No time to snooze…

  • Release the ‘Palace Letters’
  • An appealing investment idea
  • How to keep your wealth away from the government

Today, the Port Phillip Publishing team is on a half-day. We hope you don’t mind.

After a big year, we’re spending a few hours away from the office for our annual Christmas party bash.

Thankfully, a handful of gallant publishing warriors have volunteered to stay on duty so that you’ll still receive your daily, weekly, and monthly subscriptions on time.

In the interests of full disclosure, your editor isn’t one of them. We’re writing this earlier in the day than usual. By the time you get this, we’ll be snoozing in an armchair at home, recovering from the slap-up feed.

Until then, the show goes on…

Markets

Overnight, the Dow Jones Industrial Average closed up 65.19 points, or 0.33%.

The S&P 500 gained 4.84 points, or 0.22%.

In Europe, the Euro Stoxx 50 index gained 43.55 points, or 1.39%. Meanwhile, the FTSE 100 gained 0.42%, while Germany’s DAX index added 1.75%.

In Asia, Japan’s Nikkei 225 is up 242.50 points, or 1.29%. China’s CSI 300 is up 0.86%.

In Australia, the S&P/ASX 200 is up 16.20 points, or 0.29%.

On the commodities markets, West Texas Intermediate crude oil is trading for US$51.08 per barrel. Brent crude is US$53.89 per barrel.

Gold is US$1,170.23 (AU$1,569.04) per troy ounce. Silver is US$17.01 (AU$22.81) per troy ounce.

The Aussie dollar is worth 74.56 US cents.

Release the ‘Palace Letters’

Writing on John Menadue AO’s blog, Gough Whitlam biographer Professor Jenny Hocking writes:

A Federal Court case launched against the National Archives calling for the release of the “Palace letters” quietly achieved a historic milestone this month. It might have seemed a routine, even unremarkable, short preliminary hearing in the Phillip Street courtroom 21B, and yet the implications of the commencement of proceedings are anything but.

The Palace letters, between the Queen and Sir John Kerr, governor-general at the time of the dismissal of the Whitlam government, are designated “personal” and embargoed until 2027 “at the instruction of the Queen”, after which they can only be released with the Queen’s approval. With the Federal Court case under way, however, the release of the Palace letters will now be determined by an Australian court and according to Australian law — and not by the Queen, “a foreign monarch,” in the words of Prime Minister Malcolm Turnbull.

Exactly what role did Queen Elizabeth II play in the ‘Dismissal’ of Gough Whitlam in 1975? Just as importantly, what other influences were at play? Was the ‘Dismissal’ actually an American-directed coup?

We believe we have the answers here. Check it out now.

By the way, if you haven’t heard of John Menadue, he was Gough Whitlam’s private secretary from 1960 to 1967.

An appealing investment idea

Interesting news from Bloomberg, concerning Rio Tinto Ltd [ASX:RIO]:

Even for the deepest pockets in the mining industry, diamonds are hard to find.

Rio Tinto Group Chief Executive Officer Jean-Sebastien Jacques said this week he’s on the hunt for new diamond mines, but with more than half of the industry controlled by just two companies and new discoveries rare, it’s going to be a tall order.

“There’s not a great deal available,” said Des Kilalea, an analyst at RBC Capital Markets in London. “It’s got to be big, but there are not a lot of those.”

As one of the world’s top producers of rough gems, Rio operates the large Argyle mine in Australia, which produces low-quality stones, and has a controlling stake in a Canadian mine. The question is where to find new supply.

Diamonds are a fascinating subject. Even the cheapest jewellery-grade specimens go for hundreds of dollars. The most expensive fetch millions.

The Blue Nile website, which apparently provides a reputable online market for diamonds, lists its cheapest diamond at AU$353.

For that, you’ll get an emerald-shaped, 0.3 carat, ‘Very Good’ cut, ‘E’ colour, with ‘Slightly included’ clarity.

When you put it like that, it doesn’t sound so appealing to own a diamond.

But, if you’ve got a little more to spend, say AU$12,948, how about a princess-shaped, 0.92 carat, ‘Signature Ideal’ cut, ‘D’ colour, ‘Flawless’ clarity diamond?

That sounds a little more like it.

Many folks will argue that diamonds make a great alternative to gold in terms of owning a ‘hard asset’. As you no doubt know, few substances are harder and more durable than diamonds.

