Speaker 1This is the Commodity Culture Podcast, where we interview prominent investors, fund managers, analysts, and company CEOs to give you an edge when it comes to investing in the commodity space. Rick Rule, great to have you back on Commodity Culture. The cries of silver stackers are once again filling up my comment section, as recent price action has led us now to $64 an ounce as we sit here today, after we came within pennies of closing at $70 at the end of August. I've spoken to a few people on this show who believe that the bullion banks and other powers that be are defending the $70 level. You know, you have different opinions on this. People like Ed Steer believe the market is largely manipulated when it comes to silver. People like Bob Moriarty say, hey, all markets are manipulated. It's nothing different when it comes to the silver. How much credence do you give to the allegations of price suppression when it comes to silver specifically right now?
Speaker 2I think they're silly. I agree that all markets are manipulated. Markets as big as the U.S. Treasury market and the LIBOR market have been manipulated in the very short term. Note, too, that manipulators are agnostic as to price. They're doing it to make money. Markets are manipulated in the way that is easiest to manipulate them. When the outlook is bullish, they manipulate markets higher, not lower. When markets are bearish, they manipulate markets lower, not higher. The idea that whoever the shadowy cabal is, the trilateral commission or the international Jewish conspiracy or whatever, uh-uh, I don't buy it. My time on Wall Street in large financial services institutions taught me that the only thing that matters to the big money, the only thing, is quarterly cash bonus. Anything like maintaining a large short position, which requires periodic margin payments and doesn't add to quarterly cash flow, from my experience, does not occur on Wall Street. It simply does not occur. That doesn't mean that markets aren't manipulated up or down in the very near term. The manipulation works like this in the silver market. The futures market is extremely, extremely liquid and extremely leveraged. It is not uncommon in a day to see 200 times the amount of silver trade that is available for good delivery. What that means is that an intelligent, well-capitalized group of, quote, conspirators can buy a short ladder. Three months out, six months out, 12 months out, 24 months out, which is to say establish an extremely large short position in the futures markets and then borrow enough physical silver to sell overnight during that period of time when the trading liquidity in silver is the lightest so that they can do as much possible damage in the very near term to the spot price as they can do. But then it gets back to time preference. my belief uh and i'd be happy to discuss this at length uh should you wish i think we bore your audience to tears but my belief is that the u.s dollar loses 75 of its purchasing power over 10 years but most people's attention span is 10 weeks uh for me i believe that gold at least will maintain its purchasing power nominal purchasing power in u.s dollars which is to say that the increase in the gold price will mirror the decline in the purchasing power of the u.s dollar history has taught me it certainly taught me in the decade of the 70s the last time the u.s dollar lost 75 percent of its purchasing power that when the momentum is established by gold silver outstrips it it's worthy to note that in the decade of the 70s and i'm not saying this will happen again i'm just quoting history in the decade of the 70s the gold price did very well it went from 35 dollars to 850 dollars but the silver price went nuts the silver price went from a buck 30 in 1970 i'm quoting u.s dollars to 50 dollars a 50-fold increase not a 25-fold increase uh the difficulty that most people have is that they want to get paid for uh a decade's worth of gold and they want to get paid for a decade's worth of gold and they want to get paid for a decade's worth of gold and they want to get paid for a decade's worth of gold and they want to get paid for a decade's not an offer i would suggest that the audience that you have that's obsessed with silver become obsessed with time the greatest uh financial strategy in the world is compounding and compounding takes time gold has historically
Speaker 1been one of the most reliable stores of wealth but now there's a way to earn from it directly monetary metals operates the gold yield marketplace where holders of physical gold and silver are able to earn from it directly and they're able to earn through their platform clients can earn up to a four percent annual yield on gold paid in gold ounces that yield derives from leasing physical gold to qualified businesses in the precious metals supply chain like jewelers and refiners your gold stays in physical form and you retain title to your metal the additional yield is paid to you in gold preserving and growing your price of gold as inflationary pressures debt concerns and macro uncertainty continue to make gold attractive as a hedge earning a yield on gold adds another strategic