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XAU.TSXV - BitGold Inc.


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Greetings to my old friends at CoB&F. It has been a very long time since I contributed to the board. I have been in semi retirement while watching these markets stay irrational longer than I had believed or have had any interest in participating. My core investments continue to outperform while my shorts have been "normalizing" my overall investment returns. I continue to be baffled by the state of affairs on a macro basis while finding it more difficult to "hunt" for undervalued long opportunities. On the metals, mining and energy side (an industry I have historically enjoyed analyzing and participating in) I see the most interesting risk/reward value proposition currently even though core positions in that industry have too underperformed. Overall, a good way to summarize my portfolio performance since actively participating on the board is this: I have been muddling through at 5-6% per year in USD terms (as a Canadian that equates to a lot more) but have a very high level of cash and short-duration instruments as i await for the market to provide me with a much wider margin of safety. I felt it was necessary to provide this brief update before getting into the topic of the post. I do lurk from time to time and sincerely miss the high-energy debates and conversations.

 

I have decided to come out of hibernation and share a new investment idea.  Last week a company was listed on the TSX V run by a young CEO (Roy Sebag) whom I have been extremely impressed with over the years through several business and non-business interactions. The company is called BitGold and it was listed under the symbol XAU.

 

I am going to provide a few links on the business as well as a write-up on Marc Fabers Gloom Boom and Doom report.

 

The company is essentially a paypal like platform operating on an electronic gold standard. It is backed by the Soros Family Office and other major investors. Paypal is unavailable to most of the world's internet population. This is partly the reason why so many have embraced bitcoin. The issues or arguments against bitcoin have (in my view) to do with its volatility, security and complexity. I believe what BitGold is doing has the potential to succeed in ways similar to paypal or smaller online wallet providers such as Skrill. This could result in a fantastic business that generates recurring cash-flows and high returns on equity capital.

 

The biggest issue I see with analyzing this stock is that the business was just launched two weeks ago and the valuation is clearly ahead of itself. That being said, there aren't many owner-run TSX V companies with two co-founders accepting a $1 salary, owning 60% of the company, and backed by such an impressive cadre of investors launching a global internet based financial services business. The two founders also understand gold and are able to very quickly articulate why gold is a currency and not an investment. They aren't gold bugs.

 

The Links:

 

www.bitgold.com

http://business.financialpost.com/investing/bitgold-begins-trading-on-tsx-venture-exchange-as-gold-transaction-platform-builds-momentum

http://www.northernminer.com/news/bitgold-surges-on-tsxv-debut/1003625979/?&er=NA

http://www.bnn.ca/News/2015/5/13/A-new-way-to-use-gold-BitGold-soars-in-TSX-Venture-debut-.aspxCEO Interview - I have been extremely impressed with my interactions with Roy Sebag the 29 year old CEO of BitGold. He is multi-disciplinary and brilliant.

http://www.321gold.com/editorials/moriarty/moriarty051515.html Another anecdote on the CEO which I found to be consistent with my interactions.

 

There are a lot of other links on the web as I have been seeing more and more press outlets cover the story.

 

I have attached a copy of Fabers GBD Report as well for registered members of CoB&F. BitGold is mentioned at length at the bottom of the report.

 

In full disclosure, I own shares of XAU that I have purchased on the first day of trading on May 13, 2015.

GBD_Report_BitGold_May_2015_copy.pdf

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Whoa, who the heck is this fellow that calls himself moore_capital? 

 

We used to have a terrific member named moore_capital who used to post here and they were wonderful posts at that.  Could this be the same?  Could it really be!

 

Where the heck have you been?  And welcome back!  Cheers!

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This is very interesting.

Looks like the stock is up again huge today.

I bought some bitcoin at $20 in 2011 and again at $40 in early 2013 and everyone thought I was nuts. Then when I paid off a mortgage with the proceeds they didn't think I was that nuts anymore.

 

The problem with bitcoin and related enterprises is the media is not friendly and most people are too "limited" to do research on their own and understand the tremendous opportunities afforded by blockchain technologies like what BitGold is probably implementing.

