Transcription
If you don't apply it correctly, if you don't ask it the right questions, AI is an acronym for artificial ignorance.
I've seen in the last 5 weeks two of the best drill holes I've seen in 50 years in exploration finance. A soft market is a sale. Uh, if we bought financial goods the same way we buy physical goods, most of us would be richer. The next 5 years are going to be very pleasant.
>> [music] >> Greetings and welcome to our Wealthion show. I'm Trey Reitz, Chief Economist at GBI. And we're here today with Rick Rule, Principal of Rule Investment Media. Um, now you would have to have been hiding under a rock for the past several years to not know who Rick is and what he's all about. So, we're going to skip the introduction and say, "Hi Rick, thanks for joining us today."
>> Trey, I'm delighted to be back. I've enjoyed conversations with you even before interviews going back what, two decades I suspect.
>> The biggest topic on the, you know, market the landscape today is AI. And look, you're a really smart guy and we all enjoy your thoughts. You usually have an answer for everything and you've usually thought about everything. So, um it because technology has never been your primary focus, I hesitate a bit. But, what do you make of this entire AI wave?
>> Well, the subject is so big, I guess I'd have to break it down. Uh, I'm increasingly a user of AI.
>> Hm.
>> [clears throat]
>> Uh, if you don't apply it correctly, if you don't ask it the right questions and can constrain the data sources, AI is an acronym for artificial ignorance. If you ask it a general question,
>> you'd have I knew you'd have something like that.
>> Well, if if [clears throat] if if if you ask it a generalized question, an opinion, and it's database includes let's say X. What it gives you is a consensus of opinion of a bunch of morons. Uh, which isn't really useful. If you however uh, use it to comb massive sources of constrained data around a specific question. It's unbelievably good. I remember as a young analyst Trey that we would take obscure companies. We get 5 years of quarterly reports. We take the staples out. You know, this is how long ago this was. Lay them out along a long conference table and use various color magic markers to draw continuums across 5 years. The company centric credit analysis that used to take me 5 or 6 weeks per company. I can do on AI now constraining the databases in 2 minutes. That's amazing. It's just absolutely amazing.
>> And you know how to construct the questions the correct way to accomplish that. You don't need a programmer to help you.
>> AI No, you don't need a a programmer. AI is teaching me. When I get garbage back, I understand that AI is incapable of making a mistake. That the problem is where it belongs, which is to say with me. So, at the same time that I've taught taught Claude what I need Claude has taught me what is possible for a person of my technological expertise, which is to say low. The the the more precise an answer and the more the answer requires uh, collating and comparing very large amounts of real data as opposed to opinion the better it is. We're seeing now in the exploration business as an example the ability of AI to look at massive amounts of data uh and correlate uh looking for concurrent anomalies between geochemistry uh spectral differentiated photo analysis uh things that require so much uh data handling capability that no human mind is capable of doing it. Uh so from that viewpoint from a applications viewpoint, I'm extremely excited about it. And I get the demand for knowledge is unlimited. I get that, too. Now, if you're going to ask me about the appropriateness of these market capitalizations I have no idea. You're got me way, way, way out over my skis. Um I I don't know how to value a company like Anthropic or or SpaceX. I don't know if they're overvalued or undervalued. I don't know the net present value of allowing people to settle Mars. That's not what I do. I have a very difficult time ascertaining net present value in the gold industry, which I tried to do for 45 years. So the broader topic around AI, which is to say, what are these things worth? I got to say I have no earthly idea. I know that the utility that even a relatively unsophisticated user like myself experiences from AI uh astonishes me even against what I thought was possible as recently as 2 years ago.
>> So I was going to ask what you thought the impact was going to be on the mining industry. You've sort of talked about that. Let's go to the next level. You speak to more mining executives than probably anyone uh on a regular basis. What How do you think mining executives are looking at at AI? What are they talking about and and what are their thoughts?
>> Well, right now most of them are using this as an excuse to raise money.
>> [laughter]
>> Most of them are saying, "Well, uh AI is real. It's going to change the world. It's going to lead to incredible demands
>> [snorts]
>> for natural resources, which we produce. And as a consequence of AI, uh our company, which doesn't produce anything right now, it should be worth billions." Uh predictably, uh the mining industry executives use anything in the world, uh however nebulous, as an excuse to raise share prices and hence raise money. Um increasingly, the higher-quality thinkers in the business, I was recently interviewing uh Ammar Al-Joundi, CEO of Agnico Eagle, uh about AI. And he was talking about the fact that if you use it repeatedly on the same data sets, uh AI can even teach you to ask questions that didn't occur to you. They can spot uh holes, or or they can spot anomalies in results, because they can digest such large amounts of data that you can't. Uh and he said, "To the extent that, as an example, AI can monitor uh 10 years of mill performance, uh and use that experience to spot to spot design or implementations uh flaws that you couldn't. If you can increase your recoveries from, say, 92% to 95% uh in a mill like Malartic, uh that could produce a million ounces of gold I mean, the um you know, the upside with the smarter people is very, very, very high.
