Jayant Bhandari - Gold, Emerging Markets, Arbitrage
Kitco Commentaries | Opinions, Ideas and Markets Talk
Featuring views and opinions written by market professionals, not staff journalists.
Jayant Bhandari the host of the highly acclaimed Capitalism & Morality sits down with Maurice Jackson of Proven & Probable to discuss Gold, Emerging Markets, Geopolitics, and Arbitrage. Mr. Bhandari is one of the most respected names in the Natural Resources with extensive experience in Emerging Markets, Junior Mining Companies and Philosophy. Find out what makes Mr. Bhandari’s perspective unique and valuable for speculators in the Natural Resource space. In addition, Jayant provides listeners with current arbitrage opportunities occurring right now in the market!
Maurice: Welcome to Proven and Probable where we focus on metals, mining, and more. I’m your host, Maurice Jackson. Joining us for a conversation is the host of the highly acclaimed Capitalism & Morality and a highly sought out adviser to institutional investors, Mr. Jayant Bhandari. Jayant, thank you for joining us.
Jayant: Thanks very much for having me, Maurice.
Maurice: When we spoke, you were in India and we discussed the fate of emerging markets. And I have to tell you, shortly after our interview, I found myself in Madagascar and literally, I mean word for word, lived out our interview.
So for our listeners, if you’re planning on traveling to an emerging market, we encourage you to revisit the conversation entitled Emerging Markets, Buyer Beware.
Jayant, today you’re in Vancouver, BC. But earlier this month, you were in London and you conducted a presentation entitled Gold in India: Current Market Dynamics and Future Opportunities. For our audience that could not attend your presentation, can you please share some of the talking points?
Jayant: In London, I gave a speech on why Indians buy so much gold. And the reason I gave behind why Indians buy so much gold is that India simply does not offer people opportunities to save their money. They don’t really have a way to save their money. When they invest their money in the stock market or in properties, they tend to have a negative yielding investment. This is exactly the reason why Indians buy so much gold.
I also talked about what has been happening with the volume and price of gold in India. And the funny thing, Maurice, is that gold at their street level India trades for about 110% of the international price. Now, if you actually add up all the taxes that this gold faces, gold in India should trade for about 115% to 120% of the international price.
And the reason why gold trades at such a discount to what it should trade at is that most of the gold that comes to India comes via smuggling. It is very easy to cross the border from Bangladesh to India and if nothing else, all you have to do is to pay a bribe of a few dollars to move your goods from Bangladesh to India. So I talked about these two issues in London.
Maurice: That’s interesting you mentioned that because we discussed the emerging markets on our last interview and it seems that scenario plays itself out well in these emerging markets or am I incorrect?
Jayant: Absolutely. There is a huge amount of corruption in these countries. Also, for a person who wants to do business the proper way, which is if he wants to comply with all the legalities, he simply cannot do business. If a commodity gets sold at a price that is less than what it should be after including taxes, if it sells for less than that, how can a businessman who does things properly can ever do business? You all have to “cheat” on taxes. And I’m using cheat in inverted commas because there is simply no other way for these people to survive because the government is rapacious and extraordinarily corrupted these countries.
Maurice: It doesn’t seem too farfetched believe it or not because that’s the same reason and/or virtues of owning gold here in the West. It’s just that it’s much more dire I would say in the emerging markets. And I’m assuming you would agree with that comment.
Jayant: Oh, absolutely. The kind of corruption that you see in emerging markets is a hundred or a thousand or much more than what happens in Canada or the US. And I do agree there’s corruption, irrationalities, bureaucracy, and tyranny in the Western countries. But this is absolutely nothing compared to what happens to let’s say, 80% or actually 70% of the world’s population.
Maurice: Indeed. Today, Jayant, let’s focus a little bit on geopolitical events that have your attention that are not being headlined in the mainstream news.
Jayant: Well, let’s stick with the emerging markets then. There continuous to be rioting and problems in the country. Hindu fanatics are increasingly getting an upper hand in India. They lynch people. They kill people for the mere crime of transporting cows. Now, cows have become this holy – big holy symbol in the country now. And a High Court judge recently said that India should make cow the national animal.
Now, India is increasingly looking like a joke to me the way North Korean dictator is. They are focused on exactly things they should not be focused on. They are not focused on development. They are focused on regressing the country to medieval times. And as I have said to you earlier, Maurice, India is very, very rapidly becoming a police’s state. And the world fails to see that for many reasons.
And the same is happening in a lot of emerging markets. South Africa has increasingly a civil war like situation but not really covered very well by the Western media. And Western media does not really want to recognize the fact that while apartheid was a horrible system, what South Africa today has is much worse. So a lot of problems in the emerging markets which the international press does not want to see.
