Speaker 1We're going to talk with my old friend Rick Rule today. Nobody knows more about natural resources. We're going to talk about how a wave of capital, how to get in front of a wave of capital that's headed for natural resources. And if you want to see a free presentation about that with lots of great ideas, go to projectvault2026.com, projectvault2026.com and check out the free presentation with lots of great ideas about critical minerals and natural resources. We're going to talk with Rick about energy. You're going to get a totally different viewpoint from all the stuff about oil and gas in the Middle East that's been in the headlines lately. So let's do it. Let's talk with my old friend Rick Rule. Let's do it right now. Rick, welcome back to the show. Always a pleasure.
Speaker 2Pleasure to be back, Dan. The pleasure is indeed mine. Thank you for having me back.
Speaker 1You bet. You recently, the first thing I want to cover is that you recently did your annual conference, didn't you, in Boca? How did it go this year?
Speaker 2I need to say we've been putting on the conference now for 31 years. The conference began in 1995 and this is the first year that the conference actually lived up to all of my major expectations. Really? I guess the lesson in life. The lesson in life, Dan, is that you work three decades, not one decade, to be an overnight success. But by every measurement I had, this is the conference that I set out to build 31 years ago. So I'm sort of basking in the reflected glory of the conference. That's good. I need to say at the outset, I don't get all the credit for that. I'm the ringleader.
Speaker 1But it was a great event. Figures it's the one I missed in the past few years, right? So that would be the best one, of course. That explains it. That explains why it was so great, too. Yeah. All right. Well, of course, what's happening in the world right now is just, to say it's interesting is a minor understatement. We are truly living the Chinese curse. May you live in interesting times. I feel like we should start with energy because there's a lot of commentary. So I'm going to ask you about a couple of things. The seeming disconnect between futures markets and physical markets and what the long-term implications of everything that's happened over around the Strait of Hormuz and in the various countries around there might be. Maybe I should just start by asking you if you're long oil and gas.
Speaker 2I am long oil and gas. I am long oil and gas in two ways. I have, for my own account, for many years, bought mineral royalties and rights. And it amuses me. And I make money drilling oil wells, or rather participating in the drilling of oil wells. So I'm in my own way, very, very, very long oil and gas in a private oil company. The name turmoil will amuse you. But I'm also long the oil stocks. It wouldn't surprise me if we were to see more permanent resolution in the Gulf crisis, to see the oil price decline a lot. But I'm okay with that. I'm not a trader. And for reasons that we can talk about in a minute, the oil price that we see today, which is a function of an artificial shortage, and could end with an armistice, gives us a foretaste of the oil price that we're going to see in 2029 and 2030, when we have a structural supply shortage that can't be ended by an armistice. Now, what will happen to the price of oil or oil stocks six months from now? Neither I, nor the Ayatollah, nor Ayatollah Netanyahu, or. Ayatollah Trump has any sense of what the near term oil price is going to be, and I don't spend much time trying to figure out something that it's impossible to know the answer to. But it's much more possible to know the answer with regards to 2029 and 2030. And that number, I would suspect, is substantially higher. The reason for that has nothing to do with a war. a war it has to do with the fact that the oil industry on a global basis including parastatals has under invested in sustaining capital to the tune of over 1 billion u.s dollars a day for a fairly long time it has to do with something else too investor stupidity investors are attracted to oil stocks that emphasize returns to shareholders which is to say dividends and share buybacks the companies that are doing that to the extent that they are The extent that they are diverting money from new project investment and sustaining capital investment are cannibalizing themselves. Yeah, they're liquidating, right? And the market seems to favor cannibalization. I just, for a whole bunch of reasons, want to take and am taking the backside of that trade. You know, if you reduce sustaining capital to the extent that we're doing… And by the way, that circumstance has been exacerbated by the war. Obviously, Iran, Kuwait, Saudi Arabia, UAE aren't making sustaining capital investments. They have other uses for the money. And in addition to not making sustaining capital investments, they're busy blowing up each other's facilities, adding to the sustaining capital investments they'll need to make. But if you don't make those investments, it has a real impact on your production in the out years. And not just in the Middle East. The production renaissance in the United States is really a consequence of tight formation and shale drilling. One of the characteristics of that is that after you've drilled the well and fracked the well, you get a substantial part of the net present value of the production of that well out in the first 18 months. If you don't both recomplete those wells on a timely basis but continue to drill new wells, your production falls even more precipitously in the shale basins. So, the idea that the deferral of sustaining capital investments is going to impact Brazil and Iran and Saudi more than it's going to impact the United States and Canada is wrong.
