Speaker 1: The people who are involved in complex hedges in the
silver market, I think you're going to get massacred. I mean,
I think they're in for some truly religious experiences. To
the extent that a short position on silver that has
been put in place by algorithms that are looking at
silver markets over the last forty years, those leverage guys
are really truly in for a world of hurt.
Speaker 2: You are listening to Carrie Lutz's Financial Survival Network, where
you get valuable information you just can't find anywhere else
to thrive in today's trying times. You need the Financial
Survival Network now more than ever. Go to Financial Survivalnetwork
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Speaker 3: Ever, And welcome. You are listening to and watching the
Financial Survival Network. I'm your host, Carrie Leutz, and with
us is one of the savvyest and most successful resource
investors on the planet. Rick Rule officially in retirement, but
I was with him last week at his investment symposium
Resource Investment Symposium. And Rick, if you've retired, you're keeping
it a big secret, aren't you.
Speaker 1: I failed retirement pretty cool, pretty completely. And I'm delighted
about that. I joke with my wife that my mind
doesn't do well in neutral. It needs to be stimulated
or sedated, and working for me is healthier than drinking.
Speaker 4: But I enjoy both.
Speaker 3: I feel exactly the same way you got a few
years on me. But the thought of retirement is not
something I've come to terms with yet. And this is
the probably the greatest time to be in this sector
of our lifetimes here right.
Speaker 1: I don't know if this will be more successful than
the decade of the seventies was, But coming into the
decade of the seventies, I didn't have much experience and
I had no money. What's different is that I have
both now, so I suspect that I will come out
of the next ten years much better than I came
out of the decade of the seventies. And I came
out of the decade of the seventies pretty well well.
Speaker 4: Rick.
Speaker 3: I was going to ask you this question last, but
since you raised being broke and having no money, what
would you buy right now if you were thirty years old,
broke but had knowledge and nerve.
Speaker 1: Frankly, I'd buy more knowledge. I know that's not the
right answer.
Speaker 4: But.
Speaker 1: Your best asset at age thirty is compounding your knowledge
and working on your reputation. I suspect that what an
investor might do, assuming they have no assets looking at
the next ten years, is to begin to save systematically
and save probably half of what you say in gold.
I say that not because gold will necessarily outperform other assets,
but I think that over the next ten years, the
purchasing power of the US dollar will decline by seventy
five percent, and that gold will maintain at least its
nominal purchasing power, which means that it is a high
probability savings instrument. That's a boring answer. I'm tempted to
say that a thirty year old who believes that he
or she will be able to increase their disposable income
over ten years, if they're looking at investments simply as investments,
should consider buying exon mobile.
Speaker 4: Yeah.
Speaker 3: Yeah, you mentioned that during the conference and the you
know talk about boring. You can't get any more boring
than the Big X, So, you know, interesting, This idea
of investing in human capital, mainly your own human capital,
I found in my life to be the one surefire
investment that has never failed me. In over you know,
nearly seven decades, every time I invested in myself it
paid back many times over time than anything else I
ever invested in.
Speaker 1: I would agree with that completely. Knowledge is an asset. Well,
you can lose it, but it can't be stolen. It
can't be taxed. The fruits can be taxed, and your
reputation the same. What thirty year olds need to focus
on is the group of people they choose to be
their community, because you become the sum of your friends,
your reputation because if you lose it's very difficult to
rebuild it. And your knowledge, all the risks that you face, Carrie,
probably are manageable. If you manage the risk. This to
the left of your right ear and to the right
of your left ear.
Speaker 4: I couldn't agree with you more.
Speaker 3: And like you said, the knowledge you attain, you know,
no one can ever take it away from you. You
can't lose it. Health, all those types of things. But
assuming your health is good, invest in your health, invest
in your human capital. So I wasn't going to go
in this direction, but I have to go there with
you now because you made me think of something at
a connection. Ironies, the ironies of life. So we're in
the midst of this green revolution, all right, And the
very people who've been espousing the green revolution have been
the people who've been holding it back because you can't
get a mining permit. They've made the process so impossible
to obtain a permit that we've seen companies just throw
up their hands and say adios, I'm done.
