As we wrap up the year and celebrate the festive season, we wanted to share some of our favorite moments from one of your favorite Wealthion interviews from 2024: Rick Rule with James Connor. Enjoy!
All the best for a happy, healthy, and prosperous New Year!
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Original interview: https://youtu.be/mNZR2FF04e0
Andrew Brill 0:00
Happy Holidays from all of us here at wealthion. To all of you, I’m one of your hosts here at wealthion. Andrew brill, we took a look back at this year, and hope you enjoy these favorite guest moments from one of our best interviews of 2024
James Connor 0:18
So anyhow, we have a lot to discuss and a lot to sell or break. Gold is up on the year. Silver is up. Uranium, it’s almost up, and the S P is up. But I want to start with gold, and I have been overweight gold myself now for the last three years, and it’s finally starting to work out. It’s up 30% year to date. It’s outperforming the S P. What are your thoughts on the gold price here. Does it keep going? Or should I reduce my exposure? I
Rick Rule 0:44
think gold keeps going. Whether or not you should reduce your exposure really depends on you. I’ve said on your show before that I don’t own gold because I think it might go through 2700 or, for that matter, 3000 I own it because I’m afraid it’s going to go to nine or 10,000 Will it do that in lockstep as a straight line? No, if you’re a trader, if you’re somebody who’s afraid of volatility, if you can’t afford to remain long, by all means, take trading profits. That’s not how or why I own gold. I own gold to maintain my purchasing power, by my measure, gold didn’t start moving. Three years ago, gold started moving in the year 2000 if you look at the 24 years that we’ve been through, gold has increased in price by about 8% compounded a year for 24 years, gold has maintained my purchasing power, which is precisely why I own it. Is the pace of the escalation the gold price picking up, yes, and in the face of political pressures on the Fed to lower their interest rate, which is a different way of saying, devalue, the yield on the US dollar, should gold continue to accelerate? Yes, if all other things remain equal, again, though, your technique with regards to gold, your strategy with regard to gold will relate more to you than to gold. I saw
James Connor 2:04
you do an interview recently, and you were talking about Mexico. Mexico is the world’s largest silver producer, and it used to be very pro mining in a very mining friendly country, and it no longer is. In the last 10 years, it’s really gone socialist. And what are your thoughts on Mexico? And in terms of an investor, do you still invest in in silver equities?
Rick Rule 2:26
I do. If you’re going to be in the silver business, you’re going to be in Peru and you’re going to be in Mexico, rough countries. The third country is Russia, a rougher country. I have found in my career that while political risk is real, technical risk is more real. I would have a I would rather have a great deposit those who are stealing than a crappy deposit that wasn’t worth stealing in a good country. And Mexico, as you say, is deteriorating politically. I have founded Mexico, and I’m no expert, but I have found a lot of support for mining in the regions where mining occurs. And I would suggest to you that the opposition to mining occurs more in the center, more around the intellectual leftists in the party in power. There are other problems in Mexico, however, in Sierra Madre Occidental, where we think of as where the silver mining districts are. And those are sociological problems related, in particular, to Narco trafficantes, narcotics traffickers in English. And those problems aren’t going to go away. If you are going to be a silver speculator, you are going to have to be in Mexico if you want high quality deposits. And if you’re going to be in Mexico, you have to deal with the political problems, and you have to deal with the sociological problems. I’ve been dealing with them now for 30 years, and they have occasionally caused me heartache. Certainly they have caused me to experience fluctuations, drama, if you will. But I need to say over time, being invested in Chile and being invested in Peru, being invested in Argentina, in the silver space has been extremely rewarding to me. I look back at silver standard resources finance at 72 cents, hit a high of $45 declined a lot since then, what down to 12 or 15 from a 72 cent base. It doesn’t feel too bad. The same thing with Pan American Silver. You if you are really, truly going to be a silver investor or a silver speculator, you have to accept the political drama. You also, when you look at Mexico, have to listen to what the President Elect has had to say, rather than the way that she has quoted. She didn’t say that she would ban open pit mining. She said that open pit mining had to have the local community support in the communities where it exists. I believe that local power brokers will probably try to manipulate the circumstance a little bit so that they can gain personal advantage from Paul. Optics in Mexico, but I don’t believe that communities where the alternative to employment in the silver industry is growing rice and beans in the desert will continue to be anti silver for any substantial period of time. I mean, I guess what I need to say is, if you’re going to be in the silver equities, and I am, you have to swallow twice, and you have to accept the political risk, and you have to accept the social risk. If you aren’t going to do that, you are going to be involved in silver exploration in jurisdictions that are geologically marginal compared to Mexico and Peru. So