>> So, I wrote down a couple of categories of surveys, essays, exploration targets, planning, metallurgy. Do all those sound potential for you?
>> Yes, yes, yes, and yes.
>> Okay.
>> Yeah, absolutely. And and I think the impact's going to be greater in the oil and gas business because they generate so much data.
>> Mhm.
>> You'll well, I should you'll be able to um people now are looking at production data against well logs, against completion, uh in data sets like 10,000 wells in the Permian Basin. Uh and they're learning to ask questions that never occurred to them to ask. Uh a human can't read and retain information from 10,000 well logs, never mind correlate it with completions, never mind correlate that with initial production, never mind correlate that uh with re-completion and uh you know, decline curves over 10 years.
>> Mhm.
>> They AI can perform all of those calculations simultaneously and report back anomalies uh and in a very very short period of time. The ability to increase efficiency in the oil and gas business with the amount of data available to that industry is I mean, literally mind-boggling.
>> Interesting. And I think it's fair to say that the mining industry uh can always benefit from
>> [laughter]
>> from a little increase. I'm trying to remember the name of the technology, but the Torex fellow that had the the drills were going to be on the ceiling. Do you remember that was going to change the way we did all mining cuz you didn't need tractors. Do you Do you remember that one?
>> No, I missed that one mercifully.
>> Yep, yep. So, um all right. So, changing changing the the view a little bit to most recent past. I know that you've said um you didn't participate in the SpaceX uh offering because you buy stocks when you think you can analyze what they're worth and you can buy them cheaper and you have no idea what SpaceX is worth. Uh Elon's net worth, I'm sure you have seen jump to 1.24 trillion dollars on the deal. My my question to you more generally as a veteran grizzled market veteran, what does the SpaceX offering say to you about where we are in the current market cycle?
>> Nothing. Mhm. Uh I don't know. I I mean, here here's what I do know. There's a whole bunch of people who participated in the SpaceX offering who don't know what value means. Uh normally in my life, when a lot of people have been attracted to something not understanding anything about what it's worth, it doesn't have a happy outcome. But, just because I don't understand it, doesn't mean that some of the people who've invested don't understand it at all. It It may be that the net present value of uh establishing a colony on Mars uh is worth something. Uh I know that uh I am a subscriber to his satellite-based internet technology. And I get tremendous value for it.
>> [laughter]
>> As far as somebody who lives in rural Washington is concerned, he's underpriced that offering, which I'm delightful for. Whether or not it says something uh about the way that society values technology generally is beyond my means to comment on. Mhm. Uh I don't know what Nvidia's worth. I don't know what Microsoft is worth. I I know what Apple's worth. Um and to me to me personally, my investing style, I think like yours is that money is made on the delta between price and value. If you don't have an opinion as to value, information around price isn't very useful to a guy like you or I.
>> So, all [clears throat] right, let me rephrase this. Are Are you copacetic about broad equity average levels valuation, or is that just something you don't really worry about? Or
>> Uh I don't know enough about it. I notice that in the areas that I focus on, which is to say natural resources and conventional financial services Mhm. that prices are not excessive relative to value. I don't want to talk about broad markets because I'm too dumb.
>> Mhm.
>> Uh I don't know what consumer durables companies should be priced at. I don't know what supermarkets should be priced at. Uh I don't know how to dress myself, so [snorts] I don't know what fashion or apparel companies are worth. When I look at the prices of community banks in the United States uh relative to the amount of money that they generate from banking or when I look at the what the price of property and casualty insurers are worth relative to the amount of money that they make. When I look at the uh valuations in most extractive industries relative to what I think their cash flows are worth and what I think their cash flows are going to do uh in the areas that I follow I don't think equity market equity prices are unreasonable. And while I'm tempted to opine on the rest of the market I'm leery about doing it because I'm very familiar with how little I know uh about those industries.
>> All right, excellent answer. By the way, it was Fred Stanford, and the technology was Maca High. You don't remember that?
>> No, sir.
>> it in Torex for a couple of years. I was talking to me that I couldn't remember that. Um all right, so we couldn't get a I'm worried about the market out of you even though I suspect you are a little bit.
