WEBVTT 1 00:00:00.240 --> 00:00:04.240 The people who are involved in complex hedges in the 2 00:00:04.280 --> 00:00:07.400 silver market. I think you're going to get massacred. I mean, 3 00:00:07.440 --> 00:00:11.400 I think they're in for some truly religious experiences. To 4 00:00:11.480 --> 00:00:15.240 the extent that a short position on silver that has 5 00:00:15.359 --> 00:00:17.480 been put in place by algorithms that are looking at 6 00:00:17.480 --> 00:00:21.199 silver markets over the last forty years, those leverage guys 7 00:00:21.359 --> 00:00:24.239 are really truly in for a world of hurt. 8 00:00:24.519 --> 00:00:28.440 You're listening to Carrie Lutz's Financial Survival Network, where you 9 00:00:28.480 --> 00:00:32.399 get valuable information you just can't find anywhere else to 10 00:00:32.600 --> 00:00:36.600 thrive in today's trying times. You need the Financial Survival 11 00:00:36.640 --> 00:00:41.359 Network now more than ever. Go to Financial Survivalnetwork dot 12 00:00:41.399 --> 00:00:45.719 com and get your free newsletter and gift. Financial Survival 13 00:00:45.759 --> 00:00:48.679 Network now more than ever. 14 00:00:51.880 --> 00:00:55.439 And welcome. You are listening to and watching the Financial 15 00:00:55.479 --> 00:00:59.320 Survival Network. I'm your host, Carrie Leutz, and with us 16 00:00:59.560 --> 00:01:06.680 is one of the savvyest and most successful resource investors 17 00:01:06.879 --> 00:01:12.640 on the planet. Rick Rule officially in retirement, but I 18 00:01:12.760 --> 00:01:17.760 was with him last week at his investment symposium Resource 19 00:01:18.040 --> 00:01:22.200 Investment Symposium. And Rick, if you've retired, you're keeping it 20 00:01:22.239 --> 00:01:23.359 a big secret, aren't you. 21 00:01:24.519 --> 00:01:28.359 I failed retirement pretty cool, pretty completely. And I'm delighted 22 00:01:28.359 --> 00:01:32.000 about that. I joke with my wife that my mind 23 00:01:32.519 --> 00:01:35.680 doesn't do well in neutral. It needs to be stimulated 24 00:01:35.799 --> 00:01:38.799 or sedated, and working for me is healthier than drinking. 25 00:01:39.319 --> 00:01:43.920 But I enjoy both. I feel exactly the same way 26 00:01:43.959 --> 00:01:47.200 you got a few years on me. But the thought 27 00:01:47.239 --> 00:01:51.840 of retirement is not something I've come to terms with yet. 28 00:01:53.200 --> 00:01:55.680 And this is the probably the greatest time to be 29 00:01:55.799 --> 00:01:58.359 in this sector of our lifetimes here right. 30 00:01:59.840 --> 00:02:02.760 I don't know if this will be more successful than 31 00:02:02.840 --> 00:02:05.840 the decade of the seventies was, But coming into the 32 00:02:05.840 --> 00:02:08.479 decade of the seventies, I didn't have much experience and 33 00:02:08.520 --> 00:02:11.800 I had no money. What's different is that I have 34 00:02:11.919 --> 00:02:15.319 both now, so I suspect that I will come out 35 00:02:15.319 --> 00:02:16.919 of the next ten years much better than I came 36 00:02:16.919 --> 00:02:18.280 out of the decade of the seventies. And I came 37 00:02:18.280 --> 00:02:20.919 out of the decade of the seventies pretty well well. 38 00:02:21.159 --> 00:02:24.599 Rick. I was going to ask you this question last, 39 00:02:24.680 --> 00:02:27.800 but since you raised being broke and having no money, 40 00:02:28.800 --> 00:02:31.199 what would you buy right now if you were thirty 41 00:02:31.319 --> 00:02:34.879 years old, broke but had knowledge and nerve. 42 00:02:37.400 --> 00:02:40.120 Frankly, I'd buy more knowledge. I know that's not the 43 00:02:40.199 --> 00:02:46.439 right answer, but your best asset at age thirty is 44 00:02:47.039 --> 00:02:52.759 compounding your knowledge and working on your reputation. I suspect 45 00:02:53.039 --> 00:02:59.800 that what an investor might do, assuming they have no 46 00:03:00.240 --> 00:03:04.759 assets looking at the next ten years, is to begin 47 00:03:04.840 --> 00:03:09.520 to save systematically and save probably half of what you 48 00:03:09.560 --> 00:03:13.919 say in gold. I say that not because gold will 49 00:03:13.960 --> 00:03:18.520 necessarily outperform other assets, but I think that over the 50 00:03:18.599 --> 00:03:20.840 next ten years, the purchasing power of the US dollar 51 00:03:21.240 --> 00:03:25.439 will decline by seventy five percent, and that gold will 52 00:03:25.479 --> 00:03:30.080 maintain at least its nominal purchasing power, which means that 53 00:03:30.159 --> 00:03:36.159 it is a high probability savings instrument. That's a boring answer. 