Eric Sprott

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Postby Mike Schimek » 28 Sep 2009 17:04

Your points are good, but I think I should have emphasized the "no" part, because even taking into consideration the points you mention, I think that some managers would be sufficiently better than others to make enough of a difference to overcome the points.

I think I read somewhere some statistic that indicated that 75% of money managers underperform the market, 25% outperform (when fees are taken into consideration). I guess if it weren't for the fees the number would be around 50/50, with the 25% difference chomped up by the fees and things you mentioned.

Taxes. Every time the fund sells stuff, you have to pay tax on that money, decreasing the real return.


This is a good point. An investor managing his own money or buying ETFs has a tax planning advantage, which is nifty.
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Postby bones1 » 28 Sep 2009 18:22

Mike Schimek wrote:I think I read somewhere some statistic that indicated that 75% of money managers underperform the market, 25% outperform (when fees are taken into consideration).


That sounds about right over a 1 year period. I expect the number would get exponentially worse as you compare longer periods.

Perhaps I over-emphasize the "luck" aspect, though I do think that's a big part of it. There are likely some good managers that do have a skill. One problem they face is that once their skill is identified, others emulate it which changes the market and nullifies their skill. No manager does everything himself... all it takes is an insider to jump ship and go work for the competition.

I do believe these fund managers' egos are far bigger than their skill. And I am skeptical of their predictions, because their #1 goal is to sell their fund to investors, not to actually make money for their investors. Witness how Sprott's company went public right at the commodity bubble, and how poor his performance was for those investors that bought into him. He made money; his investors did not.
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Postby randomwalker » 28 Sep 2009 19:02

bones1 wrote:
Mike Schimek wrote:I think I read somewhere some statistic that indicated that 75% of money managers underperform the market, 25% outperform (when fees are taken into consideration).


That sounds about right over a 1 year period. I expect the number would get exponentially worse as you compare longer periods.

Perhaps I over-emphasize the "luck" aspect, though I do think that's a big part of it. There are likely some good managers that do have a skill. One problem they face is that once their skill is identified, others emulate it which changes the market and nullifies their skill. No manager does everything himself... all it takes is an insider to jump ship and go work for the competition.

I do believe these fund managers' egos are far bigger than their skill. And I am skeptical of their predictions, because their #1 goal is to sell their fund to investors, not to actually make money for their investors. Witness how Sprott's company went public right at the commodity bubble, and how poor his performance was for those investors that bought into him. He made money; his investors did not.


Check here

http://www2.standardandpoors.com/spf/pd ... d_2008.pdf

and here

http://streamer.perimeterinstitute.ca/m ... ize=False#
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Postby bones1 » 29 Sep 2009 06:18



No can do. My browser's anti-script filter blocked the first site, and the second site was blocked by a pop-up filter. I suppose the first site is trustworthy, so I may enable it when I have some time to look at a PDF.
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Postby jwr » 01 Nov 2009 10:54

In case you failed to catch it in our previous articles this year, we thought we’d state it outright for our readers this month: the United States Government is on a trajectory to default on their obligations. In its current financial condition, it will not be able to fund its forecasted budget deficits and unfunded Social Security and Medicare promises on top of its current debt obligations. This isn’t official yet, and we don’t know when the market will react to it, but there is no longer any doubt about the extent of their trajectory. There simply isn’t enough taxing power, value creation or outside capital willing to support its egregious spending.


http://www.sprott.com/Docs/MarketsataGlance/MAAG_10_2009.pdf
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Postby ukridge » 01 Nov 2009 11:47

Great halloween reading. Scary stuff!

- ukridge.
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Postby George$ » 01 Nov 2009 13:48

... the United States Government is on a trajectory to default on their obligations. In its current financial condition, it will not be able to fund its forecasted budget deficits and unfunded Social Security and Medicare promises on top of its current debt obligations. ....
http://www.sprott.com/Docs/MarketsataGlance/MAAG_10_2009.pdf

Somewhat related - and a bit of interesting US history I learned while watching the story of Alexander Hamilton on PBS - chapter 9

Apparantly some 200 years ago the US had a huge debt to repay for the cost of the War of Independence - it was bankrupt. Most politicians of the day argued that they could not repay the crushing debt and should default. Hamilton was the strong opposing voice who argues that they had to repay in order not to lose trust with future lenders - that the future prosperity of the US depended on this trust to raise capital for future growth. His voice and foresight prevailed (It seems mostly because George Washington had incredible faith and trust in him - and some horse trading on the site of the new US capital - a 'dinner compromise') - and the US did go on to enjoy immense prosperity.