Speaker 4: And then our current.
Speaker 3: President, who is the most anti anti electrification. I wouldn't
say he's anti technology, he's just maybe common sense about it.
His policies speeding up mind permits, things like putting the
road through at the Ambler District in Alaska for Trilogy
who I worked with in the past, full disclosure. But
his policies are making the Green New Deal more accessible
than any of his adversaries. Do you find that as
ironic as I do?
Speaker 1: Rick, Well, it's important to understand that the Green New
Deal wasn't really about environment.
Speaker 4: Let's get that out of the way.
Speaker 1: And I also need to say I'm no particular fan
of Trump, but I do note that he has been
effective at rescinding executive decrees by prior administrations. And I
have noticed myself a real change in the politics of
the regulatory agencies, which means frequently in the regulatory agencies.
Speaker 4: There was.
Speaker 1: A belief at the staff level the resource projects should
go ahead, but the politics of the agency were such
were such that at the very least stasis was what
you expected. Now at the BLM, which by the way,
has really competent technical people working there, They've been hidden
well for twenty years, but they're there now. There is
an incentive within the organization to get stuff done. They
can use the knowledge that they have in the agency
to complete the regulatory process in a responsible matter. It's
further to what you say, Carrie, mining, look at empirically,
is an efficient use of land. You generate an awful
lot of economic activity and an awful lot of consumer
utility by despoiling a very small piece of earth. The
Resolution copper mine in Arizona, when it's built after twenty
seven years of permitting, will have substantially less environmental disturbance
than one golf course. Golf courses are green and people
like to play on them, so they're regarded as not
being environmentally deleterious. But if you have a monoculture, which
is to say, grass in a Riparian area, the truth
is that they're environmentally extremely injuries. So it's important to
look at the concept of environmental degradation from an empirical
technical lens as opposed to an emotional narrative lens. And
I think what mister Trump has been able to do
with the regulatory agencies is allow them to return to
empirical rather than political or narrative analysis.
Speaker 4: Yeah, I think we'd agree.
Speaker 3: There are probably some places minds should not be built,
you know, due to geographical population, many factors. But you know,
invoking his emergency authority to push these projects through something
that we really only saw happen during wartime or run
ups to wartime. Is this a good thing? I mean
from our standpoint, yes, it's a good thing. We agree
a healthy mining sector, not just for the United States
but for the world in general, is essential to our
continued prosperity and well being. But invoking emergency authority to
push a copper mind through, what are your thoughts?
Speaker 1: What I would like to see mister Trump do, and
he won't do it, by the way, but what I'd
like to see him do is require upfront bonding environmental
bonding for resource development the United States, including exploration, which
means that the company would need to propose a reclamation
budget which the regulator would accept, and that would need
to be funded upfront by way of an insurance policy.
What happens right now is that the risk was socialized.
People promise to reclaim, but you know what a promise
is worth, particularly for a bankrupt company, It's worth nothing.
The best way to ensure environmental compliance would be for
the company planning to do the mind to convince the
insurance company to take the risk and pay them the
price for the risk that they assumed. That lets the
taxpayer off the hook. Then the regulatory process comes to
be involved in prohibiting the discharge of deleterious materials from
the mind sight to the environment. Stop. That's what I'd
like to see mister Trump do. That's not what he
will do. What he will do will be to solicit
campaign contributions and political favors from elements in society, like
the oil and gas industry that he thinks are more
aligned with him than the other side, Which is to say,
carry the old saw that mankenhead about events elections being
advanced option of stolen property. First to book, Democrats and
Republicans in equal measure.
