For example, gold has a density of gold is 19.3g/cm3 while that of steel is 11.4g/cm3.

Therefore, a piece of real gold measuring 10cm x 10cm x 10cm would weigh 19.3kg while steel of similar size would only weigh 11.4kg. The standard gold bar held by central banks weighs 400-ounce (12.4 kg) and must be stored in recognized and secure gold bullion vaults to maintain their quality status and ensure maximum resale prices.

If the gold is of an irregular shape, the volume can be found be finding the displacement of water in a graduated cylinder.

The issue gets a bit more problematic when a fake material that has a close density to gold is used.

Uranium has a density of 19.1g/cm3 and would fit this criteria. However, it is radioactive so it is not that suitable.

Another metal is tungsten which has a density of 19.25g/cm3, almost similar to gold. Thus, a gold-coated tungsten would pass the density test with ease. However, tungsten is extremely brittle and has the highest known melting point of any non-alloyed metal at 3422 degrees Celsius, which makes it difficult to work with.

Nevertheless, gold-coated tungsten is being sold openly, one example is this China company, China Tungsten Online.

One author even suggests that fake tungsten gold is being widely circulated in the market, sometimes deliberately.

Short of cutting up a gold bar to see whether it is tungsten at its core, other ways of testing for gold fakes would be to use sound (sound travels at twice the speed in tungsten compared to gold), electrical resistance or thermal conductivity.

I don’t have the exact details of the terms but I would caution anyone from joining such “guaranteed buyback”  schemes. I will post more details of the Gold Label scheme once I have it.

My earlier post on  Genneva Gold has already attracted close to 500 comments; you can refer to it to read some of the arguments for and against such schemes. Some of these comments would be applicable to The Gold Label as well.

According to the information on the website, Genneva Gold sells you Gold Bullion at a 2% discount to the market price with a buy-back guarantee.

At the end of one month, the buyer can

1. Sell buy the gold to Genneva Gold at the market price based on the time he bought (thus making an immediate 2% profit)
2. Keep the Gold Bullion.
3. Rollover. Meaning do step one and buy a new Gold Bullion at a 2% discount to the current market price.

The deal seems too good to be true because the company is essentially selling you gold at a 2% discount and giving you a free put option.

There doesn’t seem to be any downside for the investor. If the price of gold goes down, he can sell it back to the company. If the price of gold goes up, he can keep the gold and sell it on a secondary market by himself.

genneva gold

Anyone considering this investment should ask important questions like:

1. How does Genneva Gold generate revenue/profit from this entire transaction?
2. Assuming an investor does just the bare minimum and rollovers his investment for 12 months, he would have made a 24% return. How does Genneva Gold substain this payout?
3. How do you verify that the gold you receive is worth its weight in gold?

There is a “Terms and Conditions” to the 2% discount thing though. I would be interested to know what they are.

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• MSCI Thailand
• MSCI Malaysia
• MSCI India
• MSCI Asia APEX 50 (an index made up of 50 stocks in China, Hong Kong, South Korea, Singapore and Taiwan)
• Reuters Jeffries CRB Non Energy

This brings the total number of ETFs listed in Singapore to 24.

For a primer on ETFs, you can visit this ETF investor’s guide page on the SGX website.

Click on the player below to listen.

The transcript of the interview provided by my friend of InvestIdeas Forum and with additions done by me can be found below:

China Journey

Media: You travel a lot, what do you see in ordinary people?

Roger: You learn more from the ordinary people than you do from the government.

I mean, I could go and see the government officials, I know what they are going to say. I can say it better than they can. I’ve been investing around the world and going around the world for a long time.

Where you can really find out what’s going on about the world is to see the world close to the ground and talk to ordinary people.

You cross the border and you are going to find out more about the country than if you fly into an international airport and go through customs and immigration. Because millions of people live across the border out in the jungle or in the deserts, and then you get to find out what’s really happening.

Media: Could you describe an unforgettable moment while you were travelling in China?

Roger: Well, I have been to China many times. I was in Hami, Xinjiang (哈密、新疆). It was the first time I drove across China. They didn’t have many hotels in those days.

I went into the hotel. It was very hard and I couldn’t figure out what it was. And then I realised it was a bag of rice. They gave me a bag of rice for a pillow. There was no tourist in China, nobody travelled in China. That’s when I realised a great opportunity existed in China as it continued to open up because there was no tourism.

And that’s what I now know, there’s fabulous opportunities for tourism in China.

Where to put your money

Roger: Things that are going to come out of this unimpaired is where you should have your money. And (one of) the many things that I know of is going to be commodities.

Most companies and most especially financial companies have been damaged. Now,they are not going to be great stocks. Coming out of it, I’m saying the fundamentals that have not been impaired – agriculture, water treatment, tourism in China, things like that. I have no idea what kind of (—) you can expect. I think all commodities will do well.

