ECB: The European Commission’s Whore

All Central Banks Now Monetizing Debt

Hinde Capital Investor Presentation

May 11th, 2010
The Independence of the ECB is now in tatters.

The most important thing about money is to maintain its

stability…You have to chose between trusting the natural
stability of gold and the honesty and intelligence of
members of the government. With due respect for these
gentlemen, I advise you, as long as the capitalist system
lasts, to vote for gold.

George Bernard Shaw, 1928

All material is compiled from sources believed to be accurate, but no accuracy can be guaranteed. The presentation is for information purposes only and is not a solicitation to
invest. Unauthorized reproduction or distribution is strictly prohibited.
The ECB: The European Commission’s Whore

"The purchase of government bonds poses significant stability risks and that's why I'm critical of
this part of the ECB's council's decision, even in this extraordinary situation.”
Axel Weber, Head of the Bundesbank

At the slightest hint of a sovereign crisis in Greece, the ECB has

monetized government debt, and utterly compromised its independence:

 Trichet, 6th May 2010: “[ECB] did not discuss buying government bonds”

 Sarkozy, 9th May 2010: “ . . . we have decided to give the Eurozone a

veritable economic government”

 Trichet, 10th May 2010: “We are fiercely and totally independent”

All central banks, not just the ECB, have now capitulated and monetized
government liabilities.

All material is compiled from sources believed to be accurate, but no accuracy can be guaranteed. The presentation is for information purposes only and is not a solicitation to
invest. Unauthorized reproduction or distribution is strictly prohibited.
The Fed has been here before . . .

The US is running a monstrous fiscal deficit. Unmanageable deficits are

often a precursor to money printing.

US Federal Surplus/Deficit, $ mns

1901 - Present

400,000

200,000

-200,000

-400,000

-600,000
-800,000

-1,000,000

-1,200,000
-1,400,000

-1,600,000
1901
1906
1911
1916
1921
1926
1931
1936
1941
1946
1951
1956
1961
1966
1971
1976
1981
1986
1991
1996
2001
2006
All material is compiled from sources believed to be accurate, but no accuracy can be guaranteed. The presentation is for information purposes only and is not a solicitation to
invest. Unauthorized reproduction or distribution is strictly prohibited.
Monetize that Debt!

In the wake of the financial crisis, the Fed purchased an unprecedented

amount of private and public debt. It has already started to monetize this.
Where the Fed has led, the ECB has followed.

Purchases of Govt Securities by Fed, $ bns

1,400 2,000

1,200 1,800

1,600
1,000
1,400
800
1,200
600
1,000
400
800
200 600

0 400

Nov-09
Jan-09

Jun-09

Jul-09
Feb-09

Mar-09

Apr-09

Aug-09

Sep-09

Oct-09
May-09

Dec-09
MBS Held Fed Agency Debt Held Treasuries Held All Secs Held (RHS)

All material is compiled from sources believed to be accurate, but no accuracy can be guaranteed. The presentation is for information purposes only and is not a solicitation to
invest. Unauthorized reproduction or distribution is strictly prohibited.
Gold: Skyrocketing in Euros

Now Germans and Austrians are demanding gold as the ECB has
destroyed its integrity. Gold is making new highs in euros.

Currencies are an ugly parade, and one can only choose the least
bad among a terrible lot. Recent events only underline the need to
own gold.
Gold in Euros

1,000
900
800
700
600
500
400
300
200
100
0
Jan-02

Jul-02

Jan-03

Jul-03

Jan-04

Jul-04

Jan-05

Jul-05

Jan-06

Jul-06

Jan-07

Jul-07

Jan-08

Jul-08

Jan-09

Jul-09

Jan-10
EUR

All material is compiled from sources believed to be accurate, but no accuracy can be guaranteed. The presentation is for information purposes only and is not a solicitation to
invest. Unauthorized reproduction or distribution is strictly prohibited.
Gold: Going Up In All Currencies

And it’s not just in euros gold is making new highs. Gold is a good hedge
against debasement in any currency when real interest rates are close to
zero.

