“Turmoil in global credit markets may lead to the collapse of a North American bank, pushing bullion prices up to $2,000 an ounce as investors seek a haven in gold.”
“There are probably 10 companies that are broke that are still trading — banks and financial institutions.”
These were just a couple of comments made by Eric Sprott in this March 10th Bloomberg story in which he also called for $2,000 gold.
On March 11th, just hours after the US Fed $200 Billion injection announcement, Marketwatch ran the following headline:
FED ACTION MAY HAVE TARGETED BEAR STEARNS
The article goes on to discuss the fact that the Fed action may have been partly directed at helping out Bear Stearns, a brokerage firm that bet heavy on bundling mortgages and re-packaging them into mortgage backed securities. Success served to commit the firm even deeper into the cash cow, which also made it vulnerable when the sub-prime markets turned.
Rumors abounded on Monday that Bear Stearns was in deep trouble as it stock fell more than 10% and credit-default swaps traded at 610 basis points over Treasurys on Monday, up 400 basis points from Friday.
Naturally, Bear Stearns denied it was in any trouble but when credit swaps increase by 400 basis points in one trading day, the jig is most likely up.
Had the Fed not come to the rescue, would Eric have had his day?
Both the Bloomberg and Marketwatch articles are a must read – but my next step is to try and get Eric Sprott on an “Expert’s Corner” interview to discuss this topic even further.
Eric, if you are reading this, please give me a call!
UPDATE:
Jim Rogers, co-founder of the Quantum Fund along with billionaire investor George Soros, echoed Sprotts’ short call on US financial institutions. He made the call this morning, less than 48 hours after the Sprott call. I point this out because this is the second time in 4 months that Rogers has echoed a big call made by someone at Sprott within 48 business hours. Here is the first time.
If Jim Rogers, Eric Sprott and JF Tardif haven’t met, they need to get acquainted. Should I make introductions?
Regards,
George
I believe Rogers has been publicly short i-banks for over a year, according to his various bloomberg interviews.
I like both Rogers and Sprott.
[…] Sprott “Bank Collapse” Was Right… Is He Also Right About $2,000 Gold? This is a must […]