Transcription
I sold 80% of my silver. I won't buy physical silver again until it's hated.
What does that mean from a price level? How much hate?
The trading desks of the banks will manipulate anything for the short term. I don't believe in the existence of a shadowy cabal. My suspicion is that if gold goes to $15,000, which is to say if the gold price triples or quadruples, that silver does better. $300. Wouldn't surprise me.
This is the real story with Michelle McCory.
Hello, I'm Michelle McCrory and this is the real story here on MFM. Coming to you from the Rule Symposium in beautiful Boca Raton. The Rule Symposium, the premier gathering of the brightest minds, the biggest names, and the top leaders in the natural resource space, precious metals and commodities. And with us right now is the host of the Rule Symposium, legendary investor and speculator, none other than Rick Rule. Rick, great to see you.
Uh, a pleasure to be with you. Thank you.
Rick. We have a lot to discuss. However, last time we chatted, I ran out of time and we did not get to talk about silver and the viewers were livid. There were tons of comments. How can you not ask Rick Rule his outlook on silver? So before I even approach any other topics, let's kick things off with silver. And the main question that my viewers want to know is why is silver down? How did we drop from that high of around $120 late January to around $60 now when we keep on telling them that the fundamentals for silver are so strong? What is going on with silver?
Michelle, markets easily during a bull market or a bear market cycle get overextended in either direction. If you saw the type of market that we saw in January where you had a hyperbolic chart, you always sell hyperbolic charts. What the Canadians call a hockey stick graph, they need to remember the backside of the hockey stick is just as steep as the front side of the hockey stick. Uh the fact that the market has fallen is no indication whatsoever of where the market's going to go. A little history not around silver but around gold but related. In 1970 the gold price marched from a price controlled $35 to late 1974 $200. In 1975, the interest rate rose and the gold price ran from a high of $200 in nine months down 50% to $100. People who loved gold at $200 couldn't sell it fast enough at $100. And the people who got shaken out missed a market from 100 to $850 in six short years. Markets, even secular bull markets, are cyclical and they're volatile. What you've seen in silver is an extraordinary case of cyclicality. Looking again at history, and I can't tell you why this is, by the way. I can just tell you that it is. In a precious metals market, the momentum is set by gold. The narrative for gold and silver is similar, but the momentum is established by gold. And when the underlying momentum in gold gets strong enough that the generalist investor comes down into our little ghetto, the precious metals ghetto, leadership changes from gold to silver. I suspect because of silver's reputation for volatility, but also in terms of emerging and frontier markets because of its lower unit cost. The market leadership changes from gold to silver. Gold will need to reestablish momentum so that that price momentum justifies the precious metals narrative. When that happens and the generalist investor returns to the precious metals market, your silverbug constituents will be uh elated as opposed to afraid. Again, it amuses me. I mean in terms of my own silver speculation and I should segregate myself. I save in gold. Uh I maintain liquidity in US dollars. I speculate in silver. For me the easiest speculation is to buy hate. So I bought silver when really truly people hated it. Because I bought it in a speculative account and because I bought it because it was hated. When it ceased to be hated and when I saw that hyperbolic up chart, I sold 80% of my silver. People tend to say to me, "When will you buy your silver back?" I won't buy physical silver again until it's hated. Although I'm buying silver stocks as we speak.
You won't buy physical silver until it's hated. What does that mean from a price level then?
I have no idea.
How much hate?
Well, I have no idea. If you assume like I do that the US dollar is losing 8% of its purchasing power annually, the nominal price of silver will I mean the price at which I will determine is hated will really depend on the purchasing power of the US dollar. I bought silver at 18 or 20 US an ounce six or seven years ago. Uh you can assume perhaps that the appropriate price level now on an inflation-adjusted basis would be I don't know $35 $40 an ounce what will be a better indication will be the public comments on your YouTube channel. If your viewers were we to mention silver would say that Rick Rule is so dumb like why would anybody care about silver I bought silver once it was the stupidest thing I ever did if there's a hundred comments on your YouTube channel about silver and 80 of them are negative. I'll likely be a buyer.
