I'm Charlotte McLeod with InvestingNews.com, and here today with me is Rick Rule, proprietor at Rule Investment Media. Thank you so much for being here. Great to have you. Always a pleasure, Charlotte, thank you for having me back. Of course. And it's nice to be catching up. We just — we just spoke actually quite recently at VRIC. Now we're here at PDAC. And I want to start with a look at the broad economic landscape in the US as we often do. I think the last several times now that we've spoken,
you've been pleasantly surprised by how it's looking. And I'm wondering, are you still feeling the same way? I think I was reading the other day that more than 75 percent of S&P 500 companies surprised to the upside on their latest earnings. I am surprised. I had anticipated that the increase in interest rates that we've seen would have had a harder effect on the economy. I would have expected housing starts to be slower, I would have expected durable goods sales to be lower. I am pleasantly surprised by
the strength in the US economy. It is true that some of that strength is focused, as an example, in the equities markets, the great big tech stocks, the word dominators seem to be the ones that are catching most of the bids. But I'm also surprised by wage strength. I'm surprised by the employment statistics. I'm cognizant of the fact that many Americans are suffering. That the wages that people are being paid do not necessarily compensate them well for the increase in the prices of goods and services that they consume. So I'm not suggesting that
the economic strength that I see in the United States in particular has benefited everyone. But I am still surprised by the strength in the US economy after those interest rate increases. Okay, and hopefully you can help me make sense of what's going on in the markets right now. Because we have stock market indexes making new highs, we have gold historically high right now — I haven't checked the price this morning. We also have last week Bitcoin near its all-time high. And to me, that makes me a little bit — it feels like something has to,
you know, the shoe has to drop for one of these things. So what's going on here? Well, there's a lot of cash in the system, first of all. People have been afraid for a long time about the possibility of recession. Were we to have a recession with relatively high interest rates, there is a chance that you could have a liquidity squeeze like 2008. People are nervous about that. The consequence of them being nervous is that there's $6 trillion cash in money market funds. Some of that cash now is finding its way back — its
way back into the market. Your listeners need to be aware of the fact that the equity market strength is very concentrated strength. If you look at the S&P 500, which has done well, there are something like 10 stocks beyond the Magnificent 7 that have driven that market. And so the market breadth — the equity market breadth — is lousy. And the bond market is still — the long bond market — is still lousy. It's important to note that a lot of the strength is concentrated. And people do need to be aware of that. Okay,
and I've been waiting to ask this question until we get a little bit into 2024, which we now are. But it's an election year for the US, and I wondered if you could weigh in on what that tends to mean for the markets, as well as for gold. If — if anything. Well, certainly, 30 percent of the American population is going to be disappointed no matter who wins. Personally, I need to say I'm disgusted that the choice that's in front of us is the choice that's in front of us. So I will be disappointed no matter who wins. I think,
in more direct answer to your question, that whoever wins there will not be a major change in economic and fiscal policy. Neither Mr. Trump nor Mr. Biden are world famous for attempting to save taxpayers money. I think in particular that there's pressure on the Fed from the Democrats to pursue a much more accommodative monetary policy because they want to get re-elected. Unfortunately, I expect monetary policy and fiscal policy to be very loose no matter who wins. I think that will probably give us artificial stimulus in 2024 and 2025. But at some point in time,
Charlotte, we need to pay the piper. We need to address the endemic debt and deficit in American society. I don't know when that happens. I don't know who happens. I know it has to happen. And I know it's going to be distinctly unpleasant when it does. Okay, I think we'll — we'll leave the economy over there. We'll go over to gold now. And I have a couple of points that I want to ask you about gold stocks right now. I don't think we went into this at VRIC. So a lot of people are looking at the gold price — very
high. They would like to know when may the stocks catch up? I want to start by asking, have you seen this type of disconnect before? Have you seen anything as big as this? I haven't seen as great a disconnect between the gold price and the gold stocks in my career, since the early part of '70s. I have also not seen as much investor hostility to gold stocks since 1970. Nor have I seen gold stocks at these valuation levels relative to book or relative to free cashflow. So the industry suggestion that the market for gold stocks is at record lows is
accurate. Now I would argue, unfortunately, that the mining industry deserves that. That investors' expectations have been set by 50 years of poor corporate performance in the gold business. The gold industry needs to own the fact that in the decade 2000 to 2010, when the gold price went up sevenfold, free cashflow per share of the Philadelphia Gold and Silver Index fell. It took real talent talent to generate declining free cashflow in the face of a sevenfold increase in the price. And the juniors actually are worse. What investors need to understand is
that although I think if you buy the sector you go broke, if you buy good individual companies, you get rich. There are a few performers, both among the majors and among the juniors, that deliver so much value and so much performance that they add legitimacy to the whole sector. And I think it's that dichotomy which people need to come to understand. I think, too, if you're going to participate in the sector, we learned, you and I, as an example, that you participate in uranium when nobody wants to be there. And the fact that nobody wants to be in gold is its greatest attribute.
