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In this Wealthion interview, James Conner ( @BloorStreetCapital ) & Rick Rule have an in-depth discussion on the 2024 investment landscape.

Rick Rule, an investor specializing in natural resources, shares his valuable insights on gold, oil, uranium, and the overall economic outlook as we head into the new year.


Rick Rule 0:00
Despite my age, I’m always planning for the future and gold is part of my plan. And the idea that I can affect those plans at lower rather than higher prices, is what has me smiling. People say to me fairly frequently, Rick, what is the gold price going to move? I began increasing my own personal inventories in 1999. And if you look at the period 2000 to 2023, the price of gold has gone from $250 to over $2,000. So when people ask me when the price is going to move, I would say 2020 has been moving for 23 years, it’s been moving well, below perhaps their expectations.

Jimmy Connor 0:47
Hi, and welcome to Wealthion. My name is James Connor, and I’m with floor street capital. And we have a YouTube channel of the same name. At Wealthion. We are always trying to introduce you to guests which can provide insights on where to invest and where they see investment opportunities. Today, my guest is Rick Rule of Rule Investment Media. And Rick has extensive experience investing in resources including oil, nat gas, uranium, and gold. And we’re gonna find out from Rick today where he sees value in those sectors. Rick, thank you very much for joining us today. I’m looking forward to this discussion.

Rick Rule 1:20
James so much for the invitation. I’m a fan both of Wealthion and Bloor Street. So I’m delighted to be on with you.

Jimmy Connor 1:26
Rick 2023 has been a remarkable year in many respects, and also very surprising because of the resiliency of the US economy. There’s an ongoing debate on whether or not the US will go into a recession or whether or not it’ll be a soft landing or a hard landing. And I want to start right here and get your views. What do you think is going to happen in 2024?

Rick Rule 1:48
With a disclaimer that I’m no economist, I’m a credit analyst. I sort of lean towards the recession camp. I, as you suggest, I’m delighted with the relative strength of the US economy in the face of a doubling of nominal interest rates. I was told that the US economy would take a punch. And I’m delighted with the fact that it’s been able to so far, I remain concerned that this strength, like the strength in the early part of the decade of the 70s is losery. And that the real reaction of the economy to the higher cost of capital is yet to come. Although I certainly hope I’m wrong.

Jimmy Connor 2:30
I’m glad you brought up the 1970s. I might come back to that later. But it sounds like you were quite surprised with the performance we saw in 2023.

Rick Rule 2:41
I absolutely was the idea that you could double the cost of capital at least debt capital. And at the same time, lower the capitalized value of distributions, which is to say, obliterate the bond market, with less impact on equity markets, and less impact on capital intensive businesses like real estate has really surprised me. The strength of the US economy, particularly with regards to jobs, has been very heartening to me. I live in a small community in Northwest Washington, where there is an actual labor shortage of anybody who is capable of working and the idea that you could more than double the cost of capital for American industry without having an immediate and profound impact on employment is something which has surprised me and something for which I am very grateful.

Jimmy Connor 3:32
One of the great things about the financial markets is that there’s so many opportunities regardless of what’s happening within the economy. And and I want to get your views on a few different sectors. I want to start with energy. Oil specifically has been very volatile. This year, it peaked around $95. And it’s gone down to the low 70s. What’s your view on oil

Rick Rule 3:55
In the very near term in North America, I could see the potential for the oil price going lower, simply because of the efficiency of the exploration the production business both in the United States and Canada. The idea that the most over drilled landscape on the face of the earth, which is to say the United States could double production in 15 years, is nothing short of a magnificent achievement on the part of the US oil industry. And our Canadian counterparts run frankly neck and neck with us in terms of their access to technology. But I think longer term and by longer I don’t mean too much longer two years or three years. There isn’t an inevitable upturn in energy prices. This occurs because governments around the world but including the government of the United States, and more particularly the Government of Canada is perversely anti energy and doing that they raise the cost of capital in a capital intensive business. The worldwide oil industry according to the International Energy Agency, is deferring about a billion dollars a day in sustaining capital investments for the benefit of the Canadian audience. This is US dollars, I’m talking about a billion US dollars a day or $365 billion a year. What happens in a business like oil and gas when you defer sustaining capital investments and eliminate New Project investments is that you reduce your ability to produce in the out years. So the stability or the decline that you’re seeing in hydrocarbon prices today, masks what I think is the inevitability of higher prices in the future as a consequence of the political disruption of access to capital by the end by the industry and a concomitant under investment in production. A second thing that I think needs to be said with regards to most natural resource commodities, is that part of the reason for the price weakness in these commodities over the last six months, has been Russian dis hoarding. For reasons apparent to everybody the Russians need cash, and they are likely did in the early part of the 1990s, selling everything that they have in the cupboards to get that cash consequence. Diamond prices are down, nickel prices are down. potash prices are down. Platinum and Palladium prices are down. And despite the big thinkers discussion of an embargo on Russia natural resources it bears repeating that Russian oil and gas is still flowing to the west. And in fact, Russian exports of uranium to their archenemy, the Americans have doubled in the last 12 months.