>> Listen, if if we have higher if we have higher interest rates, the market's going to get hurt. That much I know. If you raise the cost of capital and you increase the attractiveness of fixed income relative to equity,
>> Mhm.
>> uh you're going to beat up the equities. That much I know, but the fact that I'm constraining my remarks to that will tell you how little I know about much else.
>> Okay, so we're going to jump a little bit there. Um and again, I was trying to think of things where we can sort of get in your head a little bit and so um I I I was wondering where do you think the next I think this is sort of what you have the best nose for or among the best noses in the world. In the next several years, where are the world's great new deposits going to come from? Where are you snooping around?
>> Well, that's a really good question. Uh I guess because exploration expenditures ticked up in the last 2 and 1/2 years. Exploration successes are ticking up, too. I've seen in the last 5 weeks two of the best drill holes I've seen in 50 years in exploration finance. The Magotes hole in the Vicuña district in Northwestern Argentina. Playing off a wonderful analog, you know, the Lundin successes.
>> Mhm.
>> That was a hell of a drill hole.
>> What was it?
>> Uh I can't remember the uh
>> Roughly?
>> Oh, uh 700 ft plus of what was in effect 1.25 or 1.3% copper.
>> So very continuous.
>> In a district in a district where there was wonderful analogs, you know, uh wonderful analogs. A stunning hole and a target generated I think by Steve Nano who is a geologist who has succeeded for me for 30 years. The result was so good I thought it was a typo to be honest with you. And then much more recently a drill hole in Kazakhstan from Aris Resources. By the way, neither of these are investment recommendations. But another porphyry copper hole similar tenor uh you know, 7 800 feet of what was in effect 1.3 to 1.5% copper equivalent if you add back gold. Um Now drilling off porphyries is not an activity for mortals. These are expensive. But the tenor of these holes in the context of the geophysical signatures that they penetrated you know, suggests that success is a deposit with if they continue to enjoy success billions and billions and billions of dollars of net present value. So to get back to the answer to the question what I try to do is I try to focus on very high quality mineral belts that are under explored as a consequence of political risk. So while a lot of people wouldn't get caught dead in Argentina much less Kazakhstan. Those kinds of places in addition to other garden spots Congo, South Sudan. Places like that are attractive to me. That isn't to say as you very well know Trey that I haven't been penalized for that from time to time. I remember having 24 wonderful years in Russia until I had one very bad year.
>> [laughter]
>> But, the great big successes, the kinds that have changed the dial for me in terms of my personal net worth, have usually occurred in places that were extraordinarily geologically prospective, but had high real and higher perceived political risk, and had as a consequence been under explored. Uh if I had to pick one place in the world to look for copper myself, it would be in the Tethyan metallogenic belt, that group of rocks that depending on your definition began begin in Turkey and go through Mongolia, or if you include the Carpathian begin in uh Romania and go through Mongolia. There's a bunch of places there, countries that end in stan, uh and folks don't like exploring in places that end in stan. Uh the consequence of that is that it's very, very, very under explored, but very prospective. Importantly, uh because the vegetation cover is sparse, you can literally explore a lot of it from space. You can use aster imagery, which looks at uh uh photo spectral differentiation, uh and you can overlay, now with AI, that data with uh structural information, much of which is so profound that it can be only viewed from space, which is to say you can take a a thousand square miles of Kazakhstan, uh and you can eliminate by remote tools uh the need to explore 995 of it, and you can constrain the amount of people that you subject to boot leather boot leather down to 5 square miles. That excites me. Uh the difficulties are uh geologists like to stay in hotels. Uh there aren't many. Uh, the mineral tenor hasn't been written. The cost of capital will be higher uh, because a lot of money is at those centric and doesn't want to get invested in a place called Stan. But, the probability of discovering billion ton plus porphyries uh, of one or one and a half percent copper is much higher in places like that than it is in places like Arizona or Ontario.
>> Do you think parts of the Yukon and I guess it's called Abitibi you know, really up north in Canada offer the same sort of potential with a little bit less political risk?
>> Uh, not for copper. The Yukon, as is evidenced by Snowline for gold, absolutely.
>> Mhm.