Speaker 1Because they don't have those wells. They have conventional or.
Speaker 2They have conventional wells, which actually deplete more slowly than our unconventional wells. Our spending cycle needs to continue very, very, very high. To make. Maintain our current levels of production.
Speaker 1Got it. Nobody's ever pointed that out, but I suppose it was something I feel like I should have seen because we all. It's been widely known how that curve runs on shale wells versus conventional. But the further implication of it, well, by the next few years, is something I hadn't considered. But there are U.S. basins. There are U.S.-based companies, aren't there, that do make those investments, are there not? Many. Many. Many.
Speaker 2They're just not as popular as those that don't.
Speaker 1All right. Which, if you're of a certain mind, is kind of a good thing. You want the ones that are maybe less popular because they tend to become more popular when the news finally hits the headlines.
Speaker 2Dan, that's a hugely important point. I struggle. In interviews like this, to understand why listeners who want to buy more of a sector want it to go up in price in the near term. Yeah. If you want to buy something, wishing for price appreciations sounds strange. You ever see a kid go into a grocery store and ask the manager to increase the price of a candy bar from a buck to a buck and a quarter? But investors seem to do that. Yeah. And it's. Very odd. I guess people need the reinforcement from price signals to justify the value of a narrative. Unfortunately, when the price adjusts to validate the narrative, the narrative just became less valuable itself.
Speaker 1Right. I'm actually glad you brought this up because I want our listeners to know that I think I met you, Rick, in like 1998 or something. And from the word go, you've been trying to teach me and everybody else who you'd come within 20 feet of or 100 feet of to be a good contrarian, especially when it comes to natural resources. And I think I've kind of finally learned it. And I finally learned to just, you know, I'll establish a small position and I'll think, well, I have no idea where the bottom is. So when I buy something, especially a mining. Related investment. I will just be. My mindset is I'm beginning to invest in this. It's not. throwing everything, you know, I'm throwing everything I'm ever going to throw at right now. No, you're beginning. And then over time, given that, you know, everything I buy goes down soon after anyway, you know, you'll probably get a much better chance. And I am happy and proud to say that I finally developed this, I would almost call it a skill that I have now, where, you know, I'll say, okay, this is my preferred, you know, just say like nickel mining investment or something. And it's 10 bucks. And oh, now it's seven bucks. So I'm buying more. Oh, and now it's five. And I'm buying, I'm continuing to buy more. Like, I'm finally comfortable with that. It took a long time, I want to tell you.
Speaker 2It took me, it took me almost 10 years and going broke, Dan. So don't feel bad. Through the decade of the 70s, of course, that's when I cut my teeth in resource industry. Investing. And it was a ridiculously generous time. Given that I was a young male, I believe that all the money I made in that bull market was due to my brilliance, ignoring the fact that the gold price went from 35 bucks to 850. That had nothing to do with it, of course. When that market collapsed, I found out just how bright I was, which is to say not very. And I went from being a very wealthy and hubris ridden young man to being deservedly humble, with a net worth, below zero. But it turned out to be very valuable. It taught me that something I should have known to begin with, which is to say that markets work. That in markets, the cure for high prices is always high prices. And the cure for low prices is always low prices. Once you understand that, the second lesson is just as important as the first. And that is that what is inevitable is not necessarily eminent. Although it has to correct, it doesn't have to correct quickly. Despite our preference that it did, when you understand those two things, that markets work and that inevitable isn't the same as eminent, you are really on the path to making money and
Speaker 1resources. And I would even, I'd go so far as to say, if you don't learn that, you're never going to do it. You may get lucky now and then, but over your career as an investor, you are going to bleed to death if you don't learn it.
Speaker 2You know, Dan, when you first met me, I owned and ran a small boutique money management and stock brokerage firm. And I'm not a trader, but the one trading signal that I did pay attention to was I'd walk in the cage in our office. For those people who don't know, the cage is where the trades are processed. And any day where there was a five to one preponderance of buy tickets to sell them. The next day I'd sell something. And any day that there was a five to one preponderance of sell tickets over buy tickets, I'd buy something. These extremes in sentiment are probably the only indicator that I've ever learned how to use. I'm not, as you know, Dan, a trader, but sometimes the markets give you things that you're ill-advised to ignore.