54 00:03:36.919 --> 00:03:40.919 I'm tempted to say that a thirty year old who 55 00:03:41.080 --> 00:03:44.719 believes that he or she will be able to increase 56 00:03:44.759 --> 00:03:47.719 their disposable income over ten years, if they're looking at 57 00:03:47.719 --> 00:03:52.319 investments simply as investments, should consider buying exon mobile. 58 00:03:53.599 --> 00:03:57.439 Yeah. Yeah, you mentioned that during the conference and the 59 00:03:58.159 --> 00:04:03.560 you know talk about boring. You can't get any more 60 00:04:03.599 --> 00:04:08.400 boring than the Big X, So, you know, interesting, This 61 00:04:09.159 --> 00:04:15.479 idea of investing in human capital, mainly your own human capital, 62 00:04:16.079 --> 00:04:19.439 I found in my life to be the one surefire 63 00:04:19.560 --> 00:04:25.639 investment that has never failed me. In over you know, 64 00:04:25.879 --> 00:04:30.360 nearly seven decades, every time I invested in myself it 65 00:04:30.480 --> 00:04:35.720 paid back many times over time than anything else I 66 00:04:35.800 --> 00:04:36.720 ever invested in. 67 00:04:37.079 --> 00:04:41.560 I would agree with that completely. Knowledge is an asset. Well, 68 00:04:41.879 --> 00:04:44.480 you can lose it, but it can't be stolen. It 69 00:04:44.519 --> 00:04:48.240 can't be taxed. The fruits can be taxed, and your 70 00:04:48.240 --> 00:04:54.120 reputation the same. What thirty year olds need to focus 71 00:04:54.199 --> 00:04:56.920 on is the group of people they choose to be 72 00:04:56.920 --> 00:05:00.000 their community, because you become the sum of your friends, 73 00:05:01.759 --> 00:05:05.160 your reputation because if you lose it's very difficult to 74 00:05:05.199 --> 00:05:09.399 rebuild it. And your knowledge, all the risks that you face, Carrie, 75 00:05:10.759 --> 00:05:14.480 probably are manageable. If you manage the risk. This to 76 00:05:14.519 --> 00:05:15.879 the left of your right ear and to the right 77 00:05:15.959 --> 00:05:16.600 of your left ear. 78 00:05:18.519 --> 00:05:21.879 I couldn't agree with you more. And like you said, 79 00:05:21.920 --> 00:05:25.519 the knowledge you attain, you know, no one can ever 80 00:05:25.560 --> 00:05:27.959 take it away from you. You can't lose it. Health, 81 00:05:28.399 --> 00:05:31.000 all those types of things. But assuming your health is good, 82 00:05:31.879 --> 00:05:35.240 invest in your health, invest in your human capital. So 83 00:05:36.000 --> 00:05:38.120 I wasn't going to go in this direction, but I 84 00:05:38.199 --> 00:05:40.680 have to go there with you now because you made 85 00:05:40.680 --> 00:05:44.839 me think of something at a connection. Ironies, the ironies 86 00:05:44.879 --> 00:05:49.560 of life. So we're in the midst of this green revolution, 87 00:05:50.279 --> 00:05:53.519 all right, And the very people who've been espousing the 88 00:05:53.600 --> 00:05:56.839 green revolution have been the people who've been holding it 89 00:05:56.879 --> 00:06:00.879 back because you can't get a mining permit. They've made 90 00:06:00.920 --> 00:06:06.680 the process so impossible to obtain a permit that we've 91 00:06:06.720 --> 00:06:11.000 seen companies just throw up their hands and say adios, 92 00:06:11.319 --> 00:06:16.000 I'm done. And then our current president, who is the 93 00:06:16.000 --> 00:06:22.079 most anti anti electrification. I wouldn't say he's anti technology, 94 00:06:23.000 --> 00:06:28.639 he's just maybe common sense about it. His policies speeding 95 00:06:28.720 --> 00:06:32.600 up mind permits, things like putting the road through at 96 00:06:32.600 --> 00:06:38.040 the Ambler District in Alaska for Trilogy who I worked 97 00:06:38.040 --> 00:06:42.800 with in the past, full disclosure. But his policies are 98 00:06:43.120 --> 00:06:47.720 making the Green New Deal more accessible than any of 99 00:06:47.759 --> 00:06:51.560 his adversaries. Do you find that as ironic as I do? 100 00:06:51.680 --> 00:06:54.600 Rick, Well, it's important to understand that the Green New 101 00:06:54.639 --> 00:06:57.160 Deal wasn't really about environment. 