Gold Is Money Every Money Substitute Is Someone Else's Liability (Debt) - Mining Stock Education
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Gold Is Money
Every Money Substitute Is Someone
Else’s Liability (Debt)
Fairview Gold Fund I, LP
“Money is gold, and nothing else.”
—J.P. MORGAN; TESTIMONY BEFORE CONGRESS – 1912
“What has been will be again, what has
been done will be done again; there is
nothing new under the sun.”
—ECCLESIASTES 1:9
206.432.9439
119 South Main Street,
Suite 410, Seattle WA 98104
www.fairview-partners.com
February 2020
Disclaimer
This presentation (“the “Presentation”) has No representation or warranty (express or The views, opinions, and assumptions
been prepared solely for use by potential implied) is made or can be given with respect expressed in this Presentation are as of the
investors in investment vehicles managed by to the accuracy or completeness of the date of this Presentation, are subject to
Fairview Partners Investment Management information in the Presentation. Some of the change without notice, may not come to pass
LLC (together with its affiliates, “Fairview”) statements presented herein may contain and do not represent a recommendation or
and shall be maintained in strict confidence. constitute forward-looking statements. offer of any particular security, strategy or
The recipient further agrees that the contents These forward-looking statements are investment.
of this Presentation are a trade secret, based on current expectations, estimates
the disclosure of which is likely to cause and projections. These statements are not The Presentation does not purport to contain
substantial and irreparable competitive harm guarantees of future performance and involve all of the information that may be required
to Fairview and or its investment vehicles and certain risks, uncertainties and assumptions to evaluate the matters discussed therein.
their respective affiliates. Any reproduction that are difficult to predict. Although Fairview It is not intended to be a risk disclosure
or distribution of this Presentation, in whole believes the expectations reflected in any document. Further, the Presentation is not
or in part, or the disclosure of its contents, forward-looking statements are based intended to provide recommendations, and
without the prior written consent of Fairview on reasonable assumptions, Fairview can should not be relied upon for tax, accounting,
is prohibited. The information set forth herein give no assurance that such expectations legal or business advice. The persons to
does not purport to be complete and no will be attained and therefore, actual whom this document has been delivered are
obligation to update or otherwise revise such outcomes and results may differ materially encouraged to ask questions of and receive
information is being assumed. Other events from what is expressed or forecasted answers from Fairview and to obtain any
that were not taken into account may occur in such forward-looking statements. additional information they deem necessary
and may significantly affect the analysis. Any Fairview undertakes no duty to update any concerning the matters described herein.
assumptions should not be construed to be forward-looking statements appearing in
indicative of the actual events that will occur. this Presentation. Investment in securities
involves significant risk and has the potential None of the information contained herein has
for partial or complete loss of funds invested.
The Presentation does not constitute an offer been filed or will be filed with the Securities
Diversification does not assure a profit or
to sell, or a solicitation of an offer to purchase, and Exchange Commission, any regulator
guarantee against loss in declining markets.
any securities, which only can be made at the under any state securities laws or any other
Investors should consider their investment
time a qualified offeree receives a Confidential governmental or self-regulatory authority.
objectives, risks, charges and expenses of the
Private Placement Memorandum (“PPM”). All No governmental authority has passed
underlying funds before investing.
information contained herein is qualified in its or will pass on the merits of this offering
entirety by information contained in the PPM. or the adequacy of this document. Any
Any such offer or solicitation will be made in representation to the contrary is unlawful.
accordance with applicable securities laws.
FA I R V I E W G O L D F U N D I, L P 2
Contents
01 02
Gold is Money 04-06 The Case for Miners 07-12
03 04
Gold: An Under-Owned 13-21 Fairview & Offering 22-24
Asset
FA I R V I E W G O L D F U N D I, L P 03
What is Gold?
• Gold is a precious metal with unique characteristics
which led humans over thousands of years to choose
it as money.
• When allowed to, humans chose gold as money over
five thousand years ago; and then again and again
through time, all over the world.
• Gold is divisible, portable, uniform, permanent,
durable, fungible; and importantly, it is limited in
supply, meaning it stores value over time.
• Gold is money.
• Money is gold.
What is Currency?