Jimmy Connor 6:31
Very interesting comments. So I just want to clarify one point, you think the price of oil is lower because the Russians are continue, are continuing to pump a lot of oil, though.

Rick Rule 6:42
I think that’s one reason. I think the efficiency of US and Canadian producers is more important to us production, despite being the most over drilled piece of real estate in the world has doubled in 15 years, which is an astonishing achievement. And the achievement of the Canadians in the western Western sedimentary basin, despite the hostility of the prime minister is also a spectacular achievement.

Jimmy Connor 7:04
And could it also not denote a slowdown in the economy.

Rick Rule 7:09
We haven’t seen a slowdown in the economy, at least in terms of United States in an amount that would account I think, for the decline in energy prices. I think the decline in energy prices has really been a supply function. It’s to the enormous benefit, of course, of the consumer.

Jimmy Connor 7:28
Let’s hope it keeps going lower. Rick, I want to get your views on m&a within the oil sector. We’ve seen some massive acquisitions. This year, Exxon is in the process of acquiring pioneer for $60 billion Chevron made an acquisition or is trying to acquire Hess for $50 billion. Those are massive m&a deals, why do you think they’re doing that?

Rick Rule 7:54
I think they’re doing that because these assets are cheap. The big thinkers of the world the Biden’s of the world, the Troodos of the world, my favorite energy physicist Greta Thornburg will tell you that peak oil demand is going to occur in 2032, which means that the net present value of deposits past 2032 doesn’t exist. In fact, my suggestion is that peak oil demand occurs about 2065. And there are very, very, very strong tail values in the oil and gas business that aren’t being accounted for in the market. Oil and gas. Fossil fuels will be with us for much longer than the big thinkers wish. The narrative around fossil fuels, which is driving financial markets is wrong. And the people who understand energy markets better than anybody else, which is to say energy executives and any energy investors are saying that this anomaly this pricing in global markets can’t last. And that these assets that they are acquiring are cheap.

Jimmy Connor 9:01
Interesting points. So the world is not running out of oil.

Rick Rule 9:05
The world isn’t running out of oil oil shortage is a function of price. If you get below $60 a barrel oil, the price at which it is believed that oil companies around the world cover the cost of capital and earn a reasonable return on capital employed. You begin to run out of oil fairly quickly. If you take the oil price above say 80 or $90 a barrel. We’ve got a lot of oil. The question is, will you let us go after it or to paraphrase your Prime Minister? Is there a business case?

Jimmy Connor 9:41
So you’re bullish on oil? What about nat gas?

Rick Rule 9:44
I’m more bullish on North American natural gas. There is a delta between the North American natural gas prices below $3.50 US cents per million British thermal units and the price for that same gas in Tokyo Shanghai. Hi Are Frankfurt, which is closer to $8. Us, it costs plus or minus a buck to transport it from where it’s produced liquefy it, and send it to Europe or Asia. So that takes the loaded cost of four and a half dollars on the sales price to $8. This arbitrage cannot last. And if you’re if you’re bullish as I am about crude oil prices, that means that the the Delta, the difference between the price of the product in the areas that consume it and the price of the product in the areas that produce it resolves higher, not lower. Importantly, at least with regards to us natural gas, we have a wonderful infrastructure that’s improving all the time in terms of gathering it, processing it, transporting it, and accredit And increasingly, liquefying it and to the world is investing in billions of dollars of liquefied natural gas transmission, transmission like shipping capabilities, it remains now to the Canadians to decide if there’s a business case for turning Canada’s massive natural gas inventories into cash for the benefit of the Canadian economy and consumers. If that’s true, the North American natural gas stocks of all stripes are at least in the five year timeframe, not merely cheap, but extremely cheap.

Jimmy Connor 11:24
And maybe you can just tell us, what are some of the names that you like?