Speaker 3: For property yet to be stolen, and couldn't agree with
you more on that. On the other hand, maybe this
policy aligns more with societal good than just stopping everything
this kind of luddite response to anything that happens. I mean,
I'm not justifying it, but I'm saying it's kind of
like I live in Florida. So there's no state more
corrupt than Florida than except for every other state. But
the difference between Florida and New York is well, like
in the Illinois there was a saying an honest judge
is one who's fixed and stays fixed. In Floriday, you
pay the price of admission, whatever it is, zoning variants,
law change, whatever, but you pay for it and you
get what you paid for. In New York, you pay
for it and you keep paying for it and paying
for it, and maybe one day you'll get it. And
that's why Florida is more prosperous than New York. Maybe
this corruption is just built in, and maybe we need
the most effective corruption we can find.
Speaker 1: They used to say a Mouisiana, the good thing about
Leander Perez was he stayed bribed.
Speaker 3: Yeah, I'm just saying So let's talk about metals markets
silver gold divergence. Is there a lagging silver squeeze that's
about to really hit and does forty dollars silver matter?
Speaker 1: Uh? Let me answer that in parts. My experience has
been that in precious metals bull markets, gold leads, and
when gold momentum attracts the generalist investor into the space,
leadership transfers to silver.
Speaker 4: Whether were there or not, I don't know.
Speaker 1: What I do know is you won't need to tell
me when it occurred. They're usually pretty dramatic events. I've
seen him happen three times before in my life, and
you don't need a weatherman to tell you which way
the wind blowing when that happens. As to a silver squeeze,
I am not one of those who believes that there's
been an ongoing conspiracy to depress the price of silver
over time. I worked for great, big financial institutions, and
the idea that they would take a negative carry a
short position over ten years or twelve years, which affected
quarterly cash bonuses. The probability of that occurring is nil.
Wouldn't happen markets. All markets are manipulated in the short term,
and they're manipulated in whatever direction is easy and is
easier to manipulate. For forty years, you have manipulated silver
markets down because that was their natural direction. I remember
the nineteen seventies when trading desk would manipulate the price
of silver up because that was the easiest direction. The
manipulation takes place because the futures markets, the paper markets
often trade two hundred times the available silver to cover
on a daily basis. They're much more liquid. So the
game works like this. A short syndicate gets involved over
the last forty years short in the futures market six
year duration, twelve month duration, twenty four months duration, that
kind of thing, and they get what would be for
you and I massively short two billion dollars short, three
billion dollars short in a market where the nominal value
of the positions is four hundred billion, and then they
borrow fifty or sixty million dollars worth a billion, and
they pound it into the market physically at whatever point
in time the market has the least volume, and they
use the impact of the physical market on the futures
market to cover their shorts and pay off their physical loss.
I mean, you see it happen time and time and
time again. That supports long term price manipulation. I think
that there's an aggregate of short term price manipulations. The
eurobond market has been manipulated, the Euro market's been manipulated,
the US treasury market's been manipulated. If you can manipulate
markets that are that big, the silver market's a piece
of cake. What will change, Carrie, is that the easiest
way to manipulate the market is going to go from
down to up.
Speaker 4: I got it.
Speaker 3: Yeah, that makes total total sense, and so a short
squeeze because some of the players aren't going to figure
this out until it happens.
Speaker 4: Right.
Speaker 1: The people who are involved in complex hedges in the
silver market, I think are going to get massacred. I mean,
I think they're in for some truly religious experiences. To
the extent that a short position on silver that has
been put in place by algorithms that are looking at
silver markets over the last forty years, those leverage guys
are really truly in for a world of hurt. Those
I mean, you know, long term capital management worked until
it didn't. It was a convergence trade, but the convergence
trade wasn't set up for a third standard deviation anomaly.
And I think the silver market's going to see a
third standard deviation anomaly, which means that the people who
are using silver as an unhedged corollary to some economic bet,
and they're doing it from algorithms that are based on
forty years of trading history, they aren't prepared for a hiccup,
and they're gonna get a hiccup.
Speaker 3: What you're describing is blood in the streets. Fortunately, nobody
works in Wall Street anymore, so you don't have to
worry about walking down the street and having a body
you know, crashed to the ground before you because everybody's
in their in their home office doing these trades here.