 

How come you didn't tell us about this one a month ago? I wanted to buy some but hate chasing... ;)

 

My last digital currency spec was "Counterparty" XCP when they were in talks with Overstock.com. I still like the premise and they are well run but the XCP has not done great to say the least. Still, it was bought with bitcoin profits and so maybe I should dabble in some XAU...

 

 

 

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Ridiculous pump and dump with this stock.  Can anyone even begin to give some kind of an estimate of intrinsic value or downside risks?

 

Charlie Munger was right.  Gold is an investment for the uncivilized.  Maybe we should give people who are into spending an appreciating currency their own economic island so they begin to realize almost no one would spend their money if their money had a fixed supply and was always worth more in the future.  Just like those pizzas bought with 10,000 bitcoin before the big run. 

 

Sorry had to vent there, but can OP give any estimate of intrinsic value or downside risks besides vague qualitative traits?

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This idea that nobody would spend gold because gold "appreciates in value indefinitely" shows a lack of understanding on your part of how economic transactions occur and their chronology on a timeline of commodity/money/capital interchange.  I highly recommend you view Ray Dalios Video: The economic machine to brush up on some basic econ 101. Here is just a simple example to help drive this point across:

 

We are on the eve of October 27, 1929. It's a sunday and I am a wealthy stock speculator. My net worth is $100,000. You, are a young Barber working at the local Barber Shop. On Monday morning the market collapses. My net worth drops by 50%. I now have 50% less to spend. Previously, you were charging $.50 cents per shave. That week I come in and need a shave but I ask for a discount. You, under pressure by other clients acquiesce and reduce the cost to $.35 cents per shave. I pay, and life goes on. Eventually this cycle ends once the asset values match or are able to support the debt levels. Did life cease to exist upon the credit deflationary event? No. Did I stop getting a shave? No. The point is, that I continue to pay you in gold. The gold you accumulate by maintaining a surplus over your own personal expenditures serves as savings fueling more stable growth in economic activity. Compare that to a fiat system where the ultimate goal is to get my networth right back to $100k never providing you with the opportunity to achieve any social mobility. That was why civilizations chose gold. Because any other system disproportionately allocates capital and thus wealth. This idea that gold is barbarous or is for elites is nothing more than a meme created in the late 1920's. A well articulated economic theory was developed and rigorously tested starting from the time of Newton to Von Mises and Marx. We all know how it works, but we also understand that its become extremely difficult to change the current system. Keynes was always an outlier and was embraced by very radical politicians at the time.

 

As for Mungers and others views on Gold being deflationary or causing credit events. As munger likes to say, always consider the incentives of the person on the other side. There is no evidence of gold being the source of deflation or causing credit events. It was in fact the creation of Federal Reserve in 1914 allowing for fractional reserve banking to proliferate followed by speculative mania in stocks (with no SEC or margin requirements) that led to the boom and subsequent bust. As gold was "fractionalized" when a run on banks began there was not enough gold to support the M2/M3 supply floating in the economy. In other words, the base money (gold) was about 1/8th of the amount of receipts outstanding for its redemption.

 

In searching for a solution to the obvious issue beyond temporary band-aids such as revaluation of the gold value following forced sale by citizens in 1934 and the lowering of the federal funds rate, JMK was putting the finishing touches on The General Theory.. (http://en.wikipedia.org/wiki/The_General_Theory_of_Employment,_Interest_and_Money) producing a potent elixir for the solution seeking politications of the 1930s.

 

Don't buy the BS that Munger and others are incentivised to feed you. In 2008, when the world was on the cusp and people on this message board began to worry not just about permanent loss of capital but counter-party risk and safety of capital (and many I know have still not rebounded from those permanent losses and or counter-party defaults from traders to portfolio managers) gold provided uncorrelated tail risk hedge from permanent loss of capital and salvation from counter-party risk (physical). That was why the best performing hedge funds of our era all sought gold ownership physically and continue to hold it til this day. They include: Einhorn, Loeb, Dalio, Singer, Soros, Baupost (yes Baupost is one of the largest owners of gold both in ground and physically), and a plethora of others.

