have some interesting speakers and one of the most interesting speakers is Knut Andersen and Knut, welcome to the show today.
Knut: Thank you so much.
Bill: It’s good to have you here with us and we’re actually in our little place here in Belize, next to the pool and actually, the runway of the airport as well. So if you hear a plane—if our listeners hear a plane—going over or taking off, they’ll know what’s going on. It’s not the end of the world. But Knut’s got a really cool business and it’s Swiss Metal Incorporated and Knut is from Norway, but you live in Panama?
Knut: Correct. I’ve lived in Panama for about five years now.
Bill: Why does someone from Norway end up in Panama?
Knut: Well, I’ll do the ten-hour story in about one minute.
Knut: I lived in Norway until I was about 25 years old and I felt… I always wanted to see the world and if I didn’t do it now, I would be stuck—get married, have kids—the whole thing. So I bought a one-way ticket to Hong Kong to see what’s out there. So I traveled around and worked around the Far East for about six years. I went through Australia, ended up in Portugal and my neighbor had this German guy visit him and he used to… This German guy used to live in Portugal for many, many years, but now lived in Panama. And he told me after we spent some time together and he said, “You are the right guy but in the wrong place.” So he wanted me to work for him in Panama selling real estate. So I went to Panama with no concept of what Panama was. I thought it was just big plantation, kind of like…
Bill: Like a jungle or something?
Knut: Nice looking guys smoking cigars. And I flew into Panama and it looks like Manhattan, only the whole city looked like Manhattan and it’s fantastic opportunities there. So I stayed there for two years doing this and then my boss met a German fellow who ran a Swiss company called Schweizerische Metallhandel and…
Bill: Say that again.
Knut: Schweizerische Metallhandel.
Bill: Schweizerische Metallhandel.? Okay?
Knut: And then to translate, it’s called Swiss Metal.
Knut: So and he wanted to have a footprint in the Americas, to offer their products in the Americas, having an [inaudible 0:03:07.2] to what the products are a little bit later. But he asked me then “Do you want to head this instead of the real estate?” and I said, “I have no idea what these kind of metals are” and he said, “Why don’t you go to Switzerland and go to a training and then see how it works?” So I went to Switzerland and after two weeks, I came back to Panama and said, “This is something I really want to do.” And then I did that for about two and a half years and built up the inside sales company called Swiss Metal Assets and then after this time, I felt it was time for me to work on my own and I got a franchise, meaning I sell the same metals, the same storage facilities. Everything is the same but it’s my own company. So now I don’t work for him. I work with him as a partner.
Bill: So let’s talk a little bit about the trend. There are a lot of people selling gold. Our listeners know a lot about gold. And what caught my eye and my ear about what you’re doing is in the very front of your flyer that I’m looking at, you’ve got one of the centralizing images is a solar panel.
Bill: So connect some dots for us because I think this is a fascinating… really sort of a fascinating story. So in the front of Swiss Metal Inc.’s flyer is a solar panel, so someone would say, “Well, metals? What concept does gold and silver have with a solar panel?” And so let’s talk about the extension and when we talk about metals and when Knut’s mentioning metals here, he’s mentioning something in addition to gold and silver that’s very intriguing.
Knut: Yeah. To the beginning of the story then, as far as most people know, the only way you can invest in metals is the precious metals. Gold being just precious but a very, very small industrial angle and then you have platinum and palladium with a little bit more industrial usages and then you have silver, which acts as an industrial metal. It’s used in 50% of all industry. But all these metals are kind of volatile in pricing because you have shorts, you have ETFs, you have a lot of paper structures where you can buy these metals instead of the real metal. And did you know, Bill, that in 36 hours they sell enough paper silver to cover the whole year production of real silver?
Bill: So that gets us into the little bit of what we were talking about on the way over here from breakfast this morning and that’s a lot of people know that some big banks—JP Morgan and others—really sort of control the price or have been manipulating—at least that’s the allegations; we’ll say it that way—that GATA and other folks are sort of continually sort of digging into just what the extent of the alleged manipulation is. But if you want to know why gold goes sideways and silver goes sideways in an era of continual fed pumping, it might have something to do with this paper side of the transaction, both gold and silver, and it seems like it doesn’t… like it’s not being allowed to get out of a certain range. So part of the reason I wanted to have Knut come in and talk is gold… I mean I think there is a degree of fatigue among gold investors and they see this and they say, “How long?” They look up in the sky and say, “How long?” Right? “How long is it going to be before this dream comes true?” And I thought what you have, in discussing these other… these other metals, is something that would be almost impossible to manipulate.