The story has a sad and perhaps ironic ending. Hamilton was killed by Burr in a duel - a duel in which Hamilton refused to raise his pistol. The selfish Burr killed the principled Hamilton. :wink:
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Postby agraham » 01 Nov 2009 16:39

George$ wrote:The story has a sad and perhaps ironic ending. Hamilton was killed by Burr in a duel - a duel in which Hamilton refused to raise his pistol. The selfish Burr killed the principled Hamilton. :wink:


That's not exactly what happened. Hamilton fired. His party claimed he threw away his shot or fired from the shock of being hit. Burr's party claimed he fired at Burr but missed.
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Postby George$ » 01 Nov 2009 19:49

agraham wrote:
George$ wrote:The story has a sad and perhaps ironic ending. Hamilton was killed by Burr in a duel - a duel in which Hamilton refused to raise his pistol. The selfish Burr killed the principled Hamilton. :wink:


That's not exactly what happened. Hamilton fired. His party claimed he threw away his shot or fired from the shock of being hit. Burr's party claimed he fired at Burr but missed.


Your sources George? If you go to the Chapter 17 video clip of my PBS link above, it gives a different version from yours.
(I wasn't there so I only have heresay. :roll: )

Added later, I may have overinterpreted the facts ... from Wikipedia
It is entirely uncertain which principal fired first, as both seconds' backs were to the duel in accordance with the pre-arranged regulations of the duel (and also so the men could later testify that they "saw no fire"). After much research to determine the actual events of the duel, Pulitzer-prize winning historian Joseph J. Ellis gives his interpretation:

Hamilton did fire his weapon intentionally, and he fired first. But he aimed to miss Burr, sending his ball into the tree above and behind Burr's location. In so doing, he did not withhold his shot, but he did waste it, thereby honoring his pre-duel pledge. Meanwhile, Burr, who did not know about the pledge, did know that a projectile from Hamilton's gun had whizzed past him and crashed into the tree to his rear. According to the principles of the code duello, Burr was perfectly justified in taking deadly aim at Hamilton and firing to kill.[15
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Re: Eric Sprott

Postby jwr » 27 Nov 2009 19:29

Don’t Bank on the Banks

Looking at the Canadian system more closely, all five Canadian banks are levered at an average of
31:1, which is actually the lowest leverage ratio during the three years that we reviewed. This implies
that if the Canadian banks’ tangible assets were to drop by 3%, their tangible common equity would
effectively be wiped out. Now, that doesn’t mean they would go bankrupt per se, but it does give us an
indication of how little asset prices would have to decline in order to wipe out their tangible common
equity. These leverage ratios worry us because they leave such a razor thin margin for error on the
‘tangible asset’ side of the leverage equation. We are always cautious about investing in companies
that have zero or negative common equity - we’ve seen what happens to public companies that trade
at those levels, General Motors being a good example.


http://www.zerohedge.com/sites/default/files/Sprott%20November%202009%20comment.pdf
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Re: Eric Sprott

Postby George$ » 31 Dec 2009 22:35

Eric's Christmas Cheer December Newsletter :(

Is It All Just a Ponzi Scheme?
“The search for truth is more precious than its possession.” Albert Einstein
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Re: Eric Sprott

Postby Wallace » 31 Dec 2009 23:20

Thanks for the link, George$

I find the logic of Sprott and others increasingly hard to refute:
1. US overspends on military, international & home budgets creating record deficits
2 US misuses its position as reserve currency to decrease interest rates, devaluing its international debt to make repayment easier.
3 Lower interest rates at home fuel a housing boom aggravated by the greed of the mortgage sector.
4 The crash of the housing market prompts the US to use unheard-of rescue measures that involve the printing of trillions of dollars
5 This results in worsening of #1 and the withdrawal of foreign investment from the reserve currency and treasury bonds.
6 The US tries to hide it by "faking" half a trillion dollars of Treasury bills investment (if this link is to be believed)
7 ..... (your prediction here)

It doesn't look good.
Anyone care to guess what will actually happen to all our investments if the US$ crashes by a significant amount. In other words, what would happen to the investmets of FWF if the US$ dropped by (say) 50% ?
How can we protect ourselves against this?

