-- Posted Wednesday, 26 September 2012 | | Disqus

Transcript:

with interest rates near zero, where can you find value in a low to no-yield environment. joining us now is eric sprott, ceo and cio at sprott asset management. a long/short equity strategy with $10 billion in assets. over 80% of the fund is allocated in precious metals. and is there anyone that liked qe-3 more than you, eric? i don't think anybody has quite the concentration that we have, joe. but we're happy to have it, by the way. happy to have the concentration. happy to have qe-3. at this point, do you ever take off some positions when you've gotten what you wanted? haven't you gotten most of what you wanted already? and aren't you thinking about standing near the side or no? well, joe, it's interesting. i go bacto the reason i got in gold was in 2000. and at that time there was some wonderful work done on the gold supply/demand market by a guy named frank vanderoso. and he suggested it would be a shortage of physical in that year and wrote a book. and because the nasdaq had gone down and we ran then only long funds, where can we hide out here? and i thought gold was the obvious answer, precious metals generally. and you might be surprised to realize that the gold stocks since the 2000 bond were up something like 1,500%. gold is up 600%. and in a way, i call it the great wealth redistribution because those who have invested in gold and silver have prospered quite nicely. to your question whether or not i want to stay with the trade. the reason i would stay with the trade and you mentioned qe-3. i never would've imagined when i got involved in gold i would have the benefit of kind of irresponsible money printing, bank runs that are ongoing as we witnessed in the various countries in europe, and those two ingredients along with the qe-3 which has been announced i think will be a huge tail wind for gold and other precious metals to go higher. you also point out that central banks save the big banks and the financial system at this point in your view, and it might have been a temporary stay, right? we're still, we still have a lot of risk that could come in the next few years and gold answers your need for covering your strategy there, right? sure. well, i mean, i go back to one of the fundamental problems was the overleveraging of the banks, which culminated in the failure of lehman brothers. and essentially the failure of many of companies. but they weren't allowed -- weren't forced to liquidate. lehman was the one time someone piece been forced to liquidate and we saw what nearly happened as a result of it. we've had many other companies that one way or another were either taken over, bailed out, fannie, freddie, aig, various banks, the spanish banks, greek banks, now we do it with governments. and i think all of those things suggest that the financial system is quite destabilized. and i agree with the fed that qe-3 is not likely to work. just as qe-1 and qe-2 didn't work. when we look back at where we were and where we are, we've had all this printing and deficit creation, and we really have accomplished nothing. in fact, we've gone into reverse in terms of job losses and numbers of homes sold in a year. so i don't see the qe-3 as being substantive in terms of helping the economy. eric, it's neel kashka. as a big gold investor, how do you think about the future of inflation? is the future 3% inflation? 4% inflation. with all of this money printing in the u.s. and in europe, there's a risk that's higher than that. do you have a view? sure. well, neel, thank you for the question, and i find it rather interesting. i read bill gross' articles and i can see going back to may that looked like bill was shifting his stance somewhat in that may article suggested that maybe real assets are a better investment and said he wasn't sure about stocks and bonds and tweeted maybe gold is a buy. and i think that inflation is likely to heat up. i mean, i think it's continually underreported for the average person in the 99%. i don't think they believe for one second that underinflation is 2%. and i think that incomes aren't going up by that much, the whole 99% is under extreme pressure here. i think it creates more stress on governments in the banking system ultimately. and you want to have your assets in something that's real, that can benefit by the debasement of currencies as basically going on and all the developed world's central bank. larry? the real question is timing. when do you think this is all going to come apart? the end game has got to be that you can't print money to get yourself out of a problem. be you can print money for quite a while. so was this going to go on for one year, two year, six months, or ten years? well, it's a great question. and when you ask the question, when is it going to fall apart? i would have thought it would fallen apart years ago. it seems rather extreme to me that as investors we accept it as a palliative to the situation, which it certainly is not. we can keep the markets, i think chairman bernanke basically measures himself by how he deals with the stock market and how he deals with the housing market. they have been kept up here by the hope that something's going to happen. but i think when you review the results of qe-1 and qe-2, post qe-1 and 2, you realize the market gets in a bit of a funk. we've come to grips with the fact that maybe it won't do anything. most of what's being done is to help the financial system and not necessarily the man on the street. we've talked about some dire stuff earlier. i guess there's a certain probability to some really frightening things happening within the next 10, 15 years, i guess. well, joe, i would say this, and things happening for quite a while here. we're used to -- we're used to, you know, we don't worry about shelter that much anymore, food that much, safety that much. we have a society that we think can't go back to, you know, decades ago. and maybe sometimes, you know, we assume we can go to the supermarket and buy all the food we want. right. quite frankly, i don't often go there. you know it's a worry, and i'm more interested in the investment and what we do about it as investments. hopefully with the money you make, hopefully yo're able to go buy something that has those things. this is a time and place for that, but with gold bugs, we've got to ask that question. i know you're ready if something does happen. right? well, i think you have to be prepared for reality. and, you know -- and when we see what's going on in the world. i mean, one can hardly argue that prudence is very much warranted here. i made the mistake of watching the road with the -- and i'm petrified. i'm going to go take karate and carry around a gun and $2,000 worth of gold everywhere i go. eric, thank you. appreciate it.

-- Posted Wednesday, 26 September 2012 | Digg This Article | Source: GoldSeek.com

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