• Currency is a money substitute which can be used for
exchange.
• One definition of currency is “The fact or quality of
being generally accepted or in use.”
• Storing value over time is not a key aspect of currency.
FA I R V I E W G O L D F U N D I, L P 04
What is the Situation in History and Today?
• Gold and silver were used as money for at least five
thousand years.
• Our monetary system of “floating currencies” has
existed for around 50 years. Ever since the USA
“closed the gold window” on August 15, 1971; ending
the already weak Bretton Woods system, and the
international convertibility of dollars into gold.
1920 1 oz = $20
• In 1920 a $20 bill was paper currency which
represented an ounce of gold; that currency was In 1920 a $20 bill was paper
currency which represented an
convertible into an ounce of gold.
ounce of gold; that currency was
» Gold was “worth” $20; in reality a $20 bill was convertible into an ounce of gold.
convertible to gold.
• In 2020 a $20 bill is a paper currency which is either
backed by nothing, or at best by debt on the books of 2020 1 oz > $1500
banks and the government. Today an ounce of gold is
» Today an ounce of gold is worth above $1500; that is a worth above $1500; that is a
depreciation of the currency of over 98% in 100 years. depreciation of the currency of
over 98% in 100 years.
» Our paper currency was shown to be a terrible store of
value, and therefore it is not money.
• As the debt backing the currency defaults, or is just
called into question, the value of the currency is called
into question.
FA I R V I E W G O L D F U N D I, L P 05
Gold Priced in Oil, an Example of the Rising Real Price of Gold
Gold falls relative to oil in times of expansive credit (see years 1999,
2007 below), it rises in contractionary times (see 2008 below, and
how much higher we are today). Here is a chart of gold priced in oil:
Gold to Oil Ratio As one example, oil was an average
price of $64.90 in 2018; at the bottom
of the March 2020 crash it reached $20.
Oil fell to a third of its value. We think
it is likely oil trades around $10 at some
point soon.
Gold on the other hand has remained
stable, in 2018 it was around $1300, in
early 2020 it was $1550-1600; at the
bottom of the March crash it was at
$1500.
2018 1 20
This is a huge rise in the Real Price of Gold, this is likely to increase
March
1 75
and sustain over the coming years. And the good news is that the 2020
primary means of investing in the Real Price of Gold has not been
discovered by the mass of investors.
FA I R V I E W G O L D F U N D I, L P 06
Gold Miners are Legitimate Money Producers
• Gold miners have revenues (the dollar price of gold) and costs (the cost to mine and produce gold). Obviously
miners would like to see their revenues go up, and their cost to go down.
• A rising Real Price of Gold says that the costs of production will be falling relative to the value of that production.
Gold miners could experience excellent results from just a firm price of gold, and a falling cost of production.
• 25% of the costs of of gold production are energy costs. The largest gold miner, Barrick, buys around 25 million
barrels of diesel each year. The cost of that diesel falling to a third of the previous price, or less, will be great for
their earnings.
• The same drop in oil price is happening at base metal producers of iron ore, tin, copper… Those mines are already
being shut down. Gold miners will come in and pick up the capital assets of those mines for
10 cents on the dollars. They will have their choice of geologists and engineers.
The price of conventional commodities will continue
to fall relative to gold; the resources used in the
production of those commodities will be freed up
to use in the production of gold. Mr. Market wants
more Real Money (gold), and he will set the prices
such that he will have it!
FA I R V I E W G O L D F U N D I, L P 07
Hold Real Money as Savings, Also Invest
in the Production of Real Money
We believe:
• That gold is money, and money is gold.
• That currencies, whether paper or “debt backed” are not
real money.
• That we have had a tremendous over-production of
currency through our fractional reserve banking system.
• We have had a significant under-valuation and under-
production of real money (gold)
• Gold is NOT an investment, at best it is money, at worst Fairview has two strategies right now:
today it is a quality form of savings.
• Investing in yet another round of
• Gold is NOT strictly an inflation hedge, it is a hedge distressed debt produced by our
against all monetary disorder. fraudulent monetary system.
