Embry - If We Repeat 2008, Stocks Could Fall 40% From Here

I still don’t have a problem with $2,000 gold and $50 silver before the year is out....

With gold holding near the $1,650 area and silver around $32, today King World News interviewed John Embry, Chief Investment Strategist of the $10 billion strong Sprott Asset Management.  When asked about events around the world and how they are impacting gold and silver, Embry responded, “This Dexia Bank failure just showed how vulnerable the European banking system is.  This was one of the banks that stood out in their stress tests and then two months later they have to recapitalize it and nationalize it.  This probably brought home to people that we are talking trillions of euros to recapitalize the banking system over there to keep it functioning.”

John Embry continues:

“That money printing is an extraordinarily bullish event for gold.  If gold weren’t manipulated the way it is, it probably would have been up $100 on that news.  Gold was mercilessly pounded at the end of last week, so gold is still getting kicked around, but it’s building a base and the next move will take it comfortably through $2,000.

Gold needed a correction after the big run it had, but it was the way it was done that was the big tip off.  They (central planners) manufactured a correction for many reasons, one being the European banking situation and the general economic conditions.  Just as importantly, I think the paper guys have to get their short positions down because they know what’s coming.”

When asked about silver, Embry replied, “The shorts had all sorts of incentives to just beat the crap out of it, which they have done.  But I think it (silver) will go up faster than it went down once this thing turns around with conviction, which is coming up fairly soon.  I still don’t have a problem with $2,000 gold and $50 silver before the year is out....

I mean one other aspect about the whole correction, there is discussion about these position limits being imposed on COMEX, particularly in silver.  It is absolutely incumbent upon these guys to get their short positions down, which they have been able to do with the recent weakness.  They simply forced the long speculators out, they have deeper pockets than those guys and basically they took them to the cleaners.”

When asked about the action in stocks, Embry stated, “Monday was classic, I mean they had a really quiet day with Columbus Day in the United States and Canada was closed.  On light volume they rammed the market up over 310 points.  

It was ironic, I was talking to Eric Sprott earlier today and he asked me, ‘Do you know what happened on Columbus Day in 2008 before the market really started to collapse?‘  I said, ‘I have no idea.‘  Eric said, ‘It went up over 1,000 points!.  Then it subsequently dropped 40%.‘  So Monday’s action to me was absolutely window dressing.

I think investors have to be aware of the degree of manipulation in all of the markets here and not make the mistake of being momentum players.  They shouldn’t just try to go with what is working and jump on board because a lot of this is manufactured for the sake of appearances. 

It  troubles me because I see people losing faith in their gold and silver holdings and buying bonds for crying out loud.  Those truly are certificates of confiscation, people just haven’t figured that out yet.”