Transcription
And by buy you I mean invest in yourself. And you are either a contrarian or you, yes, you've paid into Social Security for 60 years, but there's no money, so you don't pay. It's important that gold mining investors pay attention to the inexorable. I maintain liquidity in US dollars, and the underinvestment sustaining capital that we pay will bite us. Why wouldn't people buy gold the way they buy tuna fish or coats? I'm a large shareholder of a co.
>> Well, Rick, it's a true pleasure to have you back on Palisades Gold Radio. Now, from the Rule Symposium, how are you today?
>> I'm fine. My pleasure. I've been, uh, being interviewed in one way, shape, or form by Palisades for years, and so I enjoy the conversations.
>> You certainly have. There's a long history there. I believe the first one is in 2013 with Colin Qatar, our CEO. Now, we've been going around the show floor of your excellent conference, I should add, and asking industry veterans really where they think the opportunity set is at right now. And I would love this 30-minute sit-down with you to also start with that. Where do you think the greatest opportunity can be found right now? And are there any things you're buying right now?
>> Uh, I'm not going to give you the answer you want. The opportunity is easy to spot for you. It's to the left of your right ear and to the right of your left ear. The conference is about making you a better investor. The conference, especially for someone your age, is all about investing in yourself so that you will be familiar with the process. Yes, it's about the exhibitors, but before it's about the exhibitors, it's giving you the knowledge that you can interrogate the investors and allocate your capital in a way that's appropriate to you. So, I know that's not, I know that you're looking for an answer like, "Buy silver," or something like that. Wrong. Buy you. Uh, and by buy you, I mean invest in yourself, invest in the process, invest in the knowledge, invest in the relationships, and then the money will make itself.
>> Very much appreciate that, for sure. You need to also understand what you own, otherwise you don't have the conviction to hold it through. But perhaps we can talk about some of the areas where you are finding opportunities right now. If we talk broad commodities, are there any ones that jump out? I know you like to focus on hated commodities first and foremost.
>> So let's get that out of the way. Uh, I've made my money since I, after I invested myself, by buying hate. Uh, the mining business, the extractive business in general, is a capital-intensive, cyclical business. And you are either a contrarian or you will become a victim. But people understand that empirically, but they don't understand it intuitively. And everybody wants to be a contrarian when it's popular, which is sort of a contradiction in terms. Nobody wants to buy uranium at $8 a pound, and everybody wants to buy uranium at $80 a pound. It takes the price action to justify the narrative, but the price action devalues the narrative. There's nothing on offer by way of hate right now. The easy money in this market has been made, but the sure money is ahead of us. Uh, and I think that's important to understand. Why do I say the sure money is ahead of us? Let's pick one commodity which is stupidly underowned, which is gold. People say to me, "Well, Rick, the gold price has fallen." And I say to them, "Well, as a buyer, that's a good thing, isn't it? Would you rather pay $5,000 for it or would you rather pay $4,000 for it? If you'd rather pay $5,000 than $4,000, I have a house to sell you." Why wouldn't people buy gold the way they buy tuna fish or coats? Then I say to people, "The price is down." Is it? I began saving in gold in the year 2000. Gold was $256 an ounce. Now it's down to $4,100. Doesn't feel like down to me, but that's rearing. Let's look forward, which is what your audience must do. History teaches us that gold does well during periods of time when investors and savers are nervous about the maintenance of their purchasing power in traditional savings instruments. We're in the United States, so let's talk about US 10-year Treasuries. The US 10-year Treasury, the world's premier benchmark savings instrument, yields 4.66 in a currency that I would argue is depreciating in terms of purchasing power by 8 to 10% compounded. If you do conventional arithmetic, you're making 4.6 in a treasury. If you do unconventional arithmetic, you're losing 4% a year. You buy a US 10-year Treasury, you lose 4% a year compounded for 10 years. It means that you put up $100,000 and you got back $50,000. Not a very good deal. Gold, now that it's down, in the last 26 years has increased at 8% compounded nominally in US dollars, which, pushed differently, has maintained its purchasing power. That's precisely what gold is supposed to do. My belief, and I can bore your audience if you