>> Uh, that's a stunning deposit. Uh, and it's a grassroots deposit. It's important to know that. The Abitibi it has a different attraction. Uh, and I wasn't really focused on this again until Omar Al Jundi at our conference last year put it up to me. The Abitibi has advanced so much in my lifetime in terms of infrastructure, roads, power, water. But, importantly mill infrastructure. The deposits that have failed in the last three bear markets, last three bull markets, I'm sorry. Uh, deposits that were too small to amortize their own mill won't have to this time. There are so many hungry mills up there that uh, seven or 800,000 oz deposit which couldn't amortize the upfront capital cost of a conventional mine won't have to. Uh, if it's within 50 km trucking distance of an existing mill. That's what's changed. Uh, it's always good to talk to people smarter than you. Uh, which I was able to do at our conference with Omar Al Jundi who explained to me the deposits that had failed three times before were going to make it this time. Because the increased availability of infrastructure was going to make them work. Now, from my viewpoint I would still personally uh rather be invested in a lower probability higher value outcome in Kazakhstan. But I understand now the the concept of being a pawn broker in the Abitibi uh taking high probability uh shots. Uh at small but decent projects.
>> You mentioned Snowline, uh which as you know SCP is very involved with. Um Another one that has sort of caught caught my attention that I am wondering if it's been on your radar or radar screen is San Lorenzo. Have you followed that one?
>> I know San Lorenzo but less well.
>> Mhm.
>> Uh >> S- Snowline separated apart from the profound nature of the deposit. The young man who runs that company is uh for speculators a gift from God. He comes from a family that have been prospectors in the Yukon. So, his experience is relevant to the task at hand. From being a kid who cut lines for his dad uh and began dirt bagging, which is to say carrying samples when he was 12. This young guy somehow uh went from Grizzly Bear Pasture to MIT.
>> [laughter]
>> So, it's important to note the caliber of the human resource at the same time that one looks uh at at the physical resource.
>> I think I'm uh putting words in your mouth, but I think what is important for viewers to recognize here is the importance the absolute importance of management when you're in this part of the the the market or the industry. Can you talk about that a bit?
>> Trey, you and I have both heard that well. Uh we've both been successful and unsuccessful uh in that. There's a social science dictum that's called Pareto's law. And people hate it because it's elitist. They hate it too because it's true. And Pareto's law is the dictum that explains what is popularized as the 80/20 rule, which suggests that 20% of the population generates 80% of the utility. Uh to understand it in the context of investing, you need to understand two things. Two more things. First of all, uh it's only one lip of a bell-shaped curve. So, in truth, while 20% of the population generates 80% of the utility, a different 20% of the population generates 80% of the disutility or the aggravation. So, your first choice your your first task is to hang out with the good 20 and identify and avoid the bad 20 like the plague. And there's both 20s in junior mining as you know. The second thing that is probably more important because the first is common sense is that if you take that good lip or the bad lip and you run through the same performance dispersal curve the data conformably aligns again, which is a fancy way of saying that 20% of the 20 do 80% of the 80 or 4% of the population generates 65% of the positive utility. Turns out, Trey in a big population base like mining the data conformably aligns at least one more time. Which means that about 1% of the management team generates about 40% of the utility. Had I or in fact had you and I for the entirety of our careers focused on identifying the 1%ers and then spent the rest of time productively fishing, drinking bourbon, chasing girls
>> Mhm.
>> I I know we both did some of both, some of all three, pardon me. We would have done better. Uh we would have made twice as much money uh and worked half as hard. I had uh dinner the other night. Uh that's a lie. I had bourbon the other night with Ross Beaty and Bob Quartermain at Bob Quartermain's house in Vancouver. And we were reflecting on the amount of success that we had had together over the last 30 years. And I remember thinking, although I didn't share it with these two guys, imagine all the time and all the money I spent with people who weren't of the caliber of these two guys. Not only uh are they of the Not only are they extremely competent, they're nice. And you want to do business with them. I remember in the case of Silver Standard, uh uh calling the company, asking for Bob, getting the receptionist, and she said, "Mr. Rule, I just want to say something. I want to thank you." And I said, "How's that?" She says, "Well, you helped build this company. And at this company, uh Bob Quartermain, didn't keep all the stock options. He made sure everybody in the company got some. And as a consequence of the growth of the company, uh I was able last week to put down a down payment on my own condo."
>> I remember that he rode a bike to work and he did the whole thing with 20 employees. So, that was a hell of a story.
>> Uh had had both of us learned the lesson about Pareto's law earlier in our careers.
>> The only one missing from your get-together at Bob's house is Pierre. Should have had him here. He's the other consummate gentleman who
>> You know, I invite Pierre every year. He's just so comfortably ensconced now uh in [clears throat] Switzerland. He used to There was a point in time when I was more used to Pierre than now.
>> [laughter]
>> He was [clears throat] very good about coming out to Vancouver for me when he lived in Toronto. Coming to Fort Lauderdale when he lives in Lugano is a stretch too far. He's been very kind to me in terms of giving me interviews, however.
