Tuesday, September 27, 2011

Eric Sprott backs Carney in Dimon spat

"In the fight to put risk-limiting regulations on banks, Mark Carney has a big name in his corner: Eric Sprott.

After Mr. Carney ended up in a well-publicized argument with JP Morgan Chase chief executive officer Jamie Dimon about whether regulators are on the right track, Mr. Sprott wrote an open letter to The Globe and Mail backing Mr. Carney."


Dear Sir,

I wish to express my firm support for Mark Carney’s recent financial regulation speech in Washington. Despite Mr. Dimon’s alleged criticism of Mr. Carney’s remarks, the fact remains that we would not be in the present situation today were it not for the excessive overleverage and flagrant misappropriation of capital undertaken by the world’s largest banking corporations.

It has been our view for many years that the world’s largest banks are operating with leverage ratios of over 20-to-1. We are now in an environment where all financial assets, including currencies, can change 5-10% in a single week (many change by that percentage in a single day – see the Swiss Franc’s 9.5% depreciation against the US dollar on September 6th, 2011). With volatility of that magnitude, the practice of maintaining such leverage is not only imprudent, it is irresponsible.

We have long maintained that all banks should make stronger efforts to bolster their capital reserves. It should not be the responsibility of government to rescue these corporations if they continue to make the same mistakes, and engage in the same risks, year after year. In that vein, we must also question why banks were allowed to reinstate their dividends so quickly after the 2008 crisis. In France, for example, where French banks are currently experiencing deposit withdrawals, one wonders how much stronger they would be today had they initiated a more prudent recapitalization policy.

In our opinion, the current economic crisis is still, at its heart, a banking crisis. Mr. Dimon’s alleged criticism reflects his inability to acknowledge this. Banking regulation is a wholly crucial issue and we stand behind Mr. Carney’s attempts to address it.

Yours sincerely,

Eric Sprott, FCA

Sprott Asset Management LP

200 Bay Street, Suite 2700

Read the full article at the Globe and Mail here:

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Biggest Names Discuss Silver, Gold and the Global Economy - Follow Up Call

Some of the biggest names in Gold and Silver discuss the current market turmoil. Including our very own Gold and Silver Vigilante, Eric Sprott.

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Monday, September 26, 2011

This Billionaire Hedge Fund Manager Isn't On Forbes' Billionaires List?

The annual Forbes' world's billionaires list is out this week that came out earlier this year has one name we know that's missing.

Eric Sprott, a 40-year veteran in the investment industry, is believed to have a net worth of at least $1.3 billion, according to Bloomberg Business Week.

However, his name is nowhere to be found on the list... odd...

- Read the full article here:


Saturday, September 24, 2011

Eric Sprott - The Single Most Important Economic Indicator

Just how bad have things been at the consumer level? Hedge fund guru Eric Sprott said the single-most important economic indicator of the past four months came from Wal-Mart chief executive Mike Duke, who literally said that his customers were “running out of money” much faster than they were a year ago. His evidence: customers are doing their bulk shopping at the beginning of every month (minutes after cashing their paycheques) and business drops off right after that.

“People’s incomes haven’t been going up, but their costs have,” Mr. Sprott said. “It’s palpable what’s happening, and it’s not good.”

His favourite “negative” indicators include U.S. bank failures (which increase every week) and over-leverage in the banking system (a huge problem in Europe). But the lesson of the past few weeks is that any investor can find a negative indicator to suit his or her taste right now. They all boiled over into a panic on Thursday, and if all those Harvard MBA recruits want to keep their jobs, that panic had better recede pretty soon.

- Read the full article here:

Friday, September 23, 2011

Sprott Money - We have run out of physical silver

“We have completely run out of physical silver, so we are temporarily out of stock."

- Larisa Sprott of Sprott Money

Tuesday, September 20, 2011

Equity investors shouldn’t let $1800 gold dissuade them from participating in precious metals equities

Something has changed recently, however. A new divergence has arisen in the precious metals equity market – a subtle, but plainly evident shift in recent daily performance.

In many of the funds we manage at Sprott, we’ve transitioned out of gold bullion and into gold equities to better participate in the continuation of the trend indicated above. As long-time investors in this space, we can assure you that the production growth rates will be significantly higher in the junior stocks. They continue to trade at discounted valuations, and we believe they offer the best opportunity to build exposure. Margin expansion is the key metric for this industry, and the market is now acknowledging the miners’ improvement in margin capture – which has occurred despite the increase in capital and operating costs

We meet with a large number of gold mining management teams on a weekly basis, and based on those meetings, it appears that the average cost of producing an ounce of gold today, all in, is now around $800. At $1,200 gold, these companies can capture roughly $400 in EBITDA. At $1800 gold, however, they’re now capturing $1,000 per ounce in EBITDA – representing an increase of 150% in profit margin. That is significantly far above what any other equity sector has been able to generate over the past year.