Knut: Correct. Versus gold and silver, this is not traded online. It’s not any stocks or ETFs. This is pure supply and demand between the wholesalers and the industry. So there is no way to manipulate this the same way you can manipulate gold and silver. And because these metals are actually used in 80% of all industry—not just a developed west and a developed east—but in all developing nations need these metals for everything and for all the infrastructure that’s going to be built now in these developing nations, they need all these metals. And you can imagine there is literally over two and a half billion people who don’t have anything. They don’t have electrical lights. They don’t have a cell phone. They don’t have a laptop. They have nothing. And for them to go from nothing to everything will take some time. But it will go from nothing to something, because most of these countries have promised their citizens to have electricity in the next five to ten years. This will happen gradually, but that means Mr.—I don’t even know how to say the names—but he wants to have electrical lights. He wants to have a 14 inch, black and white TV.
Bill: Oh, we saw this in China, right? We saw China go from something to nothing in a relatively short period of time, historically speaking. And what did that do to strategic metal interests?
Knut: Well, like most of our very big demand compared to supply, so it put a big stress on the supply. And this was just for 5% of the Chinese populations. It’s just really that lead that has gone from nothing to something. There is still about 95% left of the Chinese population. And I was traveling all over China and I’ve seen this firsthand. So this means with the production levels being finite, meaning they cannot be increased, they have to go sideways. Because they are a byproduct of basement of production, you cannot just increase it because you want to, but demand is increasing because in addition to the developed west and east [inaudible 0:09:01.0] 25-inch TV that we had 20 years ago and they want to have four 50 inch TVs and so forth. The developing nation wants to have a little slice of the pie as well. And this will ensure that the demand is high and going higher.
And some of my prospective clients ask me before they really understand the concept of the developing nations’ need is “What happens if the US or European economy goes south? What happens to demand?” And then I tell them the story about the developing nations. But in addition to that is if Mr. Joe Schmo in America, he has a job and makes $100,000 a year. His wife makes $50,000 a year. So he has a nice car. He has a Lexus. He buys an Apple and he does all the things that everyone wants, right? 50-inch TV and the whole thing. If he loses his job, they still have to pay the mortgage; they still have to send the kids to school and all those things. So now they have a very stressed economy. So what is Mr. Joe Schmo going to do? He is going to sell his Lexus and buy an older Mazda. Mazda needs maintenance. All the car parts need the metals. He is going to… Maybe the next time he needs that new cell phone, he’s going to buy a Chinese no-name brand cell phone for $50 instead of the Apple for $500. That Chinese cell phone…
Bill: But that uses the same amount of strategic metals as the expensive iPhone.
Knut: Exactly. And he may even go from a private practice doctor to a public hospital. The surgical equipment and the pills and the medicines that have trace elements of these metals are all the same. So the demand does not change in quantity. It just changed from the end products.
Bill: So who controls…? Do you want to go through some of these and talk a little bit about…? I mean because I think to the average American who knows gold and silver, the metals that we’re about to talk about—these strategic metals, and they’re called strategic for a reason—Jim Dines, the investment legendary figure has been sort of talking about strategic metals for years and years and years saying, “Look, here is a trend.” And he’s basically saying the same thing you are, Knut. “Here is a trend that’s sort of an immutable, irrefutable thing with civilization of the world, with people that are going from nothing to something,” and that’s a rising standard of living. Whether it’s going fast or whether it’s going slow, it is happening. So these metals that we’re talking about aren’t common household names. Well, bismuth… I guess if you take Pepto-Bismol you’re taking some bismuth. But do you want to talk about a few of these and just…?
Knut: Yeah, I’ll pick a few.
Bill: You could never go through them all, but I think the average American would do himself well to go to your website and poke around a little bit—and we’ll give that website later—but just to get an education on this.
