Sinclair says: ''We are very close''

9:33p ET Monday, April 14, 2003

Dear Friend of GATA and Gold:

Here's another interview with John Embry, formerly of RBC
Global Investment Management, now president of Sprott
Asset Management -- this one done by the quot;Lunch Moneyquot;
column of the National Post/Financial Post in Canada.

The interview may tell you more about the menu at the
Toronto restaurant where the interview took place, Reds, than
you want to know if you're not in the Toronto area, but then
the newspaper may figure that many gold investors want to
strike it rich mainly so they can go out to lunch and dinner
every day, as GATA's delegation to the Montreal Resources
Investment Conference just did. (We're lucky that, until we
too reap a jackpot in gold, we have friends in the gold
industry who are willing to pick up the check for us every
few months. Given the lousy gold price and their right to
be drinking heavily lately, they might not even have noticed
us at their table.)

Anyway, this is a good interview. But what the heck is
a gold advocate, presumably an advocate of private
property and the rule of law, doing at a restaurant called
Reds?

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

* * *

John Embry digs in on gold;
Veteran fund manager is 'reinvigorated'
by move to Sprott Asset

By William Hanley
Financial Post, Canada
a href=http://www.nationalpost.com/financialpost/story.html?id=6A8E3ABC-8338-ht...
465A-A287-D01F36E78ECC
Saturday, April 12, 2003

John Embry has been following gold for more than 30 years,
so he's not overly concerned on this day at Reds Bistro just
off Bay Street when Lunch Money notes that the bullion price
has dipped below US$320 an ounce from near US$390 earlier in
the year.

quot;The volatility in this area never fails to amaze me,quot; he says
as we settle into a booth in the airy upstairs dining room, a
favourite luncheon spot of his -- and ours too.

quot;I thought it would correct back around US$350,quot; he concedes.
quot;But we're in a gold bull market and we've seen the first leg
and this is the first correction. We're certainly getting rid
of the Johnny-come-latelys and the nervous Nellies.quot;

At 62 and with almost 40 years in the money-management
business, this Embry is no Johnny-come-lately. Unless, that
is, we're talking about his surprising late-career move from
Royal Bank of Canada, where as vice-president of equities
he earned a sterling reputation for running the top gold fund,
across the Street to Sprott Asset Management Inc., where
he was recruited in March by chairman and CEO Eric Sprott
to become president of the company and manager of its gold
and precious minerals fund.

To their and their clients' good fortune, they have both been
bears on the general stock market and the U.S. economy.
quot;I knew what Eric's view had been in the past three years
and it certainly meshed with my view of the world,quot; Embry
says.

While the lead-up to war in Iraq and the conflict itself have
been distorting factors, they are merely a quot;little noisequot;
around the basic fundamentals of gold, which are that U.S.
interest rates are flat to negative and the U.S. dollar is
extraordinary vulnerable in the post-bubble world, that the
era of outperformance for financial assets is over. quot;And
these are extremely gold-friendly items,quot; he says, adding
that the gold stocks are quot;digging in at this level.quot;

So friendly were they that Embry's Royal Bank precious
metals fund returned 153 percent after fees last year -- the
third year of the bear market in stocks generally -- and
Sprott's various investment vehicles were not far behind
for the third year of great outperformance.

Now, though, the Sprott funds are down across the board
for the first quarter and a few clients are slightly nervous.

quot;The problem is when you start off the year with negative
returns, that looks worse than when you have two negative
months in the middle of the year after you've had good
months,quot; he says. quot;People just have to go back and look
at the returns [Eric Sprott has] generated since inception.
And you either believe him or you don't.quot;

We haven't even looked at Reds' menu yet, but, typically,
Embry knows what he wants.

quot;I've never had a bad meal here,quot; he says, ordering the
applewood smoked chicken penne with peppers, spinach,
mushrooms in a chardonnay cream sauce, accompanied
by a glass of robust cabernet sauvignon.

We go for the bronzed pacific black cod with a saffron dill
cream, served with sauteed leeks and herb whipped potatoes.
We surprise ourselves by ordering a glass of chardonnay.
But there are no surprises with the food. It is very good, as
usual.

A native Winnipegger, Embry began his career at GreatWest
Life in the 1960s and joined United Bond amp; Share in the 1970s.
It was folded into Royal Bank 15 years ago as the nucleus of
its investment subsidiary.

If he hasn't seen it all in the investing world, he's seen
plenty enough to make him certain what he's seeing now.

quot;We're in a secular bear market. We had an extended period
of abnormally high returns in stocks and bonds. It was
unsustainable. There would come a period when you get
negative real returns, as you did in the '70s. Now I'm afraid
you're back in a period when you're going to get terrible
returns on most of your assets.quot;

Eric Sprott saw that happening and with perfect timing just as
the dot-com bubble was about to burst in early 2000, he
changed his whole operation to a money-management firm
specializing in hedge funds and precious metals funds.

quot;He's one of the real virtuosos in this business,quot; Embry says
of Sprott. quot;And I know them all. He's a man of great intellect
and sees things clearly. More important, he acts on what he
sees.quot;

Indeed, Eric Sprott was bullish all the way up in the bull
market, staying with the company slogan, quot;We remain bullishquot;
right to the end of 1999, when he turned flat-out bearish.

Which is where he and John Embry remain today, except for
gold, gold stocks and special undervalued situations for the
company's equity fund.

They and a small minority of money managers believe we've
had the biggest financial bubble in history and it must be
followed by one of the longest, ugliest bear markets as a
result.

quot;But the thing that's remarkable,quot; Embry says, warming up
to his topic and his big plate of pasta, quot;is as ugly as it's
been, confidence in the market remains terribly high in the
face of what I believe is obvious economic deterioration,
profit problems of a serious nature, and a debt structure
that's unprecedented.quot;

So he remains comfortable holding a quot;minority viewquot; even in
the face of the quot;Wall Street marketing machinequot; holding
steady to the bullish view through three straight years of
stock market losses.

And yet he concedes he's surprised that with the amount of
attrition in the market and to the degree that people were
exposed to stocks and those big losses, that there hasn't
been more financial and economic fallout.

quot;The economy has been better until recently than I would
have guessed. The consumer has hung in there. I don't know
whether he's like Wile E. Coyote off the cliff and his feet
are going and he doesn't know he's in trouble yet. It takes
time to unravel and we haven't done it yet.quot;

Which, as always, brings us back to gold. Embry says the
fall in the gold stocks foretold what has subsequently
happened to the bullion price.

quot;It just means you're going to make more money from
US$320 than you would if it had stopped [falling] at US$350
or US$360.quot;

Spoken like a true gold lover -- one who believes that it's
going over US$400 and aiming for US$500 -- and that the
best way to play it is to take big positions in stocks with
great upside leverage to a higher price, the small producers
and those in the development stage with big ore bodies and
good people. He particularly likes Southwestern Resources
Corp. (SWG/TSX), and among the mid-caps, Goldcorp Inc.
(G/TSX) and IAMGOLD Corp. (IMG/TSX).

We've had a great lunch at Reds -- the food, the wine, the
seamless service. Over coffee, John Embry, who joined
Sprott Asset Management on his 62nd birthday March 1,
declares: quot;I'm feeling reinvigorated.quot;

And he has some last words that are particularly relevant
to Lunch Money, who is heading toward 60.

quot;There's a time in life to make money and there's a time in
life to keep money,quot; he says. quot;Right now, we're in the latter
stage. What you're trying to do is maintain your purchasing
power.quot;

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