That’s a positive…and a negative.

One of the reasons why gold and silver are historically so popular, as a form of money, is down to their divisibility. It’s literally quite possible to cut or reshape a gold or silver coin without creating any unusable, cast-off material.

That isn’t so with a diamond.

For a start, you can’t just take a hacksaw, or a strong pair of clippers, to a diamond. Sawing diamonds requires specialist machinery — a superfine bronze blade, with a diamond and oil coating.

You’ve probably heard that the only thing strong enough to slice through a diamond is another diamond. Strange, but true.

Furthermore, cutting and polishing a diamond results in ‘cast-off’ material. A finely-polished diamond may only be 70–90% of the size of the original rough diamond.

That’s a lot of waste.

Of course, there is another difference between gold or silver and diamonds. With diamonds, you can achieve more value through subtraction.

That is, a rough diamond is worth significantly less than a cut diamond. That’s due to the work, effort and skill that goes into it. Even though the final cut diamond’s mass may be less than the rough diamond, it has a higher value.

Even so, there are other limitations to diamonds, such as: How can you tell the difference between a real and fake diamond? And what about the increased popularity of manufactured diamonds, or lab-created diamonds?

Alchemy hasn’t yet resulted in people being able to turn base metals into gold, but scientists can create diamonds in a laboratory, which are in many cases indistinguishable from natural diamonds.

Will that have an effect on the price? Maybe. Although, according to Stephen Lux, the CEO of Gemesis Diamond Company, their lab-created diamonds only sell at a 20–30% discount to natural diamonds.

It suggests that even lab-created diamonds require a lot of work, effort and skill to bring them up to scratch.

So, does it make sense to own diamonds as an investment? Sure, why not? If you’re already comfortable owning gold and silver bullion coins, it’s not such a leap to diversify into diamonds.

We’d just suggest doing some homework first. Understand the different qualities of diamonds. This will help you make sense of which diamonds are likely to make the most sense as an investment.

Our bet is that the better quality diamonds would make the most sense, even though they cost more to begin with.

And providing you don’t sink your entire wealth into diamonds, we see it as a neat little investment idea. After all, even if the value falls, you’ll no doubt still have something that’s appealing to look at.

You can’t say that about every investment.

How to keep your wealth away from the government

Buying diamonds has been on Jason Stevenson’s radar since September 2015.

As he wrote in that month’s issue of Resource Speculator:

When it comes to the government, your wealth is their wealth.

Today governments are already tracking your physical gold purchases. When you walk into the Mint to buy physical gold, they ask you for your name, driver’s license, and transaction details. So when the time comes, they’ll know who you are…and exactly how much you own. Of course, they will pay you some Aussie dollars in exchange for your gold — the exact currency that you don’t trust or want to hold.

Thanks to Part IV of the Banking Act of 1959, the Australian Government can get away with this theft. Although it was suspended in 1976 (but not repealed), the Act gives the Commonwealth the right to confiscate private gold and have it delivered to the RBA.

Please don’t think that government won’t stoop to stealing your physical gold during the next sovereign debt crisis. If you’re looking for a safe haven for your wealth during the crisis, gold is not the answer.

Instead…

In an age when governments are aggressively hunting for money, diamonds should shine. They’re portable and secure stores of wealth. In fact, a diamond portfolio worth millions can be carried in a wallet or purse.

Furthermore, diamonds don’t typically trigger x-rays — although they can be seen. And being non-metallic they don’t trigger metal-detecting security scanner alerts either.

But more importantly, unlike gold and silver which can be used in circulation, governments don’t see diamonds as currency — they’re seen as a precious collector’s item. When FDR unveiled his executive order, he didn’t confiscate gold collector coins — he was a coin collector himself and understood they wouldn’t be used in circulation. That means the likelihood of government confiscating your diamonds is quite low.

Buy physical diamonds, and, importantly, buy diamond stocks, too. Just as Rio Tinto is on the lookout today for a diamond investment, so too was Jason Stevenson back in 2015.

The good news is that he’s found one. And while the stock in question is currently trading above his buy-up-to price, it isn’t doing so by much.

It’s a great little story, and one that keen speculators should follow with interest. If you don’t subscribe to Jason’s Resource Speculator, you can find out all about it here.

Cheers,
Kris