Eric Sprott was on Canada’s BNN last week for a rather lengthy interview. Given the deal flow that Sprott gets to see on a daily basis being based in Canada they are an excellent place to go to get a feel for the natural resource market.
Here is what he had to say.
Notes from the interview:
- On European debt issues: Risk in the banking business has been moved to sovereign risk. Greek banks have lost 12% of deposits last year and 8% of deposits this year. That means they have to sell some assets in order to fund the deposit withdrawals. But the banks can’t sell assets that they have because they aren’t worth anywhere close to their carrying value. Therefore the government has to come in and buy these assets from the banks. Now we have systemic risk.
- Issue is we are trying to solve the problem of an overleveraged banking system and right now they are simply trying to prevent the first sovereign default from happening.
- Thinks these problems aren’t isolated to Greece.
- Canadian banks are better off than US banks which are more levered. Still fears for the banking system, we have no idea of the value of derivatives. Banking is not a business he would want to be in.
- Canadian banks have a competitive advantage as people are going to want to take money from weak banking systems and into strong banking systems
- Likes farmland, oil, gold and silver.
- Does not like real estate as it is a function of interest rates in liquidity. If interest rates go up the value of buildings goes down. Expects rate to go up obviously.
- Thinks there is a residential real estate bubble in Canada
- Believes it is a contest of which currency is worst (yen, euro and US dollar), believes the market has decided that gold is the reserve currency.
- Thinks the United States is pretty close to being in a recession again already. If not certainly heading that way.
- Believes QE1 and QE2 did not work. Government is stuck, how do you reduce debt and stimulate economy?
- Institutional interest in gold is unpredictable as hedge funds move in and out. Thinks gold and precious metal stocks will eventually segregate themselves from the rest of the market.
- No sense in just trading a paper contract, should invest in physical gold or silver.
- Massive underperformance of gold/silver equities vs. the commodities themselves. Thinks investment products that allow gold/silver exposure takes away interest from the equities.
Here are the two videos from BNN:
Video 1
Video 2
Here is what he had to say.
Notes from the interview:
- On European debt issues: Risk in the banking business has been moved to sovereign risk. Greek banks have lost 12% of deposits last year and 8% of deposits this year. That means they have to sell some assets in order to fund the deposit withdrawals. But the banks can’t sell assets that they have because they aren’t worth anywhere close to their carrying value. Therefore the government has to come in and buy these assets from the banks. Now we have systemic risk.
- Issue is we are trying to solve the problem of an overleveraged banking system and right now they are simply trying to prevent the first sovereign default from happening.
- Thinks these problems aren’t isolated to Greece.
- Canadian banks are better off than US banks which are more levered. Still fears for the banking system, we have no idea of the value of derivatives. Banking is not a business he would want to be in.
- Canadian banks have a competitive advantage as people are going to want to take money from weak banking systems and into strong banking systems
- Likes farmland, oil, gold and silver.
- Does not like real estate as it is a function of interest rates in liquidity. If interest rates go up the value of buildings goes down. Expects rate to go up obviously.
- Thinks there is a residential real estate bubble in Canada
- Believes it is a contest of which currency is worst (yen, euro and US dollar), believes the market has decided that gold is the reserve currency.
- Thinks the United States is pretty close to being in a recession again already. If not certainly heading that way.
- Believes QE1 and QE2 did not work. Government is stuck, how do you reduce debt and stimulate economy?
- Institutional interest in gold is unpredictable as hedge funds move in and out. Thinks gold and precious metal stocks will eventually segregate themselves from the rest of the market.
- No sense in just trading a paper contract, should invest in physical gold or silver.
- Massive underperformance of gold/silver equities vs. the commodities themselves. Thinks investment products that allow gold/silver exposure takes away interest from the equities.
Here are the two videos from BNN:
Video 1
Video 2
