People have always asked why investment bankers are so much richer than anybody else. The answer is because they have always sold and bought money in preference to anything else; when they promoted metal mining operations they have always earned more money from the companies' stock exchange activities than from the actual commerce of the physical metal.
This applies especially to gold. Nobody has yet been able to produce gold artificially. Diamonds have, and are still being produced industrially in profusion, and Russia had been marketing them for years, even before the West became aware of their artificial character.
The diamond counterfeits were so good that De Beers only realised it was being duped because it was inconceivable that Russian diamond mines could possibly have such a heavy output. The Russian diamond mine geological configuration was similar to that of South Africa and its productive capacity was well known.
This is a word of warning. Investment in mining shares, especially gold and diamonds, is to be approached with proper guidance and deep study that makes for passionate enjoyment of honorable profits.
The sums of money required to make a killing in mining shares is what any worker can afford if he were to give up his smoking habits. These last few weeks were like fireworks for those who could spot the mini-cycle within the trade cycle of shares the likes of BHP Billitor and Peter Hambro Mining. It is the mining trade cycle, and the mini-cycles within it, which provide the great money-making opportunities. Malta would have made tens of millions if it cared to activate its foreign reserves. This would have entailed a Minister for Finance being phoned at night. The investment game is not for politicians. When Gordon Brown was Chancellor, he managed to sell much of his country's lifeblood, its gold, at the bottom of the cycle. He was not tricked by a dollar mini-cycle, as was our honorable incumbent of the House of the Four Winds in Hastings Gardens in 1984 when he lost Lm88 million in one day.
On June 2, 2006, I wrote that "gold is back - 25 years after it peaked. The dollar is down - 20 years after it fell". It was the beginning of a new cycle for gold, after the metal had fared extremely badly in the 90s. It then seemed that Alan Greenspan was managing the American economy with a golden wand.
His success seemed to ensure that country's victory over gold. America had been the declared enemy of gold since it instigated the unsuccessful International Monetary Fund's (IMF) sales in the 70s. It is now basking in new glory of its revaluated gold in Fort Knox. America is always a winner.
I reiterated my stand on gold and the dollar exactly two years earlier and today gold has advanced by an astounding 29 per cent in less than a year. Gold equities, like those of Peter Hambro Mining, have handsomely outperform the price of gold.
The steady nine per cent yearly economic growth of China is a most probable outcome.
This ensures an upward trajectory path of the BHP Billitor graph. Its cycle will be punctuated by mini-cycles.
Those who profited from the BHP mini-cycle at the beginning of last year would today be sitting on a 100 per cent profit, and this without the money trading in the other mini-cycles which occurred that particular year.
Mr Azzopardi Vella has advised S&P and has been the promoter of the Malta Development Fund. This is not investment advice. E-mail: johnazzopardivella@hotmail.com.