Rick Rule 11:28
Well, I think it depends on the risk tolerance of the investor. If the risk tolerance of the investor is low, I think you look at the big us names, where there is more infrastructure and less political headwind, those names would include Devon, in the US West and Southwest, and equitable monetizing gas resources in the Northeast of the United States. If you have more courage, and by the way, I have more courage, you take the view that Canada will have will eventually vote in its own self interest, and begin to monetize Canadian natural gas in that case names like birchcliff arc, which I think is the best run intermediate oil company in North America. Certainly paedo and tourmaline. All are ones that one could own. I think it’s important to say that you don’t need to come all the way down into the penny Dreadfuls to play this name. There is enough value enough torque and enough money to be made playing the beta side of North American natural gas that you don’t need to come into the 200 million into the sub 250 million market cap to grab Alpha. There’s plenty of money to be made with beta. And by the way, with the beta there’s plenty of five and six and 7% dividends to pay you while you wait.

Jimmy Connor 12:50
Rick, the US recently relaxed restrictions on Venezuela selling oil. What are your thoughts on that was that politically motivated,

Rick Rule 12:59
Absolutely politically motivated, in addition to being politically motivated, was stupid. The United States built a lot of refining capacity on the US Gulf Coast to take advantage of the lower prices for a heavy sour crude, primarily produced in Mexico and Venezuela. That crude came into short supply, mostly because of a lack of reinvestment by ped of Asa in Venezuela, and by Pemex in Mexico, but also because of US sanctions against Venezuela, meaning that the US refining industry had a lot of stranded refining capacity. In an era of high gasoline prices. The US administration sought to address this lack of refining capacity by reversing some of the impacts of the US sanctions against Venezuela, despite the fact that Venezuela isn’t able to produce very much sour crude. There is another country available to the US, one north of our border, one that we’ve traditionally enjoyed very good relationships with that country is called Canada. Canada produces lots of heavy sour crude. I believe that both Mr. Biden and Mr. Trudeau should be made aware of the business case for the utilization of Canadian crude rather than Venezuelan crude to supply the US Gulf Coast industry. The infrastructure exists to get it there, although approval of the Keystone pipeline would of course, help.

Jimmy Connor 14:27
See Allah boil you love nat gas even more? What about uranium, the US gets 20% of its electricity from nuclear energy. And of course, uranium is needed for nuclear energy. What are your views on uranium?

Rick Rule 14:39
I believe uranium bull, you know, for a very, very, very long time and from from time to time, and overall, that’s treated me fairly well. I need to say from the standpoint of equity investors, the easy money has been made. Uranium was really hated. Three years ago when the price had to go up. It’s interesting that at $20 a pound with the industry making this stuff for 55 or 60, fully loaded and selling it for 20. Losing 35 or $40 a pound, it was very clear that the price of uranium had to go up or the supply of uranium would cease. For the reasons that you noted, the market share of uranium with regards to energy the price had to go up, the price did go up. Now that the price doesn’t have to go up anymore. By the way, I think it still will but doesn’t have to go up anymore. Uranium has moved from being a really truly hated commodity to one that’s returned to investors favor so the easy money in uranium has been made Cameco advancing from what $8 to $45, some of the penny Dreadfuls tripling in price. The truth is, however, that the uranium sector has much more strength ahead of it. And here’s why. In addition to the fact that the spot price is cleaned up from $20 to $8. We’ve gone from a circumstance where about 85% of the volume in the physical uranium trade was in the spot market, which is to say day to day market, to the point where now almost 80% of the volume is in the term market. The term market gives both the consumers and the producers some certainty as to price. And it makes the development of projects like next gens massive project in Saskatchewan, Financeable because the lending institutions can see security on the revenue side security on the pricing side. This ensures to the benefit of the big producers to chemical has about 15 million pounds a year of production, which they aren’t producing right now, because of historically low prices going back two or three years from now. Cameco has said that they will return this material to production when they can contract enough of it in long term term markets, that they cover their cost of capital and ensure reasonable returns on capital employed for their shareholders. This is a very, very, very strong structural change in the uranium market. So I believe that good times continue for the better uranium producers for a substantial period of time.

Jimmy Connor 17:08
So in spite of the fact that uranium is up 60 to 70% on the year, you’re still bullish on it.