>> He's just incredible guy.
>> Wonderful human being.
>> Incredible. And uh there you just can't have an When you talk to him, uh you always feel better when you leave the room. You just feel like uh you know, you're a better person or you've had a uh a little bit of a religious event. So, you've said recently that you talked about these drill holes earlier and you said the market's not responding like it normally does. So, not that you necessarily know why, but why do you think that's the case? Is Is it uh just a function the fact that gold sold off a little bit since the the uh Iran hostilities or what Is there something about where we are in the cycle that people are looking in the wrong spot or what do you think?
>> Uh I think maybe that it's a combination of all those factors. I think the competition for micro cap equities that existed 6 months from now 6 months ago doesn't exist. Uh I think the money that's remaining is focused on takeover targets. Uh which is to say there's a theme that's worked so well for the last 2 years that it's attracted a whole lot of attention, deserved attention by the way. Uh but those are both guesses. I don't know. I know that those type of drill holes even 6 or 7 years ago would have doubled the market caps.
>> [clears throat]
>> Uh and I'm not trying to say that the Aris market cap didn't go up. It went up by 50% and it enabled a nice financing to get done. Uh and I'm not saying that that drill hole is going to result in a major porphyry discovery. All I'm trying to say is that that type of drill hole is odd. And that type of drill hole on top of the geophysical target of that size if you're me you can't resist.
>> The good combo.
>> Yeah.
>> The good combo. The other thing that you've talked about or I I guess I would have to say a little birdie told me this one but the little birdie told me that you're returning to your legacy interest in the small prospect generators. I heard you talk about them probably 5 years ago at the conference. It was one of your favorite areas. I haven't heard you talk about them in recent years. So talk a little bit about who they are, what they do and why you're interested.
>> Uh prospect generators is a term that originated in oil and gas. That's where I learned it. Uh the term prospect generator in mining is broadly attributed to me. Uh I'm
>> [laughter]
>> delighted to take the credit but I don't deserve it. Uh a prospect generator is a company an exploration company whose development methodology is to utilize their technical expertise and perhaps their business acumen and political expertise to originate exploration ideas. Uh develop a thesis and then bring in a joint venture partner to develop the thesis. Uh rather than emphasize everything in terms of physical capital which is to say the deposit, what they're really marketing is intellectual capital. So they dilute their interest at the project level in return for keeping their share structure intact, not having to dilute equity uh to drill. Uh statistically Trey, I've invested in something like 70 public prospect generators in the mining business over 50 years. I have, as a consequence of that, participated in 23 economic discoveries and 22 takeovers. That would suggest that I've enjoyed a 30% plus uh success ratio in 50 years. If you juxtapose [clears throat] that with the chances of success in conventional exploration in junior markets, you'll find that the result that I've enjoyed is about two standard deviations better than had I employed a different approach. When I was in university, I learned in economic geology that the prospect of a nice mineralized anomaly becoming a mine was about 1 in 3,000. Um so, you juxtapose 30% with 1 in 3,000, and the arithmetic becomes fairly clear. Uh the market hates prospect generators because they're boring.
>> Because they're complicated?
>> No, because they're boring. Uh the market demands to be lied to. And they want to be lied to by very sophisticated liars, capital markets liars. The um investment banks, the brokers hate prospect generators because they don't come to market and issue equity very often.
>> Got you.
>> And the number of times that you see a research report from a brokerage firm that doesn't generate any commissions for the brokerage firm hovers very close to zero. Very, very, very close to zero. And people also like the theme that, well, this project, you know, first came about 100 years ago, and had the mule not died, the prospector would have become rich, you know. You ignore the 1 in 3,000 chance of success in favor of what might happen if that one chance came in.
>> Mhm.
>> Uh which is to say you ignore arithmetic in favor of hope. Uh people prefer to hope than to do arithmetic. So, I love the prospect generators. They've rewarded me
>> couple.
>> extraordinarily well. Sure. Uh I mean, the bigger more familiar bigger The more familiar ones would be, as an example, Elemental Royalty beginning life as EMX. Uh Altius beginning life as Altius. But, if you come down the uh uh come down the market cap trail a lot uh and I'll out of self-interest just talk about ones who will exhibit at my conference. Um Kenneland uh has done a wonderful job generating project prospects including an economic discovery in Quebec. Origin has done an absolutely superb job including an amazing monetization uh in Nevada. Um Where else could we look? Uh Andean Uh there's a whole range that'll be at the conference. Six or seven of them.
>> Which Andean?