102 00:06:57.240 --> 00:06:58.240 Let's get that out of the way. 103 00:06:58.879 --> 00:07:01.160 And I also need to say I'm no particular fan 104 00:07:01.199 --> 00:07:05.959 of Trump, but I do note that he has been 105 00:07:06.079 --> 00:07:15.120 effective at rescinding executive decrees by prior administrations. And I 106 00:07:15.240 --> 00:07:19.319 have noticed myself a real change in the politics of 107 00:07:19.319 --> 00:07:25.639 the regulatory agencies, which means frequently in the regulatory agencies. 108 00:07:25.199 --> 00:07:25.759 There was. 109 00:07:27.439 --> 00:07:31.279 A belief at the staff level the resource projects should 110 00:07:31.279 --> 00:07:35.199 go ahead, but the politics of the agency were such 111 00:07:35.519 --> 00:07:39.639 were such that at the very least stasis was what 112 00:07:39.680 --> 00:07:43.839 you expected. Now at the BLM, which by the way, 113 00:07:44.120 --> 00:07:48.959 has really competent technical people working there, They've been hidden 114 00:07:48.959 --> 00:07:53.439 well for twenty years, but they're there now. There is 115 00:07:53.839 --> 00:07:59.160 an incentive within the organization to get stuff done. They 116 00:07:59.199 --> 00:08:02.560 can use the knowledge that they have in the agency 117 00:08:02.959 --> 00:08:10.240 to complete the regulatory process in a responsible matter. It's 118 00:08:11.240 --> 00:08:16.600 further to what you say, Carrie, mining, look at empirically, 119 00:08:18.160 --> 00:08:24.079 is an efficient use of land. You generate an awful 120 00:08:24.160 --> 00:08:28.240 lot of economic activity and an awful lot of consumer 121 00:08:28.360 --> 00:08:33.080 utility by despoiling a very small piece of earth. The 122 00:08:33.399 --> 00:08:38.360 Resolution copper mine in Arizona, when it's built after twenty 123 00:08:38.360 --> 00:08:43.440 seven years of permitting, will have substantially less environmental disturbance 124 00:08:43.519 --> 00:08:47.440 than one golf course. Golf courses are green and people 125 00:08:47.559 --> 00:08:50.679 like to play on them, so they're regarded as not 126 00:08:50.759 --> 00:08:53.960 being environmentally deleterious. But if you have a monoculture, which 127 00:08:54.000 --> 00:08:57.879 is to say, grass in a Riparian area, the truth 128 00:08:57.960 --> 00:09:05.039 is that they're environmentally extremely injuries. So it's important to 129 00:09:05.159 --> 00:09:11.200 look at the concept of environmental degradation from an empirical 130 00:09:11.799 --> 00:09:15.080 technical lens as opposed to an emotional narrative lens. And 131 00:09:15.159 --> 00:09:17.960 I think what mister Trump has been able to do 132 00:09:18.039 --> 00:09:23.080 with the regulatory agencies is allow them to return to 133 00:09:23.360 --> 00:09:26.919 empirical rather than political or narrative analysis. 134 00:09:27.600 --> 00:09:30.000 Yeah, I think we'd agree. There are probably some places 135 00:09:30.440 --> 00:09:36.679 minds should not be built, you know, due to geographical population, 136 00:09:37.759 --> 00:09:44.360 many factors. But you know, invoking his emergency authority to 137 00:09:44.440 --> 00:09:49.440 push these projects through something that we really only saw 138 00:09:49.559 --> 00:09:54.279 happen during wartime or run ups to wartime. Is this 139 00:09:54.320 --> 00:09:57.240 a good thing? I mean from our standpoint, yes, it's 140 00:09:57.279 --> 00:10:01.879 a good thing. We agree a healthy mining sector, not 141 00:10:02.000 --> 00:10:04.480 just for the United States but for the world in general, 142 00:10:04.840 --> 00:10:10.320 is essential to our continued prosperity and well being. But 143 00:10:10.840 --> 00:10:16.159 invoking emergency authority to push a copper mind through, what 144 00:10:16.200 --> 00:10:16.799 are your thoughts? 145 00:10:17.279 --> 00:10:18.879 What I would like to see mister Trump do, and 146 00:10:18.879 --> 00:10:20.399 he won't do it, by the way, but what I'd 147 00:10:20.440 --> 00:10:24.960 like to see him do is require upfront bonding environmental 148 00:10:25.039 --> 00:10:31.279 bonding for resource development the United States, including exploration, which 149 00:10:31.320 --> 00:10:35.000 means that the company would need to propose a reclamation 150 00:10:35.120 --> 00:10:39.240 budget which the regulator would accept, and that would need 151 00:10:39.240 --> 00:10:42.120 to be funded upfront by way of an insurance policy. 