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.
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 dot com and get your free newsletter and gift. Financial Survival Network now more than.
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.
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.
But I enjoy both.
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.
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.
Rick.
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.
Frankly, I'd buy more knowledge. I know that's not the right answer.
But.
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.
Yeah.
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.
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.
I couldn't agree with you more.
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.
And then our current.
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?
Rick, Well, it's important to understand that the Green New Deal wasn't really about environment.
Let's get that out of the way.
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.
There was.
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.
Yeah, I think we'd agree.
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?
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.
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.
They used to say a Mouisiana, the good thing about Leander Perez was he stayed bribed.
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?
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.
Whether were there or not, I don't know.
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.
I got it.
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.
Right.
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.
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.
Rick.
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.
Meltsound about that.
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.
It'll go broke.
Good riddance.
No one cares about them anyway.
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.
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.
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.
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.
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.
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.
Got a lot of AI going on.
Do you think the AI can pick out the lifestyle companies from the real companies five years from now?
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.
That is so true.
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.
She comes to me. I said, fuck it, Like.
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.
And they worked.
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.
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.
So true.
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.
Right.
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.
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.
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.
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.
That's a little too.
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.
I mean, who cannot see the potential of this.
At a quarter of the cost?
Yep?
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.
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?
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.
Give me a little while.
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.
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.
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.
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.
We'll get you an answered.
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.
Soon, my pleasure carry Thank you. I welcome the opportunity to come back.
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,