Okay. I don't know that you'd get those kind of comments on our particular YouTube channel. We'd have to expand our audience quite dramatically for that. But but I take your point about uh consensus and dissent and market sentiment. But can we really attribute that rally just to retail silver interest when we've had people making the case for there is a six-year supply deficit when it comes to silver as the silver institute will have us know when the fundamentals are there with industrial use for silver accelerating everything from data center to batteries to EVs to electrification to solar panels. I mean, we we make all of these very compelling cases as to why silver finally reached what many would say was its fair market value. Can we really say that the drop from 120 to 60 was because the retail investor is fickle and and lost interest?
I guess we need to ask ourselves uh whether there's more demand for solar at 115 than there is at 68 or whatever the price is today. We need to ask ourselves whether silver is still in a deficit. We need to ask what has changed with regard to the fundamentals in silver uh since January until today. I would suggest to you nothing.
I would suggest to you sentiment.
Sentiment. Sentiment. Uh, I would suggest that the silver deficit is getting worse, not better. I would suggest to you that silver has more utility to fabricators below 70 than it had above 100. Which is to say that the reflective property of silver goes further if you could buy more silver for $65 an ounce than it would have at $115. In other words, I would say that the fundamentals for silver speculation are noticeably better.
Cheaper prices. I also know that human nature is that the silver narrative plays better to the public when the price action in silver has justified the narrative. It's odd that people don't have the courage to buy a narrative until the price devalues the narrative. The silver narrative was true at 20. It was true at 100. Nobody wanted to buy the narrative at 20 because it was unproven in the market. Everybody wanted to buy the narrative at 100. But the truth is that the move from 20 to 100 devalued the narrative. Mercifully for me, I'm old enough that I try and take a big fat slug out of the middle. And that's what happened.
Okay. Well, when it comes to silver, people have often said that the price of silver is artificially suppressed, that it is manipulated, that you yourself have said that there are what, a hundred thou what a thousand paper claims for every ounce of silver, and that it is uh manipulated via the futures markets, via the banks, the spoofing, the JP Morgans of the world and that always plays a role here. And did you think that played a role in in in this current price decline?
Both ways. Up and down.
The banks will the trading desks of the banks will manipulate anything for the short term. The silver bugs who have been let's just say occasionally wrong for 40 years have always sought someone to blame for their misfortune other than themselves. You didn't in the period 1982 to 2022 need to manipulate the price of silver down because it was doing that by itself. Why would you need to work hard to do something that was taking place all by itself? I don't believe in the existence of a shadowy cabal. Uh, you know the I don't know pick one the international Jewish conspiracy or whatever the Rothschilds. I I don't believe that there's any shadowy group that controls the market. I know because I've been in markets for 50 years that markets are manipulated. They can manipulate the euro bond market. They can manipulate the treasury market, but not over decades. That's not the way conspiracies work. What happens in the silver business and it happens again and again and again is that a a group of conspirators will establish a long ladder in the futures market, billion, two billion dollar position. They will borrow a large amount of physical silver. They will dump that silver overnight in the market when the market is least liquid trying to lose as much money as they possibly can on the physical slice. So that the physical slice moves the leverage slice that they have in the futures market. They cover the shorts in the futures market, use some of the money from the profits to pay back the loss in the physical markets. Drive on. If it's easier to manipulate the market up, they establish a long ladder. If it's easier to move the market down, they establish a short ladder.
Well, big uh Rothschild conspiracy theories aside, um there is this notion that silver becoming a critical mineral being added to the national critical minerals list that silver is essential for national security. Uh everything from defense from AI data centers electrification that there is an incentive to manipulate paper silver and now when we're seeing more and more delivery of physical silver that that is going to cause a crack in in that manipulation. And when you bring in the idea of more exchanges in the East challenging those in the West like the COMEX and the LBMA, and those exchanges like the ones in Singapore like the AEX one which is dependent on actual physical delivery into vaults for industrial uses that eventually that leads to true price discovery. What says Rick Rule?
