8 Reasons Why Silver Is the Investment of the Decade (Subtitles)

A man who has predicted a big run in the price of gold and warned of trouble -- in some of the major financial institutions, all of which came true... Eric Sprott, Chief Executive Officer of one of Canada's largest independently owned Securities firms -- Sprott Asset Management -- and he joins us from Plantation, Florida, where he's attending the BMO Mining Conference. It's good to see you Eric. You're making a presentation there. What are you going to be talking about? (Sprott): Well, Michael, the main emphasis of the story today is about silver -- As you have mentioned... I think silver will be the investment of the decade. I thought gold was the investment of the last decade, and I think silver is now starting to make a run. In fact, I think it's at an absolutly new high today, so, I'm gonna give some details on why I think silver should go higher. (Reporter): And... Is it based on the fundamentals or is it the religion? Just like gold has been governed? (Eric laughs) (Sprott): Well, I like to base it on the fundamentals and I look at -- various data points that just kinda scream at you that the price of silver has to go higher. And I could give you a couple of examples: For example, the US Mint in the months of January and February -- sold as many dollars of silver as it sold dollars of gold. Uh, I have a little company called Sprott Money that sells "Silver Maples" and "Gold Maples". We sell about 5 times more "Silver Maples" than "Gold Maples". Uh, the Chinese used to export 100 million ounces of silver -- They now import 112 million ounces. And that's in a market that's a total of 800 million ounces. So we've seen a 20% shift just in chinese demand. And where it's coming from, I don't know. Where the silver is coming from. You're probably aware that when we launched our Silver Trust, we had to go and buy 15 million ounces. It took us about 10 weeks to get 15 million ounces delivered. And I would point out that silver -- trades 400 million ounces a day on the COMEX, but trying to get 15 million ounces was very, very difficult. (Reporter): What is silver being used for? We know that, uh, a couple of years ago when digital cameras made a big splash and really undercut the market for photographic films... Silver took a real drop. What is it being used for? Is it strictly an investment? (Sprott): Well, I base my optimism on the new investments that are taking place. You know, the ETFs and the funds like we have and just the general demand for people to replace their currencies with silver. But, last year for example, industrial production was up something like 18%. There's all sorts of new uses: Solar panels and the healthcare businesses -- In bandages and clothing and various other uses... For antibacterial uses. So, the industrial demand has been quite surprising. But the real demand has been from the investment side. (Reporter): All right. -- Cough -- Excuse me. Just before we leave silver... We were talking about it trading at an all time high. Where do you see it going? (Sprott): Well, there's a secular argument for silver here. And the secular argument is that, historically, silver has traded in the ratio to gold of 16:1. So, in another words, if the price of gold was $1,600, typically, silver should trade at 100 dollars. Uh, but that ratio has been not effective in the last probably 20 or 30 years. The last time it probably traded in that range was in 1980 when the Hunt Brothers arranged for the prices over to go up to 50 dollars. But the ratio is coming down. I think today -- it's probably at 40 or 41, having been as high as 80:1. And I think it's going to 16:1 again. So, quite frankly, in the next -- 3 to 5 years, I will be the least surprised person in the world to see silver go to 100 dollars. (Reporter): I just thought of something else to ask you, because unlike other commodities, the silver market is in backwardation right now. The prices get lower the further out into the future. You get... What does that tell you? (Sprott): Well, it tells you that there's a silver shortage. And even when we bought silver, for example, for our Silver Trust... Some of the silver we bought was manufactured two weeks after we purchased it. Which it really told me there was no inventory around. I mean, if there was inventory, we would have got it in a week. It would have been existing inventory. So I think that uh, there is a tightness in physical silver. That's why the spot month is, I think, it's over -- a dollar and a half different from about 3 or 4 years out. It's a very unusual situation that that exists and it indicates a -- short-term supply problem. (Reporter): Last question: What do you think about the London Stock Exchange's efforts to take over the TMX? (Sprott laughs) (Sprott): Well, it's not really a subject that I dwell on. Uh... Obviously it seems to be that consolidation is taking place amongst the Exchanges. There's competition amongst all Exchanges -- I'm not a shareholder of TMX. And I don't really... I don't have an opinion -- one way or the other. I'd probably prefer that it stayed in Canadian hands, but uh, we'll see how it plays out. (Reporter): Great to get some time with you this morning, Eric. -- Cough -- Excuse me. Thank you very much, Eric Sprott. (Sprott): Ok, Michael. All the best. (Reporter): He's the CEO of Sprott Asset Management. He spoke to us from Plantation, Florida.