Knut: Sure. Let’s start with bismuth. That’s the medicine, bismuth. I mean every American knows Pepto-Bismol, hence the name Pepto-Bismol, because it’s made from bismuth. And the reason it’s made from bismuth, it has a very good antiseptic power. So it’s used in ointments for burns. It’s used in your wife’s makeup. It’s used in radioactive shielding of nuclear power plants. Just to give you the feeling of the variety it’s used for. There are over 500 applicants that uses bismuth.
Bill: So if there’s a nuclear meltdown, should I go grab the Pepto-Bismol and start chugging or…? Do you think that would help me?
Knut: I don’t think that will help you. If you had a shelter built from bismuth, it’ll help you.
Knut: Another interesting metal is gallium and as you mentioned earlier with solar panels, the gallium is a key ingredient for making solar panels in green technology work. It’s also a key ingredient in LED lights, pharmaceuticals, nontoxic mercury substitute because it’s liquid at about 27 degrees Celsius.
Bill: So mercury substitute would seem to me to have a lot of value in our culture, with it being as poisonous as mercury is.
Knut: Yes. This is 100% nontoxic. I wouldn’t recommend drinking a gallon of it, but it is nontoxic. Yes.
Knut: Another interesting metal is indium. Indium is used for engine bearings, flat screens, touch screens, again solar technology; it’s used in space industry and displays on cell phones and navigation screens. It’s also what they call the Chinese silver. The reason I’m saying that is because Chinese people buy this as a store of value in addition to buying gold and silver.
Bill: They buy indium?
Knut: Yeah, they already know this. They are a little bit ahead of us.
Bill: They are way ahead of the curve.
Bill: So indium, I can imagine, Apple and other… some of the small tablet companies buying indium or trying to control indium. That would be a major, major play, because what do you do without it if it’s a touch screen technology?
Knut: There is no cell phones or TVs, as we know them today, without these metals. And this is just two of the metals. A typical smartphone today will use about five of the metals that we offer.
Bill: And let’s pull indium out and talk about… Like a lot of these metals, China is a producer and a controller of the flow of these metals.
Knut: Well, China is producing, I would say, about 75% of them, but there is some production in Australia, Brazil, even in Canada and the US for a few of them. But it is too small to really… to talk about and anything that is produced outside of China has to be refined in China, because China has the refining expertise and capabilities. This is true both because of the… they have the knowledge and know-how after doing this for the last 25 years, but also because the costs and because the environmental damage that this refining has produced in the last years. It’s getting cleaner now, but it’s nothing we wanted in our own back yard. That’s why we let China kind of do it. But this has the result that China has the monopoly on this. They control about 95% of the market, even if they only have 60% of the actual resources.
Bill: So there is an interesting economic and cultural trade-off that you just mentioned that I find fascinating. Here we’ve said we don’t want this kind of pollution but we want the touch screens and we want this and that and we want the cell phones. So let’s farm this out to someone else. Let them chemical dump themselves. In the process you lost… We lost control of supply.
Knut: Exactly. And it takes about 10-20 years to make this in the US again or in Canada or…
Bill: So we want to start out again with a… and say, “Look…” And maybe a different candidate would get elected and said, “Look, we need strategic metals research, development, mining—all those things. How long would it be before we could be…?” Or if you just said… Let’s say we get into a little bit of a currency war issue with China and they said, “Okay, we’ll show you. We’re going to sort of tighten the supply of this or raise the prices or do whatever on this.” America finds itself without some of these things and a lot of these metals—and I know you make a good point in your information—about a lot of these are defensive issues, even used in war time, these metals. So if China says, “Hey, I’m going to turn this faucet maybe not off but maybe down,” that would affect the average American life tremendously and it would take us 20 years to develop the infrastructure necessary to produce our own…
Knut: 10-20 years to be able to produce it and I’m not even going to tell you how long it’s going to take to be self-sufficient. So you are really depending on China’s mercy and they are already using this as a geopolitical thing. They already cut the export by about 40-60%. This turns the price up for these metals outside of China. It has already created shortages that we as the private citizen don’t see. The manufacturers, they do see it.
Bill: You see it probably eventually in higher prices for the tablet or the phone or for this or that.