Speaker 1Right. And they give them to you quickly. And what else can you do but respond rationally, right? If the, you know, the silver price just went absolutely nuts, right, recently this year, and you had to be selling into it, right?
Speaker 2I did precisely that in January. When you see these hyperbolic up moves, the Canadians call them hockey stick graphs. It's wise to know that the backside of a hockey stick is just as steep as the front, but it's a lot less fun if you're long. Uh, there's something about that graph. There's something about something becoming rapidly more expensive that to an odd class of people makes it more attractive. Yeah. Um, similarly, uh, if you understand the reason for a hyperbolic sell-off, uh, those are good times to buy. I know in my own markets, particularly in the small cap resource markets, you can have a 15 or 20% share price to, decline because some institutional investor got redemptions and had to sell into a market that didn't have bidders, had nothing to do with the company, had nothing to do with the broad market. It had to do with institutional investor, investor redemptions. Uh, but a truism is that if there's more sellers than mark than buyers, the market's going to go down. Uh, and one probably should take advantage of that.
Speaker 1Yeah. Forced finding, uh, for sellers. I know Seth Klarman often referred to that in his career and a few other, um, what I would call bottom up fundamental sort of value types. They look for that situation, knowing that if you know the fundamentals, if you know what the thing is worth and somebody else is selling it for reasons, having absolutely nothing to do with it. Well, it's a gift, isn't it? Which raises another question, Rick, what we have seen in the past, you know, a few decades, is the, the rise of so-called passive investing. We could quibble about the term passive another time perhaps, but let's just call it passive. And we know what we're talking about. People throwing money into 401ks into index funds every time they get paid year after year after year. And, uh, you know, as a consequence in that the indexes go up and we wind up with, you know, 10 stocks accounting for 40% of, of your 401k. Um, and, and the question about what, you know, where and how does it end is one question that, that some folks have given a very interesting answer to. Um, and another question is, is sort of the flip side of what we're talking about. We're talking, you know, we mentioned people selling for reasons that have nothing to do with fundamentals, but now I'm talking about, um, like massive, the overwhelming mass of investors, um, that are selling for reasons that have nothing to do with fundamentals. In the U S buying for reasons that have no reference whatsoever. They don't even know what they own. My friend, uh, Brian beaches pointed out. Many of them don't know they're in the stock market. Okay. There's no knowledge of fundamentals. I promise you, if they don't know they're in the stock market. So this creates this, this is the opposite situation, but it seems like the opposite action to sell into it has just been wrong and wrong and wrong and wrong and wrong for decades here.
Speaker 2Well, I think you have to use it. Uh, I think you need to get in the way of the money. There was a point in time in my life when I was a little critical of the ETFs, even a couple of my own construction, uh, because if they're as an example, volume weighted, um, that's not necessarily, uh, a measure of value. And I, I thought there was something inelegant for myself buying as an example, the GDXJ, uh, and paying a fee to somebody where 60% of the stocks in the ETF, I wouldn't buy with a straight face. The idea that I would pay somebody money to construct an artificial portfolio that I wouldn't buy seemed odd. I've learned actually that there's a whole bunch of people out there who won't do the work themselves. And if they want to express their preference for a theme, uh, buying an ETF is a lot better than doing nothing. Uh, in my own case with resource ETFs, I came to a different conclusion, uh, which is that, as you know, my former firm Sprott, where I'm still the larger shareholder is a major sponsor of ETFs. I think between ETFs and trusts, we probably have 50 exchange traded investment products in the market. Hmm. Now the answer to that for me, when I do the math, uh, and I hate talking up as my former firm, in a sense, uh, why would you buy four or five of our products and pay us a management fee when you could buy the parent company, own an indirect interest in all 60 of them and get paid a dividend? This is fairly simple arithmetic. Would you rather pay or be paid? I've decided I would rather be paid. And people who are interested in passive investing might want to take the added risk of owning the manager as opposed to the product and being paid as opposed to paying. The second part of the equation that I think is important is that you understand in the construction of most ETFs that size matters. Uh, trading liquidity, simple market cap and heft matters. And this is exacerbated and otherwise already in place trend to mergers and acquisitions. Front running the ETFs. If you give yourself a two year or three year lag time is really, truly simple. If there are big valuation lags between small companies and big companies, either the value arbitrage yours are that away or the big companies. And then the big companies take over the little companies, end of discussion. That's over. A single asset producer in the mining business is viewed as being riskier, which it is, than a multi-asset producer. That discount goes away when the single asset producer gets taken over.