I think that's accurate. I think that if you have five price discovery mechanisms, you end up with better true discovery than one price discovery mechanism. The allegation with regards to systemic shorts, the idea that silver is too critical or the idea that strengthened silver is bad for the zeitgeist of the US dollar assumes that the people who would be manipulators are competent. These are the same people that can't educate the kids. They can't deliver the mail. They founded the Federal Reserve. As Doug Casey says, these are people who would be bagging groceries at 71 if they didn't have good names and went to good schools. I don't believe that a cabal exists that's competent to manipulate the silver the silver market except in the paper market. I do believe that the transactional market for silver has been a monopoly controlled by the dealers for a very long time. And I love the fact that as an example, uh the Chinese would like not to be controlled by the LBMA or by the merc. Uh I love the fact that Josh and his crew are setting up a competing silver market in Singapore that's a true users market. I love that. Uh as a silver investor myself and as an occasional trader, the idea that there are five facilities competing for my business as a consumer is a benefit for me.
You and I talked years about years ago, you may not recall, but I do about cryptocurrency. And I think I told you at the time I'm a currency consumer to the extent that there are four or five governments and seven or eight crypto teams that are trying to create a better currency for me as a currency consumer. I'm all for it.
And the same as an investor in the silver market to the extent that there are five different exchanges competing for my business.
Sure.
God bless.
Sure.
But then again, does that ultimately lead to the real fundamental value of silver being exposed and do you see that happening in some kind of dramatic fashion or a progression or how does that evolution take place?
I think silver becomes less volatile with five competing markets. The thing that could add volatility to the silver market would be a real true squeeze. I don't mean an engendered squeeze. I mean that given that most days the trading volume in Chicago, the futures volume exceeds by a factor of 200 the amount of physical silver available for delivery. The chance that the system could get way way way out of whack with one exchange was very high. Now make no mistake, there would be no physical squeeze. The exchange is controlled by the dealers.
What would happen in that event is that they would declare force majeure. They'd halt the exchange and they would cash settle. There would never be the type of margin call that the silver bugs envision. The probability of that happening though with the uh trade in silver dispersed among five hubs as opposed to one, right, means that far from making the market more volatile it makes the market less volatile which is good.
Yes. And yet you are not buying physical silver until it maybe drops to 35 if I may paraphrase what you said earlier. But in terms of uh exposure to silver via mining companies, via ETFs, are you looking into exposure via a non-physical silver way?
Right now. Uh, if you take my decision, if you take me back to January,
Yeah.
when I sold my silver, and by the way, I knew I was doing the right thing because of the amount of hate I got online. Spectacular. It's really truly spectacular.
My thinking was this. I bought the silver, the physical silver as a speculation because it was hated. When it ceased to be hated, my reason to own it went away and I had to weigh that physical silver position against other speculations. What's the best speculative place for my money? One thing I figured out fairly quickly was that the silver equities were discounting a price of 40 or $42 silver. The net present value of the silver, the producing silver equities were discounting the silver price. What that meant to me was if the silver price continued to go up, the silver equities could do well. If the silver price went sideways, by definition, I couldn't make any money in silver, but I could still make money in the silver equities because they were priced discounting 42 dollar silver in the $60 silver market. And if the price of silver went down, I was better sheltered for the price decline in the equities because they were priced to discount the price of silver. So, I decided that I could stay partially in the silver trade, but switch out of physical silver in favor of the silver equities, and it worked out well for me.
Are you still in any of the silver equities?
I'm still in all the silver equities, and I'm adding to them as we speak.
Any names you care to share, especially after this conference, where we've heard from many of them, some of them?
Uh, there's a couple I'd prefer not to share because I'd not I'd like.
You haven't bought them yet?
Well, right. I'd like not to share my bid with the Miles Franklin Network. But I am adding to my position in Wheaton Precious, a silver company in drag, if you will.
I'm adding to my position in Pan-American. I'm adding to my position in Abra, which just had a truly truly truly superb press release. And I'm swallowing twice and adding to my position in Vistla Silver, which some of your listeners may know suffered a tragic circumstance six months ago when 10 of their workers were kidnapped and murdered.
Yes. That uh does that mean that you just have more uh faith in the geopolitical environment in Mexico or you just uh.