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Re: Eric Sprott

Postby broke » 01 Jan 2010 09:08

Wallace wrote:...
6 The US tries to hide it by "faking" half a trillion dollars of Treasury bills investment (if this link is to be believed)

The take/opinion/rant from Karl Denninger on Where Did The More Than $500 Billion Come From?
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Re: Eric Sprott

Postby kcowan » 01 Jan 2010 13:26

Wallace wrote:...
6 The US tries to hide it by "faking" half a trillion dollars of Treasury bills investment (if this link is to be believed)
7 ..... (your prediction here)

It doesn't look good.
Anyone care to guess what will actually happen to all our investments if the US$ crashes by a significant amount. In other words, what would happen to the investments of FWF if the US$ dropped by (say) 50% ?
How can we protect ourselves against this?

Unfortunately, the USD decline will drag down the C$. Would anyone predict that the C$ will be worth $1.50 by the end of 2010? If it stays in a more reasonable range (say 1.10), then we will have something akin to deflation. The reason I say akin is that the absolute dollars will not go down, but the value will decline in real terms.

So where do you hide during rampant deflation? You put it in real stores of value, like gold and copper. And oil.

So the TSX will continue to outstrip the Dow. And overseas companies that do not rely primarily on USD income will also continue to outperform.

(Sadly, my Corriente holding in the RESP is being taken out by Chinese Investors, $2.24 purchase currently trading at $8.53, so I will have to do some due diligence to acquire something new.)
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Re: Eric Sprott

Postby newguy » 01 Jan 2010 16:09

I think Sprott and Denninger are a little to conspiracy minded. Why wouldn't the household sector buy bonds? I talked about this here.
viewtopic.php?p=364821#p364821
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Re: Eric Sprott

Postby agraham » 01 Jan 2010 23:18

kcowan wrote:The reason I say akin is that the absolute dollars will not go down, but the value will decline in real terms.


Not getting this. If the value of the dollar declines that's inflation: it takes more dollars to buy stuff.

kcowan wrote:So where do you hide during rampant deflation? You put it in real stores of value, like gold and copper. And oil.


Under deflation each dollar buys more and more stuff so cash is where you want to be, no? Unless you're saying dollars will inflate against value stores and deflate against other stuff - but I can't see how that would happen.
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Re: Eric Sprott

Postby newguy » 04 Jan 2010 10:10

broke wrote:
Wallace wrote:...
6 The US tries to hide it by "faking" half a trillion dollars of Treasury bills investment (if this link is to be believed)

The take/opinion/rant from Karl Denninger on Where Did The More Than $500 Billion Come From?

Deninger and Sprott contend that the household sector is not buying treasuries because they're poor and there are net outflows from MM funds. This is a graph of savings accounts plus MM deposit accounts (not MM funds) per person in the US.
savpp.JPG

I'm thinking this is an effect of wealth concentration, so I subtracted $100 bill and 4 people to account for Bill, Warren and a couple friends. :) Don't worry, it doesn't change the result noticeably, and I was really just playing with the new Fred Graph tools. I still think the median person is poorer but don't know where to find that info, plus it doesn't matter for this analysis.

Here is just the savings for the last 5 years, up about a trillion since the start of the recession.
sav.JPG

Reading the latest H.6-Money Stock release shows that MM funds are down about $200 bill. but currency and checkable deposits are both up about the same since Jul '08.

I'm looking at this because I'm buying bonds, I think the demand is, and will be, there. I'm thinking the real question is, if all this money didn't flow into the stock market, what made it go up? :shock:

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Re: Eric Sprott

Postby kcowan » 22 Mar 2010 14:47

kcowan wrote:...(Sadly, my Corriente holding in the RESP is being taken out by Chinese Investors, $2.24 purchase currently trading at $8.53, so I will have to do some due diligence to acquire something new.)

I actually sold this out of my RESP at $8.53 last week only to discover that it is now trading at $7.47 on rumours that Ecuador will make it difficult for China to do business there.
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Re: Eric Sprott

Postby George$ » 27 Aug 2010 13:28

Fooled By Stimulus

July 2010 letter from Sprott

In the end, Keynesian stimulus ultimately fooled us all. It roped in the politicians of the richest
countries and set them on an unsustainable course of debt issuance. Recent Keynesian stimulus has
even managed to fool the sophisticated economic models designed by central banks. The process
of accounting for massive government spending ‘confuses’ the models into calculating a recovery
trajectory when it doesn’t exist. The Bank of England confirmed this with its announced £3.5 million
overhaul of its current model due to its inability to generate accurate inflation and recession forecasts.