>> Uh I think it's called Andean Minerals. Um to be honest with you I can tell you all about the company, but maybe not the name or the symbol. That is the way my mind works. And I suspect that next year's conference, not the 2026 conference, but the 2027 conference a major sub-theme is going to be prospect generators again. My goal is to have between 15 and 20 of them there.
>> Mhm.
>> Uh because the probability of success for a patient investor uh with the project with the prospect investor is, I suspect, the highest in exploration. The only thing that might be higher is in in you know, odd market like this uh uh speculating on the third dimension where you have a great discovery all and the market rewards it, but not as thoroughly as the market might otherwise reward it. And there are periods of time when that doesn't work because the market response is so extraordinary that the share price escalation overprices the new data.
>> Uh you mentioned EMX in your list. Didn't you just sell that Tether or something like that?
>> Tether is the largest shareholder. There was a three-company amalgamation. Amusingly, I was a founding shareholder of two of the three 20 years ago.
>> Mhm.
>> When they all amalgamated, Tether was the largest shareholder of two of the constituencies, and Tether is far and away now the largest shareholder of the combined company, and Tether has become an increasingly important force across the whole royalty scene. Uh the Tether people have noticed and have mentioned publicly that the third-tier royalty companies are substantially cheaper by most valuation metrics than the second-tier royalty companies and the first-tier royalty companies. And what they're lobbying to do is merge enough of the third-tier royalty companies that they become a second-tier royalty company. By definition, uh and they then eliminate that discount. They have also said to the royalty companies uh that they're involved in, "Don't be afraid to look at acquisitions that are above your capabilities because we will fund you."
>> Mhm.
>> Uh in other words, you are no longer constrained by capital, where it had to be in the past that you looked at royalty or streaming acquisitions in the $50 or below level. With regards to streaming, you are fine to look at billion-dollar acquisitions.
>> Mhm.
>> And with regards to royalties, you're fine to look at $250 million acquisitions. In other words, they are unconstraining the application of the intellectual capital in these smaller companies uh given their own access to capital. And that's a game changer.
>> Are you a Tether owner or not?
>> Uh Tether is private. I'm embarrassed to say.
>> Oh, I thought I'm I guess I meant do you own any of in the um the like the coins?
>> No. No, they uh you know, the idea that I um pay them to own and store my gold isn't attractive to me personally. And the idea that I would pay them to own my US Treasuries and they keep the interest and I get the Treasury
>> Mhm.
>> uh that's somehow less appealing to me than just owning the Treasury and getting the interest myself, thank you. Uh but I'm impressed about the fact that these guys have built one of the largest financial services companies in the world in 10 years. Uh I'm also impressed. I've met a couple of them now uh at their worldview given what it is they do for a living. They're the largest non-governmental of older of Treasuries on the planet. And what they're doing with their own money is buying gold and farmland and timberland.
>> I think they're up to the 17th largest central bank, right? They're up there in the top 20.
>> Uh in terms of gold holding holders, right? Yeah. My understanding is that they're the largest non-sovereign holder of Treasuries on the planet. I don't know that to be true, but I've just read
>> they also they made 9 billion last year, right? I mean, it's an incredible
>> what they I don't know if you remember this trade, but you and I had the ability to participate with the Stevens sons, Paul Stevens sons, when we were at Sprott. Uh we had the ability to participate in Blockchain Capital round one
>> Mhm.
>> uh which ended up being a 4% holder of Tether. I was of course too small for that too smart for that. Uh so I I shut myself out of both Coinbase and Tether as a consequence of my Luddite tendencies.
>> We uh don't have enough time to spend a lot of time on Tether, but suffice it to say the fact that Tether is interested in gold as the largest stablecoin has enormous, I think, implications uh you know, on the gold market. Um one of the other things you've said recently is you pointed out we've had a good run in gold and you said I am very positive long-term, but I'm concerned a little bit about a a rough summer especially for juniors, and I'm asking you this question so that you could give Wealthion viewers a little bit of um confidence that even though it may be a bit of a spotty summer, this is a good thing, not a bad thing, and this is when you want to start uh you know, picking off some names that you've followed for a while. Does that
>> Trey, this is a no-brainer. Uh let's take the whole value spectrum. GPI GBI uh came into life as a facility for bullion. Uh so, let's start with gold. Uh I think it could be a tough summer for gold if the interest rate goes up. Uh in fact, I hope it'll be a tough summer for gold cuz I'd like to own a lot more gold.
>> Mhm.