Amazingly – despite this new reality for gold producers, we are still finding opportunities in select gold and silver mining companies that can be purchased today at 2-3 times their 2-year-out forecasted cash flow. These multiples are based on the current gold and silver spot price, and if these companies hit their production targets, and gold and silver continue their appreciation – we may discover that these stocks were trading at less than 1 times 2-year-out cash flow today. Having been in the business for many years, we can tell you that investing in a stock at 1 times 2-year-out cash flow tends to be a winning proposition – let alone in an industry that literally mines the world’s reserve currency out of the ground.

Equity investors shouldn’t let $1800 gold dissuade them from participating in precious metals equities. The world is still dramatically underexposed to gold, and we firmly believe it should represent a higher percentage of investors’ total portfolios today. The fact remains that both gold and silver continue to trade well below their inflation-adjusted highs in nominal terms, and the market is now beginning to acknowledge the profit potential that precious metals equities offer at today’s bullion prices. We believe the equities will offer more upside than the bullion over time. Many of the smaller names are well priced and have momentum behind them. The prospects for gold stocks look extremely bright.

Saturday, September 17, 2011

Buy Gold & Silver - Protect Yourself!

“There’s great risk in owning paper assets because of what’s going in the paper-asset world,” Mr. Sprott said. “We have sovereign risks, we have bank risks, we have budget deficits, we have irresponsible monetary policies and fiscal policies, all of which leads you to a common conclusion: How do I protect myself?”

Tuesday, September 13, 2011

Default threat boosts case for gold, Sprott says

The risk of Greece defaulting on its debt may be roiling the world’s financial markets, but it’s good news for Eric Sprott.

Investors seeking refuge from the financial storm drove the price of gold to a record high last week, and Mr. Sprott is optimistic that demand for the precious metal will expand as fears grow that Greece and other European countries will fail to repay their massive debts.

“Greece either defaults or they print money, both of which are great for gold,” said Mr. Sprott, chairman of Toronto-based Sprott Inc, which holds $2.2-billion of gold and $900-million of silver among its $11-billion in assets.

While acknowledging that a Greek default would lead to “a crescendo of problems” for the global financial system, he argues that it would be unambiguously positive for haven commodities such as gold. “The market has made gold the reserve currency. The market has already made that decision, that this is the safest asset when there is potential financial contagion.”

- Read the full story here:


I think silver will outperform gold in the next decade

“I think silver will outperform gold in the next decade. If silver should trade at a 16 to 1 ratio (to gold), it will probably trade at 10 to 1 because things tend to overshoot. Let’s use Jim Sinclair’s $12,000 target, that would suggest $1,200 silver, which is a thirty bagger from here...The biggest reason it (silver) should go there is people should fear bank deposits, that’s what I think they should fear.”

- Eric Sprott, via a King World News Interview, Read the full interview here:

Saturday, September 10, 2011

King World News Interviews Eric Sprott - Silver a 30 Bagger?

Eric Sprott, was recently interviewed by Eric King, of King World News. This is a powerful interview, where Mr. Sprott speaks of Gold, Mining shares and Silver becoming an eventually 30 bagger from these prices! This is an interview you won't want to miss.

Hear the full interview here:


Thursday, September 1, 2011

Top investor (Eric Sprott) buys into Halifax firm

An influential Toronto firm has invested more than $2 million in a junior Halifax exploration company.

Mountain Lake Resources announced Tuesday that it has arranged a private placement with Sprott Asset Management LP of 3.1 million units at 65 cents each to raise $2,015,000.

The deal gives Sprott 3.1 million common shares of the company that is looking for gold in Newfoundland and Labrador, plus the ability to buy another 1.6 million Mountain Lake shares at 80 cents a piece within two years of its closing date.

"We plan to raise a fair bit of money between now and the end of the year for our program for next year, which will be fairly aggressive," Gary Woods, president and chief executive officer of Mountain Lake, said Wednesday from his Port Williams, Kings County, home.

Woods said he did the deal Monday directly with Eric Sprott, a famed investor and founder of Sprott Asset Management...

- Read the full story here: