Eric Sprott, “The Dominoes Will Continue to Fall”

By on May 10, 2012

Eric Sprott - Sprott Asset ManagementCanadian hedge fund manager Eric Sprott ($9 billion assets under management) was on CNBC’s Halftime Report yesterday. The interview was conducted at the SkyBridge Alternatives (SALT) conference in Las Vegas (two videos included below).

Sprott said we had an overlevered banking system going back to the NASDAQ crash. The Lehman event exposed the overleveraged system. Lehman’s liquidation created nothing but chaos. Subsequently the powers that be (ECB, Fed, Bank of Japan) made every attempt to not let things unravel, according to Sprott.

Sprott said people looking at the surface can’t see what the underlying problems are. Sprott added that with Spanish yields over 6% it might be the next one to fall; following Greece. Sprott posed the question whether investors in Argentina, Ireland, and Greece would have taken their money out of the bank and purchased gold, to which he believes the answer is yes.

Sprott stated that physical purchases of gold suggest strongly the price will go up.

When asked why, with all the turmoil recently, gold wasn’t going up, Sprott said it was counter intuitive because gold doesn’t go up when things are the most extreme. The LTRO announcement February 29th crashed gold which seemed counter intuitive to Sprott.

Sprott referred to the interview of Jim Grant where Grant said all markets are manipulated. Sprott stated we know the credit markets are manipulated. He added that central banks fighting the contagion don’t like gold going up. Sprott said people who sell paper gold and silver can rule the market over the short term, but those who own physical metals will win the day.

Sprott Asset Management Short PositionsCNBC’s Scott Wapner pointed out ¬†Sprott has achieved an annual return of 17% since 2002.

The interview continued with Sprott pointing out the strong fundamentals of gold supporting his year-end target of over $2,000 per ounce (exports from Hong Kong to China up 600% year over year in March, etc.); his view on silver which he sees over $50 an ounce by year-end (U. S. mint sold the same amount in dollars of silver coins and gold coins, etc.); his opinion of recent negative comments from Warren Buffet, Charlie Munger and Bill Gates regarding gold (they missed the trade and he doesn’t know if he can respect their opinions now); and a discussion of areas he’s short (financials due to the “Minsky Moment” where productive engine can’t possibly pay off the debt).

One Comment

  1. Manfred Yodel

    May 13, 2012 at 6:18 pm

    There will be no solution other than debasement of currencies worldwide causing all precious metals to gain value over time. There are several silver mining companies trading at steep discounts including Hecla, Pan American Silver and Silver Wheaton.

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