Gold & Why We Are Facing A Real Catastrophe Going Forward

Chairman of Leeb Capital Management, Stephen Leeb, says that “Everything I’m looking at tells me to buy gold. I don’t see another way out of it." Leeb believes that we will see more easing before the next Fed meeting which will take place sometime in the next three to four weeks.

Eric King
August 2, 2012
King World News

Today Stephen Leeb, who is Chairman of Leeb Capital Management, spoke with King World News about the dreadful warning legendary value investor Jeremy Grantham’s recently issued: “This is a guy that has come to the view of resource shortages over the last 2 or 3 years. He’s becoming much more vehement about it, saying we could have real catastrophes in the food market, in water, etc., and energy could be right behind.”

The acclaimed money manager also discussed gold, but first, when asked about the dire situation the ECB faces, Leeb responded, “They’ve got to start buying bonds, period. It’s very simple, Spain cannot survive with bond yields over 7%. I doubt they can survive with bond yields much over 5%, when you’ve got no growth and 25% unemployment.”

Stephen Leeb continues:

“25% unemployment is the kind of unemployment we had during the (Great) Depression. It surprised me (that the ECB did not take significant action), and it makes me think, what is going on behind the scenes? My guess is we are putting tremendous pressure on Germany.

Every other country in Europe, including Great Britain, is ready to ease and buy bonds....

“I think we will provide them (Germany) cover. If the US is doing it and it is being done in concert with the United States, the Germans have a very credible out. They are not in a position, like Russia and China, to fight the United States.

They need us for their own physical security, and right now we need them for our own and physical security because if our economy starts to collapse, there is no doubt about it, all of our securities are in jeopardy. We are not going to allow one country to create that kind of shock which could occur in the West.

I think they (Germany) will relent and I’m going to predict you will see easing before the next Fed meeting, within the next three to four weeks.”

Leeb also added: “Everything I’m looking at tells me to buy gold. I don’t see another way out of it. What I find interesting about today, when I see junior gold’s up and I see gold down 1%, that to me is a pretty meaningful divergence.

You’ve seen this all day. Gold is now off its lows, but junior gold’s are up. That’s a very positive divergence because when gold goes down, typically junior’s are the ones that that take it on the chin. So to see them up (today) is kind of unusual and it suggests that investors are looking for a way to get into the gold market.

As I’ve said before, I think the biggest rally most of us are going to see in our lifetimes will be in the junior gold stocks. That’s where the gold is and we’re going to need the gold in this world, there is no doubt about it. You are going to see sensational gains in these stocks.”

Leeb had this to say about legendary value investor Jeremy Grantam: “Jeremy Grantham has turned into a big-time resource bull. He sees food shortages and he sees water shortages. He sees them as being critical.

This is not some extremist talking (Grantham oversees close to $100 billion). This is a guy that has come to the view of resource shortages over the last 2 or 3 years. He’s becoming much more vehement about it, saying we could have real catastrophes in the food market, in water, etc., and energy could be right behind.

He’s (Grantham is) a very powerful figure, he’s a very thoughtful figure and he’s very concerned. He’s close to his mid-70s, he has no axe to grind. He’s not trying to start a career making bold statements. He wants to do something to help the world. He’s warning people about these critical shortages coming up, and creating funds to deal with them.”

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