Speaker 4: Rick.
Speaker 3: But but seriously, this is like an existential event, what
you're saying, and it could spread to other markets as well,
because like you said, silver is tiny. You got thirty
five billion dollars worth of shorts in silver, man, like
this could just spread in one counterparty hits the hits
the bricks, and we're talking to from the fledge.
Speaker 4: Meltsound about that.
Speaker 1: To be honest with you, thirty five billion dollars is
a lot to you and me, But the notional value
of derivatives is more like five trillion dollars. I'm not
so concerned about that. I'm much more concerned about things
like unfunded entitlement liabilities and the imbalance between the nominal
and the real interest rates. I mean, if you want
me to scare your audience, carry I can really truly
do that. I'm less. I'm less concerned about the impact
on Wall Street and the deriven's markets by a silver short.
I think it'll be you know, I think there's probably
a couple of quantitative hedge funds.
Speaker 4: It'll go broke.
Speaker 1: Good riddance.
Speaker 4: No one cares about them anyway.
Speaker 1: Yeah, you know, the derivatives market is, it's truly vast.
There are other counterparty scenarios that scare me a lot more.
If if maws and paws in the United States that
own high yield ETFs junk bond ETFs get a whiff
of the beginnings of a credit crisis like they did
in two thousand and eight around real estate, and they
go to sell those high yield ETFs. The ETFs are
extremely liquid, they trade billions of dollars a day, but
they're comprised assets that are totally illiquid. Yes, if they
redeem the ETF and the manager has to sell the
bonds and can't. Now that's a scenario that's truly scary.
Speaker 3: And I remember reading Benjamin Graham. You know, he only
wrote this almost one hundred years ago. They had junk
bonds then. Junk bonds aren't a new thing. The liquidity
of junk bonds are. But he said that, you know,
no individual investor should ever buy a junk bond because
you cannot understand it. And we've seen even the guys
who understand the market get slaughtered by it. And yet
there's a lot of junk out there.
Speaker 1: Harry, in shows like yours where there's live Q and A.
I've talked to investors that held I high yield ets
that didn't understand that the assets were comprised of junk bonds.
They just looked at the cover yield, not how the
yield was generated. When I was a younger man, wasn't
the young man, but in the eighties I was pretty
active in the high yield credit market because I understand
how to read bond covenants. And I remember that when
Drexel Burnham started to blow apart and blew apart the
junk bond market. We had a we had a description
for these ill liquid bonds. We called them owl blonds.
And we called them owl blonds because when you called
your broker to sell, your broker would say to who too.
Speaker 3: I had some friends that worked at Drexel, and you know,
but then Leon Black picked over the carcasses of all
those owls and made billions of dollars because, like you said,
he could read a convenant.
Speaker 1: It's a great, great, great market if you understand it.
The oil and gas industry junk bonds in the eighties
and the nineties made me, relative to my net worth,
a large amount of money forever, great full. But I
understood about oil and gas and understood about covenants. You know,
I remember buying bonds with a cover yield of twelve
percent that we're selling at sixty. So you know, I
got a running yield of twenty percent and a yield
maturity of thirty five percent in a dead instrument. Life
doesn't get better than that. But that's not what's on
offer today.
Speaker 3: I remember making twenty percent on Ford bonds myself. But yeah,
so talking about the junior resource sector, which is revivified,
that's the right word as witnessed by your recent conference.
You know you always said the junior resource sector is
a broken model if you will, composed of lifestyle companies
that aren't real businesses, and you know, look, we.
Speaker 4: Got a lot of AI going on.
Speaker 3: Do you think the AI can pick out the lifestyle
companies from the real companies five years from now?
Speaker 1: But you have to know how to ask AI the questions.
What AI does is aggregate misinformation often, So if you
ask AI to search the Edgard database or the Cedar
database for companies where general and an administrative expenses less
than twenty five percent of total expenditures, that's a great
use of AI. But if you ask AI to look
for lifestyle companies without defining what a lifestyle company is,
they'll go to CNBC or Kitko or places and they'll
aggregate a whole bunch of narrative and misinformation. AI is
really good for what the Bloomberg gobots have been good for.