want with all the arithmetic, is that the US dollar will duplicate its performance in the decade of the 1970s, which is to say it will lose 75% of its remaining purchasing power the next 10 years. And gold, I think, will maintain its purchasing power. Gold will today, as it has always done, buy you a very fine men's suit. Maybe not at a hotel this expensive, but at a reasonable place. It'll buy you a very fine men's suit, an ounce of gold. And 10 years from now, it'll buy you a very fine men's suit. That same men's suit in US dollars will probably be a $15,000 suit in 10 years. So, gold will maintain your purchasing power. Now, let's bring that down to you. Let's use you parenthetically because you're probably smarter than the broad population. The market share of gold and precious metals related securities in the United States relative to other savings and investment assets is one-half of 1%. Figuratively, this is a pimple on an elephant's behind. The four-decade mean market share is 2%. If gold reverts to mean, gold and precious metals related securities reverts to mean, demand increases four-fold in the largest savings and investment, uh, asset, uh, country in the world. And that's what I think is going to happen. People not owning gold and not owning gold equities are a total, total mystery to me. And we could go sector through sector through sector in extractive industries, and I could make a similar case. I wanted to pick on gold simply because gold is identifiable to many people.
>> Really great bull case as you're outlining there. Well,
>> something I would love to pull a thread on is you mentioned gold of course retains purchasing power. If you were to go back a few hundred years, you could buy a fine suit, and that's still the case today. Is there still an opportunity, as in sometimes in history has occurred, for gold to gain in relative value compared to other assets over the next few years? And what drivers would drive that forward?
>> There is absolutely the chance that that takes place. But I'm trying to make the case from a conservative point of view. I'm trying to tell you that your downside is upside. I'm trying to give you a case where the answer begins with "when," not "if." Can I give you an "if" scenario? Of course. Uh, if you look at the last period of gold's hyper outperformance, it was the period 1970 to 1980. During that period of time, the US dollar, uh, lost 75% of its purchasing power, and gold ran in price 26-fold.
Today's episode of Palisades Gold Radio is proudly brought to you by our parent company, Palisades Gold Corp. Canada's leading junior resource investment vehicle, trading on the Toronto Venture Exchange under ticker symbol PAI, with equity and warrant positions in over 200 companies, ownership of mineral projects and royalties, and a significant stake in New Found Gold. Palisades offers investors powerful leveraged exposure to precious metals, uranium, copper, and other critical minerals. Palisades shareholders directly benefit from our team's extensive industry knowledge and access to deal flow opportunities historically reserved for a small group of investors. To learn more, visit us at palisades.ca and join us in our mission to level the playing field for investors. Now back to the show.
>> Uh, it is estimated, although statistics don't exist, that in 1981, uh, precious metals and precious metal securities represented 7% of the savings and assets of Americans versus one-half of 1% today. If gold didn't revert to mean, which is to say a 2% market share, and went to a 7% market share, there isn't enough gold on Earth to fill that demand. That's an "if." Okay. I, I don't. The point is, I don't need to make the upside case to meet my, make my case. I need to make the downside case. And I challenge any of your listeners to challenge the downside case. People say, "Rick, what would make you sell your gold?" No problem. I'll tell you. You'd have to balance the US federal budget. You would have to make political accommodation to pay down $40 trillion in debt. You would need political accommodation to solve the $120 trillion in the net present value of unfunded entitlement liabilities. You'd need to find a way to say to me, uh, an old guy, "Yes, you've paid into Social Security for 60 years, but there's no money, so you don't get any." And you'd have to have a positive real interest rate. If the purchasing power of the US dollar is declining at 8% compounded, I would need at least 150, maybe 200 basis points yield on top of that, which is to say the US 10-year Treasury would have to be yielding me 10. The first mortgage rate in the US would have to be 12. The prime interest rate in the US would have to be 11. How long do you think the American taxpayer would stand, would would stand for that? The probability of the circumstance occurring that would cause me to sell my gold within 10 years is, I think, functionally nil.