Speaker 1Right. So we're saying, I just want to be clear for the listener's benefit. So we're saying if a stock is not in the ETF and it has a more attractive valuation, the big stocks in the ETF are going to wind up buying it? Or is that what we're saying?
Speaker 2Correct. And there's now two types of M&A, at least in the markets that I follow. There's the first, which is strategic, which is to say an Agnico Eagle that has a plethora of infrastructure in the Abitibi, taking over a company that has an attractive deposit, but a deposit that couldn't amortize the construction of a mill. Agnico takes it over because it has a mill within trucking distance and it doesn't have to build a $350 million mill. In other words, the deposit is more. Is more valuable to it than it is to the current shareholders. Those are strategic acquisitions, but there's tactical acquisitions. Now, the growth of Equinox Resources, the recent takeover of Orla, you combine companies that have absolutely no operating synergy, but they know that by combining, they have an attractive product pipeline and they're producing a million ounces a year. In other words, you construct a new major and that will get index inclusion and it will get. Passive buying every two weeks from, as you point out, workers who don't even know that they own gold stocks or stocks. These are trends that while they make you and I laugh are trillion dollar trends and understanding what it is and understanding the likely, not the certain, but the probable outcome and tailoring part of your investment thesis to getting in the way of the money. Is something that I think all thinking investors have to do.
Speaker 1Well said. I just want to underscore this for the listener. Did you hear those two things? One of them was buying the undervalued smaller company that is not in the ETF because the bigger company in the ETF is going to own it. That was one. And the second one was what buying the, you know, the folks basically building a bigger company. Building a major company. That will then attract all the liquidity of ETFs and so forth. Correct. Very interesting. Getting in the way of structural trends.
Speaker 2Yes. That are caused by the trend of passive investing. Yeah. I like the second one. I'm not suggesting necessarily that you buy the passive investment. But if you're lazy, in fact, if you're lazy, you know, there's, there's a certain argument, Dan, that an accurate argument that not all forms of wealth are material. Which is to say some of your listeners are going to buy the passive investment. And if you're lazy, you're going to buy the passive investment. If you're lazy, you're going to buy the passive investment. Which is to say, some of your listeners are probably smarter than you and I, they spend time with their children and grandchildren, they read books, they garden, they fish, they don't want to spend their whole day going over 10 Ks and 10 Qs. For those people, if they spot a trend that other people haven't spotted, and they want to participate in it. Without wrecking their lives, studying the individual companies, the ETFs probably have a place. Right.
Speaker 1Everybody's different. Absolutely. Not everybody is Rick Roll. Mercifully. Simply put. Yeah. All right. Now what, so we talked about energy and then all this passive stuff too. There's some other things happening like we've heard a lot of talk over the past, well, basically since Trump got into the White House. We've heard a lot about building critical materials, mining and processing capability in the United States. My kind of take on this, things are being done, money is being shoved around here and there. Okay. I won't deny that. But here's my take on this, Rick. I look at refineries, right? The Greenfield Refinery, which they say they're going to do at Porter Brownsville, America's first refining, that's the sixth name of that entity. It's been through bankruptcy. It's been going since like 2016. They tried to build a pipeline to that same site and storage in a terminal. They couldn't do any of that, but now they're going to build a massive, it's like 260,000 barrel a day refinery, a multi-billion dollar thing. I think the number thrown around that Reliance was going to put in was like 40 million and it was like a whisper through the financial team. It was like a whisper through the financial times or something. Then there was a smaller project up in North Dakota that never went anywhere. There's barley growing on it now. That's where it went in 10 years. I just think to myself, if anybody was going to build a refinery, it wouldn't be these little fly-by-nighters. It would be the people who could write the check tomorrow, right? I don't think the Greenfield is ever going to get built during my lifetime. Do I correctly extrapolate that into other industries or no? If I'm completely wrong, please tell me. That's where my skepticism about this whole building critical mineral processing in the US comes from.