No. But Mexico is what one of the world's top silver producers and there were concerns there with the unruly cartels and lack of government enforcement impacting silver miners in general, not just Vistla.
It's the uh that deposit is I believe the fourth best undeveloped silver deposit in the world and I think it's stupidly cheap. Uh, I have been a speculator for long enough that I've lost if I lost half the money that I invested in Vistla Silver. It wouldn't change my decision as to what to have for breakfast. Uh, and if I'm right, that's a potential 10 bagger. So if you look at a circumstance, if you're a speculator and you juxtapose a 50% risk against a thousand% reward and you think there's a slight probability.
On the reward side, the arithmetic is fairly compelling. I've done business in Sinaloa in that state. I've done business down there for 30 years. I've never felt safe. The government in rural Sinaloa is the cartel. When there was one cartel, the Guzman cartel, there was a form of peace in Sinaloa. The mining companies including Vistla won't admit to it, but there were informal relationships with the cartel. It might be that security was provided by somebody's uncle. Uh, you know that kind of thing. That that happens.
When uh Señor Guzman became a guest of the US government, his cartel fractured. Uh one side was his sons and the other side were his former henchmen. And what happened in Sinaloa is that the informal arrangements that existed existed with a shadow government, the cartel, that didn't exist anymore. And the companies got thrown into uh into turmoil because if they made a deal with one part of the Guzman syndicate, they were mortal enemies of the other side. There was no one to negotiate with. Now you will never see a press release from Vistla that says good news. We've made a deal with the murderers. That will never happen. You're violating laws in all countries. You will say Vistla say Vistla say it is likely that we will be protected from the Mexican military by the Mexican military.
The Mexican military is going to be outgunned. That's not what's going to happen. Somebody's lawyer is going to phone somebody's lawyer and an arrangement is going to be made. Vistla will deny this till the end of the earth which doesn't matter. What you will see at some point in time I hope is an announcement from Vistla that they have resumed substantial construction. That will be.
And you're saying essentially means cutting a deal.
Somebody made a deal.
Somebody made a deal.
Well, there's no honor amongst thieves as they say. So deals like that I I don't know how much staying power they have.
Uh.
They'll probably increase the premium of what you need to pay to keep that protection. Shall we say.
You take the risk in the case where the reward is in the 10 digit range?
Might this not happen? Yes, this might not happen.
Uh, in which case uh I face a fairly substantial loss. But the loss if I put it in the context of the potential reward becomes less significant to me. Assuming I lost 50%. This would not be the first time in my life I lost 50% on a speculation.
Well, you know, I I guess it's a reality of uh the operational risks and the mechanisms one needs to use, correct, to overcome said risks. Uh, I know my audience is going to push me for a price target. I know you say that it is a fool's game to name price and time and and a timeline. Occasionally, you do it anyway, though. Um, I'll ask you the fool's question.
Where does silver end 2026, more or less?
Um, end of '26, let me just say higher. I think it goes lower first. Uh, I think the balance of July, August into September.
Uh, we're going to see a market malaise. Uh, and then I suspect that uh we will see renewed inflation fears.
Mhm.
I mean the arithmetic uh around inflation is fairly compelling in a bad sense. So my suspicion is and I'm not a silver trader. I'm not a trader at all as you know. But my suspicion is that silver surprises people to the upside at the end of the year and I I suspect it disappoints the the diehards for the next eight or 10 weeks.
Okay, we'll take that. Uh, we'll take that. I I know that's about as precise and specific as I'm going to get from you. So, we will move on to uh and one of the factors behind inflation and one could say that that has been oil with regards to the current conflict in Iran. Now last time we spoke you were very very accurate with regards to your call in oil but you were mostly speaking from oil was hated.
The energy sector was hated. So it fit into the Rick Rule criteria of what is being hated as an asset as a commodity. Uh and on top of that that there was structural under supply in terms of investment in oil. And then we had the conflict in Iran which saw oil um skyrocketing up to 120 at one point. Now last we checked it was at around um 72 even though we've got renewed tensions in the Strait of Hormuz between the US and Iran. And it seems as of the time of this interview that uh the conflict is back on. President Trump says there's no ceasefire. There's no memorandum of understanding in place that Iran initially violated the the ceasefire by shooting at ships in the Strait of Hormuz. The US retaliated. He's come out and said Iranian leadership in his view now that he's gotten to know them a little better or scum. And he he doesn't see a deal in place. Again, this could change by the time we post this interview, especially when it comes to uh comments from the Trump administration. But given where we are right now and given your general outlook uh on oil, how do you see all of this factoring in?