layer to your portfolio individuals and institutions around the world have already been earning returns through monetary metals leasing program for almost a decade so go to monetary-metals.com slash commodity to find out how to put your gold to work the link is in the description below the show notes below and now back to the interview we'll talk to us about the dollar i i do not think people will be bored to tears about this this is a thing that a lot of viewers are interested in because there's varying opinions on the u.s dollar you know i had james rickards on the show recently and he pointed out that okay everybody's making a big deal about china and other foreign nations selling their treasury bills but they're selling their treasury bills because they need dollars so this is actually bullish for the dollar and although he sees the long-term trajectory potentially going downwards he thinks the current idea that you know the bricks are going to rise and we're going to see a big drop in the u.s uh dollar is perhaps a little bit overblown so i'd love to get your thoughts on on where we are in the life cycle of the u.s dollar right now
Speaker 2i think the dollar will do badly absolutely uh but not relatively uh i think the euro will do a little worse uh i think the connect buck will do a little worse uh doug casey describes the dollar as the prettiest mayor at the slaughterhouse uh and i think that's an apt comment i think for your audience and i know your american audience is fairly large uh what they could expect is that a basket of goods and services which cost them a thousand dollars today will cost them four thousand dollars ten years from now and i think that experience is marginally better than what people in the eurozone or in canada will expect i i think people need to understand that i think that currencies in general are going to be much more volatile than they have been in the past i think the currency volatility that we're about to experience will be much more reminiscent of the period 2000 to 2010 than 2010 to 2020 and i suspect that people who want to maintain liquidity in currencies at liquidity in currencies will unfortunately need to save in bank in more than one currency but i believe that for the maintenance of the purchasing power that people need to save they need to devote a greater percentage of their savings to precious metals last time you were on
Speaker 1the show you discussed that some of the prices on the gold miners were a gift from god you were speaking specifically about wheat and precious metals and agnico eagle um but i think that both now up around 30 since you said that on the show very interesting um what are your thoughts there are these equities still undervalued at these levels and are there any others that you're watching right now that you that you think are still presenting a good value proposition if i'm
Speaker 2right about the direction of gold and silver prices over the decade these things are cheap they're cheap because they're indestructible uh your listeners might be able to get better returns at the expense of risk volatility and the need to do work i mentioned those names on your show because you have a very very very large audience and most of your audience despite their own self opinion to the contrary aren't willing to do the work and aren't willing to tolerate the risk that would allow them to come down the quality chain they will anyway but my job as a responsible commentator is to save them from themselves and in that context if as i suspect the u.s dollar loses 75 of its purchasing power and if gold maintains its purchasing power the amount of money that investors could make just in beta i define beta as the outperformance of the precious metal sector relative to the broad market they won't need to chase alpha remember that in the last period of significant dollar purchasing power decline the 1970s the gold price ran 25 or 26 fold uh and the philadelphia gold and silver index the then equivalent to the gdx increased 49 fold uh is 49x a reasonable reward in 10 years by the way this is not a projection that the gold market is going 49x i'm only trying to say that the if you agree with my thesis that u.s dollar debasement is inevitable in the context of quantitative easing and artificially low interest rates uh then constructing a defense around the highest quality assets is something that's very very very advisable i don't think you need to get fancier than that is somebody gonna make more money with uh consolidated caribou or amalgamated orangutan or some penny dreadful sure uh will they do so at a risk that they're willing to endure with volatility that they're willing to endure relative to agnico eagle wheaton precious or franco nevada no when it comes to
Speaker 1the silver market mining sector then would you say something like the sil etf or silj pan-american silver because obviously it's a much smaller universe of names when it comes to silver interestingly the sil etf holds wheat and precious metals very heavily weighted i don't really get that um silj i think seems to be a bit better representation of the pure play silver miners what what are your thoughts there when approaching the silver mining sector