Rick Rule 17:14
I am James remember, and you’ve been around commodity markets for a very long time. The impact of higher prices on supply is not immediate. The fact that the uranium price has gone from $20 to $60. And now to $80 Doesn’t in the near term change supply. You will see a circumstance over the next two years where surplus Kazakh and chemical production comes online, but not enough to erase the production deficit. In terms of new mine production remind remember that you have to permit them a lengthy process in every jurisdiction, you have to finance them challenging in the current circumstance and you have to build them. What that means is that is that this price probably doesn’t impact supply for six or seven or eight years. Remember to that. Two other fundamental changes happened to Uranium inventories. One Japanese restarts most of the surplus above ground uranium in the world was owned by Japanese utilities. Owners that weren’t utilizing that uranium because of a hiatus in uranium fired electrical generation in Japan that’s over. That means that those inventories aren’t held for sale anymore. They’re held to create power. The second thing that happened was that my former employer, Sprott Inc, through the Sprott physical uranium trust went out and bought 46 million pounds of uranium reducing, I would suggest most of the available of ground above ground inventory for sale, taking it to in effect, supply heaven. Those facts have really changed the nature of the uranium business. But it’s important in answer to the question to remember that in the near term, increases in price don’t increase don’t impact supply markets work. High prices are the cure for high prices. Low prices, by contrast, are the cure for low prices. But it takes years for that thesis to work out and we’re in the early stages of that readjustment.

Jimmy Connor 19:18
We haven’t seen any meaningful m&a within the uranium sector. What are your thoughts on that? And and I would think given the high price, and also the moves that we’ve seen in a stock like Cameco, why wouldn’t they take advantage of that expensive stock to acquire someone? Well,

Rick Rule 19:34
I would argue, first of all, it’s not expensive, but that’s picking that’s nitpicking. You did see an interesting piece of m&a where Brookfield and chemical combined to buy the old assets of Westinghouse Cameco is on its way it hopes to being a cradle to grave power producer producing uranium storing depleted waste, building reactors and actually supplying power on a merchant basis. So there was very Recently an $8 billion transaction which the market overlooks. With regards to m&a within the space. It needs to be noted, first of all, that there’s only two giants in the space one being because atom prom, the other being chemical, and both are protected by their host governments, I would suggest from being taken over. If you come down the quality trail a little bit, you have to come down a very long way. Probably the best undeveloped deposit in the world is the deposit the two deposits in the western part of the Athabasca basin controlled by next gen and fission respectively. A wonderful transaction could take place between next gen and fission the idea that you develop these two assets separately when they’re 300 or so kilometers away from infrastructure makes absolute sense. Will it occur? I don’t know. But then the bigger question is, how does the deposit or those deposits themselves get built? It makes absolute sense that somebody would take over next gen and fission. But who could that be? China general nuclear? I don’t think that’s politically acceptable. In Canada, chemical perhaps because Adam prompt almost certainly not. There are a limited number of projects to acquire and an even more limited number of politically acceptable acquire ores. Would bhp be permitted to buy Canadian assets? Perhaps, given their former prominence in the diamond industry and their prominence now in the potash industry in Canada? Would Rio Tinto be permitted, perhaps that would tech perhaps, look at doing something in the uranium business with the proceeds from their coal divestment, that could happen too, but the truth is that there are a limited number of targets and II and an even smaller number of buyers. Now, in a different circumstance, which is to say horizontal transactions, juniors taking over juniors, that has to happen. The companies are subscale. They aren’t large enough to enjoy economies of scale, either in their operations, or the scale and trading. That reduces their cost of capital by increasing the share price. Also, combining assets while maintaining only one rather than two sets of general and administration lowers the general and administrative cost relative to assets under management or prospective cashflow. So I think we need to see mergers and acquisition in the junior space. And we’re starting to do that now at least in Australia.

Jimmy Connor 22:33
So you mentioned that a positive acquire or might be bhp or Rio, Tinto or tech. What about another oil company like Exxon and Chevron?

Rick Rule 22:42
I’m not sure that Exxon or Chevron would be allowed into Canada, and I think both Exxon and Chevron see so much opportunity in the oil and gas business, that they are unlikely to stray into the uranium business. My hope is, of course, that chemical becomes a consolidator. I wonder about chemicals appetite for other people’s projects, given the amazing project pipeline that they have themselves. I’m speculating out loud my hope, of course, would be, at least for Canada, that a Canadian champion other than Cameco could arrive could arrive on the scene if Cameco is unable or unwilling to consolidate next gen and fission.

