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Even the biggest of paper''s big shots are only as good as their counterparties

Section: Daily Dispatches

1:34a ET Thursday, October 20, 2005

Dear Friend of GATA and Gold:

Tuesday's National Post in Canada gave a long
sneer to Eric Sprott, chief executive of
Sprott Asset Management in Toronto and colleague
of John Embry. That sneer was a lot easier than
doing some investigative reporting about the
evidence and conclusions contained in Sprott's
reports about government intervention in the
gold and equities markets. But better a sneer
and the notice it brings than to be ignored, as
the Sprott reports have been largely ignored in
North America.

Indeed, sneers are always a great start, for
Sprott's friends will recognize him instantly,
while others will be curious enough to read
his firm's reports.

The National Post story is appended.

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

* * *

Eric Sprott, Apostle of Apocalypse

Keith Kalawsky and Jonathan Chevreau
National Post / Financial Post, Toronto
Tuesday, October 18, 2005

Stepping up to the podium at the World Hedge Funds Summit in Niagara
Falls yesterday, Eric Sprott did not deviate from his signature
thesis and apocalyptic message.

Mr. Sprott has created a cottage industry out of paranoia. The fear-
mongering chief executive of Sprott Asset Management Inc. is
obsessed with the energy sector and convinced that global oil
supplies are running dry. His colleagues at Sprott have also
published a widely circulated, conspiratorial report claiming that
the U.S. government routinely manipulates the stock market. Gold is
also the victim of mysterious forces. "If you believe in fair
markets, don't read these reports," he dared the audience. A
wisecracking hedge-fund manager in attendance said Sprott has
probably stockpiled guns, canned food, and gold in his basement.

Mr. Sprott briefly detailed a list of brewing disasters: overzealous
consumer lending ("We have a negative savings rate. Who cares?");
U.S. trade and budget deficits; rising inflation; some US$37-
trillion in Medicare and Social Security liabilities in the United
States; and 20% annual growth in derivatives (US$250-trillion worth
of derivatives in a US$12-trillion U.S. economy).

But Sprott really tried to scare the pants off his audience by
offering chart after chart detailing the decline in oil reserves and
discoveries. His favourite chart of all is of Hubbert's Peak,
affirming the prediction of Dr. M. King Hubbert in 1956 that U.S.
oil production would peak 14 years later, in 1970.

Kicking off his presentation, he said, "I intend to be your
alarmist." Just when Mr. Sprott got the ball rolling on his bearish
speech, a server brought him a glass of water at the podium. Mr.
Sprott paused and asked, "Is someone trying to poison me?"

Investors in his fund better hope not. He's delivered 64%, 74%,
negative 6%, and 26% the past four years in his flagship hedge fund.

In the short term, Mr. Sprott thinks investors don't fully grasp the
damage inflicted on the Gulf Coast by Hurricane Katrina and then

While some commentators thought the area dodged the bullet when Rita
was downgraded in severity, Mr. Sprott said otherwise. Although
there hasn't been much evidence of this, he figures that underwater
oil pipelines in the Gulf of Mexico, which took decades to build,
have been destroyed and will take months, if not years, to
reconstruct. The damage to drilling platforms and other facilities
was also extensive.

Over the long term, he cites predictions that oil production will
drop to 85 million barrels a day to 63 million in 10 years. The
decline may not be that severe, he conceded, but "I make the case
than any reduction will create massive economic dislocation."

He's also big on other fuel sources, such as natural gas, coal, and
uranium, although it will take years for the development and launch
of more nuclear power plants. There has been resistance to using
nuclear energy, Mr. Sprott acknowledged, but he thinks those
concerns will melt away once the oil shortage takes hold.


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Franklin Sanders
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