Recent news article on Josef Schachter and John Ing
"Top stock-pickin' hombre avoids the herd"(click to view article)
By Gyle Konotopetz
Business Edge
Published: 12/9/2004 - Vol. 4, No. 44

Is it back to the '70s for gold?
John Ing detects strong parallels now with rally to US$850

William HanleyWilliam HanleyWilliam Hanley
Financial Post

Saturday, April 10, 2004

John Ing, president and CEO of Maison Placements Canada: "You should be making your investment decisions based on what's going to happen after the [U.S. presidential] election.''

On this Tuesday in late March, John Ing normally would be running his 10 kilometres at lunch from the Cambridge Club, not sitting in the club looking out at the rain lashing down on Toronto's city hall square. For the fitness-conscious Ing, chief executive of Bay Street boutique brokerage Maison Placements Inc., running has become almost as much a part of his routine as his day-in day-out belief in the ultimate value of gold. Almost.
Ing is the Street's best-known gold bug, one of a hardy breed of people who are true believers in what John Maynard Keynes called a "barbarous relic." After a 20-year bear market that saw bullion fall from US$850 an ounce to just over US$250 in 1999, the believers are once again making believers of many investors as the relic's price hovers near a eight-year high of US$420 and gold stocks are subject to waves of speculation.
And the price is not stopping here, Ing says from his window seat in the Cambridge's airy and comfortable dining room on the 11th floor of the Richmond Tower. "My sense is the big move is coming for gold, notwithstanding that we've had a move of US$100 since we last met 18 months ago," he says of our most recent lunch in November, 2002. "I've been saying consistently that US$510 is my target, but I think it will be easily surpassed this year."
Ing believes that for gold, which has been called the ultimate store of value but which has been a lousy investment for almost a quarter century, it's back to the 1970s, when the price rocketed with inflation to US$850 an ounce from US$50. "Every cycle exceeds the previous one," he says.
The Cambridge Club, which is built around squash and fitness, will also be harking back to the '70s next month, when it celebrates its 30th anniversary. It's our third visit here as a guest and the hospitality is such that we feel we belong. Today, the Ing party of two is treated to a special starter by chef Steve Morsi. His hand-made butternut ravioli lightly sauteed in sage, butter and oil is special, indeed. Our host has the fish special, blackened tilapia with mashed potatoes and steamed broccoli. We head for the grilled halibut with saffron beurre blanc, fennel and green beans.
"Everything is good," Ing says. We can't argue. Even the portions seem to be sized for people who have just had demanding workouts and will be having more.
And everything looks good for gold, too, in Ing's admittedly biased book. He's especially excited by the fact that gold is not just going up against the U.S. dollar, which has been the classic hedge play so far.
He leans over to make his point.
"Finally, gold is starting to move out and break out against the
euro. In yen, gold is about to break out. In other words, gold is going to start to outperform all currencies."
This is great news unfolding for the believers. Until recently, those who bought gold with euros or yen had seen little or no real appreciation of their gold investments because the dollar was falling and falling against their own currencies.
"The last time this happened was in the '70s against the Swiss franc," Ing says. "That's when people started to look at gold seriously."
The primary driver of gold will continue to be a "classic debasement" of U.S. currency, which he says is merely a symptom of a sick U.S. economy that is indebted to China and Japan, which may not want to hold U.S. dollar-denominated debt and the dollars themselves in such quantities forever. "They are starting to look at diversifying."
Some of that diversifying, Ing says, will be further into gold. "One of the reasons I'm bullish is that China has less than 2% of its reserves in gold. I believe they've been buying every ounce the
Europeans have been selling. They also liberalized the ownership of gold. The man in the street can buy gold. It was a cultural thing to give gold as a gift. Chinese have a huge savings rate and the stock market is considered too speculative."
So, China, increasingly at the centre of world financial and economic events, could be good for gold.
China also has a connection to another of Ing's gold themes: Inflation. China's and the economies of other Asian countries have been red-hot and instrumental in the increasing demand for oil, the rising price of which could help touch off inflation, just as it did in the 1970s.
"What the Street hasn't even considered is inflation. That's when gold really makes its big move. Inflation is now dead in most economists eyes....Growth in Asia could stoke inflation."
So the universe is unfolding as it should for Ing -- just as the 1970s did. "If I'm right, we're just at the beginning of the [gold] cycle. All we've done is just come out of a 20-year bear market."
In this new bull market, the "terrific 10" stocks he's been recommending to clients -- and which on average have risen almost 250% since June, 2001 --should continue to outperform. They are Bema Gold, Campbell Resources, Crystallex International, Eldorado Gold, Claude Resources, High River Gold, Miramar Mining Corp., Northgate Exploration, Philex Gold and St. Andrews Goldfields. Among the bigger stocks, he continues to favour Newmont Mining, Agnico Eagle, Goldcorp, Kinross Gold and Teck Corp.
He personally doesn't own any gold stocks. He never has, even though he's been following gold since he got into the investment business in Montreal in 1969. Instead, he prefers to own bullion and, to a lesser extent, gold certificates. He has "lots of cash," he says, and T-bills. And he is quick to note that his firm, Maison Placements, has broker warrants from companies it helps finance.
Since last we had lunch, Ing has missed out on the stock market's big rally. But still doesn't like the market and gold is a counter-play against stocks.
Gold, of course, has done well since November, 2002. But for the record, we must note that he was calling then for bullion to hit US$510 by the end of 2003. That's his near-term target again for this year and he can foresee scenarios unfolding that could see the price going over US$600 and heading toward that magic US$850 after the presidential election is over and the harsh realities facing the U.S. economy come into focus.
"You should be making your investing decisions on what's going to happen after the election," he says as he pays the bill, a quick peek of which shows that the Cambridge is perhaps priced a little below comparable Bay Street restaurants. "I can guarantee you interest rates are not going down."
The Cambridge has a clubby feel even for guests. The service, as you might expect, is more familiar but very efficient. And the prices for various classes of memberships will frighten few people away.
John Ing will probably pick a different venue when next we meet. Something with a '70s theme might be appropriate. And we can guarantee the message of the gold true believer will not have changed.
© National Post 2004

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