>> What would cause me to sell my gold? Well, we'd have to have a balanced budget, first of all. And then we'd have to find a way to deal internally with $40 trillion in debt. And then we'd find need to find a way politically to deal with $120 trillion in in unfunded entitlement liabilities. And then we'd have to have an interest rate on the 10-year Treasury that exceeded the rate of depreciation deterioration of the purchasing power of the US dollar. I think that rate of deterioration is about 8% between 8 and 10. If you had a 200 base basis point positive yield, that would suggest a US 10-year Treasury rate at the 10 or 12 level. That would suggest first mortgage rates at the 12% level. In other words, the set of circumstances that would cause me to sell my gold doesn't seem possible.
>> Mhm.
>> [clears throat]
>> Uh I would like to own a lot more gold. Uh and I'm a consistent buyer of gold. I save in gold. Uh the consequence of that is that I look forward to this summer as a time to increase my holdings, uh which will tell you how bullish I am about it. And the gold stocks themselves, I would suggest by traditional valuation metrics are at a discount to their values relative to the price of gold and their future cash flows. And this occurs from the top of the feeding chain. From Agnico Eagle all the way through the penny dreadfuls. Now, where on this continuum your customers want to be, I think depends on how hard they want to work. Uh if they're sensible, unlike Trey Reik and Rick Rule, uh what they will do is buy the very best. They'll buy Franco-Nevada, they'll buy Wheaton Precious, they'll buy Agnico Eagle. They'll read books, play golf, play with their grandkids, uh and let the decade take its course. Uh they might not have a good summer, but 5 years from now they won't remember this summer.
>> Mhm.
>> To the extent that they want to do work, to the extent that they want to come down the quality trail, uh and look for companies to get taken over or look for deposits that are growing, uh or look all the way down to the prospect generators. To the extent that they want to do work, endure volatility, and endure cyclicality, uh I would suggest to you, Trey, that we're coming into a period like the early part of the decade 2000 to 2010. Uh I I think we're coming into a truly spectacular period of time. The difficulty, and you know this, Trey, I've graded almost 100,000 portfolios in my time, 35 years now, for free. And I've learned a lot about the mistakes that speculators make. Uh and one I mean, maybe three mistakes that people make. They're anti-contrarian, which is to say they want to overpay. Uh they want to buy silver in a parabolic up move. That's the wrong thing to do.
>> Mhm.
>> Uh they don't work hard enough, which is to say they don't do enough work to segregate between the high-quality juniors and the low-quality juniors. And it's a risky enough business in the high-quality juniors. Uh and then, of course, their time frames are mismatched. Many, many, many speculators who I know have good strategies. They think the copper price has to go up over 5 years, or the gold price has to go up over 5 years. But they have trauma holding stock over a long weekend.
>> Mhm.
>> Uh if the time frame necessary for your thesis to play out is 5 years, and the time frame that you allow yourself to own the stock is 2 months, of course that mismatch is going to cost you money. But for people who are willing to overcome those three sins and do the work, uh employ contrarian strategies, which is to say uh buy more gold at 3,500 than they did at 5,500,
>> [laughter]
>> the next 5 years are going to be very pleasant.
>> I uh again, sometimes stick too close to putting words in your mouth, but the the message that I want people to take away is your confidence that even though the summer could be a little bumpy, rather than looking over your shoulder at January 26th highs on everything, mhm,
>> [clears throat]
>> um it's important to look at this as an opportunity.
>> You know, Trey, if people who are better at shopping, your wife and my wife, uh were in a department store and suddenly over the loudspeaker speaker, it came out all goods now on sale, 35% off. Would they all run out of the store? Would they all leave?
>> Mhm.
>> A soft market is a sale. Uh if we bought financial goods the same way we buy physical goods, most of us would be richer. So, when you say despite the fact that the summer's going to be rough, that's wrong.
>> Mhm.
>> Uh the way people anticipate rough is when there are good opportunities. When people change their mindset to understand that money is made on the delta between price and value, uh they'll come to worship times like this summer. I'm really truly looking forward to this summer, despite the fact that I suspect that the aggregate price levels at the end of summer will be lower than the aggregate price levels that are now. Uh it will be a time when you can acquire high-quality assets at prices that will seem laughably cheap uh 4 years from now or 5 years from now, but maybe laughably expensive between now and then.
>> An awfully fortuitous juncture for our conference. So, um we're we're running out of time, but I want to ask you one last sort of general question. The miners, especially due to their gross misjudgments uh and mistakes in the 2009 to 12 period, have earned a fairly sticky reputation for poor management. And I tell my clients that I think that reputation is at least in part has become undeserved. Rather than asking you generally what you think about mining managements, I thought of a way to ask you let's look at it in terms of seniors, mid-tiers, um uh explorers and developers, uh you know, emerging producers. At the senior level, would you agree that the quality of management is significantly higher than its reputation?
