How Eric Sprott Is Minting Money

Canadian fund manager Eric Sprott appeared on Yahoo Finance's Breakout segment today with Matt Nesto and Jeff Macke to talk about how he is positioned in his hedge funds. He said that the major problem that he sees right now is the leverage in the banking system, which was exactly what brought Wall Street to its knees in 2008. According to Sprott, not much has changed. He said that financial institutions, on average, are levered at around 20-1, meaning a 5% haircut on their assets wipes out their entire capital base. He added, "their has been so much volatility in so many different investments, that to imagine banks could lose their capital in a big hurry, is not a problem." Sprott told Nesto and Macke that in the hedge funds he manages he is shorting financials, homebuilders and consumer discretionary stocks. On the long side, Sprott is a huge precious metals bull, and has been making great returns in that sector for years and years. He said that while his short bets have gone against him to some extent over the last year, those losses have been more than made up by the long side of his portfolio.