Knut: At the moment the producers are eating it. They’re cutting into their production levels. They’re cutting into their profit margins. And some of them have problems. Some of them will go under. Some of them have to set up shop in China. And again, yes, okay now we can produce them. We get the metals. What happens now? Now China doesn’t only have the control of the supply of the metals. They also have the control of the production facilities. So they are giving a little bit to get more. So now they have even more control. So this is a double-edged sword, which is really going to be a problem in the future. Now there are some importers that have special ties with the Chinese.
We are working with one of them. This company is called Haynes and Marsden. It’s a family-owned company, run the business since 1948 and they have been trading with the Chinese since before Mao came to power. So that’s a long time. What Chinese respect is family and tradition. Family-owned company, tradition to trading with them for over 60 years—they actually get metals when they say no to the US and say no to Japan. But this is just one company, so they cannot supply the world. They supply some of the German industry and they are our main ally so that private individuals, such as yourself, can buy physical blocks, pellets or bottles of these metals and have them in a physical vault in a duty-free zone in Switzerland to be ready to stockpile and to offer to the industry at the time when it’s critical.
Bill: So you have… And what your company does—this is what I find fascinating—as a hedge against inflation, as a hedge against the shortages that you mentioned, you offer different packages of metals, depending on what people see as being the predominant or prevailing trend. So let’s look a little bit… Is there any other metals that you want to talk about before we go on and…?
Knut: Well, I think it’s very technical. I think people should come to the website and read about the metals. They can email us and we’ll send them some information and they can read through it. I think it will take too much time to go through all these metals.
Bill: But one thing that the listener should know is as I look through these, whether it’s gallium, the indium, molybdenum, bismuth, chromium, cobalt, you don’t see the United States as being principial producers of much of this stuff at all. I don’t see the United States anywhere.
Knut: The only… is tellurium, which has Canada and USA and the rest is all outside.
Bill: That’s amazing and scary at the same time.
Knut: Scary for the western societies, yes.
Bill: All right. So let’s talk about the packages that you guys offer. You’ve got Basket A is a package of really the key industries. Do you want to talk a little bit about that package? What the bet is there, kind of? And again, we’ll just reiterate that there is no investment, there is no… Business is full of risk. Investment is full of risk. So everyone has to measure their sensitivity to risk, what they’re capable of living with. I like looking at trends and saying, “Where is this going to be long-term?” Even if I’m not right short-term, kind of supply and demand issues, worldwide kind of favor what you’re doing.
Knut: And let me tell you a little bit about that. This is the medium to long play. This is the three to five year play or more. It’s not something that you would do if you want to go in the now, in the next six months, because it is physical metals. They actually have to be physically shipped to a vault and there are costs involved. The prices do change daily, but very slightly. It’s not like gold and silver. And if you take from January 1—the January 1 of any year—they always go up. So they have a slow increase in value and over the last four years, if you take all the four baskets combined, it’s about a 17% increase of the metal per year.
Bill: So the last four years yield 17%?
Knut: Per year, yeah.
Bill: Okay, so the four baskets you mentioned, you’ve got your Basket A—and again, you can buy these things from Knut in these baskets—Basket A is a general, just kind of the whole…
Knut: It is a general European industry basket, a key industry basket for the European industry. It contains indium, hafnium, gallium, tellurium, tantalum and bismuth. And we have the four different baskets with four different names, precisely because they are set aside for that industry and will be sold to this industry only. This basket was launched in February 2009 at $10,200 and it is today about $19,000.
Bill: So tell them what’s in this basket. I mean we won’t go through every one, but it’s kind of interesting because you could say… Look, you could own this—two kilograms of indium, three kilograms of hafnium, two kilograms of gallium, seven of tellurium, eight of tantalum and 47.4—I like that—of… kilograms of bismuth. So you own this stuff. You own… This is your little…
Knut: That’s your actual metals.
Bill: Your little stockpile of…
Knut: Yeah. Correct. It’s your actual metal holdings and with the ownership certificate that we issue, you will have outlined what metals you own, how many kilos you own, plus the purity, where it’s stored—and it’s stored in a third party vault, which is fully insured and you can—with this certificate—come to the facility and say, “Show me my metals.”