Speaker 2there's precious few opportunities to play silver uh there's a lot of companies that are leveraged to silver but there's a lot of companies that are leveraged to silver but there's not a lot of high quality silver companies and the i i used to i used to criticize the etfs uh because for myself uh paying somebody a fee to own an etf that was comprised at least 60 of names that i wouldn't otherwise own seems silly to me uh the idea that i'm paying 60 basis points to somebody to operate an index where i think more than half the names in the index are junk uh isn't appropriate the truth is uh in a rip-roaring silver market which is why people buy etfs the junk names are going to outpace the good names uh the other thing is that most people are unwilling to do the work that would allow them to differentiate differentiate between the good the bad the ugly so i'm no longer so disparaging the bts although i don't own them the truth is that there are a scarcity of good options in the silver market and the etfs have been so popular among speculators their net assets have grown so much that they have to go into names like like Wheaton Precious. They have to go into names like Pan American, where the revenues are 55% gold. They have to do that because there aren't sufficient high-quality silver names. In fact, there aren't sufficient names to accommodate the money that's come into the ETFs. So they have no choice. And I think inadvertently they're saving their investors by investing in high-quality precious metals companies, irrespective of the silver moniker.
Speaker 1I want to talk about what many are saying is a burgeoning debt crisis, a sovereign debt crisis. We're now seeing the 10-year treasury hit the highest yield since 2007 at over 5%, 20 and 30-year at 5.3, 5.6, something like that, perhaps headed towards 6% or higher. Japan, of course, experiencing a relentless rise in rates across the board. And we are seeing rates rise, generally speaking, when it comes to the sovereign debt markets. Are people making too big of a deal of this? Or is this actually perhaps the beginnings of a sovereign debt meltdown?
Speaker 2I wouldn't describe it as a meltdown. We survived the decade of the 70s, but it was challenging. During the decade of the 70s, the 10-year treasury rate and the prime rate increased fourfold. The 30-year fixed mortgage rate increased more than fourfold. Jesse, make no mistake, credit is cheap right now. It might not be cheap, for your listeners who might not have access to credit. But the idea that the U.S. government could borrow 10-year money at 5% is an insanity. Here's why. The U.S. government has convinced the market that the CPI is the relevant measure of the deterioration in the purchasing power of the U.S. dollar. And that's wrong. That isn't even a fact. It's a falsehood. It's a falsehood for many reasons. In the first instance, the CPI, when it's inconvenient, doesn't include food or fuel. How many of your listeners don't eat? In addition to that, the CPI doesn't measure tax. How many of your listeners don't pay tax? A common-sense approach would be for your listeners to casually look at the price, levels that existed in the basket of goods and services that they consume, not that the government consumes, in the year 2020, and then rerun that same price survey today. Gasoline prices, more than double. Health insurance and health care, at least in the U.S., more than double. Groceries, more than double. This is not two and a half percent compounded. This is eight percent. The U.S. dollar.
Speaker 1There's nothing but tailwinds behind in the sector as far as I can tell, and yet we've seen the equities take a hit once again. Now, I know you're very long-term. I can already hear the answer coming back at me.
Speaker 2Which equities have taken a hit? They might not be up as much as you want, but which equities have taken a hit? People say to me, when is the uranium price going to move? Since they've been asking me that, the price has gone from $55 to $90, and these morons say, when is it going to move? This is a crisis of expectation. The uranium market is doing wonderfully well, wonderfully well. It hasn't given us, pardon the pun, the explosive growth that occasionally we enjoy in six-month spurts, but the uranium market cannot be expected to service the fantasy of speculative morons.
Speaker 1Yeah, I think what people's expectations were was that- Around five years ago, the story of the uranium market was, this is kind of when the bull was just getting started. People thought, after five years, the sector is going to go up so much. We're all going to make so much money. This was the chatter on X. This was the chatter on social media. These were, once again, people's expectations, and now people are saying, well, five years have gone by, and you're right. So many of the equities are up multiple hundreds of percents. In the meantime, I think people are expecting that type of 10X growth coming out of the sector, and they haven't seen it yet. That's where I think the frustration lies in terms of your average person who's investing in this space.