>> It's an incredible point that you're making. Of course, the fiscal responsibility, the demographic side of the equation, and keeping up with this debasement would be incredibly impressive for any asset class. I really struggle making the case for almost any other than gold to actually be able to keep up to the massive amounts of money printing that you're outlining here.
>> Well, again, if you dial yourself back to the decade of the 70s, assets that are denominated in dollars, when dollars are devaluing, become nominally more expensive. It's important that people realize that. The second thing that happens is that later in a cycle where inflation occurs, the interest rate goes up. Uh, and when the interest rate goes up, the capital expense of developing additional productive capacity in copper, in iron, uh, in oil becomes more expensive, which favors the incumbent producer. If your ability to add incremental supply becomes more expensive, you add less incremental supply. So the price, the existing supplies become rationed by price. That was something we learned in the decade of the 70s. People look at the increase in the oil price over the course of the decade and they blame the Arab oil embargo. They forget the fact that society underinvested in oil for 20 years before that decade. And they forget that the capital expenditure associated with developing new supplies increased exponentially as a consequence of inflation during that decade. They don't understand the reasons behind the price appreciation. And the reasons behind the price appreciation that occurred in the decade of the 70s occur today in the same fashion.
>> I was going to say that sounds like a situation very familiar to the oil situation today, which I would love to park for just a second. Perhaps we can talk about the gold miners, which of course people tend to think they provide leverage to the underlying commodity as they're the producer of it. Costs would hopefully remain flat, but in a money-printing environment, deep environment like you're outlining, costs will rise.
>> That's correct. And are rising, not will rise. It's important that you note that. It's important that gold mining investors pay attention to the inexorable increase occurring already in all unsustaining costs. As an example, open-cut mines in particular are extremely energy-intensive. An increase in the oil price hits, and it doesn't hit you three years from now. It hits you three months ago. The second thing that's happening, and the industry's noted this in industry conferences, is that the inputs with regards to building mines are increasing in price at about 10% compounded. So what is a billion-dollar mine build today, a year from now is a billion-one. It's important that people understand when they're discounting future cash flows that they need to increase by at least 10% compounded the input costs that they're looking at.
>> So then how can you still ensure that the miners that you participate in with a long-term outlook, as I'm sure you would advocate for as well, actually provide that leverage that one would be looking for?
>> Company by company, through hard work. Uh, I'm a large shareholder of Agnico Eagle. More importantly, the 24,000 people at the Rule Classroom who pay attention to my work are very large shareholders of Agnico Eagle. I had the good fortune last year to sit down at this conference with Omar Jun, the CEO, uh, and then visit with him at length on the phone, and we went through every project in the Agnico Eagle portfolio. Uh, and he took me through as much as is allowed by law. He couldn't give material non-public information, but we went project by project, what the inputs are, uh, and I was allowed to make my own models with regards to input cost increases. We looked at their development pipeline. As an example, at Malartic, they want to take that from 600,000 ounce a year production to a million ounce a year production. That's a $2.5 billion capital build. The part of that capital build which is taking place right now will be on budget. The part of that capital build that's going to take place three years from now will be on budget times 1.3. And you build a model. When younger people build models, they expect their models to be accurate. When older people build models, they expect their models to be probabilistic. And I'm an older person, so I know that the answer that I give you with regards to Agnico Eagle five years from now will be wrong. I just want it to be closer than the models that are constructed by people who don't construct models.
>> Directionally correct is what matters. Yeah, exactly right.
>> Rick, you've been very gracious to invite us, Palisades Gold Radio, to the conference, as well as our parent company, Palisades Gold Corp. And I would be remiss to ask, I know that you're interested in the company. What, what is your opinion of the value proposition that Palisades Gold Corp offers today?
