Wednesday, December 30, 2009

Sprott Says S&P Will Drop Below March 09 Lows, So WiIl US Dollar Go Up?

Business Week reports that Eric Sprott's Hedge Fund claimed ROI was 496% over the past 9 years. In the same period, the S&P 500 lost 32%. In an interview, Mr. Sprott now says that investors are misinterpreting economic data and is predicting the SPX to drop 40%, which would put it below 676.53, the 12-year low reached on March 9 2009.

If this were to happen, the U.S. Dollar will likely rally again. However, Sprott is also very favourable on gold. Gold and the U.S. Dollar do not traditionally go together, so perhaps they are implying this inverse relatonship will be broken. Either that, or they will be mightily wrong on one or both calls.

Some of his comments are below.

On the state of the market:

“We’re in a bear market that will last 15 or 20 years, and we’ve had nine of them,”

On the faith in the U.S. currency:

“If they announce another quantitative easing, trust me, the gold price will go up another 50 bucks that day,”

On employment:

“We don’t have employment gains,” “We have less of a decline. That’s a sign of weakness. The data is weak.”

On gold:

“If you get into this thing where you’ve got to keep printing more and more and more, who knows about the price of gold?” he said. “It will be the new currency in due course.”

Sprott however, has a very interesting research on who is buying U.S. Treasuries (coming up)

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