Stocks

All have been beaten down right now. I’ve covered a lot of shorts on Thursday. I’ve been covering shorts and when you have a panic like this, it means you always think you should be buying – who knows. I think even if you have a rally from here, it could be a bottom is being formed, but I don’t think it’s the bottom yet.

Singapore Financials

Media: What can Singapore learn from this crisis?

Roger: Singapore has learnt a great lesson. Save your money. Save a lot, invest wisely and don’t do a lot of foolish things. Your government is not printing a lot of money and doesn’t seem to be printing money.

So far from everything that I can see, Singapore government is doing the right thing. Now, Singapore is going to be affected by all of this, but Singapore has more foreign currency reserves per capita – than any other country in the world that I know of. The last country standing is going to be Singapore.

New Market Opportunities

Media: What are the new markets and opportunities?

Roger: The new stock market in Cambodia which should start next year if it’s on schedule. It might do good things for Cambodia. I’m optimistic about Cambodia. Myanmar is another place that has magnificent opportunities.

It is changing, and places that have the best opportunities are probably the ones which haven’t been exploited, such as, Myanmar, Cambodia and North Korea. They are starting to open up slowly. That’s where you’ll find the best opportunities, going forward.

Stage (From Left to Right): Professor Gillian Yeo, Executive Associate Dean, Nanyang Business School; Ms. Elim Chew, Co-Chairperson, Culture & Education Action Crucible, Action for Community for Entrepreneurship (ACE) and Member, NUS Board of Trustees; Mr. Jim Rogers; Professor Bernard Yeung, Dean & Stephen Riady Distinguished Professor of Finance, NUS Business School.

Photo Courtesy of National University of Singapore Business School.

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Currently, Jim Rogers resides in Singapore.

During the presentation, he shares his views on China, the USD, commodities (what else) and about his short position in US bonds.

Here’s the audio where you can listen to Jim’s presentation. Please pardon the quality. There’s a bit of cuts in the first few minutes due to technical problems and some slight noise throughout.

Click on the play button above and increase the volume of your speakers to begin listening.

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Powder River Receiver’s Report

There’s one part of the report that existing investors of both Oilpods and Powder River will be very concerned about. The cost of the leasehold and the price that it was sold to Asian investors are as follows:

• In 2005, cost of leasehold – $997,794. Price sold to investors – $4,498,820
• In 2006, Cost – $144,637. Price sold – $17,705,262
• In 2007, Cost – unknown. Price sold – $18,764,060

If the numbers reported by Bruce is correct, then I am not very optimistic of the production capacity of the oil wells – certainly not at the projected revenues given by Oilpods/Powder River. Taking 2006 for example, I don’t think a $144,637 well can generate $1.7-3.4 million/year to give a 10-20% return.

Things will be clearer once Lee Keeling and Associates, an independent oil and gas engineering consulting firm, gives their evaluation of the oil and gas properties of Powder River Petroleum in a few weeks’ time.

An agreement was also made by Brian Fox to pay a 9% interest to investors on their investment amount for the initial phase. In 2007, a total of $4,413,406 in interest payments were made to investors. Of this amount, $3,263,004 came from funds received from subsequent investors.

A lengthy lawsuit will only mean that it will take a longer time for investors with Oilpods to find out what is going to their investments.

Incidently, this case was also reported in today’s newspaper.

This incident highlights the risks of investing in unregulated alternative investments. You have to be mindful that you might not have a clear exit strategy with your investments should things go wrong.

If you ever plan to invest in such products, make sure it is extra money you can set aside for a long time. Above all, never commit too much of your investment capital into such schemes.

Powder River has already been placed into receivership for a host of charges brought against them – these includes operating a ponzi scheme and cheating thousands of Asian investors.

(Update: Powder River will be contesting those charges.)

The receiver has uploaded at the Powder River website quite a fair bit of information on what is happening .

However, the links don’t seem to be coded correctly. I managed to find the correct links to download the documents. Here they are for easy access:

Petition

Plaintiff’s First Amended Petition

Affidavits of Newsome, Chang, Lim Romine

Order Appointing Receiver

Plaintiffs Motion for Temp Restraining Order and Permanent Injunction

Plaintiffs Motion to Reduce Bond

Temporary Restraining Order

Initial Receivers Report

What would you be buying?

We should be asking what are the sectors to be sold. He doesn’t see value in equities, commodities and real estate.

Are you saying we should be in cash?

Cash is not good as it is losing its purchasing power due to the “money printing” policy of the Fed.

On the surge in oil prices

He is not sure whether oil at US$140 is justified. There will be corrections along the way, but if the supply of money is being increased, the price will go up if supply is constant. The big upside is gone. Be careful about blindly buying commodities.

On the one investment if he had to make a pick

There was no commitment from Marc. His reply was that he would go for a holiday.

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