The markets are suggesting that the renewal of the conflict will be short-lived. I'm not smart enough to confirm or deny that it would appear to be obvious. Uh and I have a few friends across the Gulf uh in Qatar and the UAE who have told me that they believe that there's a fairly serious schism within the Iranian political class which is to say there was a group of Iranians who were never in favor of settlement and from the Iranian point of view that the settlement was ill-advised and shouldn't have occurred. You and I talked before and I'm not a geopolitical analyst, but I suggest that some of the issues on the table are irresolvable in the sense that some of the Iranians feel that this is existential and some Israelis figure that the issue is existential. I'm not smart enough to moderate that debate. It would appear to me that we haven't solved the near-term supply dilemma that was posed by the original closure of the of the straits. And if the straits are closed again, um the supply difficulty that we averted by perhaps a week last time will be revisited. A bigger lesson, a much more predictable lesson is the price elasticity or the demand elasticity around oil. The oil price as a consequence of the shortage went from $55 a barrel to 115 or 120.
Mhm.
And that was in a what 10 week period. We're facing a period coming up 2029 2030 where the structural where the supply constraint isn't artificial and it isn't temporary. It isn't war. It won't be able to be settled by an armistice. It'll be structural. We have underinvested for some years about a billion US dollars a day in sustaining capital investments. That underinvestment was exacerbated during the war. The Iranians obviously weren't uh investing in sustaining capital because they needed the money for something else and because if they built it, we blew it up. Similarly, uh they weren't doing sustaining capital investments in Saudi or Qatar or the United Emirates for the same reason. And in addition to the sustaining capital investment, we need to rebuild all the stuff we blew up. So the circumstance hasn't changed. The world is still structurally underinvesting in sustaining capital. Uh at the same time the circumstance was exacerbated by war. What all that means is that the next structural the next shortage that we have in oil will not be a consequence of war but rather will be a consequence of structural underinvestment and it won't be able to be solved by armistice. It'll only be solved by reinvestment.
Well, let me challenge you there because doesn't this conflict highlight just how dependent we are on Iranian oil or oil rather flowing through the strait of which is 20% of the world's supply and doesn't this create a wakeup call for countries to invest in oil uh even to the extent that they can more a domestic production in oil I mean the ESG narrative has sort of fallen out of favor ever since BlackRock seemed to backpedal on that a little bit. So you take this conflict, people are aware of how they shouldn't be taking oil from dirtier countries for for granted, shall we say? And I do I mean dirtier like environmentally.
Um, doesn't this create an incentive to invest in oil and also an alternative energy which could then negate the need for oil to some degree?
Uh, let's take the last one first just for fun and I'll remember that whole sequence of questions I promise you. Alternative energies is one of my favorite questions to answer. People have asked me about this for years in the last 45 years and mercifully I've been around for those years. Uh humankind has invested something like $10 trillion in alternative generation. I've invested some of it myself. Wind, solar, low-head hydro, stuff like that.
I mean, more uranium.
Uranium, too. Uh, and the consequence of that $10 trillion in investment is that we've reduced the market share of fossil fuels from the high of 83%.
Mhm.
All the way down to 81%. 10 trillion has reduced the share of the market share of fossil fuels by 2%. Now total energy demand has grown and total energy demand is going to grow. There was a suggestion a few years ago by the geniuses you know Annalena Baerbock and Joe Biden and uh that uh noted energy physicist Greta Thunberg.
Yes.