Maurice: Let’s discuss also geopolitical events that again, aren’t making the news. You’re in British Columbia. Is there anything there that’s concerning to you?
Jayant: Recently, Maurice, British Columbia had prevention elections. And a party called the Green Party has won 17% of votes. This is absolutely amazing that this party which used to own 1% or in that kind of range not too long back in the past and which owned – got only 8% votes in the last election now suddenly has 18% of the votes in this election. They are basically now in a position to decide who rules British Columbia next and they will partner with NDP, which is a left-center party.
British Columbia will very likely become much more leftist than it has been recently. These people are talking about killing. A major gas pipeline project which has mostly been approved but they now want to create problems to stop this from happening. This is a $7.4 billion project.
They are also talking about killing a hydroelectric project. They want to increase minimum wages to $15 an hour. They want to impose very high punitive taxes on people, foreigners, who want to buy properties in British Columbia. They want impose a 30% tax on these people.
So, some of the policies are absolutely outrageous and this will set British Columbia very badly. But again, Alberta has chosen to lean left now. British Columbia is leaning left. And Canada as a country has increasingly taken the path of the left in the recent past with the election of Justin Trudeau as the Prime Minister of the country.
Maurice: Yeah, it sounds like the same demographic from Seattle is having an influence in that B.C., Vancouver area. Is that what you’re seeing there?
Jayant: Oh, yeah. If you look at the statistics closely, it seems to me that people who vote for the left are mostly the so-called educated, people who live in high technology urban areas. This is very ironic because I would have expected these people to be more enlightened than the none-urban people, than the less educated people.
But my guess is that living a very structured life of urban areas ensures that these people become very simplistic in their thinking. So they get prominent to be attracted towards leftist ideology which is very simplistic.
Maurice: Switching gears, Jayant, listeners are always anxious to hear your share of arbitrage opportunities. Are there any that have your attention at the moment?
Jayant: There are always companies. There are always mergers and acquisitions happening in the market, Maurice. And mergers and acquisitions offer a very low risk, high reward way to invest in their stock market.
Two names I want to mention to you. Neither of the names is a current investment opportunity because the volume of the acquiring companies are very high right now because the announcements were made recently. I’m hoping for both these volumes to dry up a bit and expect arbitrage to increase as days pass by.
So let me give you the two names. One is Mariana Resources. It is being acquired. And the ticker is MARL. The current arbitrage is only 4%. I would expect at least 7-10% arbitrage upside before I invest in Mariana Resources.
Another company that I find interesting and again, an arbitrage opportunity, is Integra Gold. The ticker is ICG. And again, the arbitrage is about 4%.And I want the arbitrage to grow to about 7-10% before I invest in this company.
Your audience should do simple math on the value of Integra. They should do simple math on the value of Mariana Resources and compare it with the share price. And then invest for about 7-10% arbitrage upside and hopefully more. I actually look for about 20% arbitrage upside, Maurice.
Maurice: And usually, we find these arbitrage opportunities to provide more than 20% but in this case, thank you again for sharing those. I know our audience is quite delighted.
Before we close, Jayant, July is approaching which means Capitalism & Morality is upon us. For the first time listener, please tell us about this unique blend of reasoning, argumentation, and liberty.
Jayant: Well, last Saturday of July, we will have Capitalism & Morality seminar which I have run for about seven, eight years now. And it’s an amazing day. This is the day I look forward to and a day a lot of my audience looks forward to.
We get some of the best people, best philosophers coming to speak at the seminar. There are about 10 to 15 speakers, Iam Plimer, Rakesh Wadha, Rick Rule, Doug Casey, Adrian Day. This is just a long list of people speaking at the seminar. And it challenges people who think because we talk about issues that you don’t really talk about in the general public these days.
So this is very intellectually challenging. People love this seminar and I invite people to come. They can actually even get 10% discount if they use coupon called P&P and they can get a 10% discount.
Maurice: Well, on behalf of our listeners again, Jayant, thank you for that invitation. Jayant, if someone wants to get more information, where can they purchase the tickets and learn more about your work? Give us the contact details.
Jayant: They can go to my website, JayantBhandari.com. And there on the website is a tab called Capitalism & Morality. And they will find all the details about the seminar and registration tabs, PayPal tab within that page.
Maurice: And last but not the least, please visit our website, www.ProvenandProbable.com where we interview the most respected names in the natural resource-based. You may reach us at Contact@ProvenandProbable.com.
Jayant Bhandari, the host of Capitalism & Morality. Thank you for joining us today on Proven and Probable.
Jayant: Thank you for the opportunity, Maurice.
Maurice: All the best, sir.
Jayant: Thank you.