Speaker 2That's a big topic. The first thing I need to say is that from a taxpayer point of view, I'm scandalized. You have an investor that can't deliver the mail, can't educate the kids, and they somehow think that they can control the economy, by the way, with my money. With all due respect to our president, he's bankrupted a lot more businesses than I have. I don't have any particular interest in hiring him to be my money manager, particularly with as much of my money as he purports to want to spend. The second thing, however, is different. As a shareholder of existing companies, there's nothing industry likes to see quite so much as dumb money. There's no money in the world dumber than government money. I've had the odd experience in seven years in the uranium business, from being perceived as an absolute pariah, a fellow who I believed, myself, would grace a post office wall in a wanted poster, and now those same morons want to subsidize me. I must say, I felt cleaner when I was vilified. I was like, "I'm not going to do this. I'm not going to do this. I'm going to do this. I'm going to do this." And I built a new refinery for a long time. We need to do it. But the government doesn't need to do it. The government needs to enforce existing law, but gas existing policy. Now Trump is talking about subsidizing the copper industry. I actually, for the first time in my life, sent an email to a sitting president, Mr. Trump, and I told Mr. Trump that there is a copper deposit in the United States called Resolution. He's probably not familiar with it. It's one of the largest undeveloped copper deposits in the world. Well over a billion tons, average grade one and a half percent, more than three times the average grade of mined copper in the world, and it sits in a wonderful location between two copper mines. There's a highway goes over top of it, a rail goes over top of it, power, water. There's a town nearby where copper miners live. You can build a copper mine and the mine has been permitting for 28 years. The mine doesn't, I mean, think about the destruction of shareholder value on a net present value basis at an 8% discount, an 11 year delay in the start date takes away all of the net present value, a hundred percent of it. This one has been in permitting for 28 years. The government, although I love the fact that they're dumb enough to give me money, doesn't need to, they just need to get out of my way. If Exxon thought, and I use Exxon just because it's an easy name, if Chevron thought, if Exxon thought, if any of those guys thought that they could be permitted to build the Brownsville refinery, it'd be built. It'd be done. They wouldn't need to go to insurance companies. Guys who were in the business of producing oil and gas and refining it and selling it to motorists, this is a good business. They'd be there like white on rice. They don't need any help. They just need the government to stop shooting at them.
Speaker 1Yep. Yeah. And it's a, it's, it gets messy too because you, you, you get the, you know, first you know, there's, there's this raft of, of, you know, so-called environmental regulations and difficulties of that nature. But then at the local level, there's always, you know, groups of people showing up in courtrooms and, and so it really, it just gets so messy and that's why you don't see any of this.
Speaker 2And that's why I think they need to, they need to enforce existing law. I mean, I'm, yes, I'm in the oil business. every oil well and gas well drilled in the united states should be bonded i think that the way that you enforce environmental considerations is that you make the industry pay up front for any potential damage this is fairly simple stuff you know uh make the user pay uh i think that would do more than all the sort of save the butterfly mandates uh in the world rolled into one uh make the offender when an offense occurs pay but make them pay up front we have a wonderful insurance industry in this country i'm part of it and we know how to price risk not always well but it's better that the private side prices risk than the department of education of the post office pricing risk
Speaker 1yeah those those their price signals aren't real price signals this thing we have called the market as you pointed out earlier works and the price signals the price signals may not be perfect but they do the best job uh in the world um so do we have it sounds like um certainly personally there is a very much a get in the way of the money pouring thing we've established that but but there is a broader sort of let's get in the way of some of this money for you know our listeners and other investors right so if you're asking me to do
Speaker 2that let's do it if you believe as i believe that there's going to be a structural shortage in the oil and gas business beginning in 2029 that's a really simple trade uh the way you play it really depends on how much risk you're willing to take how much volatility you're willing to endure and how much operational risk you're willing to endure uh the easiest thing to say to an audience as big as yours is buy exxon just relax a company with a 30-year track record of intelligent deployment of capital and really intelligent management of political risks uh is making the sustaining capital investments and they've actually made a discovery in guiana that's big enough to move the dial on a company the size of exxon so one thing that people might do is buy exxon if it goes lower buy a decent but by oil company standards stingy dividend uh and let just wait till they're sustaining capital investments relative to their competitors makes you a boatload of money in 2029 or 2030 yeah if you want to be a bit more aggressive uh i think that the theme u.s natural gas is a theme that's done well but has more legs we're producing too much gas now but we're at the same time that we're building up the infrastructure in the united states to use it and that imbalance changes and when that imbalance changes uh people who got in the way when it was unpopular are going to make a boatload of money and you don't need to get too fancy devon merging with cotera uh yes an oil producer too but an important gas producer in the permian