Is that uh peak oil demand would occur in 2030. I'm a very healthy 73 year old and peak oil demand won't occur in my lifetime or to make the point more vivid peak oil demand won't occur in your lifetime despite alternative energies. Uh, it's important to know that as a motor fuel as an example as transportation fuel the energy density and transferability transportability of oil is so good the utility of oil is so high that peak energy demand probably occurs in 2060 or 2065. Now let's back up in the question. Uh I don't know if you remember the question but I do. Uh in terms of the sustaining capital investments were Michelle McCory the head of PMEX or Petrobras. In other words, if the state oil companies acted rationally rather than existing to fund politically expedient social spending programs then the requisite that sustaining capital investments would be made. Probably hopefully if Michelle McCory was the CEO of a US oil company or a Canadian oil company where Wall Street was asking her to increase the yield to shareholders, buybacks and dividends at the expense of sustaining capital investments. Hopefully Michelle would have the courage to say "Drill baby drill. I'm not cannibalizing my business. I'm not cannibalizing my business." But the incentive for her as a CEO, option-based compensation, is to increase the popular yield to shareholders even while cannibalizing her ability to maintain those distributions five years from now. The arithmetic was the same before the war as it is today. The war notwithstanding, state oil companies divert proceeds from their free cash flow in favor of politically expedient domestic spending programs that yield benefits to politicians this quarter. Similarly, in the private sector, uh the management teams are incentivized by the institutional owners to cannibalize the business in favor of higher shareholder returns and lower sustainability. That doesn't change. There are exceptions and those should be bought.
So bottom line, you still see oil as underpriced, underinvested in and is one of your top commodity plays?
Total no-brainer. Uh, for most people, it should be the bedrock of their commodities investing. It's a better business than mining. It's a bigger business than mining. Uh, it's one where the outcome is inevitable, if not imminent.
There we go.
I love the phrase. I know it makes you smile because you find a way to work it into every interview and and it's a Ruleism. It's a classic Ruleism. What is inevitable is not necessarily imminent.
Uh, all right. So, this extends obviously to oil producers. Any any particular picks there?
The no-brainer is Exxon. Uh, you know it's not a particularly brave pick but the truth is that Exxon has a 30-year track record of intelligent capital allocation which is not necessarily endemic to oil. They have a discovery in Guyana which is large enough to move the dial on a company the size of Exxon. Uh and while other companies have been deferring sustaining capital investments, Exxon has been increasing them and increasing new project investments. They have a reasonable return to shareholders, but they've actually been reinvesting in their business, and they have a 30-year track record of having a culture of intelligent investing. So, I would start from that is not a very challenging name.
And again, I know you don't like specific timelines, but you're assuming this trade to really show its profitability by when.
I think that you shouldn't be investing in most of the commodities if your timeline doesn't run out through 2030.
Okay. They're very long. Well, relatively long. It depends on how you view things.
You say that, Michelle. When I was a young man, when I had lots of time left on Earth, I was extremely impatient. Now that I'm an old man with less time left on Earth, I'm patient. It isn't that my time preference has changed. It's just that I've learned that the markets don't care about my time preference. Making money on a theme.
Shortages requires time. The first wonder of the financial world is compounding. How do you have compounding without time?
Well, time is our most valuable asset, right? And and the thing that so far we haven't found a way to buy more of so far, although it seems as though they're working on longevity. I believe they say that if you can survive the next 10 years, there will be no aging. There is a young woman at this conference. We're drifting far away from where we started. There's a young woman at this conference who has a PhD in something I can't can't pronounce, but it's some kind of biology. And she has told me that my job is to get to age 80 or 85. And she says if I can do that health with with my good health that she'll take over and get me to 120.
Uh, I can only hope that what you say is says is true. And I can only hope that I moderate my bourbon consumption to the extent that I can meet her criteria.
Well, that that falls into the timeline that I was saying. If you can hang on for another 10 years, more or less, uh, you're good until uh.
Triple-digit longevity. Not so much triple-digit silver, but we're going to be talking about triple-digit longevity at the next conference.
Well, speaking of the conference, you know, one of the reasons that you started this conference is to educate people, to inform people. This is perhaps not the direction we were going to go into, but it's one of the things that's so wonderful about this conference is that you do have these conversations on the sidelines and the networking time and you do expand your mind and your horizons and in in different areas. What is the top lesson you would want people to learn from attending a Rule Symposium?