Okay, I wonder if you can talk a little bit more about that hostility angle, because you're the second person who has mentioned that to me at this conference. I had Adrian Day yesterday who was commenting that people are looking at the results, for example, coming out from the gold producers, and they seem like they're looking for something to be wrong. So maybe tell me more about what you see. Understanding that this is anecdotal, Charlotte, I'm not a social scientist, I do maintain a database of
80,000 investors. And what I notice is that the younger investors, the non-US investors, and interestingly the younger female investors, have no inherent hostility to gold because they haven't experienced the industry. It's the gold bugs. It's the people that have 30 or 40 years of experience in gold that are feeling hostile towards it. And this is something that's just come in my attention looking at my own database recently. The younger investors who I talk to, which are by now most of the additions to the database in the last five years, are absolutely attracted
to the gold thesis. They are absolutely open to participating in gold stocks. It's the people who have large inventories of gold stocks, many of which are junk, that feel hostility. Some of the paradigms needs to change. For 50 years, people have invested in gold stocks because they thought the gold price was going to go up. They'd look for leverage to gold. The stocks that have the most leverage to gold are the companies with the higher costs, because as the gold price increases their margin increases faster. So the gold investors have come to favor,
ironically, investing in the worst companies. The new investors have a very different outlook. They are looking for good companies irrespective of the commodity. So it's strange that the investors who have the least experience in the industry are at once the most favorably inclined and the most rational. This is the building block, the first building block of a bull market. Intelligent application of capital in a bad market is always — you'll remember the uranium business in 2022. The
intelligent application of capital in a bad market is always square one for building a bull market. I feel over the five year timeframe very attracted not to the gold-mining sector, which I think is a disaster, but to the high-quality companies, some of the high-quality companies. Okay, I'm not sure — maybe I should now throw this question out the window considering what you have just said. But I know — so we should, we should be focusing on companies that are not reliant on a higher gold price to do well. But I do
think people are wondering when — when are the gold stocks as a group going to rise? So maybe, maybe we'll look at it — what could be the trigger there for that broad-based increase? I think the trigger will surprise people. I think what will happen is that sellers will become exhausted. I think that's what's going to happen. The sellers will become exhausted, and the bids won't get filled. When the momentum gets established in the gold stocks, what I think that you'll see likely — and I don't want to give your people too much hope — but I think it'll
gap up. That's what's happened in past markets. When you exhaust the sellers it gaps up. Here's an interesting statistic for you, Charlotte. Maybe I've used it before. Precious metals and precious metals equities comprise less than one half of 1 percent of the total savings and investment assets in the United States, less than one half of 1 percent. The four decade mean is 2 percent. If the market share of precious metals and precious metals-related assets returns to mean, demand for them increases fourfold. And that's what I think happens. Does it happen in two years,
three years, four years? I don't know. I have no idea. What I do know is that a gold bull market, a gold equities bull market, is such a profound event that if you're two years early, like I was on uranium, it doesn't matter. The amount of money you make, particularly given the fairly low level of risk — absolute risk — if you experience deploying capital now, is silly. You know, we have talked about that statistic before, and I saw a piece of news recently that made me think of that, and then I thought of you. So I've seen Pierre Lassonde and Frank Giustra in
the news recently urging Canada's pension funds to invest more in the mining industry. And so I wondered in connection with what you've just been talking about, if you had any comments on that. Both Pierre Lassonde and Frank Giustra are friends of mine. And they've both made me a lot of money. And on occasion, against all odds, made me look smart. In this particular circumstance, I think they're out of their minds. I think that the Canadian pension plans owe a duty to the pensioners. The performance of the gold-mining industry over the last 50