Jimmy Connor 23:25
The US Congress is trying to pass the Russian uranium imports act. What do you think of this? Do you think it’s going to have any impact on the uranium price is that significant? Anyway,

Rick Rule 23:36
The US Congress, like the Canadian Parliament seldom gets anything right. Atoms are very fungible, it’s worthy to note that so far, despite the overt hostility between the United States and Russia, American imports of Russian uranium in the last 12 months have doubled, and atoms are fungible. If Russian Graham can’t come into the United States, then Russian uranium will go to China, and the Canadian and Australian uranium that used to go to China will come to the United States. It doesn’t matter much despite the postulations of the big thinkers. And I suspect that all the all the big thinkers are really doing this jostling for news time. In popular media, I don’t think that even they are stupid enough to believe that there would be any particular import to banning Russian uranium imports in those states, they would just divert them to China, and material that now goes into China would come to United States theater, I would suggest,

Jimmy Connor 24:31
and not to mention the fact that when it comes to enrichment and conversion services, the US is dependent on Russia,

Rick Rule 24:38
Russia has control well over 50% of the world’s can conversion and enrichment capacity. I suspect that the US Congress will, in their wisdom, provide generous subsidies, which is a different way of saying wasting shareholders wasting taxpayer money subsidizing shareholders in the United States to duplicate that same capacity.

Jimmy Connor 24:59
So I want to move On discuss something that’s very near and dear to your heart, and that’s gold. And as you mentioned, you are a contrarian investor you love investing in assets and others hate. And I can’t imagine a more hated asset right now than gold. And even if it’s not hated, there is a level of complacency that’s probably at record highs. What are your views on gold in this current economic environment,

Rick Rule 25:22
you’ll note my smile. Despite my age, I’m always planning for the future. And gold is part of my plan. And the idea that I can affect those plans at lower rather than higher prices, is what has me smiling. People say to me fairly frequently, Rick, what is the gold price going to move? I began increasing my own personal inventories in 1999. And if you look at the period 2000 to 2023, the price of gold is gone from $250 to over $2,000. So when people ask me when the price is going to move, I would say 2020. It’s been moving for 23 years, it’s been moving well, below perhaps their expectations, and their expectations matter not to me. Now, gold moves Well, historically, moves well, by Well, I mean to the upside, when investors are concerned about the maintenance of their purchasing power in conventionally denominated instruments, fit instruments, in particular important feed instruments like US dollar instruments. And I believe that investors have a reason to be concerned going forward, in fact, several reasons. The first reason is quantitative easing around the US dollar. James, if you did it, quantitative easing would be called counterfeiting. If you produced Wealthion ‘s and tried to buy bread with them, they put you in prison. But if you are a member of parliament or a member of Congress, and did the same thing, you’d be elevated to hero status. Irrespective of the politics. Quantitative Easing, which is printing more currency without increasing the backing is in fact counterfeiting. And each existing counterfeited unit does not increase the value of the units that came before it. But a second cause for concern, I think a second reason why people need to consider owning gold is the credit quality of the debtor, which is to say debt and deficits. I don’t know the Canadian equivalent numbers. So my apologies to your large Canadian audience. But in the US the on balance sheet liabilities of our government, that is the debts expressed by Treasury securities exceeds $33 trillion. But that’s not the worst of it. The worst of it is the off balance sheet liabilities, the net present value, not nominal value, the net present value of entitlements, Medicare, Medicaid, Social Security, federal pensions, military pensions, the environmental trust fund these numbers, recourse obligations to the taxpayer, exceed by the estimate of the Congressional Budget Office $120 trillion. So at the federal level in the United States, not including state and local governments, we owe each other or rather the spenders over the Savers, some number over $150 trillion. And we’re addressing this debt with a budget that’s in deficit $2 trillion a year, by the way, before the impact of higher interest rates on the servicing of the government debt. This should make any saver in US dollars concerned. But I think it actually gets a little worse. And that’s the specter of inflation. Many of your listeners will believe that inflation is under control inflation as measured by the CPI. But I don’t think that the CPI is a measure of the deterioration of the purchasing power of your currency. In the first instance, shames the CPI, is hedonistic li adjusted, which is to say that the imputed value of your computer or your house is determined via capital of big thinkers who control the index. Of course, when it is inconvenient the index doesn’t include include food or fuel, which I guess would be relevant to me if I neither ate nor drove, but I do. But the strangest part of the CPI as a cost of living index is that it doesn’t include tax for working Canadian and American households. Tax is their largest cost of living larger than shelter larger than food larger than transportation and larger than energy combined. I believe that the basket of goods and services I purchase means that the purchasing power of my savings is declining at about 7% compounded So if you think about the concern I might have as a saver in US dollar denominated instruments, let’s do the arithmetic. The US 10 year Treasury is of course, the benchmark security and the benchmark saving asset worldwide. That instrument purports to pay Savers 4.3% In a currency that I suggest is declining in purchasing power by 7% compounded, which means that if I lend the US government money for 10 years, in other words, I buy the US 10 year treasury, I am losing 2.7% of my purchasing power every year compounded for 10 years. Now, what is it on earth that could make me more concerned about the efficacy of saving and US dollars than an absolute government guarantee that they’re going to take 2.7% of my wealth away from me every year? For those reasons, I believe I have to own gold. But there’s a little more arithmetic James, I want to leave your audience with the market share of precious metals, and precious metals investments in the United States relative to all forms of savings investment assets stands below one half of 1%, which is to say, gold and silver and precious metals related assets, mining stocks, and the like, comprise less than one half of 1% of all the savings and investment assets in United States. That’s down from a four decade mean of 2%. I believe, because of quantitative easing, debt and deficits and negative real interest rates, that we will at the very least revert to mean. And if I’m right, that means that demand for this asset class will quadruple. And I think it’ll do that in five years. You’ll remember that I mentioned the year 2000 as being the year when the gold price move started. And I think that’s useful to people spend too much time wondering whether the price of gold will break 2000 Or will break 2200. I own it. Because when gold gets on the metaphorical bicycle, it really moves in the period 2000 to 2011, it moved from $250 An ounce to 818 $150 an ounce, I don’t own gold, because I think it might go to 2500 I buy gold because I’m afraid it’ll go to 8000 or 9000. That’s why I own gold. It’s important to note too, that you don’t have to go overboard. Gold is a form of insurance that when it pays off, it pays off in spades. So the purchase of a little bit of insurance buys you an awful lot of coverage over time. Imagine the holder of gold in 2000, owning gold as to, you know, four or 5% of their portfolio, seeing the price of gold go up seven fold, it would have taken real damage and other parts of the portfolio for gold not to have been able to do its job and shelter the holders purchasing power.