>> What Palisades Gold Corp does for me is it allows me to participate in an opportunity that used to be very good to me that I'm too old and fat and lazy to do for myself. Uh, what O'Neil does, where he sits and listens to, for one of a better phrase, lies from hundreds of issuers a month, is something I don't have the patience to do anymore. If I had to listen to penny stock stories about how a five-cent stock could become a 15-cent stock, and I had to do that 15 times a day for a year, I'd be in a penitentiary. Uh, I did it in the early 70s, and it treated me very well. But in my 70s, I can't do it anymore. Colin and Steve can do it. Um, I'm not interested in the value proposition of very, very, very small stocks, but I understand in the right market condition, which I believe we'll have sometime in the next five years, that the market's reaction to these things will be extraordinary, and the upside volatility associated with a warrant bank is very high. Most people probably shouldn't avail themselves of that opportunity, but the people in the Rule Classroom who can afford access to optionality would be well advised to let young people who work at it full-time do it as opposed to doing it themselves. You think about the optionality that would be available to an engineer making $300,000 a year himself, should he or she take 50 weeks off their business and try and build a warrant bank? Like, no way. No way. If that same person believes that in the right set of circumstances, the market gaps up and those warrants could reprice fivefold or 10-fold, if they like the chance that they might be able to turn $10,000 into $35,000 or $45,000, and they might turn that $10,000 into $5,000. Letting somebody else do it for them is a very good use of time for me. It keeps me out of the penitentiary. If I had to do what O'Neil does, I'd be killing people.
>> Well understood. So perhaps we can then talk about the right circumstances that you've outlined there for the juniors to really potentially gap up, because like you've outlined in the past before, juniors that have gold in the ground but don't extract them, they really well if they have gold in the ground, perhaps they should trade up with gold. But if they just have moose pasture?
>> No reason they should trade up if the gold price is trending up. So what mechanics would allow really that move higher, that gap higher that that you've outlined? Potentially?
>> If, um, just sticking with gold, forgetting the rest of the universe, if gold reverts to mean, if demand for precious metals and precious metals related equities reverts to mean, demand for this class of assets increases four-fold. Uh, and there isn't enough supply. When that happens, gold gets used up. The best of the best gets used up. The best of the rest gets used up. The single asset producers get used up. I mean, their market caps. Doug Casey describes a bull market as trying to siphon Hoover Dam through a garden hose. When it gets down to the tertiary assets, and there's no assets in the world more tertiary than junior explorers, the price response that you get is truly, truly, truly insane. You suffer through very long droughts, and you suffer through really, truly exquisite risk, and it's also very labor-intensive to take, uh, advantage of. But when you get paid, which is a once-a-decade event, uh, if you're lucky enough to be there ahead of time, you get paid in spades. Now, I don't believe in the thesis long enough to own all of Palisades, to own the whole company. Uh, if I did that, it would be incumbent on me to participate, and I'm not going to do it. But the idea that I can allocate, uh, enough money to it that if I lost all the money, it wouldn't change my decision is to have breakfast in return for which I got some young guys who are working hard who could deliver me a 10-bagger. I got time for that.
With gold trading at new all-time highs, gold producers are printing money. And this means that for the first time in years, money is beginning to flow into exploration. This is a trend that we at Palisades Gold Corp have long anticipated, which is why we spent the last decade assembling the largest junior held mineral claim package in the United States through our subsidiary, Made in America Gold Corp. Made in America Gold Corp. holds over 700 km of prospective ground, located exclusively within America's most prolific gold mining trend, the Battle Mountain Eureka trend. Made in America's properties are nestled amongst several of Nevada's largest gold mines and resources, making it higher perspective for a potential discovery. To find out more, visit palisades.ca and join us on our mission to make Nevada's next multi-million gold discovery. Now, back to the show.
>> I appreciate you taking us along here. I would actually also love to touch base on on silver, which in early January we had you on the show, and you mentioned you were contemplating selling your silver stash. Which I did. I sold my silver. Yeah.
>> As, as I'm aware of. So I would love to get your sense. Of course, we've seen a moonshot higher for silver since then, and subsequently a fall back down to some kind of reality.
>> How close are we back to the reality on the ground?