• Savings are important to have, and we recommend our » This is the purpose of our series of
clients hold some portion of their savings in gold; we plan distressed debt funds.
for our fund to save a certain portion in gold. • Investing in the production of money,
• An investment involves putting your capital into a as the production of money becomes
productive asset, such as a gold mine. vastly more profitable.
» This is the purpose of Fairview Gold
Fund I, LP
FA I R V I E W G O L D F U N D I, L P 08
The Market Moment for Gold Miners
We believe that gold miners are about to enter a fabulous bull market The Benefits of a
based upon a rising price of gold. The good news is that gold miners
Bear Market
are coming into this having already been ground through the mill of a
brutal bear market.
Here is a chart of the GDXJ, an ETF of intermediate gold producers: Since a top in 2011 this group of miners
dropped over 80%, finally finding a
bottom in 2016. Technically the market
has risen since that point, but it largely has
been a sideways market to today; for the
experience of most gold stock promoters,
it has been a nearly 10 year bear market.
This bear market provided these three
benefits to investors today:
1. Reduced the price they must pay for an
interest in these assets.
2. Forced the write down of projects and assets
though, those physical assets still exist, they
are just held at a reduced book value for us
41.2
to buy cheap.
3. Wring out the various excesses that can exist
in this market; expenses and overhead have
been reduced, debt has been reduced, bad
management purged, etc.
FA I R V I E W G O L D F U N D I, L P 09
The Relation of Gold Miners to the Gold Price This chart is a ratio of a gold stock mining index called the XAU divided by the price of gold. It shows once again that… THE MINERS ARE HISTORICALLY CHEAP! XAU to Gold Ratio FA I R V I E W G O L D F U N D I, L P 10
The Status of Gold Miners
Consistent with our theme of an almost ten-year bear market having enforced discipline on the sector,
Barrick is an excellent example. Here is a chart of how they have reduced their debt from bull market highs:
Barrick’s Debt Reduction
Net Debt
Debt in Billions ($)
FA I R V I E W G O L D F U N D I, L P 11Historical References
Homestake Mining in the Great Depression
Homestake mining was the premier listed gold miner
leading up to and during the Great Depression; akin to
Barrick today.
Into the crash of 1929 Homestake Fell initially with the
rest of the stocks, it then took off into a tremendous
multiyear bull market. The stock price rose by over 6
times by around 5 years later.
This was at a time during which conventional stocks
Homestake Mining Great Depression
went down over 80%, with similar carnage in real Oct 1929 to July 1932
estate, etc. So even just maintaining wealth during DOW
a period of time like that was huge, those that
maintained their wealth could invest when assets were
cheap.
An allocation to gold mining shares is a hedge against very serious dislocation in the financial markets.
FA I R V I E W G O L D F U N D I, L P 12What our Investment Thesis is NOT
• We are expecting a further inflation of currency and credit; we are
NOT expecting a general price inflation in the near term.
» Because of that we are not buying oil, farmland, soybeans, wheelbarrows,
or any other “real assets”; we are saving in real money and investing into
the production of real money.
» If we actually believed in conventional “inflation” we would recommend
you lever up and buy any asset you can; that is the opposite of what we are
recommending.
• We do NOT think that the US Dollar will fall off a cliff tomorrow. We actually think the dollar is highly likely to
rise against other currencies in the near term, and we plan to use that strength in the dollar to position ourselves
favorably in certain gold assets; for example, Canadian or Australian miners.
» The world has a ton of dollar denominated debt, that means they are short the dollar, and about to go through a painful
short squeeze.
• We are not speculating on a rise in the Nominal Price of Gold; we are investing in a proven thesis of a rising Real
Price of Gold.
FA I R V I E W G O L D F U N D I, L P 13That Said, We Should Note… There is also a heck of a case for a rising Nominal Price of Gold, and of course our investment thesis would be helped greatly by it. This chart shows the price of gold as adjusted by the official CPI, it shows that the 1980 high in gold still has not been exceeded. CPI-Adjusted Gold Price Over 100 Years FA I R V I E W G O L D F U N D I, L P 14
But Wait, There’s More…
Has inflation been massively understated by official statistics? Here is an inflation adjusted chart of gold
using the CPI formula as it was composed in 1980:
Inflation-Adjusted Gold Price Using 1980 CPI Formula
Monthly Average Gold Price
FA I R V I E W G O L D F U N D I, L P 15Gold is the Margin Clerk for
Central Bankers
This is a chart of the monetary base of the Federal Reserve Note the following times and events:
plotted along with thevalue of Federal gold reserves at
• Gold reserves dropping in the 1960’s, this is
market prices. Where the two lines intersect, the monetary
actual physical gold leaving the country at
base is fully backed by gold.
