Today a man who has been involved in the financial markets for 50 years spoke with King World News about the incredibly valuable lessons he has learned after being on this planet for nearly three quarters of a century. Although this man is business partners with billionaire Eric Sprott, he also discussed another billionaire’s massive bet and how this has impacted his own investment strategy.
John Embry: “I am feeling philosophical today because I am rapidly getting close to being on this planet for three quarters of a century. So you start thinking about things that have happened in your lifetime….
Continue reading the John Embry interview below…
I’m absolutely boggled at advances in technology, medicine, etc. The advances are truly stunning. When I was a young boy living in Winnipeg, television wasn’t available. When I was a kid it just wasn’t available in Winnipeg.
Now you’ve got the Internet, Google and other search engines, smart phones, etc. Basically people have the ability to get instant information at any time of the day. It’s unbelievable, the advances in technology.
Similarly, I was hosting a fundraiser at my house about a month or two ago for a hospital. One of the people attending the dinner was a doctor representing the hospital. I've known him for a long time. He is the head of surgery. He has been in this position for 12 years and is in the early stages of retiring. But he gave a talk on the advances in surgery and robotics, and my jaw was dropping as I listened to the astonishing advancements in these areas.
Along the same lines, one of my close friends had his ankle replaced two or three months ago. As recently as 10 years ago he would have lived the rest of his life crippled and in pain. But now he is walking around quite nimbly and with no pain. So I look at these advances and I’m thrilled at what mankind has been able to do.
And then I look at finance and I think that despite all the advances in so many different spaces, we are actually regressing in finance. The idea that we can print ourselves into some kind of Nirvana is preposterous. These high priests of Keynesianism who have been spouting the same garbage that got us in the trouble in the first place continue to suggest we can get out of it by doing the same thing. We can’t.
So with all the other advances, I just don’t think we’ve learned a thing in finance. And it’s going to take a terrible toll. Even when you have had innovation in finance, in many ways it has been negative. I don’t consider derivatives a positive factor at all. I think they have dramatically enhanced the leverage in the financial system, and at the same time they have put our banking system at risk.
Then you look at high-frequency trading and algorithm programs. They are used for front-running and manipulation. So essentially there is no real price discovery anymore, which is one of the real underlying factors that are supposed to be present in a truly capitalistic system. So the advances in finance have been used to destroy capitalism, not enhance it.
When I got into the industry more than 50 years ago, finance was an adjunct to the real economy. Basically it was used to finance real growth. But today it’s become the dominant factor in the world. That is, finance is running the world and the real economy is kind of a sideline. It’s the adage about the tail wagging the dog. But in this instance the tail is swinging the dog around the room and banging it off all four walls until it’s comatose. And that’s basically what’s happening to the real economy — it’s going to be comatose before this is over.
I used to be very proud that I was in the investment business but today I’m almost embarrassed. I just think this is going to end very badly and I really am disturbed about whether we are going to have a hard debt deflation or we are going to have to endure hyperinflation first. But there is no easy answer today and anybody who tries to suggest there is one is blowing smoke.”
Embry added: “I was really fascinated when I saw that Egon von Greyerz had the pleasure of chatting with Frank Giustra over in London last week. I know both Egon and Frank and I have an enormous regard for them. I knew Frank quite well in the Canadian mining space a few years ago when things were going really well.
To me, Frank Giustra is one of the giants in the industry and he had a great feel for everything. So I was fascinated to read that he thinks there is a fantastic opportunity in gold and silver shares. I guess that when a smart guy agrees with you, you feel better. But more importantly than that I think he’s dead right.
People do not have any understanding of what is going to happen when the gold and silver prices start seeking their correct levels. And with the potential earnings leverage in these companies when we see gold at $2,500 and silver at many multiples of what it trades at today, I can see some of these smaller companies earning more than their entire market caps today.
I can see them improving their cash flow over the next year or two by the amount of the market capitalizations being quoted today. The impact that is going to have on their stock prices is going to be astounding — and virtually nobody owns them. I swear that if you gifted somebody with money and said, ‘Buy mining shares,’ he or she would probably turn down the offer. So I strongly believe you have the perfect conditions for a spectacular up-move in gold and silver shares, and that nobody sees it and virtually nobody agrees with me makes me even more comfortable with my point of view.”
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