years would suggest that until real reforms take place in the industry, that the pension funds should avoid it like the plague. The idea that pensioners have some duty to support the Canadian economy with their hard-earned pension dollars is exactly wrong. The pension managers have a duty to the pensioners, not to society at large. I think that was an ill-founded, and in fact I think it was a harmful statement. I believe it was well intentioned. I think the gold-mining industry needs to understand — needs to ask itself why it's perpetually short of
capital. Had it made money for investors in the past, it wouldn't need to come back and pass the hat. It's sort of like foreign aid — send new money, old money all gone. That doesn't seem to me personally to be a prescription for a sector that deserves a lot of pension fund money. Okay, interesting to get the other — the other side of that, thank you for going into that. I think continuing on, we'll leave gold. But continuing on in precious metals. So last time we talked we spoke about what could be the next uranium, and you mentioned silver,
although maybe not for right now and not as crazy a scenario there. So I know that silver tends to lag behind gold, then it outperforms. But conversations I've been having here, you know, talking about this really big deficit there. So I wonder if you can go into that and kind of talk about why we have that and why we don't see the price move. The silver stocks are for real speculators. You need to understand that. Typically people when they look at silver — when they look at silver miners, and they talk about the deficit,
neglect the fact that silver-mining companies are fairly small sources of silver, which is to say new mined silver accounts for about 17 percent of silver supply. Recycling and by-product production from other mines accounts for most of the supply, which puts the silver miners at a disadvantage. That being said, there is no class of securities that I know of that has more volatility to the upside than silver stocks in a silver bull market. I personally have a goal in the next year and a half to get the allocation of silver equities in my own portfolio up to 2.5 percent,
which is a fairly small number. I believe that that 2.5 percent could, if I'm correct about the direction of the silver market, come to comprise 25 percent of my portfolio through capital gains. I — the idea that you allocate on a risk/reward basis, 2.5 percent is my number — if things go wrong, I lose 1, 1.5 percent of my portfolio. If things go right, I make 10 times my money. That juxtaposition of risk to reward is something that's extremely, extremely attractive to me. Speculators who are thinking about doing that need to take
into account first of all whether or not they're patient enough to do it. It could easily take two years or three years — easily. I could be wrong. So they need to take into account their tolerance for absolute loss. And they need to work hard and to look through the flotsam and jetsam among the silver stocks and find the real ones. For people who are willing to work hard, who are tolerant to volatility, tolerant of risk and have the financial capability to stand the risk, there is no sector that I could think of that has the potential to be more fun than silver.
Okay, thank you for going into that. And I won't keep you too long. But I did want to check in on platinum and palladium, still in the precious metals umbrella. We talked a little — just so briefly — about them last time. And you know, you mentioned the silver stock universe — pretty small. Platinum and palladium, I think even smaller. So I just wondered if you could give some more detail on how you're approaching that. I'm learning all I can right now about platinum and palladium, and also about nickel. Which
are out of favor. I think they continue out of favor. I think they continue out of favor — well, the platinum and palladium. One thing that's against them is the narrative. There's a whole bunch of people in the world who think that the internal combustion engine is going the way of the dodo. So there won't be a need for catalytic converters. And I think that's insane. I think the internal combustion engine will be with us for 50 years. And I think that platinum and palladium
will enjoy increased usage as catalysts. I note too that platinum and palladium are really only produced in quantity in three countries: South America, Zimbabwe and Russia. That means that for social and political reasons the supply is challenged, and at any point in time there could be supply disruptions. The other thing you need to know about nickel, platinum and palladium is that they're being dis-hoarded by the Russians right now. The Russians need money. I lived before this — '90, '91, '92. The last time the Russians
had to dis-hoard. And they just beaned these markets down. When the Russian selling ended these markets popped back. So I'm expecting that each of platinum, palladium and nickel sometime now — two years from now, three years from now — will enjoy a rebound. You're watching right now Sibanye-Stillwater shutting productive capacity of platinum. You're watching a whole range of companies shut down sulfide nickel. This cutting into productive capacity is always the hallmark of the very, very, very beginning of a bull market, or at least the depths,