152 00:10:44.039 --> 00:10:46.240 What happens right now is that the risk was socialized. 153 00:10:47.320 --> 00:10:50.279 People promise to reclaim, but you know what a promise 154 00:10:50.360 --> 00:10:54.039 is worth, particularly for a bankrupt company, It's worth nothing. 155 00:10:54.919 --> 00:10:58.960 The best way to ensure environmental compliance would be for 156 00:10:59.480 --> 00:11:02.840 the company planning to do the mind to convince the 157 00:11:02.840 --> 00:11:06.320 insurance company to take the risk and pay them the 158 00:11:06.360 --> 00:11:09.440 price for the risk that they assumed. That lets the 159 00:11:09.480 --> 00:11:14.000 taxpayer off the hook. Then the regulatory process comes to 160 00:11:14.039 --> 00:11:19.080 be involved in prohibiting the discharge of deleterious materials from 161 00:11:19.080 --> 00:11:23.639 the mind sight to the environment. Stop. That's what I'd 162 00:11:23.679 --> 00:11:26.039 like to see mister Trump do. That's not what he 163 00:11:26.080 --> 00:11:29.960 will do. What he will do will be to solicit 164 00:11:30.000 --> 00:11:35.960 campaign contributions and political favors from elements in society, like 165 00:11:35.960 --> 00:11:40.519 the oil and gas industry that he thinks are more 166 00:11:40.559 --> 00:11:44.720 aligned with him than the other side, Which is to say, 167 00:11:44.759 --> 00:11:47.840 carry the old saw that mankenhead about events elections being 168 00:11:47.879 --> 00:11:51.600 advanced option of stolen property. First to book, Democrats and 169 00:11:51.639 --> 00:11:53.600 Republicans in equal measure. 170 00:11:54.480 --> 00:11:58.320 For property yet to be stolen, and couldn't agree with 171 00:11:58.320 --> 00:12:02.639 you more on that. On the other hand, maybe this 172 00:12:02.759 --> 00:12:08.360 policy aligns more with societal good than just stopping everything 173 00:12:08.440 --> 00:12:14.279 this kind of luddite response to anything that happens. I mean, 174 00:12:14.320 --> 00:12:18.679 I'm not justifying it, but I'm saying it's kind of 175 00:12:18.720 --> 00:12:23.000 like I live in Florida. So there's no state more 176 00:12:23.039 --> 00:12:27.159 corrupt than Florida than except for every other state. But 177 00:12:27.200 --> 00:12:31.720 the difference between Florida and New York is well, like 178 00:12:32.200 --> 00:12:35.440 in the Illinois there was a saying an honest judge 179 00:12:35.480 --> 00:12:41.440 is one who's fixed and stays fixed. In Floriday, you 180 00:12:41.519 --> 00:12:44.919 pay the price of admission, whatever it is, zoning variants, 181 00:12:46.039 --> 00:12:48.320 law change, whatever, but you pay for it and you 182 00:12:48.360 --> 00:12:50.759 get what you paid for. In New York, you pay 183 00:12:50.840 --> 00:12:52.799 for it and you keep paying for it and paying 184 00:12:52.840 --> 00:12:55.600 for it, and maybe one day you'll get it. And 185 00:12:55.639 --> 00:13:00.720 that's why Florida is more prosperous than New York. Maybe 186 00:13:00.759 --> 00:13:03.879 this corruption is just built in, and maybe we need 187 00:13:03.919 --> 00:13:06.159 the most effective corruption we can find. 188 00:13:06.639 --> 00:13:10.120 They used to say a Mouisiana, the good thing about 189 00:13:10.200 --> 00:13:12.320 Leander Perez was he stayed bribed. 190 00:13:15.320 --> 00:13:18.960 Yeah, I'm just saying So let's talk about metals markets 191 00:13:19.240 --> 00:13:24.799 silver gold divergence. Is there a lagging silver squeeze that's 192 00:13:24.879 --> 00:13:29.480 about to really hit and does forty dollars silver matter? Uh? 193 00:13:30.600 --> 00:13:33.639 Let me answer that in parts. My experience has been 194 00:13:34.639 --> 00:13:38.360 that in precious metals bull markets, gold leads, and when 195 00:13:38.679 --> 00:13:43.120 gold momentum attracts the generalist investor into the space, leadership 196 00:13:43.120 --> 00:13:44.000 transfers to silver. 