All material is compiled from sources believed to be accurate, but no accuracy can be guaranteed. The presentation is for information purposes only and is not a solicitation to
invest. Unauthorized reproduction or distribution is strictly prohibited.
Currencies: An Extremely Poor Store of Value

Money should be: 1) a unit of account, 2) a means of transaction and 3) a

store of value. The dollar has been an extremely poor store of value.

Almost all European currencies have performed worse than the dollar over
the last fifty years. The ECB’s recent move means the ECB is not the
Bundesbank, and the Euro will be more like the Drachma or Peseta.

All material is compiled from sources believed to be accurate, but no accuracy can be guaranteed. The presentation is for information purposes only and is not a solicitation to
invest. Unauthorized reproduction or distribution is strictly prohibited.
Betting on Deflation is a Poor Bet

Inflation is the norm. Deflation is extremely rare following the move to

paper currencies. This is no surprise.

All material is compiled from sources believed to be accurate, but no accuracy can be guaranteed. The presentation is for information purposes only and is not a solicitation to
invest. Unauthorized reproduction or distribution is strictly prohibited.
Why Gold?

Hinde Capital believes gold will go much higher over the next few years:

 All major central banks are now monetizing debt. They have shown
very little independence and will do anything to fund deficits.

 Monetising debt, i.e. printing money, will debase paper currencies.

 Global demand for gold will overwhelm supply, causing gold prices to
skyrocket.

 Gold produces no cash flows and therefore has no price limit.

All material is compiled from sources believed to be accurate, but no accuracy can be guaranteed. The presentation is for information purposes only and is not a solicitation to
invest. Unauthorized reproduction or distribution is strictly prohibited.
Gold Has No Upper Price Limit

Bubbles form when goods are priced not based on any cash flows, but
based on what other investors will pay (NASDAQ, subprime loans, etc).

Gold cannot be valued on any basis of cash flows and perfectly satisfies
bubble conditions.

Yet the bubble is not actually in gold, rather it is in fiat money. As of now,
there is no end in sight to its creation by central banks.

Thus the ultimate value of gold could be as high as the moon.

As investors allocate money to gold, demand will overwhelm supply.

All material is compiled from sources believed to be accurate, but no accuracy can be guaranteed. The presentation is for information purposes only and is not a solicitation to
invest. Unauthorized reproduction or distribution is strictly prohibited.
Gold: Massively Lagging Money Creation

The growth in global money supply is vastly exceeding central bank gold
holdings.

Without anything to restrain money issuance, central banks have behaved

irresponsibly and printed money at a furious rate . . . . Gold, however,
cannot be printed.

Gold Reserves and Monetary Base

(US, UK, Japan, Europe) - Jan 1999 = 100

350
300
250
200
150
100
50
0
Feb-99
Aug-99
Feb-00
Aug-00
Feb-01
Aug-01
Feb-02
Aug-02
Feb-03
Aug-03
Feb-04
Aug-04
Feb-05
Aug-05
Feb-06
Aug-06
Feb-07
Aug-07
Feb-08
Aug-08
Feb-09
Aug-09
Feb-10
Money Supply ($bns) Gold Reserves (mns troy ounces)

All material is compiled from sources believed to be accurate, but no accuracy can be guaranteed. The presentation is for information purposes only and is not a solicitation to
invest. Unauthorized reproduction or distribution is strictly prohibited.
Most Central Banks Hold Little Gold

Emerging market central banks hold very little gold. Their primary holdings
are in US Treasuries. The scope for gold allocation in emerging markets is
huge.

All material is compiled from sources believed to be accurate, but no accuracy can be guaranteed. The presentation is for information purposes only and is not a solicitation to
invest. Unauthorized reproduction or distribution is strictly prohibited.
Most Central Banks Now Buying Gold

For the first time in forty years, central banks are beginning to buy more
gold.