 

Munger and Buffett placed their patriotic duties ahead of their business legacy in 2008. I would have done the same. A continued rush into precious metals would have complicated this "recovery" and lead to significant write downs in core investments for Berkshire. Their actions previous to the sudden hatred of precious metals confirm no only their understanding of their importance in society, economics, and markets but also their ability to capitalize on movements in those markets.

 

Consider every macro buffett has written from his well documented critique of the US dollar in the early 2000s in Fortune Magazine (he was the first to openly criticize the trade and budget deficits and china's holdings of the national debt) to Buffett's purchase and attempt to corner the silver market in 1999 after purchasing several billion ounces and soaking up the COMEX inventories. I may be mistaken but I believe he even mentioned in several press interviews at the time that one of the reasons for his purchase was gold and silver no longer being money and the rampant printing of fiat money to make up the delta between the governments revenue (taxes) and spending.  There are even more examples. Even in this years Annual Letter, Buffett critiques negative interest rates (which makes holding gold less expensive than owning fiat currencies) and says he couldn't have ever imagined us going this far with central bank experimentation. I recall in 2007 or 2008 sitting at the Annual Meeting in Omaha and Buffett putting up a slide of a trade ticket for T Bills purchased by Berkshire yielding "only 5 bps" - these were 30-60 day T-Bills. Golly how we would love to earn that today.

 

Back to BitGold, what they are attempting is an interesting experiment and has the potential to resolve these academic debates. By decimalizing fully reserved gold and digitizing it in a manner that makes it compatible with every payment system we use today, how can there be a credit deflationary event? A run? People redeem physical. Deflation? People spend less by simply decimalizing their gold. Eventually, the business cycle runs its course and the economy continues to expand. Much better than the hokey pokey system we have today.

 

Your entire investment framework today relies on Yellen and Draghi. This cycle is long in the tooth and while i fully embrace the bottom-up methodology, I know in my bones that there is not sufficient margin of safety right now aside from possibly the energy sector due to the recent declines in oil prices.

 

Good Luck.

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You claim there is no margin of safety in other productive asset classes, but you show no basis for the margin of safety in BitGold.  So what they are capable of "digitizing" or "decimalizing" gold.  It says nothing about what one is paying for the stock.

 

This is starting to make my head hurt from the irony.

 

As far as the "hokey pokey" system you claim is flawed, well that hokey pokey system has led to some pretty damn good results.  I am not sure what kind of Mad Max, 1929 groundhogs day you may live where markets crash every other week but even with those downturns the purchasing power of a saver in productive asset classes has done just fine.  Even someone who invested in 1929 or 2007 ended up okay despite their terrible timing.  I can't say the same about someone who invested at the peak of the gold market in previous bull runs.  I wonder how the purchasing power of the bitcoin guys are looking who "invested" at 1000+.  If my currency is going to be less valuable in the future, it is better to spend it or deploy it in other manners.  If you think the currency is going to appreciate (like gold) then why the hell is it a source of spending instead of investment?  And I suppose the people who bought gold at $1900 have seen their purchasing power go up?

 

I'm not going to get into it with you about economics since I partially agree that it would be nice if they printed less money to get the desired results, but it would be nice if you could defend the stock versus diverting attention to a flawed monetary system.

 

 

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Oh and this:

 

Don't buy the BS that Munger and others are incentivised to feed you. In 2008, when the world was on the cusp and people on this message board began to worry not just about permanent loss of capital but counter-party risk and safety of capital (and many I know have still not rebounded from those permanent losses and or counter-party defaults from traders to portfolio managers) gold provided uncorrelated tail risk hedge from permanent loss of capital and salvation from counter-party risk (physical).

 

What are you even talking about, gold went down 30% with everything else.  How is that "uncorrelated tail risk hedge?" 

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Gold is down by 30% to you and other american elites living in USD. Priced in other currencies, Gold is near an all-time high. As a Brazilian measuring their purchasing power in Reals what Gold is doing or if you have a bloomberg terminal type in XAU/BRL.

