Yesterday 'the boyz' had a video session with a man much more famous in Canadian financial markets, than American - Eric Sprott. [Dec 30, 2009: Eric Sprott Wonders if US Debt Scheme is Simply the Biggest Ponzi Scheme Ever] Keep in mind, like most managers, Sprott is talking his book as he has a multitude of commodity based products under his wing... but he reaffirmed an extremely positive view on silver. Indeed despite the 22% gain in Q1 2011 alone, he sees it doubling again to $80.
With all the major currencies headed by central bankers happy to devalue it, the case against precious metals is difficult to make. One can assume when the next recession happens (cyclically it should be here within 3 years), the only game plan in town nowadays is another global round of quantitative easing and fiscal deficit spending to the moon. Rinse. Wash. Repeat.
(lost in the Fed speak the past few weeks, I read yesterday the Bank of Japan has put in $275 BILLION USD worth of yen into the system since the earthquake - relative to their economy size, that would be akin to the Fed doing $1 TRILLION - in a few weeks!)
In the nearer term, as the Fed works on creating the 3rd bubble in 12 years, it looks like commodities are going to be the "winners" this time around. As we saw with NASDAQ stocks and U.S. real estate, the last stages of the bubble will be parabolic moves upward - and then the crash. But until then, speculators will want to play the Fed's mandate to create bubbles. And unlike the appreciation in housing and stocks during the last 2 Fed bubbles, the move UPWARD in commodities is causing all sort of pain for citizens globally. Got corn?
6 minute video
- Sprott, the chief investment officer and CEO of Sprott Asset Management, doesn't see a bubble in gold, calling it wildly under-owned when viewed in historical terms. But if you want to get the genial Sprott really worked up, ask him about silver. Even at three-decade highs near $40 an ounce, Sprott says silver will more than double from here.
- What would change his mind? Global stability and rational central bank behavior. Nothing, in other words.
- When pushed, Sprott says $2,000 gold and $50 silver are possible in 2011. But he's got the kind of macro bullishness that leads to buying any and all dips, as he believes higher levels for precious metals are inevitable.
- "I've owned gold for 11 years, and I've never sold any of it," Sprott says with conviction. And gold is only his second favorite metal. As befitting a hedge fund manager, Sprott is betting on other assets declining in price as his precious metals soar. He's bearish on base metals -- those used in production -- and he's shorting financial and consumer-related companies.