basin midland basin delaware basin uh it's important to note that this merger they did with cotera doesn't just make them bigger they had inner fingered leases which makes them much more efficient you can drill three mile laterals as opposed to one mile laterals another name in u.s natural gas and i know our old mutual friend porter stansbury is like this company equitable up in the northeast transporting gas from the northeast which never had any uh to the northeast where they've always used some now they have it i mean this is a really good business you know taking gas from ohio to ohio from pennsylvania to pennsylvania or if you're really really really fancy pennsylvania to massachusetts nice business uh it's gonna be a much better business five years from now if you can take political risk look north of the border as cheap as our companies are relative to the cash flows that they'll enjoy in 2029 the canadian companies are cheaper because there's headline political risk the guy who runs that country uh the circus barker carney uh has the same philosophical predisposition as his predecessor trudeau did the difference is that carney can count uh whereas mr trudeau couldn't count uh mr carney understands that his social spending goals require money uh and what canada as well as produce oil and gas so despite the fact that he's philosophically opposed them he's fiscally now in favor of them if the political risk manifested by the political risk manifested by the political risk manifested by the political class in canada goes away the incredible disparity in valuation between the canadian producers and the united states producers begins to go away but there is that headline political risk people need to understand that and the more attractive parts of that market are probably smaller which means that investors have operational risk and they have to do some work but if they are willing to do work uh the icing on the cake that has to do with terrain canada that's much less drilled in the united states but it has the infrastructure that is by any measurement metric substantially cheaper playing catch-up over five years in what is already a good market i think is particularly attractive uh and are there names like yeah that's what are their names sure uh the big ones synovus not a great company but stupidly cheap uh canadian natural resources a better company big company covers the length and breadth of the canadian play those are there i personally prefer smaller companies uh we talked i guess a year year and a half ago about arc petroleum uh somebody else liked it too shell they took it over lock stock and barrel so that one's gone but freehold royalty is still there great company tourmaline maybe best return on capital employed of a decent sized company in the canadian oil space just fantastic operators birch cliff pedo uh prairie sky royalty there's seven or eight names up there that if somebody is willing to hold them till 2030 uh will by then think that you and i were very good guys for having talked about them
Speaker 1now all right that's that's a lot of names thank you um i may have recommended about half of them in various places in my newsletters well it will
Speaker 2inure to your benefit over the next five years yeah
Speaker 1we we actually we had arc um right up until it was taken over that
Speaker 2was a good one you know i used to compete with them i flatter myself by saying i competed with them when they were in the finance business what basically happens i i got what they didn't take um um competing with them for 30 years let me know i wanted to be their shareholder i got to know them very well because when i say i competed with them they trounced me
Speaker 1all right for our listeners sake if you want to get in the way uh you want to see a really good presentation with a lot of ideas um just go to project vault 2026.com and it basically is a presentation about getting in the way of the money the way rick has described a couple of times here and it's got a lot of a lot of good ideas project vault 2026.com um all right wow uh that's a lot of good names um the one i'm going to talk about is the project vault 2026.com which is a project vault 2026.com one thing i that i felt like i i wanted to mention just to sort of um complete the loop on exxon mobil was you mentioned the dividend was stingy and earlier you had said well these companies are paying out dividends instead of making sustaining capex it's hard for people to see isn't it that the bigger dividend is the less desirable situation but but it is the the more so than the more generous dividend over time
Speaker 2that is accurate um it's important to note that this is a capital intensive business and if you defer your sustaining capital investments you're not able to pay the dividends four or five years out so people it's important that people understand that there there's one company in the world uh and this is much riskier uh petrobras which has a habit of paying too much dividend because the brazilian state is the largest shareholder and is rapacious but they've been so efficient upstream that they are uh increasing their production and their reserves uh while making smaller sustaining capital investments that would be the case and still paying decent dividends uh they weren't until the last two years growing reserves and resources which is to say the capital drought uh was cannibalizing the company they've become so effective so efficient. with the drill bit that they are able to make what i would consider suboptimal sustaining capital investments while still growing the company and still paying an outrageous dividend your risk here is that the political class in brazil looks at this and decides to up the level of theft that's occurring now understand this theft benefits you too to the extent that the government takes more money out by way of dividends you get
Speaker 1more dividends too right um you mentioned when you discussed canada the uh you know the the differential created by the perceived risk. And, you know, if it ever went away, boy, would there be a nice benefit for shareholders of Canadian oil and gas companies? We're calling that a low probability event, right?