It can search databases if you give it very very
very specific correlations, and you can do it instantaneously. AI
can do in terms of comparative balance your analysis. If
you know how to ask the question tasks in two
minutes that would take me two months and I'm good
at it. The important part, though, is that you have
to understand how to ask it the right question.
Speaker 4: That is so true.
Speaker 3: I've been using it for three and a half years now,
and you know, like could they talk about prompt engineers
and all that, Well, that's nice, but I'll tell you what,
Like for law, I had a friend and the legal
profession doesn't even see what's coming here. Adam Ray, friend
of mine. She wanted to read. She wanted to amend
her trust a mendor will and quit claim her condo
over to her trust. And she goes to one lawyer
forty five hundred dollars. She goes to another lawyer thirty
five hundred. Now I'm a recovering attorney, in fact, in
America's top recovering attorney.
Speaker 4: She comes to me. I said, fuck it, Like.
Speaker 3: I'm not writing papers, Let's throw it into the AI
and see how it works. I think it'll do, okay, Rick.
Twenty minutes later, I had all her documents done, multiple
copies stapled, and they were ready to be witnessed and notarized.
Speaker 4: And they worked.
Speaker 3: They were perfect. In fact, they were better than the
documents I would have created. Myself because I'm a master
of typos, and there wasn't one typo. And that's just
one area. So I had the legal expertise. I could
look at the docs and know that they were.
Speaker 1: You edit it, you can shape the product, and then
you can consume the product. That's important. I asked AI
to try to do some work for me in anticipation
of an interview about six weeks ago talking about debt
deficit on baalllot sheet liability stuff like that. I didn't
specify source, and so they went through Twitter and CNBC
and ABC and CBS, and what I got was an
aggregation of misinformation. They didn't, as an example, talk about
They talked about one balance sheet liabilities, you know, thirty
seven trillion. They talked about net on balance sheet liabilities
thirty trillion net of the seven. But they don't talk
about unfunded entitlements. They missed completely the one hundred trillion
dollar elephant in the room. So it's important that somebody
be like Harry Lutts, somebody use AI in a subject
that they know well enough that they can frame the
question and they can judge the product.
Speaker 4: So true.
Speaker 3: We used to say garbage in garbage out Now, it's
garbage in landfill out. I mean it's so true because
you can ask it questions and they're theoretically correct, but
they're absolutely on a factual level they're wrong. And I
see it all the time. But if you can't recognize it,
then you're going to spout out garbage that you don't
really understand. That's the whole problem with AI. It's a
black box and nobody really understands how it's producing its
results at this point.
Speaker 4: Right.
Speaker 1: We're seeing now in the exploration business. In exploration, we
have a thing called coincident anomalies where you might look
at ten different factors and you might look you look
for areas where favorable data overlays itself geographically right. And
AI has the potential to do that spectacularly well. It
has the potential to look, as an example, at two
thousandsquare miles of Earth from a landsat photo, look at
spectral differentiation so that you can understand how different landforms
respond to light differently from space. Merge that with visible
structures you know callederas or faults. Merge that with historical
ground data, historical geophysical data. Each of those inputs might
take a researcher two or three weeks to do. In
the old days, we used to actually make vellums overload them.
AI can do that. AI can take two thousand square
miles of earth and define a thousand acre target so
that geologists don't have to look at two thousand square miles,
they can look at one square mile. That's a great
use of AI. It's a great use of AI. And
over the next five years we're going to learn how
to do this, and we're to develop data sets that
are AI usable. You know, it's going to actually change
the way we develop in store data to make it
assimilable on AI. That's that's going to be fantastic.
Speaker 3: And then if the Elon Musk starts taking as tunneling
machines and devotes them to mining, we might really have
a revolution in the mining space.