>> I don't know. Uh, I bought silver because it was hated, and I didn't buy it as an investment. I save in gold. I maintain liquidity in US dollars, but I save in gold. Silver is different for me. Silver is a speculation. I bought silver because it was hated, and I thought if the hated, if the hatred dissipated, that there would be a price response in silver. I also, as a consequence of being an old man, having watched these cycles happen many times, knew absolutely positively that if we had a precious metals bull market, it would be led by, led by gold, pardon me. And that when the momentum in gold attracted the generalist investor into the precious metals silo, that when that happened, market leadership would switch to silver. I don't know why it does. I'm not that smart. I just know that for the prior four precious metals bull markets in my life, that's what's happened. So I theorized that if I was able to buy silver, that I would get a bump when hatred disappeared, and then I would get a second bump when market leadership traded to silver, and it happened. A third thing happened. We were confronted in early January by a hyperbolic chart. Whenever you see a hyperbolic chart, you sell it. No exceptions. Unless the hyperbolic chart is the consequence of a news release that's company-changing. But if you see a sector chart that's hyperbolic, you always sell it. The Canadians refer to that as a hockey stick graph. The visual is that the back side of a hockey stick is just as steep as the front side, but it's a lot less fun as you're, if you're wrong. And so when I saw silver lock limit up every day, experience told me that what I had to do was sell. The reason to own the asset disappeared. Silver as a speculation had less upside relative to downside than other asset classes that were speculative, and I had a hyperbolic chart. I had to sell. The thinking might be instructive. Uh, I looked at my silver and I said, "Okay, this occupies a speculative part of my portfolio, and it's used up my reasons. Are there other speculations that seem more germane?" What I decided was to take some of the money all the way off the table, and I bought physical gold with it. I called it savings. The only other asset class that felt hated to me was oil. So, I took 25% of the money and I bought oil stocks. And I took 50% of the money and I bought silver stocks. The thinking was as follows: If I was wrong and the silver price continued up, the silver stocks would benefit. By definition, if silver traded sideways, I wouldn't make any money. But the silver stocks were priced at $85 silver as though silver were $42. So, I had a cushion. So, if silver went sideways, I'd make more money in silver, but I could make money in silver stocks. And if silver went down, because of the implied discount of the equity price relative to the silver price, I would lose less in the silver stocks than I would in silver. That seemed to me to be a much more germane speculation arithmetically than owning an asset class for my reason to own it had disappeared.
>> Well understood. And perhaps we can also talk about the failure proposition that silver miners offer today. Are they still being priced at around $40 silver, or have they now moved to behind?
>> I understand that most of the silver miners today are valueless.
>> Miners or juniors?
>> Well, even some of the junior miners. Uh, there's some silver mines that are extraordinarily marginal, and they're producing against mining companies that produce silver for free. Uh, if you are operating a big, uh, porphyry copper deposit, the cost to extract silver is really putting a silver extraction unit on the back of your mill stream. The mining is paid for, the processing is paid for, the grinding is paid for by copper, and all you have to do is take the silver out of it. So, primary silver producers who are producing silver for $35 an ounce are competing with BHP, who are producing silver for 50 or 60 cents an ounce. That's ugly business. Uh, so when you buy a silver miner, you have to think in your own mind, uh, what is the net present value of the silver stream? How is that net present value likely to change? And in, in particular, how much risk do you have in a declining silver market environment, because you're competing not with other silver producers, rather relatively, you're producing, you're you're competing with recyclers and copper miners.
>> I would also love to get your assessment of oil and gas. Earlier, you started outlining the the inflationary environment of the 70s, and you pointed that a lot of people looking backwards think that inflation was caused by the spike in oil prices on the back of the Arab oil embargo, that when you started outlining that, it felt very similar to what we might be occurring today. Is it fair to draw a parallel to the 70s, even on the oil front, as it is now?
