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John Hathaway continues:


“So, we are in this lengthy correction and most of the things I look at suggest we are near a bottom.  I don’t see a huge amount of downside risk.  To me this is an excellent opportunity to put money to work in the sector, particularly in the gold stocks which are as cheap as I’ve ever seen them.


We’re seeing values that I don’t think we’ve seen, I’ve never seen since I’ve been doing this.  Newmont is trading at roughly five times cash flow.  It’s trading at about eight times earnings, with a 3% dividend yield.


If you’re a value investor and you don’t even have a point of view on monetary debasement, you would have to say let’s take a look at Newmont because it looks cheap.... 


Continue reading the John Hathaway interview below...




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“The great thing about Newmont is that it’s a long-term call option on gold.


The negatives are already cooked into the gold stocks.  What’s going to get the gold stocks going is a move to new highs (in gold) sometime this year.  The biggest thing that’s going to drive gold is the Fed having to extend their support of the bond market.


Now we know that on February 29th, Bernanke stated that the Fed’s work was done.  But I would have to put that in the category of all other Fed forecasts.  They didn’t see the 2008 credit meltdown and they didn’t see the housing collapse.


So the Fed has not been all that great at making judgments about what the future holds.  But the market took his statement as gospel and said quantitative easing is a thing of the past, as of June 30th.  I believe the Fed will have to print more money to support the bond market.  We’ll just have to wait and see. 


Last year the Fed bought 61% of all new Treasury issuance.  What we do know is the biggest supporter of US Treasuries outside of the Fed has been China.  In some month’s China has even been selling Treasuries.  China’s foreign-exchange accumulation has been dropping dramatically. 


If they (China) are buying fewer Treasuries and the Fed is backing away from supporting the interest rates, where are interest rates going to go?  If we have a negative yield today of 2.5%, where do rates have to go?  Probably 3% to 4%.  I don’t think in the middle of an election year that politicians are going to want to see interest rates go up to that level.


So, I think investors need to understand why they have exposure to gold.  We are in an environment where central banks are trying to debase currency.  Ultimately that has to be reflected in the gold price and the performance of gold stocks.”


This is an excellent interview with Hathaway because it is packed with information regarding what is taking place now and what to look for going forward.  The KWN John Hathaway interview is available now and you can listen to it by CLICKING HERE.


© 2012 by King World News®. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed.  However, linking directly to the blog page is permitted and encouraged.


Eric King

KingWorldNews.com

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