Jimmy Connor 33:04
So some very interesting points here. Now I want to unpack a few things. First of all, your target price on gold. It’s currently trading around $2,000. So in five years, you think it goes to $1,000? I don’t

Rick Rule 33:16
have one. I mean, I really truly don’t. I’ve been forecasting for 45 years like most other forecasters. My long term precise forecasting track record is Unblemished by success. But I will continue to hold gold, as long as we have quantitative easing, as long as we have debt and deficits. And as long as we have negative real interest rates, I can tell you that I sleep better at night holding gold than not. So well. I don’t have a specific price target. When I think about the efficacy of gold relative to other asset classes like long bonds that I might hold. I’m very, very comfortable on the gold side of

Jimmy Connor 33:54
the trade. And I think one of the reasons why people are always asking you why gold isn’t going higher. It’s because it’s not moving the way it did in say the early 2000s. Right. As you mentioned, from 2000 to 2010 or 11. It had a significant move, and we haven’t seen that. Do you think it might have to do with the fact that there’s a lot more asset classes that have evolved in the last 10 years? Social media stocks EVs, battery metal stocks, cannabis, so many new sectors cryptocurrencies?

Rick Rule 34:26
I think that’s a convenient excuse, but I don’t think it’d be true. The global value of savings and investment assets around the world is estimated now by the World Bank to exceed $750 trillion. The market capitalization of gold or the market capitalization of crypto relative to that number is about as significant as a pimple on an elephant is behind. It doesn’t matter. Now, they may be competing for the speculative fringe in both commodities, but I would suggest as an example that crypto and gold offer very different utilities. Crypto being an allegedly anonymous frictionless medium of exchange. And gold being a primary store of value, I can see arguments for owning either. I don’t think of them as competitive asset classes, except as I say, on the fringe, there is plenty of money to be made and plenty of utility in both now, for the speculators, which is to say for the people involved in the more speculative part of the gold trade, the junior gold shares. There is probably direct competition between the speculators in crypto and the speculators in junior mining shares, although they’re very different asset classes, I think that the mentality of the participants is similar. So in that case, there probably is competition. Yeah.

Jimmy Connor 35:51
And when I asked that question, it just wasn’t on Kryptos, there was all these other new asset classes. So I’m just saying there’s another a number of new asset classes that have really taken away a lot of demand or a lot of capital.