Keynesian stimulus can’t be blamed for all our problems, but it would have been nice if our politicians
hadn’t relied on it so blindly. Debt is debt is debt, after all. It doesn’t matter if it’s owed by governments
or individuals. It weighs on the institutions that issue too much of it, and the ensuing consequences
of paying off the interest costs severely hinders governments’ ability to function properly. It suffices
to say that we need a new economic plan – a plan that doesn’t invite governments to print their way
out of economic turmoil. Keynesian theory enjoyed a tremendous run, but is now for all intents and
purposes dead… and now it’s time to pay for it. Literally.
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Re: Eric Sprott

Postby ghariton » 27 Aug 2010 17:43

George$ wrote:
The Bank of England confirmed this with its announced £3.5 million overhaul of its current model due to its inability to generate accurate inflation and recession forecasts.


I thought that the old macroeconomics was broken and that the new macroeconomics hadn't been developed yet. Why would one spend L. 3.5 million building or rebuilding something when one doesn't have the blueprints yet?

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Re: Eric Sprott

Postby randomwalker » 07 May 2011 19:44

Eric Sprott sells his Silver Trust units
TIM KILADZE
Globe and Mail Blog Monday, May 2, 2011

"It’s unclear at this time why Sprott has sold the shares. A request for an explanation has been put in with Sprott. Regardless of the reasoning, the timing looks quite prescient, considering that the price of silver has come off in the past few days."

http://www.theglobeandmail.com/globe-in ... le2006755/
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Re: Eric Sprott

Postby newguy » 07 May 2011 20:24

randomwalker wrote:Eric Sprott sells his Silver Trust units
TIM KILADZE

So why the sales? “Every dollar of money that was raised by selling shares of [the Trust]... was reinvested in silver or silver equities,” he said.


http://www.theglobeandmail.com/globe-in ... le2007195/

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Re: Eric Sprott

Postby randomwalker » 11 Jun 2011 05:57

BOYD ERMAN, Globe and Mail Blog, Friday, June 10, 2011

"Sprott Inc.'s asset management unit is ending the run of the Sprott Growth Fund.
Sprott said Friday that it will seek to merge the Growth Fund with Sprott Small Cap Equity Fund. If unitholders approve the plan...Sprott Growth has a two stars out of five rating on Globefund.com . The fund experienced a big drop in the financial crisis and never fully recovered. It fell 62 per cent in 2008, a bigger plunge than its peer group."

http://www.theglobeandmail.com/globe-in ... le2056348/
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Re: Eric Sprott

Postby randomwalker » 09 Jan 2012 17:42

GMP cuts rating and target on Sprott
by Christine Dobby, The National Post, Jan 9, 2012

Sprott also estimated it generated about $4-million in gross performance fees for all of 2011. “Fourth-quarter performance fees were below GMP’s estimate of $30-million as Sprott’s mutual and hedge funds performance suffered in December 2011,” Mr. Boland said in a note to clients. He pointed to fund performance troubles in 2011, with “a number of flagship funds reporting negative returns of over 20% for the year.” With several funds in deficit positions heading into 2012, Mr. Boland said he is reducing his 2012 performance fee estimate to $45-million from $105-million.

http://business.financialpost.com/2012/ ... on-sprott/
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Re: Eric Sprott

Postby George$ » 09 Feb 2012 17:20

January, 2011 newsletter by Eric Sprott

Which starts with -
The Financial System is a Farce Part Three

2011 was a merry-go-round of more bailouts, more deferrals and more denial. Everyone is tired of the Eurozone. It's not fixable. There's too much debt. The politicians don't know what's going on. Nothing has structurally changed. We're still on the wrong path. There's more global debt than there was a year ago, and it's the same old song: extend and pretend, extend and pretend,… around and around we go,… and it isn't fun anymore.

Just as we wrote back in October 2007, and again in September 2008, we feel compelled to state the obvious: that the financial system is a farce. It's a complete, cyclical farce that defies all efforts to right itself. This past year continued the farcical tradition with some notable scandals, deferrals and interventions that underscored the system's continuing addiction to government interference. With the glaring exception of US Treasuries and the US dollar (which are admittedly two of our least favourite asset classes), it was not a year that rewarded stock picking or safe-haven assets. Many developments during the year bordered on the ridiculous, and despite some positive news out of the US, we saw little to test our bearish view. If anything, our view was continually re-affirmed
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