 

This ties in well with your other comment re: Purchasing power. It is elitist and naive to assume that everyone out there has access to complex financial assets (as you call them productive). For the majority of people on this planet, they subscribe to a belief that a surplus of savings over expenditures will lead towards social mobility. Then, when they generally reach retirement - they figure out how messed up the system really was and that all that surplus of savings was withered down by some external actor.

 

I am not defending BitGold stock or analyzing it for a margin of safety. It's currently incalculable under traditional metrics. What I see is an asymmetry in terms of what this could potentially become and I wanted to share the name with the board and let others make their own decisions.

 

You have spent too much time assessing everything through the lense of an Elite American living in NYC I presume. There are billions of unbanked or underbanked people. Those are the people embracing bitcoin and paypal. Those are the people paying exorbitant fees to MoneyGram and WesternUnion.

 

Not GoldBugs.

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Gold is down by 30% to you and other american elites living in USD. Priced in other currencies, Gold is near an all-time high. Ask a Brazilian measuring their purchasing power in Reals what Gold is doing or if you have a bloomberg terminal type in XAU/BRL.

 

This ties in well with your other comment re: Purchasing power. It is elitist and naive to assume that everyone out there has access to complex financial assets (as you call them productive). For the majority of people on this planet, they subscribe to a belief that a surplus of savings over expenditures will lead towards social mobility. Then, when they generally reach retirement - they figure out how messed up the system really was and that all that surplus of savings was withered down by some external actor.

 

I am not defending BitGold stock or analyzing it for a margin of safety. It's currently incalculable under traditional metrics. What I see is an asymmetry in terms of what this could potentially become and I wanted to share the name with the board and let others make their own decisions.

 

You have spent too much time assessing everything through the lense of an Elite American living in NYC I presume. There are billions of unbanked or underbanked people. Those are the people embracing bitcoin and paypal. Those are the people paying exorbitant fees to MoneyGram and WesternUnion.

 

Not GoldBugs.

 

Finally, i am somewhat disappointed that you were unable to defend or rebut even one of my points. Hopefully you have reconsidered your position on fiat.

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You claim there is no margin of safety in other productive asset classes, but you show no basis for the margin of safety in BitGold.  So what they are capable of "digitizing" or "decimalizing" gold.  It says nothing about what one is paying for the stock.

 

This is starting to make my head hurt from the irony.

 

As far as the "hokey pokey" system you claim is flawed, well that hokey pokey system has led to some pretty damn good results.  I am not sure what kind of Mad Max, 1929 groundhogs day you may live where markets crash every other week but even with those downturns the purchasing power of a saver in productive asset classes has done just fine.  Even someone who invested in 1929 or 2007 ended up okay despite their terrible timing.  I can't say the same about someone who invested at the peak of the gold market in previous bull runs.  I wonder how the purchasing power of the bitcoin guys are looking who "invested" at 1000+.  If my currency is going to be less valuable in the future, it is better to spend it or deploy it in other manners.  If you think the currency is going to appreciate (like gold) then why the hell is it a source of spending instead of investment?  And I suppose the people who bought gold at $1900 have seen their purchasing power go up?

 

I'm not going to get into it with you about economics since I partially agree that it would be nice if they printed less money to get the desired results, but it would be nice if you could defend the stock versus diverting attention to a flawed monetary system.

 

Some more shocking flaws in your argument. You make the assumption here that owners of gold arbitrarily decide to "load up" at a specific USD/XAU cross. That argument can be extended to any of your "optimizing purchasing power productive assets" or securities as you most likely infer. Picking tops or bottoms is a fools errand. Comparing gold to investments generating a rate of return is too a fools errand.

 

Well then, what should gold be compared to? How about currencies?

 

Guess what happens when you compare gold to currencies over long-periods of time. Against the world's reserve currency gold's up 8.1% per annum since its demonetization. Against currencies relevant to the rest of the world's 7 billion person population, Gold is up a lot more.