Rick Rule 36:03
I think perhaps that’s true. But I think there’s also an awful lot more capital since 2000. So both the numerator and the number and the denominator have grown, what I think has really happened is that the cost of capital has come down for 40 years, which has spawned the attraction of a whole range of asset classes that wouldn’t have existed in the absence of free capital, we wouldn’t have an Amazon today, were it not for Amazon’s very, very low cost of capital, we probably who had never crypto today, as a consequence of the low cost of capital, 40 years of declining interest rates, have increased investor confidence at the same time that they’ve lowered the cost of capital. My suggestion is that well, I’m not a real doom and gloom, er, the next 10 years are going to be more challenging than the last 40 years have been. And they’re going to usher in an epoch in human history, where the type of investments that were favored by a low cost or no cost, cost of capital, are going to be shunned in favor of asset classes that have traditionally done well in challenging environments. Gold being one of those.

Jimmy Connor 37:11
You mentioned earlier about the stratospheric debt levels in the US. And we’ve been hearing about these debt levels for decades. And a lot of people are always calling an end to the world because of the stratospheric debt levels. And who knows, maybe in five years, they’re at $100 trillion. But it really hasn’t seemed to have impacted the US in any way the US, the US economy still continues to grow. You and I continue to live our lives and we have very good lives. Why do you think it’s going to matter this time?

Rick Rule 37:42
Well, first of all, I think that our lives are gonna continue. And I think 15 years from now, we’ll be better off immeasurably better off than we are today. But I think we have to get from here to there. When you say US debt levels have been increasing, the thing that bothers me is that US debt levels relative to GDP, have been increasing. As an example, if, at the time of the 2008 financial crisis, when the United States was able to spend its print, spend and or print its way out of circumstances, aggregate US government debt was between 25 and 30% of GDP. Now, that same numbers 110% of GDP. So the ability of the big thinkers of the central planners, to print, or to spend our way out of difficulty is more constrained simply because of the relationship between debt and GDP. In other words, there’s less room. The second thing, I think, I don’t know if I think this the second thing that I’m afraid of, is that the circumstance that we’re going into, could cause confidence to diminish this confidence in the economy. This confidence in markets, this confidence in the future, was born of an epoch, I would suggest 1982 To 2020 to 2020, to the most benign climate in economic history, I would suggest, and if you have a diminishment in confidence, the ability of the big thinkers to talk our way out of trouble is diminished. I am not one who says that a liquidity event, circa 2008 is imminent. But I do think that if you have any diminishment in, in confidence, and I think that there are reasons for a diminishment in confidence that the probability of a 2008 style event increases at the same time that the government’s ability to deal with it. Because of the increased level of debt relative to GDP is a real cause for concern. By the way, I don’t want to be right I’m one of those weird guys who owns a lot of gold, and who hopes the price of gold doesn’t go up. I hope when I shed my mortal coil where or when I’m about to shed my mortal coil, I turn around and say, You know what, Rick, all that insurance you bought was for naught. Thank God, the set of circumstances that causes the gold price to go to five digits is a set of circumstances that makes the rest of your life a lot more miserable.

Jimmy Connor 40:27
Rick, when we started this discussion, you made reference to the 1970s. Why do you think this time period is similar to then?

Rick Rule 40:35
I, I think broadly similar for really three reasons. In the 1970s, we were coming off a period from the 50s and 60s, where we had two decades of benign economic outlook. In other words, people weren’t afraid of anything, we had two decades to where we had under invested in the productive capacity around natural resources. While at the same time the economy was growing rapidly. So we used a lot of natural resources. Similarly to in the 1970s, at least in the US context, we attempted to fight two wars, simultaneously, the war in Vietnam and the war on poverty, we lost both, of course. But we added a lot of debt in doing so the only way that we could get out of debt was effectively to devalue the net present value of the obligations. So we diminish the purchasing power of the US dollar over the decade of the 1970s by approximately 75%. When I look at the similarity between the 1970s and today, I’m struck by that similarity there. We were coming off 20 years of benign economic climate. Now we’re coming off 40 years of benign economic climate, that benign climate then and now has increased our How would you say confidence, perhaps hubris, and caused us to be less cautious than we otherwise, would, to in those great periods of growth, those benign times, there are investments that generate higher returns on capital employed than natural resources. So like the decade of the 1960s, at least, the last 20 years have seen an under investment worldwide and productive capacity around natural resources. And by the way, an increased social take, by way and by way of royalty and taxation, which means that more of the benefits of natural resource investing has been socialized or nationalized. That means that we’re headed into the same sort of shortage, I would suggest, on the supply side around natural resources that we saw in the decade of the 1970s. And then finally, simply the debt and deficit Or put differently the size of government and government debt, relative to the economy, society’s ability ability to fund it, I think has declined in by the same order of magnitude, that it declined in the decade of the 1970s. I’m one of those who subscribes to the school that history doesn’t repeat, but it rhymes. And for those circumstances, I’m struck by the similarities between the circumstances that we see in 1970, and in 2023, I would hasten to add that the economy on a global basis is much larger, we have many more participants now. And I don’t think that the circumstance that we faced in the 1970s needs to be as bad for society, as it was in the 1970s. I’m heartened by the fact that the world economy isn’t just led by the West, but rather, that the whole range of frontier and emerging markets are becoming more importantly, more important. I’m not a doom and gloom guy. But I am certainly one who believes that as a consequence of the circumstances, I just described, the for natural resource and precious metals investors that this decade will resemble none, as well as the 1970s.

