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Rick Rule: Why Gold Miners Are on Sale

Tom welcomes back legendary investor, President, and CEO of Sprott U.S. Holdings. Rick discusses his spectacular partnership with Sprott and the career changes he has planned. Rick is giving up his managerial and administrative roles along with his regulatory functions at Sprott. His focus will be on what he enjoys, which includes educating and mentoring others.

Rick thinks the strength in interest rates is negative for gold but factoring in inflation; we are still negative in real terms. Time is on your side with the interest rate market as bonds today bring return-free risk. Regular declines in a gold market are expected, and it is not unusual to see 20-25 percent drops. If you understand this, it is much easier to bear these events.

All financial markets from time to time are manipulated. Today, the futures market’s silver daily volume exceeds the amount of physical metal available. Mr. Rule paints a silver futures scenario that would affect the metal adversely and why this seems to play out routinely. Rick remembers a time back in the 70s when the precious metals were regularly manipulated upwards.

Ricks says, “The Comex is run for the benefit of the Comex, not for you and I. Any supposition to the contrary is very nieve.” He outlines the tools available to Comex for adjusting the futures markets, including changing margin reserves and the possibilities of outright fraud. The silver price control is beginning to be replaced by the physical market, and the excessive risk-taking by banks and other players will have to unwind.

Rick says they haven’t had any problems acquiring physical silver for the Sprott ETF so far. The demand for smaller physical products has overwhelmed the retail market. Silver, unlike gold, is logistically challenging due to its size and weight. Unlike other ETF’s, Sprott is unable to trust any other parties and must acquire the actual metal.

Rick argues that a metals bull market starts with gold, and then silver accelerates. The Reddit crowd didn’t buy much silver individually, but many also purchased in the futures market, and collectively they handed some traders a religious experience. They gave the market notice.

Rick asks, “why should anyone postpone consumption in the hope of future benefit when saving costs you money? “

If a stock moves from ten to twenty, people like a stock more, but that doesn’t work for anything else that you buy. People set their expectations from their recent past.

Rick quotes Doug Casey regarding jurisdiction, “Being a milk cow is bad enough, but you need to be very concerned when the taxing authorities look at you like beef.”

Talking Points From This Episode

  • Rick’s career changes at Sprott.
  • Bond markets and interest rates.
  • Silver futures and manipulation.
  • QE, Debt, & Deficits

Guest Links:
Portfolio Review:

Time Stamp References:
0:00 – Intro
0:37 – Changes for Rick
2:59 – Educating and Mentoring
7:33 – Five Factors on Gold
10:15 – Risk Management
14:56 – Changing Rules
18:24 – Sprott PSLV
20:53 – Sourcing Silver
25:04 – Silver Reddit Movement
27:28 – QE, Debt & Gold
33:25 – Gold Mining Malaise
35:46 – Rating Companies
37:18 – No Good Jurisdictions
39:30 – Risks in Canada
42:28 – Sprott Media Changes
45:35 – Concluding Thoughts
46:54 – Wrap Up

Rick Rule has dedicated his entire adult life to many aspects of natural resources securities investing. Besides the knowledge and experience gained in a long and focused career, he has a global network of contacts in the natural resources and finance sectors. As President and Chief Executive Officer of Sprott U.S. Holdings Inc., Mr. Rule leads a highly skilled team of earth science and finance professionals who enjoy a worldwide reputation for resources investment management.

Mr. Rule is a frequent speaker at industry conferences and is often interviewed for radio, television, print, and online media outlets concerning natural resources investment and industry topics. Prominent natural resources-oriented newsletters and advisories frequently quote him. Mr. Rule and his team have expertise in many resource sectors, including agriculture, alternative energy, forestry, oil and gas, mining, and water. Mr. Rule is particularly active in private placement markets, having originated in hundreds of debt and equity transactions with private, pre-public, and public companies.

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