>> But it gets even better, or worse, depending on your point of view. There are parallels here too. Uh, the most important thing to understand about the oil market is that it's a really capital-intensive business. And the oil industry has been underinvesting in sustaining capital, never mind new project investment, but they've been underinvesting in sustaining capital to the tune of about a billion US dollars a day. Now, that doesn't impair necessarily your ability to produce next year or even the year after. But if you look a couple years out, uh, if you think about a billion dollars a day cumulative and compounding, we've underinvested now about a trillion and a half dollars, uh, in the oil and gas business. Uh, the Gulf War exacerbated that for two reasons. Uh, Iranian sustaining capital investment went to zero because they needed the money for other purposes, and because anything they got built got blown up. The UAE and Saudi, also Qatar, reduced their sustaining capital investments to zero. In addition to reducing those assets to zero, uh, probably a hundred billion dollars worth of producing assets got blown up, and that gets, that needs to be rebuilt. What's instructive is that we had a three or four-month period of artificially induced supply constraints. War. You could end that supply constraint with an armistice, if we ever get one. The shortage that we have coming up is structural. The shortage that we have coming up will be a consequence of, by then, $2.5 trillion dollars of underinvestment. And you can't solve that with an armistice. You have to solve it with, uh, a $2.5 trillion capital input. And you can't input that in a month or two months or three months. You can't do it. The price response that you saw in calendar 2026 from $55 to $115 was artificial and temporary. The structural imbalance that you're going to see coming forward is structural. That's very different. You can't cure it. What you learn is that when oil begins to be rationed by price, uh, when it's allocated by price, the utility of oil is so high that the price that the customer must pay is very high if he or she can't get the oil. The paradigm in the investment community and the political community is wrong. Uh, that paradigm, you know, established by Angela Merkel and Joe Biden and who was that energy physicist, Greta Thunberg, that was her name, that paradigm was the peak oil demand would be reached in 2030, and that's simply wrong. I'm a very healthy 73-year-old, and peak oil demand won't occur in my lifetime. I suspect that peak oil demand won't occur in your lifetime either. The industry is priced as though we reach peak oil demand in four years, and we're going to reach peak oil demand in 40 years. And the underinvestment in sustaining capital that we've made will bite us probably in 2029 or probably in 2030. And the circumstance that we saw three months ago, that was temporary and artificial, will become structural and semi-permanent.
>> And I would love to take a stab at that longer-term structural deficit that you're outlining there. I would also take you to the short term for a second because
>> perhaps perhaps you can explain to me really how that situation has solved itself. But aren't we still seeing a significant supply deficit and really haven't really found a way to go around that except going into our inventories?
>> If the, uh, armistice is truly over, uh, then we're back in hot water. I suspect that we missed a real shortage. Not a shortage. I think we had a, we had a price spike in anticipation of a shortage. We had strategic petroleum reserves. We had floating inventories. We had a substantial amount of oil that was available for utilization. The price spike that we got was in anticipation of a shortage. I think we averted a real shortage by a week or two. Some societies that had no money, Pakistan, uh, Sri Lanka, Myanmar, uh, even to an extent Australia, experienced real shortages. Here in North America, we had higher prices, but we didn't have a shortage. Uh, if this armistice doesn't hold, uh, if the floating cargo goes north of the straits are still bound up north of the straits, um, we'll have a different oil price. Uh, I hope for reasons completely unrelated to the economy that we find a way to have an armistice. I don't like circumstances as an old man where young folks are killing each other. You know, I would prefer that we didn't do that. Neither our president nor the Ayatollah has me on his speed dial. So, they don't pay much attention to my wants. But if we, uh, don't solve that problem, um, we're going to be back in the hot seat. I'm no geopolitical, you know, analyst, so I can't speak to that.
>> Well understood. Well, that's kind of the impression that I get that we could be in a very hot seat very, very rapidly as well. So on the on the longer term, of course, what you're outlining is a really structural underinvestment in sustaining capital expenditures. On the other hand, oil companies have been nothing but incredibly deflationary machines, being able to become more efficient at production, production over time. So how are you balancing that for your longer-term outlook for oil and gas? Of course, oil in inflation-adjusted terms has never been cheaper than it has.
>> Correct. Correct. Oil is very cheap today.
>> As a consequence of really some spectacular advances in technology.