Speaker 2I don't know. You know, I'm no fan of politicians, as you know, down on either side of the 49th parallel. Or forecasts, I would assume. Yeah. If you look at Carney's actions in the last six months, and you look at his background, CEO of Brookfield, as an example, you see a guy who may not be a good capital allocator knows good capital allocators. If you look at his spending programs, which are absolutely obscene, he knows he has to raise the revenues. The prior Trudeau, Pierre Trudeau, almost bankrupted Canada. And this lesson hasn't been lost on Carney. It took, you know, Trudeau's successors to get Canada back on track. I think that Carney will be less opposed to major projects, including hydrocarbon projects, than would otherwise be the case, simply because he knows how to add and subtract, which his immediate predecessor, Justin Trudeau, obviously did not know how to do.
Speaker 1Less opposed. We take the wins where we get them. If that's the best we can do, less opposed, bring it on. To what extent, we've framed the lack of sustained capital investment at some of these firms. To what extent is it not a choice? In other words, to what extent is it driven by, you know, awareness of these political risks that we're talking about or other, you know, regulatory issues? I
Speaker 2think there's a related issue. I think institutional investors have made a mistake in oil and gas. Institutional investors, to some extent, control the purse strings. And I think the major banks have had a role to play. I think that a lot of. One of the discussion around oil and gas was, I think that the thought leader was that noted energy physicist, Greta Thornburg, and her ilk, Angela Merkel, Justin Trudeau, Joe Biden, Gavin
Speaker 1Grusom, the rest
Speaker 2of that crew. And I think they told people, and I think people believed that the end of fossil fuels was over, that peak oil demand would, you know, occur in 2030. And in that case, you didn't need to make sustaining capital investments. Who needed to maintain production when demand was falling? The difficulty with that is that the markets didn't act that way. I'm 73 years of age. I don't think the peak oil demand will occur in my life or, frankly, Dan, for your life either. So cash flows that occur post-2030 will still have value. The detractors to this point of view say, what about alternative energies? And I've, as you know, invested in alternative energies, occasionally wisely. What I've noticed about alternative energies, and this is interesting, we've now spent somewhere around $10 trillion over 45 years in alternative energies. A lot of money. And we've reduced the market share of alternative energies. Hydrocarbons from a high 45 years ago of 83% to a low today of 81%. In other words, a $10 billion, $10 trillion, pardon me, I lost three zeros, $10 trillion investment over 45 years has reduced the market share of fossil fuels by 2%. Demand for all forms of energy is growing. And this isn't all about data centers. This is about making the poorest of the poorest of the poorest. The poor, less poor worldwide. A billion people on Earth have no access to primary electricity. I think we'll fix that over 20 years. But that means we're going to need a lot of power. We're going to need a lot of energy. Wind? Sure. Hydro? To be sure. Oil and gas? Yeah, that too. Even coal. I mean, people need to realize their narrative notwithstanding that poor people want to be less poor. And materially substantial lives are energy dense. All forms of energy, including hydrocarbons. As you know, Dan, I'm competing in the banking business again. Side note, should you ever want to retire, don't start a bank. But one of the things that really attracts me is that one of the businesses I know well is energy lending. And competitors that over the last 40 years would have trounced me had I gone into their territory. The Bank of Americas, the JP Morgan Chases, the Citicorps, Wells Fargo. Are moving away from energy credits. I guess they listened to too much Greta Thornburg. But capital is becoming less available in that industry. Something which I treat with utter delight as a banker. But I think the thing that you talked about earlier, which is the fact that a lot of spending decisions are being driven by institutions. And I think that's a good thing. I think that's a good thing. But I think that's a good thing. And institutional investors, in turn, are being driven by the narrative that peak oil demand has arrived. I think that supposition is wrong. I think it's easy to bet against. And I am delighted that some of the biggest minds in investing, you notice I didn't say the brightest minds. I said the biggest minds in investing seem to be following their investment lead from that dropout physicist, Greta Thornburg.
Speaker 1Okay. Yeah. So that is a good answer to my question. So in other words, yeah, the capital is not making its way there partially for the perception that these things are going away for which really amount to political reasons. There's no reason for them to go. We don't want them to go away. We need them. They're essential parts of our standard of living. Let me see. We are almost at time here. Actually, we are. We are at the perfect time to ask our final question. It is the same question for every guest. You've answered it before. If you don't remember it, it works better that way. So I hope you don't remember it. It is the identical question, no matter like even when we don't have a financially oriented guest, same identical question. It's just for our listeners' benefit. If you could leave them with a single thought today, what would it be? If you've already said it, feel free to repeat it. Or if you want to think about it, take your time.