 

The difference between a currency and an investment is that a currency does not need to be timed. It's accumulated as working capital over as a person generates a productive surplus. An investment, is a decision to take risk by allocating a portion of that surplus for the future.

 

Lots more points but the day is beautiful and I prefer to spend it with my daughters. Cheers!

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I am not the one picking arbitrary times to load up on gold.  You picked the top of the 1929 market to have someone loaded up on stocks and use it as an argument that it's a flawed system.  I am only showing you that gold it is not as stable and consistent as you want to imply. 

 

At the end of the day you say returns from gold don't matter.  That makes absolutely so sense especially since you then show how it's performed 8% in USD terms. 

 

And again I asked where is the margin of safety or method of valuing this company.  I am seeing none of this which leads me to believe you are not clear on that manner either. 

 

Sorry if buying a piece of a business returning 7-15% of cash to its owners a year or bonds earning 6-7% a year sound unproductive to you.  I don't think investing or saving into those assets makes me an "elitist."

 

I feel like I am on the comment section of zerohedge or /r/bitcoin. 

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I think what moore is referring to is the end of the 80 year super cycle? We are at all time highs debt levels, and governments spending borrowed money is a significant part of the economy, and is sort of cancelled out by reduced demand leverage (less negotiating leverage in asking for higher pay) of workers in the western world because of automation, but mostly: developing countries are opening up and shaping up their economies, providing a flood of cheap workers that are willing to work for a lot less. So that is why we don't see inflation yet, despite all that money printing. 

 

And if those governments run out of pension funds and insurers to sucker into borrowing money that will partially never be repaid, the whole thing will crash, and that will pretty much dwarf 2009. Im curious what kind of inflation you will see then of especially the dollar?

 

BUT:

 

http://dqydj.net/sp-500-return-calculator/

 

If you invested in 1928, and cashed out in 1945, that was still 3.5% after inflation! Assuming your in this for the long haul. And that is through a major stock market crash, in a time when everything was a lot more primitive and through the largest war ever fought that affected the entire planet. You still would have almost doubled your money after inflation!

 

And if you selected for cheap stocks your return would likely be even better! Especially if you have access to small caps.

 

Also one major thing that can be easily overlooked is that not all world players are in the same place in this super cycle. I am very bullish on Asia. Labor is many times cheaper there, and they are really shaping up to become like the west. Debt levels are relatively low and China is where Japan was in the late 60's. (this relates to that dalio paper you posted about earlier).

 

Especially since you can find lot's of cheap small caps there. So I don't see why you should flee to gold. Unless you are a multi billionaire (like those people earlier mentioned). Too often I see people with small funds try to emulate billionaires, which is extremely inneficient. Your giving up your biggest edge: being small.

 

 

As for this investment, can you explain how this works Moore? Are they connected to the bitcoin network? In that case you will have several limitations, one being the transaction limit of 4 per second, which is way too low.

 

If it is connected to gold, almost any idiot can set this up? What would their moat be? Why isn't it better to invest in gold, if that is your thing? It seems more like a gimmick then really a practical thing to link this to gold.

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Yadayada these are some good Q's.

 

Maybe re. competitors the first mover advantage is key. Seems to have worked for bitcoin.

 

Also would like to know what the true current market cap is. I think it is around 3 times what is shown on yahoo etc.

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  • 1 year later...

This thread just ceased being updated. What happened?

 

Did anyone continue to own or follow this through the amalgamation.

 

 

 

BitGold Announces Name Change to GoldMoney Inc. Pursuant to Amalgamation With Subsidiary

http://web.tmxmoney.com/article.php?newsid=77074748&qm_symbol=XAU

 

 

Goldmoney Inc. Completes Acquisition of Schiff Gold LLC and Formation of Marketing and Service Agreement with Peter Schiff November 14, 2016

 

About Goldmoney Inc.

 

Goldmoney Inc. (TSX: XAU) is a mission-driven financial technology company that operates the world's largest 100%-reserved gold-based savings and payments network.