Jimmy Connor 44:16
Fascinating comments, Rick, as we wrap up, I want to get your views on what’s going to do well in 2024. Gold did exceptionally well in 2020. Lithium was the metal in 21 and 22. In 2023, was uranium, what’s going to be the metal to invest in in 2024? I’ve learned

Rick Rule 44:35
not to constrain myself two years, because resource investing takes four or five years. I think investors that don’t maintain adequate liquidity, including US dollar liquidity despite negative real interest rates are making mistake. I think you need to be liquid enough that you take advantage of illiquidity rather than being taken advantage of anybody who doesn’t own gold I think as someone who is innumerate. I really truly believe that somebody who isn’t is innumerate if they don’t own gold. If somebody is a speculator, I suggest that silver is very hated. And the population of silver stocks and their combined market capitalizations is so small, that if the gold narrative develops and extends to silver, there won’t be enough money in the sector to handle the inflow of generalist funds. So for speculators, not investors, I would begin to assemble silver stock portfolios. I am one two who believes in energy transition, but in the sense differently than most people do. That delivering the benefits of electric of electricity to the billion people on Earth who don’t currently enjoy it will be transformative. 3 billion people on earth use the energy equivalent of one refrigerator a day, that’ll change over 20 years. And that change will endure to the benefit of a whole range of materials, including, of course, copper, nickel, cobalt, all those types of things. Will that occur in 2024? Highly unlikely, but investors need to think in longer terms among the entire natural resource complex. The one sector that I think gives the best juxtaposition of risk to reward for investors, not speculators for investors in the five year context is, of course, conventional North American oil and gas.

Jimmy Connor 46:40
Well, that was a fascinating discussion, Rick, and I want to thank you very much for spending time with us today. If someone would like to learn more about you and the various services that you offer work, and they go, thank you

Rick Rule 46:51
for asking. If your listeners care about my opinion, as to natural resources, I’d love to make it personal. Any of your listeners who go to rule investment can download their natural resource stocks, please, by the way, no crypto please no pot stocks, please no tech stocks, leave an old guy to what he does well, download your natural resource stocks, and I will for no obligation and no charge, rank them one to 10 one being best 10 Being worst. If I have an opinion that I think is worth sharing on any individual issue, I will comment on it. So once again, rule investment list your natural resource stocks. For those who want to learn more about becoming a better natural resource investor themselves. Go to rule classroom, the rule classroom has over 200 hours of programming, on how to analyze natural resource investments and how to be a better natural resource investor. There’s no charge for this. It’s all free. We’re adding to it all the time. So rule investment, for a ranking of your natural resource investments, rule, for 200 hours of free programming, about how to do natural resource investing, and how to become a better natural resource investor. I’d like to thank you again for carrying on the fine work that Wealthion does, and for carrying on the fine work that you do at blur street capital with your wonderful online seminars.

Jimmy Connor 48:16
I do appreciate that. And once again, Rick, thank you and I look forward to our next discussion.

Unknown Speaker 48:21
I look forward to it as well. Thank you. Well, I

Jimmy Connor 48:23
hope you enjoyed that conversation with Rick Rule. One of the reasons why we do these interviews with people like Rick is to help you prepare for your financial future. And if you would like some help in preparing for your financial future, consider having a discussion with a Wealthion endorsed financial advisor at After providing some basic information Wealthion will put you in touch with a vetted advisor. There’s no obligation to work with any of these advisors. It’s simply a free service that Wealthion offers to all of its viewers. Don’t forget to subscribe to our channel and hit that notification button to be kept up to date on future events. We have some amazing content coming out in the coming weeks, which will help you prepare for your financial future. Once again, thank you for spending time with us today and I look forward to seeing you again soon.


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