197 00:13:44.840 --> 00:13:46.440 Whether were there or not, I don't know. 198 00:13:47.120 --> 00:13:48.600 What I do know is you won't need to tell 199 00:13:48.639 --> 00:13:53.159 me when it occurred. They're usually pretty dramatic events. I've 200 00:13:53.159 --> 00:13:56.399 seen him happen three times before in my life, and 201 00:13:56.600 --> 00:13:58.159 you don't need a weatherman to tell you which way 202 00:13:58.159 --> 00:14:01.840 the wind blowing when that happens. As to a silver squeeze, 203 00:14:01.919 --> 00:14:04.159 I am not one of those who believes that there's 204 00:14:04.279 --> 00:14:08.200 been an ongoing conspiracy to depress the price of silver 205 00:14:08.399 --> 00:14:14.240 over time. I worked for great, big financial institutions, and 206 00:14:14.279 --> 00:14:16.879 the idea that they would take a negative carry a 207 00:14:16.919 --> 00:14:21.799 short position over ten years or twelve years, which affected 208 00:14:21.879 --> 00:14:25.679 quarterly cash bonuses. The probability of that occurring is nil. 209 00:14:26.120 --> 00:14:30.759 Wouldn't happen markets. All markets are manipulated in the short term, 210 00:14:31.399 --> 00:14:35.159 and they're manipulated in whatever direction is easy and is 211 00:14:35.240 --> 00:14:40.080 easier to manipulate. For forty years, you have manipulated silver 212 00:14:40.120 --> 00:14:45.840 markets down because that was their natural direction. I remember 213 00:14:45.879 --> 00:14:49.039 the nineteen seventies when trading desk would manipulate the price 214 00:14:49.080 --> 00:14:53.600 of silver up because that was the easiest direction. The 215 00:14:53.639 --> 00:14:59.120 manipulation takes place because the futures markets, the paper markets 216 00:14:59.159 --> 00:15:04.639 often trade two hundred times the available silver to cover 217 00:15:05.440 --> 00:15:09.679 on a daily basis. They are much more liquid. So 218 00:15:09.840 --> 00:15:15.120 the game works like this. A short syndicate gets involved 219 00:15:15.120 --> 00:15:17.960 over the last forty years short in the futures market 220 00:15:18.440 --> 00:15:21.799 six year duration, twelve month duration, twenty four months duration, 221 00:15:21.919 --> 00:15:26.279 that kind of thing, and they get what would be 222 00:15:26.320 --> 00:15:30.480 for you and I massively short two billion dollars short, 223 00:15:30.519 --> 00:15:33.879 three billion dollars short in a market where the nominal 224 00:15:33.960 --> 00:15:37.600 value of the positions is four hundred billion, and then 225 00:15:37.600 --> 00:15:41.879 they borrow fifty or sixty million dollars worth a billion, 226 00:15:43.240 --> 00:15:47.200 and they pound it into the market physically at whatever 227 00:15:47.240 --> 00:15:51.759 point in time the market has the least volume, and 228 00:15:52.279 --> 00:15:56.240 they use the impact of the physical market on the 229 00:15:56.279 --> 00:16:00.320 futures market to cover their shorts and pay off their 230 00:16:00.320 --> 00:16:03.039 physical loss. I mean, you see it happen time and 231 00:16:03.080 --> 00:16:09.919 time and time again. That supports long term price manipulation. 232 00:16:11.120 --> 00:16:14.360 I think that there's an aggregate of short term price manipulations. 233 00:16:14.399 --> 00:16:19.799 The eurobond market has been manipulated, the Euro market's been manipulated, 234 00:16:19.840 --> 00:16:22.799 the US treasury market's been manipulated. If you can manipulate 235 00:16:22.840 --> 00:16:25.879 markets that are that big, the silver market's a piece 236 00:16:25.879 --> 00:16:29.679 of cake. What will change, Carrie, is that the easiest 237 00:16:29.679 --> 00:16:32.440 way to manipulate the market is going to go from 238 00:16:32.480 --> 00:16:33.120 down to up. 239 00:16:34.559 --> 00:16:38.320 I got it. Yeah, that makes total total sense, and 240 00:16:39.200 --> 00:16:42.320 so a short squeeze because some of the players aren't 241 00:16:42.320 --> 00:16:45.200 going to figure this out until it happens. Right. 242 00:16:46.120 --> 00:16:50.159 The people who are involved in complex hedges in the 243 00:16:50.200 --> 00:16:53.320 silver market, I think are going to get massacred. I mean, 244 00:16:53.360 --> 00:16:57.320 I think they're in for some truly religious experiences. To 245 00:16:57.399 --> 00:17:01.159 the extent that a short position on silver that has 246 00:17:01.279 --> 00:17:03.360 been put in place by algorithms that are looking at 247 00:17:03.399 --> 00:17:07.039 silver markets over the last forty years, those leverage guys 248 00:17:07.279 --> 00:17:11.119 are really truly in for a world of hurt. Those 249 00:17:11.400 --> 00:17:14.119 I mean, you know, long term capital management worked until 250 00:17:14.119 --> 00:17:17.440 it didn't. It was a convergence trade, but the convergence 251 00:17:17.480 --> 00:17:21.440 trade wasn't set up for a third standard deviation anomaly. 