>> And I think there's a chance. I'm not smart enough to know how to quantify it. Let's back up. The United States went from being the world's largest oil importer to one of the world's largest oil exporters. The geology was always there, but the technologies didn't exist to access the hydrocarbons that the US had locked up in jail over 30 years. Um, horizontal drilling, measurement well drilling, three-dimensional seismic, multi-stage fracturing, and, uh, the use of surfactants, uh, meant that oil and gas that we have always known was there became able to be accessed. But we accessed it. At $60 oil, we have used up about 85% of the tier one locations left to drill in the United States. $85 oil, we have a greater number of tier one locations because supply is price-sensitive. But at $60 oil, we probably have a two and a half year runway. And we have a two and a half year runway at today's cost of capital, which is today's interest rates. If the interest rate goes up, of course, the economic margin goes down. So there's an interplay. The thing that could allow us, uh, over time to deal with that would be better extraction technologies. Uh, right now we have the ability to access this shale oil and shale gas. We extract 10, 12, sometimes 15% of the hydrocarbons in place. If we can improve our extraction technologies, if we could get an extra 5%, we could get an extra 15-year holiday. You don't incentivize that technology at $60 oil. You incentivize that technology at $90 or $95 oil. So I'm not, I, I'm not unconvinced that we don't have another technological runway ahead of us. But the technology to affect it doesn't exist today. What does exist today is the opportunity to employ the technology that works in the United States and Canada, in Argentina, in Saudi Arabia, in Russia. But in order to do that, you need the political and economic structures in place to allow it to occur. And that doesn't occur right now. There's nobody that's willing to go, uh, and the Saudis wouldn't allow it, uh, into the Gulf, into the Gar shales and put the same capital investment in that has happened in the Permian Basin. The only people that the Saudis will allow to do that are the Saudis. And the Saudis are diverting too much of their free cash flow to petrochemical industries and Mercedes and stuff like that.
>> And I guess also if we were to do that, the total blend mix that the world produces, heavy crude versus light crude changes. And as I've learned over the course of this conflict in the Middle East, apparently that is very much less fungible than a lot of us had thought. So if you were to
>> You can, you can cure that over time. What happens is that refining capacity adapts itself to economics. So the US Gulf Coast refiners 15 or 20 years ago began to concentrate on heavy sour crudes from Mexico and Venezuela because it was cheap. The Venezuelans and the Mexicans weren't reinvesting in their oil industries. So the availability of those heavy sour cruds changed, and ironically, the lousiest grades of oil became more expensive. Uh, if the current circumstance continues over time, the bottlenecks, uh, in the US Gulf Coast, in other words, the US Gulf Coast refiners will begin to retool themselves to use what is, ironically, better quality domestic oil as opposed to lousy quality Mexican and Venezuelan oil. I, I think it's funny because it's, it's interesting that the industry is retooled for marginality, and then the marginality became expensive.
>> That is indeed very intriguing. So I would also love to get your thoughts on on the refiners as a potential opportunity right now. We often times on X see charts go around with the crack spreads, the spreads between the refined products versus the input for them, the crude. Is it an interesting place to be looking for bargains?
>> I love the question. My track record as a refining and marketing analyst over 45 years is almost unblemished by success. I wouldn't want to burden your audience with my lack of knowledge.
>> Excellent. Well, very well understood. Rick, is the best place to start talking Battle Bank?
