How To Protect And Grow Your Capital In A Market That Wins During Recessions
Dear Reader,
What's your reward for working hard and saving prudently?
The reward for your commendable frugality is absolutely nothing ("zilch") on your savings.
People who should not have borrowed took money from people who should not have lent it to them. That money is now gone and the government paid for the loss out of our taxes.
What no one is quite sure of yet is what the implications are from a bankrupt Government. The banks are no longer bankrupt but the Government is and the Government owns the banks. You get my point.
This applies in both the UK and the US.
So, your money is now sitting in a bank earning nothing but you are happy because you have protection in the form of a guarantee from the Government. Everyone knows that a guarantee is only as good as the person giving the guarantee. I personally don't think a guarantee provided from someone who has no money to be of much value.
Your guarantee is from a bankrupt Government.
It is clear that cash is no longer a zero risk investment. The risk, you are taking leaving your money in a financial institution owned by a bankrupt Government earns you nothing.
Actually, you are earning less than nothing because inflation is eroding your wealth every day.
The Impact of Inflation
The Retail Price Index (RPI), as a measure of inflation, increased by 29.5% over the past 10 years.
If that rate of inflation was to continue over the next 10 years, your savings would be worth roughly 23% less in 10 years time. That means someone with savings now of £10,000 will have a purchasing power in 10 years time from those savings of £7,700.
With many financial commentators predicting an increase in the rates of inflation in the coming years, the problem of wealth erosion is even more acute.
Add to that the fact that it looks unlikely banks will raise savings rates any time soon and we know we have a problem.
I decided it's time to "wake up and smell the coffee". I could not sit back any longer and watch the money I worked very hard for disappear through no fault of my own.
I recently emptied my savings account and have redistributed that into other investments, which I believe will provide me with a suitable return at a level of risk I can sleep with.
As much as anyone else, I have realised the importance of true diversification and have put some of that money into collectibles.
Britain's Best Investment Guarantee
Our "Guaranteed Minimum Return Investment Contracts" offer investors a guaranteed minimum return of 20% over a 5 year contract. That equates to a guaranteed minimum return of 4% per annum.
If you can find a bank that offers you that sort of return, let me know.
With the price of rare stamps going up by an average of 10% per annum over the past 50 years on a compound basis and it is likely that the minimum return is nothing more than a safety net. The potential returns could be much more.
In previous recessions, rare stamp prices continued to rise and evidence from recent auction realisations suggests this is the case in the current recession too.
There are only a couple of questions that remain.
How safe is your cash investing in a guaranteed minimum return contract where the guarantee is given by Stanley Gibbons?
What do we do with your cash?
Once I show you what I do with your cash, you will see that you are in safe hands.
4 key things I do ensure your cash is safe:
- I impose a strict limit on the value of sales I permit each year containing buy back guarantees.
- I re-invest your cash in my business which generates an average return on capital of 25% per annum.
- I transfer monthly amounts into a "client reserve account" to ensure that funds are available to re-pay your guaranteed return at the end of the contract.
- I sell you rare stamps with a level of quality which are most likely to rise by more than the guaranteed return over the next 5 years.
Strictly Limited Availability
The most important thing we do to protect your cash (and the interest of our Shareholders) is to impose a strict internal limit on the value of sales we permit each year containing buy back guarantees.
The limit is set at a level appropriate to the size, asset value and liquidity of our business. To put into context, the total value of assets we are committed to repurchase in any one year is equivalent to 1 month's average purchases of rare stamps by Stanley Gibbons.
This, more than anything else, protects our liquidity and financial strength even in the darkest times.
Your Cash Invested In A Well Managed Business
Stanley Gibbons has enjoyed an 8-year period of growth in profits. We have grown our net asset base by 167% from the year 2000 to 2008. I will say no more than this as I would only be "blowing my own trumpet".
What is more important to you is how we make a return on your cash.
The first thing that happens when we take your investment is that we reinvest that cash into our business, mainly through the acquisition of new quality rare stamps and historical signatures. We make an average return on capital of 25% per annum which you will appreciate is far in excess of the 4% we guarantee to you on your investment contract.
What this means is that we can turn a £100,000 investment into £300,000 in cash over a 5 year contract term. This gives us a huge margin of safety.
Your Cash Protected
However, we take further measures to protect your cash and to ensure that we can meet all our financial obligations.
During the course of your investment contract, we undertake to transfer monthly amounts into a "client reserve account" to ensure that, by the end of the contract, sufficient funds have been set aside to repay the minimum guaranteed amount to you.
To illustrate, if you invested £100,000 with us on a 5 year contract guaranteeing a minimum return of 20% in 5 years time, we transfer £2,000 per month from the date of your contract into the "client reserve account". That means that at the end of your contract the money required to pay your minimum return is sitting with your name on it waiting for you.
Banks could have learned a lot from us!
But The Underlying Assets Pay For The Guarantee Anyway
Everything above is only added security. In reality, we fully expect your investment in rare stamps or historical signatures to appreciate in value by more than the minimum guaranteed return.
Thus, the minimum guarantee is financed out of the underlying increase in the value of the assets invested in. Consider the guarantee as an insurance policy.
During 2008, 3 year contracts written in 2005 expired. The value of those investment portfolios were, in all cases, higher than the minimum return guaranteed. In many cases, those investors chose to reinvest with us without any guaranteed returns.
Remember that rare stamps have never declined in value in any 5 year period over the past 50 years.
And Finally... Something For the Doom-mongers
For those of you who are still not convinced, let's take the scenario that Stanley Gibbons went bankrupt.
In the highly unlikely event that the Stanley Gibbons Group were to cease trading or become insolvent, as an investor in one of our guaranteed minimum return investment contracts, you would not lose your investment but simply the guaranteed return.
In this circumstance, investors would take personal ownership of the underlying assets which they could dispose of personally.
Your ultimate protection is that you own a valuable tangible asset.
Protect And Grow Your Capital By At Least 4% Per Annum While You Still Can
As referred to above, the main way we protect your capital is by heavily restricting the availability of investment sales we make with a guaranteed minimum return attached.
As a result, our supply of 5 year investment contracts, which will guarantee you a return of 4% per annum over the next 5 years, is strictly limited.
To subscribe to a 5 year guaranteed minimum return investment contract guaranteeing a minimum return of 20% in 5 years time, please complete the order form in the link below:
Alternatively, if you would like one of our advisers to give you a call to discuss options further, please complete the contact request form in the link below:
It is time to join some of the great investors, in the world of diversification. I look forward to welcoming you on board for an interesting and wealth-accumulating ride.
Sincerely,
Mike Hall
Chief Executive
The Stanley Gibbons Group
PS. If 5 years is too long for you, we still have a small supply of 3 year investment contracts available paying a guaranteed minimum return of 3% per annum over the next 3 years.