252 00:17:21.640 --> 00:17:23.440 And I think the silver market's going to see a 253 00:17:23.440 --> 00:17:28.519 third standard deviation anomaly, which means that the people who 254 00:17:28.559 --> 00:17:34.680 are using silver as an unhedged corollary to some economic bet, 255 00:17:35.319 --> 00:17:38.440 and they're doing it from algorithms that are based on 256 00:17:38.480 --> 00:17:41.720 forty years of trading history, they aren't prepared for a hiccup, 257 00:17:41.839 --> 00:17:43.200 and they're gonna get a hiccup. 258 00:17:43.440 --> 00:17:47.799 What you're describing is blood in the streets. Fortunately, nobody 259 00:17:47.839 --> 00:17:50.680 works in Wall Street anymore, so you don't have to 260 00:17:50.680 --> 00:17:53.279 worry about walking down the street and having a body 261 00:17:54.119 --> 00:17:57.720 you know, crashed to the ground before you because everybody's 262 00:17:57.759 --> 00:18:02.359 in their in their home office doing these trades here. Rick. 263 00:18:02.720 --> 00:18:08.240 But but seriously, this is like an existential event, what 264 00:18:09.400 --> 00:18:12.920 you're saying, and it could spread to other markets as well, 265 00:18:12.960 --> 00:18:16.720 because like you said, silver is tiny. You got thirty 266 00:18:16.920 --> 00:18:22.480 five billion dollars worth of shorts in silver, man, like 267 00:18:23.200 --> 00:18:27.519 this could just spread in one counterparty hits the hits 268 00:18:27.519 --> 00:18:31.519 the bricks, and we're talking to from the fledge meltsound 269 00:18:31.559 --> 00:18:31.920 about that. 270 00:18:32.240 --> 00:18:35.519 To be honest with you, thirty five billion dollars is 271 00:18:35.559 --> 00:18:38.599 a lot to you and me, But the notional value 272 00:18:38.599 --> 00:18:43.799 of derivatives is more like five trillion dollars. I'm not 273 00:18:43.799 --> 00:18:47.000 so concerned about that. I'm much more concerned about things 274 00:18:47.319 --> 00:19:00.960 like unfunded entitlement liabilities and the imbalance between the nominal 275 00:19:01.000 --> 00:19:03.599 and the real interest rates. I mean, if you want 276 00:19:03.599 --> 00:19:06.079 me to scare your audience, carry I can really truly 277 00:19:06.119 --> 00:19:10.079 do that. I'm less. I'm less concerned about the impact 278 00:19:10.079 --> 00:19:13.559 on Wall Street and the deriven's markets by a silver short. 279 00:19:13.599 --> 00:19:15.480 I think it'll be you know, I think there's probably 280 00:19:15.480 --> 00:19:20.440 a couple of quantitative hedge funds that'll go broke. 281 00:19:22.200 --> 00:19:25.000 Good riddance. No one cares about them anyway. 282 00:19:25.160 --> 00:19:29.319 Yeah, you know, the derivatives market is, it's truly vast. 283 00:19:30.000 --> 00:19:33.680 There are other counterparty scenarios that scare me a lot more. 284 00:19:34.000 --> 00:19:39.880 If if maws and paws in the United States that 285 00:19:40.079 --> 00:19:45.920 own high yield ETFs junk bond ETFs get a whiff 286 00:19:46.000 --> 00:19:48.240 of the beginnings of a credit crisis like they did 287 00:19:48.319 --> 00:19:51.640 in two thousand and eight around real estate, and they 288 00:19:51.680 --> 00:19:55.880 go to sell those high yield ETFs. The ETFs are 289 00:19:55.920 --> 00:19:59.279 extremely liquid, they trade billions of dollars a day, but 290 00:19:59.319 --> 00:20:03.480 they're comprised assets that are totally illiquid. Yes, if they 291 00:20:03.519 --> 00:20:05.759 redeem the ETF and the manager has to sell the 292 00:20:05.799 --> 00:20:12.000 bonds and can't. Now that's a scenario that's truly scary. 293 00:20:12.119 --> 00:20:15.359 And I remember reading Benjamin Graham. You know, he only 294 00:20:15.400 --> 00:20:18.799 wrote this almost one hundred years ago. They had junk 295 00:20:18.839 --> 00:20:22.519 bonds then. Junk bonds aren't a new thing. The liquidity 296 00:20:22.559 --> 00:20:26.759 of junk bonds are. But he said that, you know, 297 00:20:27.480 --> 00:20:31.680 no individual investor should ever buy a junk bond because 298 00:20:31.920 --> 00:20:35.200 you cannot understand it. And we've seen even the guys 299 00:20:35.200 --> 00:20:39.079 who understand the market get slaughtered by it. And yet 300 00:20:39.559 --> 00:20:41.240 there's a lot of junk out there. 