$35/Oz until that was suspended in 1971.
• Throughout the 1970’s the price of gold then
Monetary Base vs Gold Reserves at Market Prices rises from $35 to $850 in 1980, revaluing the
remaining gold held by the Fed.
• The price spike in 1980 revalued the gold
holdings until they fully backed the monetary
base of the Fed. (Where gold line crosses
blue)
• Not long after we saw the “taming of inflation”
and the beginning of the great financial bull
market we have been in ever since.
• This most recent monetary inflation has once
again created a massive spread between the
value of the monetary base and the value
of gold reserves; this can only be corrected
through price.
• Some of that correction can come from an
increase in gold, some can come from a
Monetary Base Gold Reserves at Market Price
decrease in the value of the other holdings of
the Fed (junk bonds, etc.)
FA I R V I E W G O L D F U N D I, L P 16Some Simple Math on Gold Price Potential, $6000 Gold?!
Beginning of the Rise
• The final link of the US Dollar with gold
was broken in 1971 at the price of $35
• By 1980 it had risen to $850
• That is a rise of 24.2 times
Current Gold Price Rise
• Gold then bottomed in 2001 around $250
• If one were to extrapolate the same 24.2 times
rise from $250 it would be priced at $6,050/Ounce
• $6,050 is 3.75 times the current gold price
around $1600.
Potential Based on Market Trends
• We have seen stranger things lately than seeing
an asset appreciate more than three times.
• We don’t predict a $6,000 gold price, but we
would not be surprised.
FA I R V I E W G O L D F U N D I, L P 17Gold is Under-owned
• We believe gold is under-owned, which The amount of assets invested in gold relative to assets invested
creates an opportunity to help our clients in other asset classes is well below its 2011 peak level as
gain exposure to this important diversifier represented in the chart below from J.P. Morgan:
as well as take advantage of an opportunity
that is not well covered. The AUM of Gold ETF funds plus the market value of total bars and coins in circulation, divided
by the sum of the AUM of equity, bond, hybrid, and money market funds. Annual obs. in %.
• Gold is not well represented in the broad
market indices. Case in point, Newmont
Corporation is the only precious metals
company represented in the S&P 500 Index
with a weighting of less than ¼ of 1% of
total assets. Therefore, individuals owning
stock market exposure through ETFs
replicating the S&P 500 Index effectively
have no exposure to gold.
FA I R V I E W G O L D F U N D I, L P 18Silver is Gold’s Wild Younger Brother
It has been said that gold is the money of kings, and silver is the money
of gentleman.
• Gold is the money of large commerce, of buying
and selling capital assets.
• Silver is the money of everyday commerce, of buying
everyday goods.
Throughout history silver has had a link to gold, it runs off for a while,
but it never goes too far, or stays away too long. Silver can fall further,
but it can also rise higher; and do it all faster.
• The Gold Silver Ratio (GSR) is a measure of how many
ounces of silver it takes
to buy an ounce of gold. The higher the number,
the less valuable is silver relative to gold.
• The GSR is an ancient credit spread; when distress hits
the market silver falls relative to gold, and the GSR rises.
• When Fairview says “gold”, we mean “gold and silver”
and we plan to have strategies around both.
FA I R V I E W G O L D F U N D I, L P 19Silver is Incredibly Undervalued Relative to Gold
• When gold and silver were used as money in America, the ratio
was often around 20, in some periods even lower.
• Even in 2011 the GSR was around 30 (silver very well valued)
• At the bottom of the most recent crash in March 2020, the GSR
hit 125; never before had it crossed 100. We are still well above
100 (undervalued silver)
• We expect the GSR could rise further once more with market
stress, but at some point it will fall; and silver will rise relative to
gold, as it has done in all great precious metals bull markets. It
will do so with great speed and ferocity.