India, Sri Lanka, China, Russia and others are now buyers on any
weakness in the gold price.
Central Bank Holdings of Gold in mm Troy Ounces

1,200

1,150

1,100

1,050

1,000

950
Jan-70

Jan-72

Jan-74

Jan-76

Jan-78

Jan-80

Jan-82

Jan-84

Jan-86

Jan-88

Jan-90

Jan-92

Jan-94

Jan-96

Jan-98

Jan-00

Jan-02

Jan-04

Jan-06

Jan-08
All material is compiled from sources believed to be accurate, but no accuracy can be guaranteed. The presentation is for information purposes only and is not a solicitation to
invest. Unauthorized reproduction or distribution is strictly prohibited.
Gold: Buy What China is Buying

China holds almost no gold, but now it is buying. Investors should buy
what China is short of.

China: FX Reserves and Gold as a % of Reserves

3,000 6%

2,500 5%

2,000 4%

1,500 3%

1,000 2%

500 1%

0 0%
Jul-96

Jul-97

Jul-98

Jul-99

Jul-00

Jul-01

Jul-02

Jul-03

Jul-04

Jul-05

Jul-06

Jul-07

Jul-08

Jul-09
Gold as a % FX Reserves, $ mns

All material is compiled from sources believed to be accurate, but no accuracy can be guaranteed. The presentation is for information purposes only and is not a solicitation to
invest. Unauthorized reproduction or distribution is strictly prohibited.
Gold: Outperforming All Asset Classes

Over the last twenty years, gold has outperformed all major asset classes
on many time horizons.

All material is compiled from sources believed to be accurate, but no accuracy can be guaranteed. The presentation is for information purposes only and is not a solicitation to
invest. Unauthorized reproduction or distribution is strictly prohibited.
Hinde Gold Fund

Hinde Gold Fund is a managed gold investment. It aims to outperform the

gold price, while smoothing any downside volatility.

Hinde Gold Fund

Relative Performance with Gold
8% 30%

6% 25%

4% 20%

2% 15%

0% 10%

-2% 5%

-4% 0%
Jul-09
Jun-09

Nov-09
May-09

Aug-09

Jan-10
Oct-09

Apr-10
Sep-09

Dec-09

Feb-10

Mar-10
Monthly Relative Performance Cumulative Relative Performance (RHS)

All material is compiled from sources believed to be accurate, but no accuracy can be guaranteed. The presentation is for information purposes only and is not a solicitation to
invest. Unauthorized reproduction or distribution is strictly prohibited.
Hinde Gold Fund

Hinde Gold Fund has performed well against other assets since its
inception.

Hinde Gold Fund Comparative Performance

(since inception)

140
130
120
110
100
90
80
70
60
50
40
Nov-07

Nov-08

Nov-09
Jan-08

Jul-08

Jan-09

Jul-09

Jan-10
Sep-07

Mar-08

Sep-08
May-08

Mar-09

Sep-09
May-09

Mar-10
Hinde MSCI World Arca Gold Index

All material is compiled from sources believed to be accurate, but no accuracy can be guaranteed. The presentation is for information purposes only and is not a solicitation to
invest. Unauthorized reproduction or distribution is strictly prohibited.
Hinde Capital: A Highly Secure Investment

ETFs and other vehicles for gold investment have inherent risks investors
may be unaware of. An investment in gold should hedge out all possible
credit risks. Hinde Gold Fund achieves this by investing in allocated gold
bullion.

All material is compiled from sources believed to be accurate, but no accuracy can be guaranteed. The presentation is for information purposes only and is not a solicitation to
invest. Unauthorized reproduction or distribution is strictly prohibited.
Hinde Capital:

Hinde Capital’s structure ensures the firm’s operations are thoroughly

audited and transparent.

