Thursday, January 12, 2012

Eric Sprott: The Financial System is a Farce

Sprott Asset Management published their monthly newsletter Market at Glance (January 2012) entitled "The Financial System is a Farce: Part Three".

This month, the newsletter is shorter than usual with 3 pages. Eric Sprott and David Baker explain that 2011 was a year with more bailouts, more kicking the can down the road and more denial.

Eurozone is not fixable,  there’s too much debt and the politicians don’t know what’s going on. Nothing has structurally changed. There’s more global debt than there was a year ago, and it’s the same old song: extend
and pretend, extend and pretend,…

After October 2007 and September 2008, its' the 3rd time Sprott Management says the Financial System is a Farce (hence the title) and they re-affirmed their bearish views on the economy and markets.

In 2011, they found four farcical (but not funny) events:
  • MF Global bankruptcy with  US$1.2 billion of missing customer funds and the CME did not act as a backstop.
  • Dodd-Frank financial reform aka "Too Big to Fail" regulations signed in 2010 has barely been implemented in 2011 (e.g. CFTC positions limits)
  • Europe and the European Central Bank (ECB) with another bailout (LTRO) and the states who lend to banks with the banks lending back to states.
  • National Defense Authorization Act (NDAA), not directly a financial issue, but when you make investments 'Political risk’ should also apply  in the US (and other developed countries)  and not only in developing or third world countries.
The full version of the newsletters is available at

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