>> I'd love to talk about Battle Bank. First of all, I hope you don't retire for many years. But if you decide to retire, don't start a bank. It's not a good leisure activity. It's a labor of love for me. Uh, this is now my seventh bank. It's my partner's third bank. So, the first thing to know is that this is a bank that's started and run by bankers. I like to describe the bank as a community bank, except for not a community defined by geography. We're a community bank that's designed around a human community, an aspiring community, a libertarian community, a self-organized community, and a community that belongs, that believes in gold. We've done this before. We built EverBank. We built it from 0 to $28 billion in assets before we sold it. So, we've done it before. We know how to do it. And when we sold that bank, the people that we sold it to, uh, abandoned our customer base. We sold it to TIAA CF, and their constituency were retired teachers, perhaps not a self-actualized, aspiring group of people. The consequence of that is that the culture of that bank morphed from this community to their community. So there's 275,000 people that were our customers that became orphans, and we decided to serve them again. If you want to see our community, walk out in the hall. That's our community. Those investors are our community. What do we do for them? The first thing we do is we pay them interest. Uh, novel concept for a bank. There's $3 trillion in deposits in the United States in checking accounts that isn't getting paid interest. Talk about risk. I mean, that's real risk. It's your money, and nobody's paying interest. This is really, really, really stupid. We don't need three trillion. We need a sliver of it. So any of your audience that's interested in interest, think about Battle Bank. Second thing of interest to you too. You're young. At Battle Bank, your IRA is your IRA. At most institutions, your IRA is a toilet for their products, their annuities, their ETFs. They tell you what can go in, and they get a fee on it. At Battle Bank, your IRA can buy a duplex that you operate. It can buy an Airbnb. It can buy a Subway franchise. Our president told us a few days ago that he's going to think about legislation that would allow IRAs to buy private credit and private equity that exists today at a place called Battle Bank. Uh, you don't need the president's permission. You just need to organize your IRA so that your IRA is your IRA. We do that. If you're the kind of person that wants Fidelity to operate your life, God bless. Go to them. If you want to operate your life, come to Battle Bank. We believe that the next 10 years will offer a lot of volatility in currency. At most US banks, you have a choice in terms of savings of the US dollar, the US dollar, the US dollar. Pick one of the three. At Battle Bank, uh, you can save in 20 currencies. I suspect you're from somewhere else. Perhaps you have a business in the country that you're from, and you have a business here, which means almost by definition, you have to save and bank in two currencies. If you go to almost any American bank, you can't do that. At Battle Bank, you can, and you can exchange currencies at a substantially lower rate than Bank of America or Chase would allow you to do. And then finally, mercifully for me, most banks think that gold is lousy collateral. And I think gold is great collateral. So you could think of us as a stacker's bank. If you own gold, silver, platinum, and palladium, and you have a lot of your capital tied up in that, and occasionally you need access to that capital without having to sell it, pay the capital gains tax. If you deposit that, uh, gold, silver, platinum, palladium with Battle Bank, you can establish a letter of credit against it, a line of credit. You don't have to borrow the money until you need it, but you have access to it, and you don't have to ask for it. You just write a check. So, let's say that there's an opportunity for distressed real estate in your community. You don't want to sell your gold and silver, but you definitely want to buy this duplex and fix it up. You don't have to. We'll loan you the money. After four or five years, after you've fixed it up, you finance out, pay on the loan. I've learned something else. I've been doing gold and silver lending privately myself for 25 years. In addition to the fact it's superb collateral, the people who are prudent enough to save in gold and silver are really good people to loan for. They pay you back. In 25 years of making gold loans, I haven't had one payment in arrears. My luck in other areas of lending has been less good.
>> Excellent. Well, Rick, thank you so much for your time here today. I know you're busy enough at the Rule Symposium, so really appreciate it.
>> Thank you for the opportunity. I hope you come back. I hope in the interim that you grace the halls of the Rule Classroom, ruleclassroom.com, 24/7.
>> Perfect. We'll put the link in the description. Rick, again, thank you.
>> Thank you.
This podcast is for general information purposes only and does not constitute investment advice, an offer, or solicitation to buy or sell any securities. The views expressed are those of the host and guest and do not necessarily reflect the views of the company or their affiliates. Guests on the show are not compensated for their appearance. Certain discussions may include forward-looking statements subject to known and unknown risks and uncertainties that could cause actual results to differ materially. Listeners should do their own research, consult a licensed financial advisor, and not base any investment decisions solely on the information discussed. For a full disclaimer, please visit our website. And for full disclosure and risk factors of any companies referenced, please see full available disclosure and risk factors on their Cedar Plus at www.cedarplus.ca.