James Connor 5:37
you bring up a very good point, that is jurisdictional risk. So as an investor, what do you suggest to people who are trying to, they want to invest in mining, but at the same time, maybe they’re very concerned about investing in certain countries in Africa or certain countries in South America? And of course, there’s, you know, I could name a dozen companies, YPF energy in Argentina that was nationalized, golden oil assets in Venezuela, cobre Panama, in Panama, just in the past year, how do you as a investor handicap this risk? This is
Rick Rule 6:08
going to make me very unpopular with your listeners, particularly American and Canadian listeners. But so be it, the most dangerous government is the one that’s closest to you. Excess profits tax, United States was de facto nationalization. They took away half the net present value of your oil stocks in Alberta, when the gas, when the gas price increased, the Conservative Government of Alberta doubled the provincial royalty on national on natural gas. That was nationalization. The Prime Minister of Canada, Justin Trudeau, suggesting that there’s no business case for Canadian natural gas, when the gate price at Eiko is a buck 50 1000 Canadian and the landed price for the same BTUs in Tokyo Rotterdam or Shanghai is $10 where it takes $2 to get it from Alberta to Rotterdam. That’s all political risk. It’s all political risk. The question is, what are the real risks, not the perceived risks. And what is the cover charge? How much do you have to pay for the equity to expose yourself to the risk? I don’t think there’s any good jurisdictions in the world. Suppose that you had made a discovery in northern Ontario, in the ring of fire, a good cobalt, nickel chromium discovery 20 years ago, and suppose that your discovery had been stuck in permitting for 20 years as a consequence of political and First Nations dispute. Would that strike? Strike you as political risk? Suppose that you would add a natural gas centric uh portfolio in Alberta 20 years and the gas price, as you expected, went up and the Alberta government proposed to double their theft. Would that be political risk? So political risk depends a lot. The next comment will make me unpopular too, but folks like you and I tend to believe that money stolen from us in English by white people, according to the rule of law, is somehow less gone. It isn’t political risk is real, but it occurs in hues and in languages that we don’t always respond to equally. I think that people are more afraid of risk that they don’t understand and risk that they don’t identify with than they are other risk. One more time, the most dangerous government that you face politically is the government that has the most control over you. So if I lived in Ontario, I would be much more afraid of the Ontario government and the Canadian government than I would the Mexican
James Connor 8:45
government. I’m not sure if I would agree with you on that point. No requirement
Rick Rule 8:50
you know when I look at countries around the world in terms of money in money out, now I’ve taken some risks. The country that’s treated me the best money in money out was Congo, the country that’s treated me the second best money and money out of Southern Sudan, both war zones. Now, I went in at an extremely risky time, but if you broaden that a little bit, the country that’s treated me the best money and money out third place is Chile. When I look at the place that I suffered the biggest personal loss as a consequence of political risk, that was on vice Pro resources in the People’s Republic of California. Imagine that you were a shareholder of BHP in Rio Tinto, and you had discovered a deposit in Arizona, in the USA, in the central valley, surrounded by copper mines. Suppose that this deposit was a billion and a half tons of copper bearing lower grading one and a half percent, three times the average grade worldwide. And suppose that you had been stuck in a permitting morass after discovery for 26 years, if you discount your cash. Cash flows at 8% for 26 years. What happens is that the entire net present value of the discovery by the time you produce it is gone. And people tell me that Arizona isn’t politically risky.
Andrew Brill 10:12
Thanks again for watching these favorite moments of 2024 and we hope we can continue to provide you with information that will help you invest wisely and be financially resilient. Wishing all of you a healthy, happy, safe and prosperous 2025.