Sadly, three lessons. Uh, the first is that you have to work. You really truly have to work. You have to invest in yourself and your education before you invest your money. Uh, this conference is meant to be used in conjunction with the Rule classroom. The conference happens over four days, but the learning process happens over the course of a year. We interview every exhibitor before the conference. If you listen to the interviews before you get to the conference, you allocate your time better at the conference. And if you utilize the lessons in the Rule classroom, in particular, Introduction to Natural Resource Investing and you listen to the interviews in the context of proper securities analysis, you make more money. The second is access. When we interviewed 68 public companies in anticipation of their exhibition at the conference, fully 90% of the CEOs when asked when I asked them who at the company investors should contact to learn more said me. Many investors don't think that they have access. What they don't realize is that entrepreneurs who start companies are so interested in their company that they want to talk about it. They want to talk to individual investors. They don't want to talk about baseball or soccer or popular culture. They want to talk about their companies. And if they won't take your call, they're telling you something valuable, too. So, you have access. And people who attend this conference need to understand that. They need to understand that they actually have access. And they need to understand that there are certain truths in investing, certain paradigms in investing that once they learn them will equip them to make money over time. Uh, this conference is it's funny this conference started in 1995. This year was the first time I achieved my goal. The first time I achieved my goal of conferences community of having attendees who had interacted with exhibitors in prior years of having 70% of the attendees prepare for the conference with regards to the interviews and the lessons in the Rule classroom. This is the first year where I saw community, the the sense of community and camaraderie that I've been trying to establish since 1995, which is a very happy moment for me.
Uh, indeed. So would that be your main takeaway from this conference then? I mean we still have a day to go.
Well, main takeaway for me, I mean after 32 years, you know, I worked three decades to be an overnight success with regards to this conference. There are communities to establish and investors do better if they associate in some community like that. Well, again, knowledge and education is obviously paramount and something that you pushed before we started this interview. We touched on whether people attending these conferences sometimes get so caught up in which equity should I buy, which miner should I buy, and they forget the fundamental basics of why they should be buying something like gold in the first place.
Correct. So, I'm going to let you explain and do a recap of of the basics of why we should be owning gold.
Wonderful, wonderful, wonderful way to end. If you understand why you did something, likely you have the courage to suffer through volatility. Why gold? Gold does well during periods of time when people are concerned about the maintenance of their purchasing power. In fiat currency, you know, fiat currency denominated instruments. The most common fiat currency in the world is the US dollar and the most liquid capital markets in the world are the US bond markets. Why would people be concerned about that? Well, arithmetic. So, let's do the arithmetic. The on-balance sheet liabilities of the US government are $39 trillion. That's T. It's a big number. It's 12 zeros, right? The off-balance sheet liabilities. I'll look at the camera right now. Old folks, Medicare, Medicaid, Social Security, federal pensions, military pensions. The net present value of off-balance sheet liabilities 120 trillion. Add those two numbers together. 159 trillion. That's what we owe, right? What do we have? The IRS suggests that the private net worth of Americans is 175 trillion. 175 trillion plus 139 million trillion, right? 16 trillion. That's the delta. A lot of money. That number, the difference between what we owe and what we have gets smaller by $4 trillion a year on balance sheet, off balance sheet.
Put differently, what we owe is almost five times GDP. Now, there's a couple ways out. We could be honest like the Argentines and default. We could say to the bondholders, "Too bad, so sad. We promised you." But there's no. We could say to old fat bald guys like Rick Rule, "Yeah, you paid into Social Security for 61 years. You deserve the money. We told you we're going to get it, but there's no money left." Or we could do what we did in the decade of the 1970s. We could honor the nominal value of our obligation by in while inflating away the net present value of the obligation. You're not young enough, you're not old enough, pardon me, to remember the decade of the 70s, but I'll paint you a picture. In the decade of the 70s, the US dollar lost 75% of its purchasing power. A basket of goods and services that cost you $1,000 in 1970 cost you $4,000 in 1980. Imagine the impact of that on a pensioner.
Think about that.