Speaker 1: That's coming the you know, the oil and gas business
has undergone as spectacular transformation the last thirty years through technology.
My mining friends will hate this, but the oil and
gas guys are smarter. That's coming to mining. You know,
it really truly is coming to mining. The technology that's
worked in oil and gas around geophysics will come to mining.
I don't know what it'll be, you know, maybe it'd
be Robert Friedan's typhoon typhoon. Who knows what it'll be.
But eventually we will have some form of tool the
human I sees an ankstrum into the earth. We'll have
some form of tool that will allow us to do
for mineral deposits what we can do for oil and
gas deposits today. That may or may not be an
AI enabled tool, but technology will truly transform mining. It's
interesting that a rocket scientist, Elon Musk is the guy
who came to us with a more efficient, boring technology,
given that our industry had been boring for three hundred years.
It's interesting that the technological innovation came from outside of
the experienced class.
Speaker 3: And all from well, I don't know if the origin
story is true or not that he got fed up
with traffic in La one day and said I'm just
going to dig a tunnel.
Speaker 4: That's a little too.
Speaker 3: Pat Well, if it's true, having been to Vegas and
ridden on that thing, and the people they can't see
the potential for this rick Like I live in Florida,
we have nothing but traffic. The idea of being able
to go under it all and not have traffic lights
and Florida drivers. I mean, I don't see how that's
just for tunneling for transportation, but for mining to be
able to bore through an entire mountain you know exactly
where you need to go and not have to worry
about collapses and all that.
Speaker 4: I mean, who cannot see the potential of this.
Speaker 1: At a quarter of the cost?
Speaker 4: Yep?
Speaker 1: Yeah, I mean you know, we we do more we
do boring in mining. And by boring I mean tunnels.
I don't mean the fact that our business is boring,
which is also true. But the idea that you can
increase the efficiency and cut the cost substantially changes things.
Speaker 3: And the environmental aspects of it too, and the safety
mining when you get down to it, you start going
into those tunnels, it's dangerous down there and anything can happen.
So well, I always appreciate your coming on the show.
So Rick, where's the best place to find your work
and your latest missive?
Speaker 1: The best place to reach me and the one with
the most current incentive is it Rule Investment Media. If
you go there and list your natural resource stocks, I will,
for no obligation review them. Please no textoks, please no
pot stocks please, no crypto resource stocks only Rule Investment Media.
Speaker 4: Give me a little while.
Speaker 1: I'm about two hundred and fifty responses behind because of
the conference last year. The other thing is if for
some reason you missed that conference, maybe you have a
life or something like that. The conference tapes are valuable.
We sell the conference tapes after the fact with a
full money back guarantee. If you play the tape and
think I didn't give you your money, I'll give you your money back.
Rule Symposiums look forward to seeing your listeners either place.
I'm glad you enjoyed the conference. Carry I hope we
see you there next year. We're going to bring it
back to a neighborhood in Florida, close to you, all.
Speaker 3: Right to thirty five miles down the road. Maybe you
should think about using some AI to to update those
emails that are stacking up there.
Speaker 1: Rick, Well, we have a person who is looking at
bringing the entire Rule Investment Media business into the century
kicking and starting as a person is less than half
my age, and I suspect we'll be able to cause
some minor miracles to occur.
Speaker 3: No surprise there. I would expect somebody half our age
to be in the thick of it. Hey, if you've
got a question for Rick myself, shoot me an email
kl at Kerrie lets dot com.
Speaker 4: We'll get you an answered.
Speaker 3: Quick and you'll find a link to rickcite in the
show notes of this interview on Financial Survival Network dot com.
And if you go there, just sign up for your
free newsletter. Rick, always a pleasure. Talk to you again real.
Speaker 1: Soon, my pleasure carry Thank you. I welcome the opportunity
to come back.
Speaker 2: Thanks for listening to Carrie Letz's Financial Survival Network, your
solution to today's trying times. For the latest, go to
Financial Survivalnetwork dot com. Financial Survival Network now more than ever,