Bill: Yeah, because you… I have to really make this point, because our… What our listeners are suspicious of are banks—bullion banks—that sell the same metal to about 50 people and you come in to get your stuff and you come in and say, “Hey, I’d like to cash out today,” and they say, “Well, that’ll be six months before you cash out” and the first thing that comes to your mind is “Oh, these guys really don’t have my stuff.” And I’ve heard actual individuals tell me stories of trying to get their metal back in Canadian bullion banks and sort of not being able to cash out. So that’s the first thing I’ve got to say to you. What’s the protection against that?
Knut: Yeah, let me just emphasize on that. Yes, because these people or companies are doing same like the banks are doing. It’s called fractional ownership. So they have one metal bar to sell to ten people. The banks have $1.00 to lend out to ten people. So the first guy in the line—he’s lucky—or the guy with the biggest gun, you know? This is…
Bill: I’ve got a feeling though, Knut, if I would do that, I would probably go to jail for a long, long time. But somehow banks and governments and other people can just fractionalize everything at no apparent cost, temporarily.
Knut: Yeah. And this has been going on for many, many years. It’s just that it’s been kind of hidden from the public and it’s kind of coming out only now. So the owner of the company, actually, he worked as an ambassador. He kind of saw behind the scenes of a lot of governments and a lot of politics and said, “This is not right.” So he started with gold and silver and then went into the specialty metals. And he wanted to make sure that for every dollar you put in there is one certain amount of grams of actual metal. There are no derivatives. There is no paper. There is no nothing. It’s just the actual bars in an actual vault. And not only do we have third party audits every month; there are Swiss customs. Because this is in a duty-free zone they will check everything going in and everything going out of the vault to make sure it’s really there and it’s not leaving the vault without Mr. Joe Schmo’s approval, because it’s his metal. So that means you can go there with your certificate and say, “Show me my metals.” You can touch it. You can feel it. And if you want, put it in your backpack and carry them out.
Bill: So you could take delivery?
Knut: Yeah. We as a company, we couldn’t take it out. We can only put it in. If you want us to sell it for you, yes, then we can sign…
Bill: But I imagine there are some forms that have to be filled out to authorize…
Knut: A resale agreement. We fill in the name and number of the basket, your name and signature. We show this to the facility. They know now that you want us to sell it for you. We’ll then take it out of the vault and get it back to the trader. He will sell it to the industry and we cash you out. And this is interesting. A lot of your listeners probably know the volatility of the dollar and the euro and paper currency in general. While you own metals, you are currency-free. You are not in any paper currency or fiat currency, as we call it, because you can pay in dollars and then four years from now, you tell me, “Hey Knut, I want to sell but I prefer to have Norwegian crowns” or “I prefer to have Swiss francs. I don’t want the dollar” or “I don’t want the euro” or whatever currency you have and don’t want. No problem. We can sell it for you and wire any currency you want.
Bill: That’s fascinating and I think that that’s kind of assuring for people on some level, to know that that’s… that you have the options to do that as well.
Knut: Because that’s really your best protection. I have to emphasize this is an asset protection with an upside. This is not an investment directly. And none of these metals are investment classified. This is not like investment in stocks or bonds or… It’s not a financial asset. This is a real thing, like buying a pair of shoes; only it’s kind of an expensive pair of shoes.
Bill: So let me ask another question that I think our listeners would be… In other words, if I make 20%–between 10-20%–a year, what’s it cost me commission-wise to get in and out over and above the sort of basket value?
Knut: That depends a little bit on the size of order. We have different kind of programs but in general, I can say we have a 5% surcharge coming in and we have no surcharge coming out.
Knut: And there is… The storage fees are 1.5% of purchase price for the first five years. So this means if you buy a combination of these baskets, for let’s say $100,000 to make the number simple, it’s $1,500 a year. You will pay that for five years up front, because this means in Year 3, when the baskets are worth $145,000 or $175,000, you still are paying 1.5% of $100,000. It doesn’t increase because most of the gold and silver storage facilities will charge you every day this spot price and they send you a bill every three months, so you pay more as the value increases. However, if you choose to sell after three years, you get your two years prepaid storage you haven’t used back, prorated. So you’re not locked in for five years. We simply lock the price for you for five years.