If you believe, like I believe that passed his prologue that as a consequence of our debt relative to the size of our GDP, that the only way out is to devalue the currency. Gold traditionally has maintained its purchasing power. I don't think that gold will increase in value, but I think the price will increase to reflect the deterioration of the purchasing power of the US dollar. Gold at $4,500 an ounce would buy me a very nice men's suit here in South Florida.
Yep.
And gold will 10 years from now buy me a very nice men's suit. I suspect that that gold, that suit, pardon me, which would cost me 45 or $4,600, maybe a little more at this hotel, would cost me 12 or $13,000.
Right?
Uh, 10 years from now.
And an ounce of gold would buy a knight, a suit of armor. It bought a toga in Roman times. It's been that that traditional value, that measurement of what an ounce of gold can always buy a fine man's suit as time goes by, centuries go by, thousands of millennia go by and an ounce of gold still maintains that purchasing power.
Correct.
And that is the fundamental lesson that you want every viewer and everybody to understand.
Absolutely. Yeah. Absolutely. It's it's strange. Uh groups, ethnic groups, uh tribal groups, societies that have gone through crisis understand the gold story. I've talked the gold story to Ismaili Muslims who got kicked out of Uganda. They get it. I talked to Vietnamese. They get it. Earlier in my career, I talked to Jewish people who went through the migrations and the Holocaust and the pilgrims. They get it. We have had it too easy.
Right? And and again, Rick, I mean, this is obviously something my viewers are very familiar with uh how every global reserve currency has come and gone. We have recency bias because we only know the dollar-based system, but every global reserve currency and every empire has risen and collapsed. I always like to bring up the example that there was a time when the Portuguese escudo was the global reserve currency. And having grown up in South Africa, I am very well aware of how currency fiat debases and devalues and how purchasing power declines. Again, that's a theme we cover at large on Franklin Media. But I did say that I would give you an opportunity to to give a a quick recap for those viewers that may be joining the programming and need that lesson. But it's it's a good reminder that we do sometimes need to revisit those basics. And so again, because my viewers will make me ask you for a gold forecast should this trajectory continue. If you believe as I believe that the US dollar will lose 75% of its purchasing power, a number a nominal number from where it is now and now 75% because according to some statistics that's lost, I believe 97% of its purchasing power since the Fed was created since since 1913. I've heard that. Yeah. People say, "How can it go?" Well, you mentioned a bunch of currencies yourself that prove the point by going to zero.
I don't think the dollar does that. And by the way, I don't think the dollar does poorly against other currencies. I think it is poorly. Absolutely. In an attempt to answer the question, uh, gold with a 12 handle or a 15 handle or a 16 handle 10 years from now, not hundreds, thousands, wouldn't surprise me.
Uh.
$15,000 gold 10 years from now.
Yep.
And so, because silver follows gold, as you started off this interview, what do what does silver look like 10 years from now? My suspicion is that if gold goes to $15,000, which is to say if the gold price triples or quadruples, that silver does better. Uh, silver is the ugly stepchild until it isn't. When the narrative returns to precious metals, and I don't know why this is, I just know that when the generalist investor picks up the precious metals narrative, they come harder into silver than gold. And so what does that look like in a number for me in 10 years time if we've got gold at 15,000.
300.
$300,000 silver.
$300 silver.
I was like well okay you said much better so I mean that's not that that's.
Well, in percentage terms if if you think that the gold price will increase.
Well, I mean seeing as we we hit $120 silver this year so that's only want like.
I'm I'm just saying if the gold price triples or quadruples I would expect the silver price to go up five times or six times.
But you're taking it from current level, not the high.
That would be correct.
Correct.
The high was stupid. Anytime you see a hyperbolic chart like this, you sell it.
We start off with silver. We're going to wrap up on silver. And my viewers that were unhappy now have a lot of silver content from the one and only legendary investor and speculator Rick Rule. And I know that you have uh some speakers to take on a on a cruise here in Boca Raton. So, we're going to have to wrap it up. Rick, thank you so much.
A pleasure. Thank you. I enjoy these conversations.
Always a pleasure, Rick Rule. Thank you. And as always, a big thank you for watching. For me, Michelle McCrory and the rest of the team, we'll see you next time.
This is The Real Story with Michelle McCory.