All material is compiled from sources believed to be accurate, but no accuracy can be guaranteed. The presentation is for information purposes only and is not a solicitation to
invest. Unauthorized reproduction or distribution is strictly prohibited.
Hinde Capital: Investment Managers

Ben Davies ran trading for RBS Greenwich Capital in London where he managed a macro
portfolio. He started his career in 1995 trading in the Credit fixed income market at Credit
Lyonnais, moving to IBJI as a fixed income specialist and finally Greenwich Capital in 1999. He
graduated with a BSc from Loughborough University where he majored in accounting and
economics. Ben Davies and Mark Mahaffey, former colleagues from RBS Greenwich Capital,
established Hinde Capital in early 2007, primarily to focus on the precious metals and
commodity sector.

Mark Mahaffey has 24 years experience in the international markets having held senior posts
at several leading investment banks. He trained as a fixed income specialist at Daiwa
Securities before joining Midland Montagu as Director of the US government trading desk. In
1990 he jointly set up the Greenwich Capital office in London where he managed a portfolio
focusing on global macro themes, before joining IBJI in 2001. His most recent appointment
from 2005 was Managing Director of Bank of America London Proprietary desk.

All material is compiled from sources believed to be accurate, but no accuracy can be guaranteed. The presentation is for information purposes only and is not a solicitation to
invest. Unauthorized reproduction or distribution is strictly prohibited.
Hinde Capital: Contact Information
www.hindecapital.com

Email
Ben Davies, CEO
ben.davies@hindecapital.com

Mark Mahaffey, CFO

mark.mahaffey@hindecapital.com

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+44 (0)20 7138 3247 / 3249

Hinde Capital
South Bank House
Black Prince Road
London SE1 7SJ
United Kingdom
All material is compiled from sources believed to be accurate, but no accuracy can be guaranteed. The presentation is for information purposes only and is not a solicitation to
invest. Unauthorized reproduction or distribution is strictly prohibited.
Hinde Capital: Disclaimer

Hinde Gold Fund Ltd is an open-ended multi-class investment company incorporated in the British Virgin Islands

This document is issued by Hinde Capital Limited Southbank House, Black Prince Road, London SE1 7SJ, which is authorised and regulated
by the Financial Services Authority. This document is for information purposes only. In no circumstances should it be used or considered as an
offer to sell or a solicitation of any offers to buy the securities mentioned in it. The information in this document has been obtained from sources
believed to be reliable, but we do not represent that it is accurate or complete. The information concerning the performance track record is
given purely as a matter of information and without legal liability on the part of Hinde Capital. Any decision by an investor to offer to buy any of
the securities herein should be made only on the basis of the information contained in the relevant Offering Memorandum. Opinions expressed
herein may not necessarily be shared by all employees and are subject to change without notice. The securities mentioned in this document
may not be eligible for sale in some states or countries and will not necessarily be suitable for all types of investor. Questions concerning
suitability should be referred to a financial adviser. The financial products mentioned in this document can fluctuate in value and may be subject
to sudden and large falls that could equal the amount invested. Changes in the rate of exchange may also cause the value of your investment to
go up and down. Past performance may not necessarily be repeated and is not a guarantee or projection of future results. The Fund is
categorised in the United Kingdom as an unregulated collective investment scheme for the purposes of the Financial Services and Markets Act
2000 and their Shares cannot be marketed in the UK to general public other than in accordance with the provisions of the Financial Services
and Markets Act 2000 (Financial Promotion) Order 2005, the Financial Services and Markets Act 2000 (Promotion of Collective Investment
Schemes) (Exemption) Order 2001, as amended, or in compliance with the rules of the Financial Services Authority made pursuant to the
FSMA. Participants in this investment are not covered by the rules and regulations made for the protection of investors in the UK. Participants
will not have the benefit of the rights designed to protect investors under the Financial Services and Markets Act 2000. In particular, participants
will lose the right to claim through the Financial Services Compensation Scheme. The securities referenced in this document have not been
registered under the Securities Act of 1933 (the “1933 Act”) or any other securities laws of any other U.S. jurisdiction. Such securities may not
be sold or transferred to U.S. persons unless such sale or transfer is registered under the 1933 Act or is exempt from such registration. This
information does not constitute tax advice. Investors should consult their own tax advisor or attorney with regard to their tax situation.