Bill: Okay. Which makes a lot of sense.
Knut: And we have some programs, which is this, which is the retail market, which is that they have four different baskets.
Bill: Talk about Basket B for a second. If you’re betting on energy and tech, he’s got a basket that’s got just indium, hafnium and gallium and then if you believe in just that there’s going to be a construction boom—not necessarily in the United States but maybe someplace else—there is Basket C. That’s got a whole bunch of strategic metals that are really a function of just construction and engineering. And then here’s the last one that’s interesting to me. If you believe that the world will be a constant place where there is conflict, he’s got a defense and aviation basket and I guess it’s more than just conflict, because you’ve got aviation built into it. But it’s like is there perpetual war for perpetual peace, your Basket D kind of is betting, if you wanted that basket, you’d say, “Yeah, the superpowers will continue to try to maintain an edge. The Chinese government will try to maintain an edge. Russians now are kind of back with saber rattling again, like they were years ago and Japan wants its own forces” and all these trends. Basket D is interesting.
Knut: Not just for the defense, which is kind of obvious. I should just point it out. Just from the aviation, in the next 30 years the fleet of airplanes has to be doubled. Plus they have to maintain and improve the existing planes. The key metal for planes to work and the engines to work is rhenium. And to make the current production of rhenium, which is only 46 metric tons per year worldwide, you have to produce 15 million tons of copper. You cannot increase the copper production much, so that means we cannot increase the rhenium production much. And even though the production of rhenium is only 46 tons, the consumption per year is 54 tons.
Knut: And then you say, “Hey, that doesn’t match.” Correct. It doesn’t match. That means the current supply stockpiles of rhenium are being consumed. In the last three years the rhenium price is going sideways because the airplane manufacturers signed a deal with rhenium producers for a fixed pricing. This expires this year and now the rhenium is hovering around $3,800-$4,000 a kilo. It was up to $12,000 a kilo just before this agreement was signed.
Bill: Okay, say that again. Say those numbers again. It was…
Knut: The high price of rhenium was $12,000 a kilo in 2008. Right now it’s about $3,800-$4,000 per kilo because they have a fixed pricing at the moment. This fixed pricing is expiring this year and that’s going to tell you it’s going to be $12,000 on the first of January 2014 but it means the spot price will be available again and that will drive the price up because already they are using more than is being produced and the recycling is expensive, so that’s ensuring the higher price.
Bill: And rhenium is basically—my guess is—is basically a product of Chile. I see Germany has some, but Chile is a huge copper mining country, so probably most of the rhenium comes from Chile and then that’s a function of well, what’s the copper market like, which adds another variable. People should also know that a lot of folks have hedged—and so these guys are buying short or long to sort of allow manufacturers who buy copper to have a stable price—but eventually those contracts expire also.
Bill: And the hedging is over and then a new sort of hedging has to start. And with something like rhenium… And I know our copper prices—we use a lot of copper in our business with cables and stuff that we sell—has been going up, up, up again. It’s on a mad roll right now.
Knut: And to talk about pricing—supply and demand—now let’s say the world goes in the next ten years great. There are no recessions, no nothing. All copper production goes full max and the rhenium production is full max, consumption is also at full max. Let’s now say we have a worldwide recession. Some of the industries that use copper maybe don’t need as much copper. It means now the copper production goes down. That affects the copper price. But that happens the opposite with the rhenium price, because then you have a less production of rhenium and the rhenium production is so small that they need the production to be at full just to supply the industry. So that means if the economy goes well, the price goes up. If the economy goes down, because of a different reason, the price goes up. So it’s kind of a bulletproof pricing.
Bill: Particularly on that metal.
Knut: Particularly on that metal. Some of the other metals too, but particularly on this one, yes.
Bill: Yeah. So that’s really interesting to know. Your cost to get in, a lot of people say, “Well, I don’t have $100,000 to invest.” What’s the minimum to get in something like this?