Speaker 2One can't help people who would prefer to feel than think. That's all I can say. I believe that the future of uranium as an investment is spectacular if people would free themselves from their own misperception. $90, is likely an incentive price for new construction, but new construction takes a very long time to affect. The fact that the price is at $90 doesn't increase cash flow from new projects because new projects take 10 years to permit, finance, and build. This is relatively simple stuff. It's the sort of delta between expectation and reality. In addition to that, there's something that you and I have talked about, but you've talked about it. You've talked about it. You've never seen disgust in the internet discussion groups, which is contract pricing. Uranium is the only business in the world where the price isn't settled in the spot market. It's settled in the term market. That's really important because it gives nascent producers, the paladins of the world, perhaps the next gens of the world, the ability to finance construction that they otherwise would be unable to finance because the financial institution has certainty and transparency with regards to commodity pricing and sales volumes. This advantage exists nowhere else in the commodity space.
Speaker 1I think the flip side of that is that the price is very hard to track for retail investors because everyone watches the spot price, which on a good year accounts for 20%, 25% of transacted volumes. But the real thing that matters is that the price is very hard to track. The real thing that matters, of course, is the long-term market. However, most of those contracts have NDAs attached to them. And so we don't know what price the uranium is actually transacting at. So it's kind of this crazy situation where you have the spot market, e-liquid doesn't account for most of the volume. You have the term market, which is perhaps a more accurate barometer. However, you've got the term price. You can see it on Cameco's website. We're at nominal all-time highs at the moment, not real all-time highs. How do you wrap your head around that, the pricing mechanism of uranium?
Speaker 2First of all, you have to be tolerant for the fact that you're never getting it right. There's a lot of people who search for perfection, and that's a form of procrastination. You aren't going to be able to do it. The difficulty with the spot price is that it changes all the time. The difficulty with the term price is that it's hard to obtain. I work very, very, very hard. On blended term prices, I do that by looking at sales volume and cash received by producers and try to work backwards, which means I never get it right, but I get closer than people who don't do the work. What I'm hoping, Jesse, I mean, really the reason why I have all these conversations on mediums such as yours is I hope that I instill in people the necessity, if they're going to speculate, to do the work, I hope that I instill in them the necessity, if they're going to speculate, to do the work, to be a successful speculator. It's odd to me that people pay such slavish attention to price, as an example, in equities, and pay very little attention whatsoever to value. The price information is easy to obtain, but I would suggest to you it's worthless if you don't have an opinion as to value. Value is much more difficult to ascertain, but what I've learned is that successful speculators in my lifetime have made money on the delta between price and value. Which is why there are so few successful speculators.
Speaker 1WTI crude now around $102 a barrel as we speak. It's looking like the market actually is starting to maybe price in the fact that there is a war in the Middle East going on. The Strait of Hormuz essentially closed. The Strait of Bab al-Mandab looking like it's now under Houthi control. Supposedly Trump's making a deal with them. I mean, we know how that goes when it comes to social media chatter. Russia, Ukraine, of course, blowing up each other's. Energy infrastructure. I personally feel like we're going much higher here. I know you feel like if the war was taken out of the picture, it doesn't matter because the long-term trajectory for the energy markets is headed higher due to fundamental supply-demand imbalances. But do you think the geopolitical events here are fully priced in right now, or do you think we could see a major volatility to the upside?