Speaker 2Two things, I think. All right. The first is take risks that's commensurate with the amount of work you're willing to put in. Dan, I've graded almost 100,000 portfolios in 35 years. I've learned a lot about how investors invest. One of the big mistakes that investors make is they don't think. They feel. And that's very, very, very difficult. The second is, in finance, the most important thing to understand is compounding. And compounding takes time. If you think in two-month or three-month terms, you take away your greatest ally, which is the passage of time. Most people think that their time preferences matter, and they don't. Of course, everybody wants immediate gratification. But if you want something that isn't available to you, you waste a lot of time. And that's why I think it's important to think in two-month terms, because that's where you get a lot of angst, trying to know the unknowable. If investors began to think, or if they began to act in four-year and five-year and six-year terms, as opposed to that same metric by week, they would do substantially, substantially better.
Speaker 1Amen to that. And if you're a subscriber to anything that I publish, please take that to heart. Because, you know, I want to hold things for years in the newsletters and show people that it's okay if it falls, you know, 20% or so. Everything's fine. You know, there's a lot of downturns on the way to a big multi-bagger result. Well, thanks for that. And thanks for being here. It's always a pleasure to talk with you.
Speaker 2A pleasure, Dan. If I might invite your audience, I mentioned I've graded almost 100,000 portfolios, and I'd be happy to grade yours too. If you go to my website, Rural Investment Media, and you list your natural resource stocks, RuralInvestmentMedia.com, list your natural resource stocks, I'll rank them for free, which is a very good price. Sidebar, please no crypto, please no tech stocks, please no pot stocks. This is natural resource stocks only. But I'm delighted to provide the service. I've found over time I learn as much from the process as I teach. So RuralInvestmentMedia.com, list your natural resource stocks, and I will for free. Rank them. I'll also comment on individual issues if I think my comments have some value.
Speaker 1So that is an incredible offer, an incredible bargain. I highly recommend absolutely everyone in the sound of my voice taking advantage of it if you own natural resource stocks. There is no better resource than this and no better price. All right. Thanks a lot, Rick. We will be talking with you again real soon, I'm sure.
Speaker 2I look forward to that, Dan. Thank you. Thank you for our conversations over the decades. Oh, you bet.
Speaker 1Thank you. I really mean it. I want you to take advantage of Rick's offer. If you own natural resource stocks, go to his website and enter them in and he'll grade your portfolio. This is like Warren Buffett offering to grade your portfolio of value stocks for free or great businesses or whatever you want to call Warren Buffett's thing. There's no better resource investment. There's no better investor to be doing this for you. I've known Rick since 1998, and he has taught me many, many things about investing in general, but mostly about natural resources. And he mentioned being the largest shareholder of Sprott Inc. I recommended the stock in 2018. And every time I see the guy who is CEO, then Peter Groskopf, he tells me that I beat everybody to that to that stock. It was only after I recommended. That all the big banks got in and recommended it. He's he's always he's thrilled with me every time he sees me for that reason. At any rate, I love talking with Rick. I feel like I could have him on. He's one of the I feel like I could have him on every quarter, every month, maybe even honestly, we could do the you know, the Rick and Dan podcast practically because he is very well informed about all the natural resource sectors. I really want to. I really want to focus on energy right now because it's there's a lot of talk about it, and it pays to have a guy who has a much more rational view of the situation and a different view that's not based on the headlines that's based on a farther out timeline commenting and telling you what to do and giving you lots of ticker symbols. Right. He mentioned Exxon. He mentioned Synovus, CVE in Canada, Tourmaline, Birchcliff, Pato. All those are. All those are Canadian companies. And, you know, like you said, don't if you don't want to make it too hard on yourself, just buy Exxon because they're it's a fantastic company and they have done a fantastic job for decades now allocating capital in oil and gas. So lots of good ideas, lots of ticker symbols for you to think about. Another great interview and another great episode of the Stansberry Investor Hour. I hope you enjoyed it as much as we really, truly did. And remember, hit like and subscribe and sign up for our free daily.
Speaker 2Email. Opinions expressed on this program are solely those of the contributor and do not necessarily reflect the opinions of Stansberry Research, its parent company or affiliates.
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