Knut: Well, the smallest basket is the energy and tech basket. It has a current price of about $6,600. The next one would be the construction and engineering basket, which is about $11,900. And then the key industries, which is about $19,000 and the defense and aviation is about $23,400. One thing I haven’t mentioned, which is important to know, is that A, B and C baskets are stored in Switzerland. The D basket is stored in Panama and the reason for that is A, B and C will mainly be used in the European industry and the D will be used in the US, Canadian and Latin industry.
Bill: And which one of them has the most rhenium? D?
Knut: D has… D is the only one with rhenium.
Bill: And how much is that basket today, as we speak?
Bill: So that looks like a really interesting play. Now if you and I were just sitting and having a cup of coffee, this is not investment advice so we’re not giving you an investment advice at this point, but I’m just asking, Knut, if him and I were sitting down, having a cup of coffee and I said, “Hey, what would you do right now?” what would you tell me? Which of these baskets would be… would catch your eye, personally? Again, this is not investment advice for our listeners, but I’m just saying between us, what really catches your eye at this point with the supply, with pricing and value?
Knut: I think that my two favorite baskets—and like I said, this is not investment advice—is the key industries and the defense baskets.
Bill: Okay, so Basket A and again, how much is Basket A? We’ll just reiterate this.
Bill: $19,000 and Basket D is how much?
Knut: Because the A basket covers so many industries and all the metals in that basket are rare. The D basket, because of the rhenium and because of the use in defense navigation in general and because if you have two different baskets in two different locations, you also have a diversification of storage.
Bill: A little bit of a hedge there. So one is in Panama and one is in Switzerland, where they keep them stored. What town in Switzerland are they kept?
Knut: Just outside Zurich.
Bill: Zurich. Okay.
Knut: And Panama is just at Panama City, in the new duty-free zone, which was opened just… I think it’s about five or six years ago. And it has its own airstrip, so for certain clients—we have some clients which have significant amounts—they actually fly in on their own planes into the duty-free zone and can fly out of the duty-free zone without touching actually the actual Panamanian system.
Bill: So talk about—just as we sort of wind things down here—talk about the advantages of storing metals in a duty-free zone.
Knut: Well, there is tax and duty-free, obviously. You don’t have to pay anything.
Bill: No sales tax, no duties?
Knut: No nothing. Because it’s in a duty-free zone, it’s kind of in a sheltered landmass within the country. This means that you cannot just enter this zone. This is very, very safe. The government or country where it’s in has to respect certain laws and they cannot go in and confiscate this. If your metals were stored in the bank—a financial institution—they could come in and take it any time. In a duty-free zone, they can’t go in, because it’s kind of a black hole within the country.
Bill: So there are almost international laws that govern that, that sort of force civilized behavior that should exist everywhere but probably only… And I think… Then I think about what you’re doing. Really the Swiss government has a history of protecting property. So that’s a good bet in Switzerland. And now in Panama you’ve got a duty-free zone, which kind of amounts to something very, very similar, though the approach isn’t as traditional, but it’s sort of putting some legal structure there between you and the Panamanian government.
Knut: Exactly. And of course, it’s fully insured. No matter what happens. If there was a political appeal, if there was anything that happened, you are fully insured. In Panama it’s insurance backed by Lloyd’s of London and in Switzerland it’s AXA Winterthur, which is the biggest European insurance company so…
Bill: And that’s part of your storage fees?
Knut: That’s part of the storage fees, yes.
Bill: Okay, very important. Anything else you want to cover, Knut, as we wind it down?
Knut: Well, I would say… Well, it’s important to know here is this is really an asset protection and a protection against inflation because if inflation goes up, so does the value of the metals and you’re away from currency. I just really want to emphasize that. This is really the key here.
Bill: And it’s almost every country. And this is something that we’ve heard from a lot of the speakers and a lot of speakers here sort of make reference to different governments around the world. We talked… We heard about Japan. We heard about other places that you wouldn’t maybe normally think of someone… of a country that would just say, “Look, we’re going to turn the spigots on and start printing money.” And almost every country is monetizing their debt today and so this is really a hedge against that and that’s the point that he’s making. It’s a good point, that it is a protection.
Knut: Yep. Another thing is that because this is physical metals—non-financial assets—this is non-reportable. So you actually can buy it and keep it and it’s non-reportable.
