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John Hathaway: Gold’s Nuclear Winter Has Ended

Tom welcomes returning guest John Hathaway. Mr. Hathaway is a Portfolio Manager of Sprott Hathaway Special Situations Strategy and Co-Portfolio Manager of the Sprott Gold Equity Fund.

John discusses traditional portfolio weightings and why they no longer work. Bonds today are return-free risk, which opens the door for gold since something has to replace bonds. Some large pension fund advisors are considering gold as a risk mitigator.

He discusses the supply of debt and why interest rates have to remain at these levels. Debt to G.D.P. could easily reach 160% in the coming year or two.

Deficit spending is keeping the consumer alive, but there will be a lot more money spent. A vaccine could create some optimism for the economy, but that’s probably not enough to offset the spending.

Many experts are calling for a 30% decline in the dollar from here. The dollar will weaken, and gold will find its way into institutional portfolios. Today, there is about 100 trillion in wealth under management, and if one trillion of that moves into gold, that will represent six years of mine supply.

John explains how relatively small gold price moves can have an outsized impact on gold producers’ profit margins. These stocks remain quite undervalued when considering their free-cash-flow yield.

Gold remains hated and is still on the fringe, but that makes it an excellent opportunity since the fundamentals have only been improving for gold.

Time Stamp References:
0:00 – Introduction
0:40 – Return-free Risk
2:09 – Interest rates and debt
3:15 – More stimulus
4:17 – Dollar Thoughts
4:45 – Presidency & Spending
5:40 – Economy Stalled
7:03 – Gold looks very good
8:29 – Money under management
10:12 – Gold price & mine profits
12:50 – Mines don’t need capital
13:25 – Leverage Recommendations
15:21 – Valuing large caps
16:28 – Smaller company risk
17:52 – Setup for gold today
18:46 – Bitcoin vs. Gold
20:07 – Gold is still hated

Talking Points From This Week’s Episode:

  • Bonds and return-free risk
  • Debt and G.D.P.
  • Dollar is likely to decline.
  • Mines and profits in a rising gold price environment.

Guest Links:

John Hathaway joined Sprott Asset Management in January 2020. Mr. Hathaway is a Portfolio Manager of Sprott Hathaway Special Situations Strategy and Co-Portfolio Manager of the Sprott Gold Equity Fund. Previously, Mr. Hathaway joined Tocqueville Asset Management L.P. in 1997 where he was a Co-Portfolio Manager of the Tocqueville Gold Fund as well as other investment vehicles in the Tocqueville Gold Equity Strategy. He was also the Portfolio Manager of private funds. Prior to joining Tocqueville, Mr. Hathaway co-founded and managed Hudson Capital Advisors followed by seven years with Oak Hall Advisors as the Chief Investment Officer in 1986. In 1976, he joined the investment advisory firm David J. Greene and Company, where he became a Partner. Mr. Hathaway began his career in 1970 as an Equity Analyst with Spencer Trask & Co. Mr. Hathaway earned a B.A. from Harvard College and an MBA from the University of Virginia. Mr. Hathaway was also the Chairman of Tocqueville Management Corporation, the General Partner of Tocqueville. He also holds the CFA® designation.

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