Speaker 2I think we could see major volatility upside. If we don't solve the battlefield crisis, then make no mistake, prices have increased in anticipation of a shortage, not as a consequence of shortage. We've drawn down the U.S. Strategic Reserve, less well-known to people. We've drawn down the Chinese Commercial Reserve and the Japanese Reserve. We had pretty good above-ground inventories, and the Saudis were able to implement the Anbu Bypass for 7 million barrels a day. The fact that the conflict in the straits is ongoing and perhaps accelerating, and the fact that the Red Sea choke point, which is the mechanism by which Asia accesses Saudi oil, is under threat, means that we are in some danger of the oil price being set by actual rather than the threat of shortages. And that'll be a very different price. I also need to say that when I told you that this was an artificial shortage, a short-term shortage, when I said short-term, I mean three years, the oil price will rise in real and nominal terms four years out, not as a consequence of war, but rather as a consequence of substantially prolonged oil prices. shortages of sustaining capital. But that won't occur for some substantial period of time. If you cured the temporary shortage with an armistice, I think that you would see oil prices fall precipitously, more than people think. And the reason that you would see them fall precipitously is that these very, very, very high prices kill demand in markets that can't afford it. When you, Jesse, are impacted by higher oil prices at the pump, you swear a little bit, you scowl, and then you pump the gas and drive your car away. When a taxicab driver in Colombia. Sri Lanka sees these higher prices, he parks his car. That's demand destruction. And if supply resumes with demand destroyed in some markets, you could see a near-term precipitous decline in oil prices. I'm not saying this is going to happen. I'm just saying that your oil and gas speculators need to take that into account.
Speaker 1Well, Rick, fantastic conversation. Tell us about Battle Bank. Tell us about Rural Investment Media and anywhere else you want to direct people online.
Speaker 2Well, first of all, a shout out to the. Next place I'll see you, which is the Vancouver Resources Investment Conference. Yes. I would suggest one of the best resource investment conferences in the world. Of course, not up to the Rural Natural Resources Investment Symposium, but a great free alternative. For people who like what I have to say about natural resources, for people who actually want to do the work, incumbent in speculation, I'll give you an incentive. Go to my website, Rural Investment Media. List your natural resource stocks, and I will. Who are free, rank them, one to ten, one being best, ten being worst, and comment on individual issues where I think my comments might have value. A different free website of mine is called the Rural Classroom, where we have almost 30,000 subscribers accessing over 400 hours of. instructional video material, and engaging in discussion groups around all aspects natural resources. Once again, that's free. Free, Jesse, is a very, very good price. Finally, and thank you for the opportunity, if any of your listeners who live in the United States and Canada are unhappy with their current bank, I suspect that's most of your listeners, they should check out BattleBank at BattleBank.com. As an example, in the United States, there's $3 trillion on deposit in checking accounts that isn't getting paid interest. How on earth can people justify having $3 trillion on deposit, not getting paid interest? BattleBank services our community too, Jesse. We offer low-cost, highly secure, storage options on precious metals. In addition to that, we allow long-term precious metals holders the ability to access the capital they have tied up in their stack. You can set up a metals equity line of credit so that if you need the money, let's say to buy a distressed duplex in your neighborhood, or an Airbnb, or for seasonal working capital needs, you can access the capital that you have tied up in your gold and silver without having to sell your gold and silver. It's a metals equity line of credit. Depositors at BattleBank will be happy to know that in terms of the assets of BattleBank, which is to say the loans we've made, about 80% are secured by precious metals, an added layer of insurance, I would suspect. Once again, if you're unhappy with your current bank for any reason whatsoever, and I suspect all of your listeners are, check out BattleBank. Let us battle for your business.
Speaker 1Great. Well, I'll put links in the description to Rural Investment Media as well as BattleBank so people can check it out. Rick, as always, thank you so much for coming on the show and sharing your insights.
Speaker 2Pleasure, Jesse. I look forward to catching you in person in Vancouver in a couple short months.
Speaker 1Thank you for joining us today on Commodity Culture. Earn up to a 4% annual yield on your physical gold paid in gold ounces through Monetary Metals. Go to monetary-metals.com slash commodity to find out how to put your gold to work for you. Link is in the show notes below.
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