Embry - People Will Be Shocked at the Chaos Heading Our Way

Today John Embry told King World News, “This situation is unprecedented.  The world has never, ever been in a condition like this.”  Embry, who is Chief Investment Strategist of the $10 billion strong Sprott Asset Management, also told KWN, “anyone that is complacent will be shocked at the chaos that is heading our way.”  Here is what Embry had to say about the situation:  “I think we’re in an extraordinary place.  It’s becoming obvious that Europe is imploding, and the powers that be really don’t have any solutions.  I’m very worried about China.  Lawrence Summers recently said China may have a year in which it only grows 7% in the next decade.” 

John Embry continues:

“I would view that as a positive if they only had one year where they grow 7% because I really think China is going to regress as well.  We’ve talked about the situation in the US.  I don’t believe the US economy is going anywhere, despite the enormous fiscal and monetary stimulus.

As a result, the markets are starting to wake up to this.  We see bond rates in the safe haven countries collapsing.  Investors are running away from risk.... 

“The only issue I have is they are trying to create the idea that gold is a risk asset.  So when the risk-off trade is on and they are selling commodities and stocks, gold is lumped in with them.  But I think the safest asset in the world, by a huge margin, is gold. 

What really troubles me about this whole risk-on/risk-off argument, as it applies to gold, is there is massive manipulation and interference in the gold market.  They knock gold down at times when it should obviously be going higher.

This engenders a lot of commentary saying something like, ‘Gold is down because the euro is weak,’ or ‘The Spanish banking problems are knocking gold down.’  If anybody stopped to think, they would realize that all of this stuff is wildly bullish for gold.  

Yet, somehow they have convinced people because of price action, that gold is sold during chaotic times.  That’s just false.  Physical gold is not sold during turbulent times, but the reality is the paper gold market does experience heavy, manipulative selling. 

The bottom line is that gold will bounce back violently from this manipulation at some point.”

Embry also added:  “What you have going on right now is a rush to the supposed safe havens, which are the US dollar, and, by extension, US Treasuries.  The US 10-Year is now at a historic all-time low.  This is preposterous, but it is a pre-condition for QE3.

The US Fed would love to have the dollar firm when they announce QE3 because it is going to get clobbered on that announcement.  Similarly, I think they want the gold price as low as possible when that announcement is made because it will be taking off to the upside when QE3 is announced.

The stock market will also be taking off to the upside from lower levels when the announcement is made.  So, I think they could be grooming (managing) the markets as we speak, positioning them for the optimal point of the launch of QE3.  

The reality is the clock is ticking for the launch of QE3, but let me clear up one misunderstanding, at least as I see it.  I don’t think QE3 will have any dramatic impact on the economy.  The only thing it will do is forestall the implosion from occurring as rapidly.

But eventually all of these QE’s are going to manifest themselves in inflation, not booming economic activity.  So, do I think QE is a long-term solution to anything?  No.  The only solution it’s going to create is ever-mounting inflation, which hopefully won’t end in hyperinflation.

I would like to add that I was struck yesterday by the comments that Egon von Greyerz made on KWN, that the only thing that can keep this system afloat is monetary creation of historic proportions.  When Egon started to talk about $100+ trillions of dollars being printed, I have a hard time thinking about trillions of dollars, let alone tens of trillions or hundreds of trillions of dollars.

This situation is unprecedented.  The world has never, ever been in a condition like this.  As a result, anyone that is complacent here and says, ‘This is just business as usual,’ they are dead wrong and will be shocked at the chaos that is heading our way.”

Embry also had this to say regarding the mining shares:  “I think the mining shares are making a bottom somewhere in here.  This is a historic buying opportunity because I think gold and silver are considerably undervalued, and the mining shares are even more undervalued against gold and silver. 

So I think you will have a slingshot effect when gold and silver recover and investors get some confidence.  The upside impact on the price of the shares will be something to behold.”

Source : http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2012/5/30_Embry_-_People_Will_Be_Shocked_at_the_Chaos_Heading_Our_Way.html