301 00:20:42.160 --> 00:20:45.400 Harry, in shows like yours where there's live Q and A. 302 00:20:45.519 --> 00:20:48.599 I've talked to investors that held I high yield ets 303 00:20:48.880 --> 00:20:52.160 that didn't understand that the assets were comprised of junk bonds. 304 00:20:52.720 --> 00:20:54.960 They just looked at the cover yield, not how the 305 00:20:55.039 --> 00:20:58.920 yield was generated. When I was a younger man, wasn't 306 00:20:58.920 --> 00:21:02.559 the young man, but in the eighties I was pretty 307 00:21:02.599 --> 00:21:05.799 active in the high yield credit market because I understand 308 00:21:05.839 --> 00:21:10.680 how to read bond covenants. And I remember that when 309 00:21:10.799 --> 00:21:13.319 Drexel Burnham started to blow apart and blew apart the 310 00:21:13.400 --> 00:21:16.839 junk bond market. We had a we had a description 311 00:21:17.319 --> 00:21:20.240 for these ill liquid bonds. We called them owl blonds. 312 00:21:20.720 --> 00:21:23.039 And we called them owl blonds because when you called 313 00:21:23.079 --> 00:21:27.079 your broker to sell, your broker would say to who too. 314 00:21:30.119 --> 00:21:33.519 I had some friends that worked at Drexel, and you know, 315 00:21:33.640 --> 00:21:38.160 but then Leon Black picked over the carcasses of all 316 00:21:38.200 --> 00:21:42.960 those owls and made billions of dollars because, like you said, 317 00:21:43.119 --> 00:21:44.160 he could read a convenant. 318 00:21:44.759 --> 00:21:48.119 It's a great, great, great market if you understand it. 319 00:21:49.920 --> 00:21:53.759 The oil and gas industry junk bonds in the eighties 320 00:21:53.759 --> 00:21:57.160 and the nineties made me, relative to my net worth, 321 00:21:57.559 --> 00:22:01.279 a large amount of money forever, great full. But I 322 00:22:01.359 --> 00:22:04.480 understood about oil and gas and understood about covenants. You know, 323 00:22:04.519 --> 00:22:08.440 I remember buying bonds with a cover yield of twelve 324 00:22:08.440 --> 00:22:14.039 percent that we're selling at sixty. So you know, I 325 00:22:14.119 --> 00:22:18.400 got a running yield of twenty percent and a yield 326 00:22:18.559 --> 00:22:22.240 maturity of thirty five percent in a dead instrument. Life 327 00:22:22.279 --> 00:22:24.920 doesn't get better than that. But that's not what's on 328 00:22:24.960 --> 00:22:25.559 offer today. 329 00:22:26.240 --> 00:22:32.240 I remember making twenty percent on Ford bonds myself. But yeah, 330 00:22:32.880 --> 00:22:37.640 so talking about the junior resource sector, which is revivified, 331 00:22:38.119 --> 00:22:42.240 that's the right word as witnessed by your recent conference. 332 00:22:42.920 --> 00:22:47.359 You know you always said the junior resource sector is 333 00:22:47.960 --> 00:22:52.880 a broken model if you will, composed of lifestyle companies 334 00:22:53.319 --> 00:22:59.200 that aren't real businesses, and you know, look, we got 335 00:22:59.480 --> 00:23:01.559 a lot of AI going on. Do you think the 336 00:23:01.599 --> 00:23:05.480 AI can pick out the lifestyle companies from the real 337 00:23:05.519 --> 00:23:08.119 companies five years from now? 338 00:23:09.039 --> 00:23:12.319 But you have to know how to ask AI the questions. 339 00:23:12.880 --> 00:23:18.400 What AI does is aggregate misinformation often, So if you 340 00:23:18.640 --> 00:23:24.400 ask AI to search the Edgard database or the Cedar 341 00:23:24.519 --> 00:23:28.519 database for companies where general and an administrative expenses less 342 00:23:28.559 --> 00:23:31.119 than twenty five percent of total expenditures, that's a great 343 00:23:31.240 --> 00:23:34.920 use of AI. But if you ask AI to look 344 00:23:34.960 --> 00:23:38.119 for lifestyle companies without defining what a lifestyle company is, 345 00:23:38.920 --> 00:23:41.960 they'll go to CNBC or Kitko or places and they'll 346 00:23:42.000 --> 00:23:46.519 aggregate a whole bunch of narrative and misinformation. AI is 347 00:23:47.319 --> 00:23:51.720 really good for what the Bloomberg gobots have been good for. 348 00:23:52.920 --> 00:23:56.920 It can search databases if you give it very very 349 00:23:57.160 --> 00:24:03.160 very specific correlations, and you can do it instantaneously. AI 350 00:24:03.359 --> 00:24:06.400 can do in terms of comparative balance your analysis. If 351 00:24:06.400 --> 00:24:10.119 you know how to ask the question tasks in two 352 00:24:10.160 --> 00:24:14.680 minutes that would take me two months and I'm good 353 00:24:14.680 --> 00:24:18.480 at it. The important part, though, is that you have 354 00:24:18.559 --> 00:24:21.039 to understand how to ask it the right question. 