the nadir of the bear market. So for that reason, I'm attracted to platinum and paladium. Thank you for asking that question. Oh, no problem at all. And I'm going to combine my last couple of questions for you because they're of more of a personal to you nature. So you're wearing your your Battle Bank shirt, we should get an update on that, because we do have commenters I know on our YouTube channel who ask what is going on with that. And secondly, this is months away. And I know we're still at one conference right
now. But looking forward to the summer, you'll have the Rule Symposium coming up. So I wanted to get just — we'll talk more about it as it gets closer. But the quick, quick notes on that. Well let's start with the bank. You know, Charlotte, and some of your listeners know, that many years ago a group of us started something called EverBank, which became a very successful online bank. We took it public on the New York Stock Exchange. We sold it to TIAA. TIAA has done a good job with the bank, but the needs of the TIAA members are
different from the original customers of EverBank. Fast forward. We're starting a new bank basically for those same people. We're starting a bank that won't have any branches — your computer, your phone will be our branch. Because of that, our non-interest expense will be lower than other banks, and because of that we'll be able to pay higher deposit interest rates. At EverBank we were always in the best for quartile nationwide for deposit interest rates, and we will be at EverBank — at Battle Bank — too. We will pay you interest on your checking account,
unlike most banks. We will give Americans the ability to save in 22 currencies, not just the US dollar. We will offer IRAs, similar to your RRSPs. But IRAs that will allow you in the IRA to buy a duplex or a triplex, to buy a franchise which you operate. An owner-operated business in an IRA — legally. We also serve the community that we understand. One community we understand is gold owners. There's $33 billion in gold in the US held in segregated accounts, and there's no lender willing to lend against it. I am certainly willing to lend against gold. So we are right now
we think in the final throes of being approved by the last of our three regulators, the FDIC. So we are hoping, we're hoping to be able to open the bank mid-summer 2024. And I would say to, in particular, your American listeners, but also your Canadian listeners, because we will maintain accounts for Canadians. If you're unhappy for any reason, with your current bank, look at BattleBank.com. If you're Canadian and the actions of Mr. Trudeau with regards to some political opponents, who were truckers a while ago, are troubling to you, think about Battle
Bank. Should Mr. Trudeau seek to freeze your accounts with me, you might imagine my response. Alright, and not to forget the Rule Symposium. I really look forward to the Symposium. I thank you for participating. We have now — the Natural Resources Investment Symposium, as it used to be called, has been in existence for almost 30 years. It's stood the test of time. Great big-picture thinkers, but not the kind you see on CBC or ABC. Fantastic analysts from the natural resource business, not analysts who parachuted in because they failed in retail, failed in technology. But
natural resource analysts. The living legends, people who have built multibillion-dollar mining companies or oil and gas companies from scratch. Talking about the lessons they learned, and how it can help you better be a better investor. Importantly, every exhibitor, every public company exhibitor at that conference is owned in accounts either owned or managed by me, so every exhibitor is vetted. There's nobody who just pays a fee to come exhibit. Finally, we're the only conference I know
of that has an absolute gold-plated money-back guarantee. If you pay the tuition to come to the conference, or if you watch it from the comfort of your own home, live streaming, and you think for any reason that the content we gave you wasn't worth the subscription price, we will happily refund all of your subscription price. There is no other other investment conference that I know that has a gold-plated 100 percent customer satisfaction guarantee, because we've done it for 30 years.
Okay, well I will certainly look forward to hearing more about who the lineup is this year, and I'll look forward to attending this summer. We'll talk more about it as it gets closer, like I said, but thank you for the quick overview right now. People can add it to their calendar. Thank you so much, Charlotte. It's a pleasure being with you. Very good. And once again, I'm Charlotte McLeod with InvestingNews.com, and this is Rick Rule of Rule Investment Media.
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