We think miners are undervalued, and therefore have a lot of profit potential…
We think silver is undervalued, and therefore has a lot of profit potential…
Can you imagine how much profit potential we think exists in a silver miner? A whole lot!
FA I R V I E W G O L D F U N D I, L P 20Battling the Bear
• Our view of significant credit stress and monetary disorder reaches beyond gold. It will affect all assets and even
systems for owning those assets.
• Our ultimate goal is to position our clients to participate in the best part of the gold bull market.
• With the credit stress that will be happening at the same time we need to be careful in building that position.
• In order to establish this position carefully we may engage in certain strategies, generally early on in fund life.
» Reasonable ownership of US Treasuries or other government bonds, with a weighted duration which is overall moderate
(3-10 years)
• We believe in an initial credit distress moment that Treasuries will be very well bid. They also provide a hedge against
very deep problems in the banking and financial systems.
» Short selling or similar strategies that would profit from the decline in financial assets.
• As we progress we may also engage in certain hedging, trading, or options strategies.
• We also may make moderate investments in companies or securities we think benefit from distress (debt
collectors, etc).
FA I R V I E W G O L D F U N D I, L P 21Why Fairview
• Fairview has shown the ability to identify significant trends
in the market, particularly relating to issues with money
and banking. Establishing Fairview was itself a forecast of
a multi-decade period of credit stress, a forecast we believe
is proving true today.
• We have studied and admired gold for many years, we are
looking to invest our clients capital into it as a completion
of our overall investment thesis.
• We also believe that planning entry and exit in the
gold market is essential. By setting up this fund we
are managing our clients entry, because we are not
permanently wed to this market like other managers, we
plan to manage our clients exit as well. “Gold managers”
will never willingly manage the exit of their clients from
their own industry.
FA I R V I E W G O L D F U N D I, L P 22Leadership Team
Carson Rasmussen Principal Nels Stemm Principal
Mr. Rasmussen co-founded Fairview Mr. Stemm co-founded Fairview Partners,
Partners, LLC in January 2011. He serves LLC in January 2011. He serves on the firm’s
on the firm’s investment committee and has investment committee and oversees all
led the firm in raising nearly $100 million aspects of the firm’s investment platform.
of partner capital. Mr. Rasmussen oversees Mr. Stemm has invested over $180 million
the operations, finance, and administration of capital into real estate credit. Under
of the firm and its funds. He received his his leadership, Fairview has successfully
B.S. in Mathematics from the University of established itself as a leader within the
Washington and his M.B.A. from Notre Dame. real estate finance community. He holds a
B.S. in Construction Management from the
University of Washington.
FA I R V I E W G O L D F U N D I, L P 23Summary of Terms
Fund Details Fund Terms
LIMITED PARTNERSHIP TARGET SIZE OF OFFERING
Fairview Gold Fund I, LP $25,000,000
GENERAL PARTNER MINIMUM COMMITMENT
Fairview Partners Investment $250,000
Management, LLC
ANNUAL MANAGEMENT FEE
INVESTMENT MANAGER The annual Management Fee will equal 1.5%
Fairview Partners Investment of the aggregate Commitments of the Limited
Management, LLC Partners.
INITIAL CLOSING PREFERRED RETURN
06/01/2020 8% annual non-compounded return on such
Limited Partner’s Realized Capital and Costs.
FINAL CLOSING
Up to 12 months after the Initial Closing. PERFORMANCE FEE
20%
COMMITMENT PERIOD
To terminate on the 2nd anniversary of the GP CATCH-UP
Initial Closing, subject to four (4) three-month 100% to the General Partner until the General
extensions by the General Partner in its Partner has received 20% of the sum of
discretion. distributions made to the Limited Partner
pursuant to the Preferred Return.
REINVESTMENT PERIOD
The Fund may reinvest proceeds derived FUND EXPENSES
from a Fund investment during the All organizational, offering, and deal specific
Commitment Period. expenses, including costs and expenses
charged by service providers to the Fund.
FUND TERM
The term of the Fund will continue until the
3nd anniversary of Commitment period.
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