Bill: So you don’t have to fill the same forms out that you would with gold and silver?
Knut: No. Gold and silver can be exempt from reporting as well, depending on how it’s held. But compared to a financial investment or buying futures or stocks and bonds, which is financial assets where you have to report everything, this is non-reportable buying and holding. As an American, you should report when you sell it because you have a capital gain.
Bill: Yeah, you want to pay the taxes on it.
Knut: So this… We shouldn’t tell you not to do that because as a law-abiding citizen, you should. But it’s private, which is important. And we don’t issue a 1099 because we are not a US based company. The other important thing is distinguish from the banks, because a lot of people say, “What’s Switzerland? Used to be safe. Now they gave away all our bank accounts to the government.” This is a monetary asset and the reason they could squeeze Swiss to do this was because they had banks in US and they had the choice of getting all their assets seized and cut off…
Bill: Or playing the game.
Knut: Or playing the game.
Knut: But again, this was only because it was a monetary asset and the banks only gave away a very, very small fraction of the list. Everyone thinks they gave away everything. No. They gave a very, very small fraction of the list. But because of all the rules and regulation and muscling that… from the US government at this time, a lot of the banks don’t want the hassle and actually, as we all know, are actually telling a lot of their law-abiding, hard-working Americans who have money there “I’m sorry. We can’t keep you as a client anymore.” This will never happen with these metals because it’s not a monetary asset.
Bill: So you’re playing in the industrial game. You’re in a different world as far as the reporting and regulatory bodies are concerned.
Bill: You really… You’re a part of industry and not a part of finance.
Bill: Yeah. That’s fascinating. It’s something that the listeners, again, should pay a great amount of attention to. Anything else?
Knut: I would say the important thing is you can actually own this in your IRA. A lot of Americans have a lot of funds in IRAs, which is either invested in stocks or just in fiat currency, which is 100% guaranteed to lose money. And you can actually own metals offshore in your IRA. And how that works is you set up an offshore LLC and the LLC owns the metals. So the IRA can… 100% IRS compliant on the LLC and the LLC can in turn own whatever it wants. Now you move your assets offshore. You move your assets into something that produce a better yield and protection and it’s 100% IRS compliant. When you sell the metals or take it back to the IRA and you have all the tax benefits still…
Bill: In the IRA, yeah.
Knut: So this is very important because buying it with the IRA is like not spending money. You just move it from one asset class to another asset class.
Bill: And you don’t have to bring any new funds into it. You’re just moving into something that’s maybe safer and has some better strategic protection.
Knut: Yeah. And there has been articles, in addition to the obvious rumors, that the government… They can’t balance the budget. This is a pretty straightforward thing. But what happens is there is $14 trillion in IRA money. What’s going to happen when the government needs money? They’re going to say, “Hey Bill, I think you should put 20% of your IRA assets into government bonds” and we make it sound like it’s up to you. And you say, “Okay. I’ll do it” and then 20% is a government bond, which is basically, it’s not worth anything anymore or you can say, “No, I don’t want to” and they say, “Okay, that’s fine. We’re not going to force you, but then your IRA will be opened”—that’s not the term for it—“but it will not be an IRA anymore and you will take a tax hit on it.”
Bill: It’ll be a MY-RA.
Knut: So anyway, you’ll have to pay something.
Bill: Yeah, it’ll be…
Knut: So moving it offshore in a metal asset, take it from the low hanging fruit to the top of the tree.
Bill: And I think what’s going on in Cypress—everyone is watching that—and it’s not… Listen, governments all basically think the same. So as you see that happening, you might want to start doing some thinking about how to have a strategy if in fact that ever… And we have listeners, Knut, all over the world so it’s not just US citizens. It’s anybody that wants to sort of figure out “Hey, how can I put something someplace that’s probably going to end up staying there and not be subject to sort of being confiscated or have a part of it taken?”
Knut: What I suggest, Bill, is that people check at our webpage. They can read a little bit of information about what we do. That webpage is www.SwissMetal.net. They can email us at [email protected]. We are available on toll-free 855-854-4679.
Bill: SwissMetal.net. Knut Andersen, thank you so much, sir. Great to have you today.
Knut: Thank you.