355 00:24:22.640 --> 00:24:24.880 That is so true. I've been using it for three 356 00:24:24.920 --> 00:24:28.640 and a half years now, and you know, like could 357 00:24:28.680 --> 00:24:35.440 they talk about prompt engineers and all that, Well, that's nice, 358 00:24:35.599 --> 00:24:38.279 but I'll tell you what, Like for law, I had 359 00:24:38.319 --> 00:24:41.519 a friend and the legal profession doesn't even see what's 360 00:24:41.559 --> 00:24:46.240 coming here. Adam Ray, friend of mine. She wanted to read. 361 00:24:46.640 --> 00:24:50.119 She wanted to amend her trust a mendor will and 362 00:24:50.319 --> 00:24:53.680 quit claim her condo over to her trust. And she 363 00:24:53.759 --> 00:24:57.799 goes to one lawyer forty five hundred dollars. She goes 364 00:24:57.839 --> 00:25:01.759 to another lawyer thirty five hundred. Now I'm a recovering attorney, 365 00:25:01.759 --> 00:25:05.160 in fact, in America's top recovering attorney. She comes to me. 366 00:25:06.119 --> 00:25:10.119 I said, fuck it, I'm not writing papers. Let's throw 367 00:25:10.160 --> 00:25:12.839 it into the AI and see how it works. I 368 00:25:12.920 --> 00:25:17.880 think it'll do, okay, Rick. Twenty minutes later, I had 369 00:25:17.920 --> 00:25:23.279 all her documents done, multiple copies stapled, and they were 370 00:25:23.319 --> 00:25:28.920 ready to be witnessed and notarized. And they worked. They 371 00:25:28.960 --> 00:25:32.079 were perfect. In fact, they were better than the documents 372 00:25:32.480 --> 00:25:35.720 I would have created myself. Because I'm a master of typos, 373 00:25:36.400 --> 00:25:40.240 and there wasn't one typo. And that's just one area. 374 00:25:40.279 --> 00:25:42.680 So I had the legal expertise, I could look at 375 00:25:42.680 --> 00:25:44.880 the docs and know that they were. 376 00:25:44.880 --> 00:25:48.160 You edit it, you can shape the product, and then 377 00:25:48.200 --> 00:25:51.079 you can consume the product. That's important. I asked AI 378 00:25:52.000 --> 00:25:54.359 to try to do some work for me in anticipation 379 00:25:54.400 --> 00:25:58.960 of an interview about six weeks ago talking about debt 380 00:25:59.079 --> 00:26:02.720 deficit on baalllot sheet liability stuff like that. I didn't 381 00:26:02.720 --> 00:26:08.920 specify source, and so they went through Twitter and CNBC 382 00:26:10.039 --> 00:26:15.000 and ABC and CBS, and what I got was an 383 00:26:15.079 --> 00:26:20.559 aggregation of misinformation. They didn't, as an example, talk about 384 00:26:20.880 --> 00:26:23.920 They talked about one balance sheet liabilities, you know, thirty 385 00:26:23.960 --> 00:26:28.440 seven trillion. They talked about net on balance sheet liabilities 386 00:26:28.519 --> 00:26:31.319 thirty trillion net of the seven. But they don't talk 387 00:26:31.359 --> 00:26:38.240 about unfunded entitlements. They missed completely the one hundred trillion 388 00:26:38.279 --> 00:26:42.559 dollar elephant in the room. So it's important that somebody 389 00:26:42.599 --> 00:26:49.359 be like Harry Lutts, somebody use AI in a subject 390 00:26:49.359 --> 00:26:51.279 that they know well enough that they can frame the 391 00:26:51.359 --> 00:26:54.119 question and they can judge the product. 392 00:26:55.720 --> 00:26:59.079 So true. We used to say garbage in, garbage out. 393 00:26:59.599 --> 00:27:04.799 Now it's garbage in landfill out. I mean, it's so 394 00:27:04.920 --> 00:27:10.160 true because you can ask it questions and they're theoretically correct, 395 00:27:10.880 --> 00:27:15.839 but they're absolutely on a factual level they're wrong. And 396 00:27:15.880 --> 00:27:18.279 I see it all the time. But if you can't 397 00:27:18.319 --> 00:27:22.799 recognize it, then you're going to spout out garbage that 398 00:27:22.960 --> 00:27:25.440 you don't really understand. That's the whole problem with AI. 399 00:27:25.559 --> 00:27:31.319 It's a black box and nobody really understands how it's 400 00:27:31.359 --> 00:27:34.160 producing its results at this point, right. 401 00:27:34.880 --> 00:27:38.640