Transcription of Finance News Network interview with Sprott US Holdings Chairman, Rick Rule Lelde Smits: Hello I’m Lelde Smits for Australia’s Finance News Network and joining me from Sprott US Holdings is its Chairman, Rick Rule. Rick, Welcome to Mines and Money in London.
Rick Rule: Thank you very much.
Lelde Smits: You’ve just given a presentation on global mining and investment opportunities, so for those who weren’t there, what’s the next hot opportunity?
Rick Rule: The nature of mining markets is that they’re extremely cyclical. You go through these ugly down cycles and investors need to remember that bear markets are the authors of bull markets. My message was simply, “You’ve been hit with the pain, why not stick around for the gain”.
The truth is finding decent companies, that have the ability to survive and then thrive for the next two or three years, is all you have to do in this market. This is actually a very, very, very simple market despite the fact it seems very bleak.
Lelde Smits: Moving to the price of gold, it has plunged about 30 per cent this year, now sitting at about $US1,250 an ounce. How do you explain seen such a steep drop and what’s next from here?
Rick Rule: Cyclical declines and secular bull markets are both normal and natural. They’re inconvenient for people who don’t have the cash or the courage to stay with the trade, but they’re extraordinary opportunities and they’re absolutely normal and natural parts of a bull market.
Lelde Smits: When I spoke with Eric Sprott earlier this year in Hong Kong he said silver was in fact the investment of the decade, would you agree?
Rick Rule: I wouldn’t. Keeping in mind that I work in a place called Sprott and he doesn’t work in a place called Rule, I personally am more attracted to platinum and palladium. I think that platinum and palladium have all the attributes of precious metals but they have much, much, much simpler supply side thesis.
With gold and silver – most of the gold and silver that have ever been mined – are in investment inventories. With platinum and palladium the above ground inventories are less than one years fabrication demand. So from my own view point, I think the supply crunch comes sooner in platinum and palladium than in gold or silver.
Lelde Smits: Over to equities, more folks are talking of a bubble on Wall Street with US stock [markets] hitting all time highs, what’s your view?
Rick Rule: We’re not on a bubble on Wall Street except in the context of the yield. The US Federal Reserve has artificially depressed the interest rate. If the market takes control of the interest rate these stocks are going to get creamed.
Lelde Smits: Speculation on when the US Federal Reserve will start to cut back stimulating its economy continues to remain in the spotlight. When do you think we may start to see some tapering occur?
Rick Rule: If you think of taper, really have to think of a different work, counterfeit. What tapering is, is the US government buying paper that they couldn’t sell to other unwitting shmucks. We have in the United States, between 25-30 per cent of our on-balance sheet deficit is unmet by on-market borrowing. We have to print the rest of that. And, until we control our spending, which hasn’t happened in my lifetime, I don’t think tapering can end.
Lelde Smits: In Australia the mining sector does dominate and you’ve been quoted as saying, “Now is a once-in-a-decade opportunity to stock up on the best junior miners.” Who are your hot tips?
Rick Rule: Well I wouldn’t want to give too many names – although you can see us on the registers. But here’s my tip – About once every ten years Australians on mass go on strike. They walk out of the mining sector in terror. And when that happens even an old slow guy like me can come in the market and make a lot of money.
Lelde Smits: Finally Rick, on the eve of a new year where do you think investors will get the most bang for their buck in 2014?
Rick Rule: You mentioned investors, and if I could by extension say speculators. For seasoned speculators I think the higher quality juniors, if the speculator is prepared to stay the course for two or three years – will yield spectacular gains.
The nature of the business through a decade, is that when you go over the edge into a bear market your portfolio falls by half, or 75 per cent, in some cases. Coming back out the other side, and day always follows night, those same portfolios are up 500 per cent or 1,000 per cent.
Having lived through the pain, why not stay for the gain.
Lelde Smits: Rick Rule, thank you for the outlook here at Mines and Money in London.
Rick Rule: Pleasure, thank you.
Ends