 

http://www.streetinsider.com/Press+Releases/Goldmoney+Inc.+Completes+Acquisition+of+Schiff+Gold+LLC+and+Formation+of+Marketing+and+Service+Agreement+with+Peter+Schiff/12238846.html

 

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Ridiculous pump and dump with this stock.  Can anyone even begin to give some kind of an estimate of intrinsic value or downside risks?

 

Charlie Munger was right.  Gold is an investment for the uncivilized.  Maybe we should give people who are into spending an appreciating currency their own economic island so they begin to realize almost no one would spend their money if their money had a fixed supply and was always worth more in the future.  Just like those pizzas bought with 10,000 bitcoin before the big run. 

 

Sorry had to vent there, but can OP give any estimate of intrinsic value or downside risks besides vague qualitative traits?

 

lmfao.....bring this thread back.  Why does sears get like 800 pages and this only 2. 

 

Any gold bugs left out there?

 

Come on in lets bring this thread back....and throw some mud.

 

True story, I remember back in 2011/2012 or something i had a friend who told me to buy silver bc it was going to $500.  He put a significant amount of his money in it (never asked how much) and he would bring it up everytime i saw him, i can't remember exactly but this went on for like 2 years it felt like.  He told me to watch this video below.

 

https://www.youtube.com/watch?v=Gl47z2g2EvI&list=PLC84FE1FBC262F96D

 

Watching the video was the good learning experience.  It reinforced for me how truly stupid people can be.  I remember telling him to buy a couple stocks i had looked at (in good detail), but he looked at me like i was stupid....like why would i buy a company that spits out a 20% free cash flow yield when i can buy shiny metal and put in under my pillow for when armageddon comes...   

 

The worst part was when silver went to shit, he never really brought it up again except to say he sold out.  He should have apologized for all my precious time he wasted talking about silver.  I can't stand it when people are so wrong about something and then act like nothing happened.....I may have to bring it up the next time i see him....the only reason i didn't before is bc he is emotional and might cry like a little girl and the conversation may get awkward. 

 

Thanks for listening.

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Making money from gold is indeed more difficult than from silver...

 

But I've done very well with gold over the years.

 

I had a little bit from scrap electronics....was cool to see the ingots when the refiner melted it all down.

 

It is much easier to make money off of silver...American 90% silver coins are where it is at!

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  • 2 weeks later...

Hi Guys,

 

We continue to own the name and have even added to it recently. What this management team has done in less than two years is nothing short of amazing. I recommend anyone interested to read up via the company's IR page: https://www.goldmoney.com/newsroom/investor-relations or SEDAR filings.

 

XAU also recently announced an NCIB for up to 3 million shares and insiders have been buying.

 

I originally made a bet on management here as I had a pre-existing relationship with the young lads yet even I have been impressed with how well they have executed so far and how they've been able to acquire nearly C$2B of precious metal assets under stewardship.

 

What is becoming evident in the Goldmoney story is that the company is seeing success from countries that are non-USD/EUR anchored. Think Venezuela or India right now. A combination of Paypal/Bitcoin using Physical Gold.

 

Happy New Year!

 

 

This thread just ceased being updated. What happened?

 

Did anyone continue to own or follow this through the amalgamation.

 

 

 

BitGold Announces Name Change to GoldMoney Inc. Pursuant to Amalgamation With Subsidiary

http://web.tmxmoney.com/article.php?newsid=77074748&qm_symbol=XAU

 

 

Goldmoney Inc. Completes Acquisition of Schiff Gold LLC and Formation of Marketing and Service Agreement with Peter Schiff November 14, 2016

 

About Goldmoney Inc.

 

Goldmoney Inc. (TSX: XAU) is a mission-driven financial technology company that operates the world's largest 100%-reserved gold-based savings and payments network.

 

http://www.streetinsider.com/Press+Releases/Goldmoney+Inc.+Completes+Acquisition+of+Schiff+Gold+LLC+and+Formation+of+Marketing+and+Service+Agreement+with+Peter+Schiff/12238846.html

 

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