>> I would. Uh and I would also say that the investors over the last 15 years have asked companies to be more responsible. Now, sadly, Trey, that's going to change. The higher gold price means that 3 years from now, we're going to ask companies to do the same thing that they did in the decade 2000 to 2010. We're going to ask them to become growth goals. Um but for right now, what you described is true. We're in the sweet spot. We're truly in the sweet spot.
>> Mhm.
>> Uh when the market has performed, we will ask the companies to be stupid, and they will comply. Uh being in before that is something that you have to do. But yes, in direct answer to your question, the median quality of the management teams are higher, and they are held to a higher standard, too.
>> And we're even seeing dividends and buybacks and all those kind of stuff, which is is kind of amazing, I think. Never thought of gold miners I've never thought buying back shares is a good use of capital, but I guess it helps with institutions.
>> I think what you have to ask your management team to do, and Amaruq Andy says this, he said that they view every capital expenditure as to whether or not it would be accretive relative to buying back their own shares. They know what their assets are worth, so they know what their shares are worth. Uh and if any investing activity doesn't generate a fairly positive return as compared to uh buying more of their existing business, you know, that's the metric. That's the hurdle. Companies that are buying back their shares are either doing it to slavishly please Wall Street, or they're doing it as a consequence of the fact that 10 years of conserving on exploration expenditures means that they don't have a development pipeline
>> Right.
>> to develop.
>> Mhm.
>> Uh and that's okay. It It's just what I want to hear from the management team is that dividends or buybacks that that they're doing that because returning capital to the shareholders or shrinking the float uh generates a higher risk-adjusted internal rate of return than any other investment activity.
>> That's terrific. So, my last question, cuz we got to let you go, give us two or three sentences on what you're most excited about about the conference.
>> You know, now what excites me the most, and this is pretty tricky, uh and I learned this from an attendee. I had an attendee email me saying, "Following Robert Friedland around the exhibit floor
>> Hi everyone, the Rick Rule Symposium is considered the gold star of the precious metals world, and it is happening July 6th. It's sold out, but through a special Wealthion promotion, you can attend it virtually. See the link in the description to learn how. The next best thing to going, watching our interviews. We'll be there talking with precious metal leaders like Grant Williams, Dr. Nomi Prins, Tavi Costa, Lobo Tigre, Rick Rule, and many more. It will be free for all of our accredited investor members. If you aren't one already, go to wealthion.com/accredited to sign up.
>> Seeing what booths he stopped in front of and listening to the questions he asked was worth the whole price of admission.
>> Mhm.
>> Everything else was for free. You're going to be if you're there live or if you're there live stream in the company of 3,000, 3,500 high-quality investors. The idea that all the knowledge flows from the dais to the assembly is stupid.
>> Mhm.
>> There's knowledge all about you. The exhibitor list is curated. If the exhibitors aren't owned in the accounts of the sponsors, they don't get on the floor. Doesn't mean that every stock I own goes up, but it does mean that they're all vetted. And the interplay, between you questioning the exhibitors, listening to the exhibitors questioning each other. Uh it's just extraordinarily high. Uh I have, as you know Trey, interviewed every exhibitor before the conference, giving my attendees the ability to arrive at the conference uh it better allocate they're able to allocate their time. One of the things that struck me is at the end of every interview, I've asked the companies who at the company, specifically, uh our attendees should contact to learn more. About 90% of the time, the CEO said, "Why not me?" Uh people say they don't have access. That's wrong. They don't exercise access. And if they do have access, or pardon me, if they don't have access, particularly with a junior, what that means is that the executive doesn't care about his or her cost of capital, and they're telling you something. If they aren't willing to talk to you, you shouldn't want to talk to them. Uh the conference gives you a curated list of people to employ that on. If you use the conference in conjunction with the Rule Classroom, where we have over 300 hours of instructional programming, where I teach you specifically what question to ask and how you ask it. Uh the conference is really, truly, where the rubber meets the road. It's really where opportunity meets preparation. You know, it's just there's there's nothing and I say this honestly. There's nothing that compares with the opportunity of the conference. I Trey, I don't think we've mentioned this, but anybody who attends live or live video. Video, but they also they also have an absolute money back guarantee. If your listener at their own discretion doesn't think they got their money's worth, I'll give them their money back. Nobody else that I know of has enough confidence in their content to give a full money back guarantee. I'm delighted to say in 30 years I've had to refund less than 1/10 of 1% of the tuitions I charged, but that guarantee is your guarantee that our content can make you money.
>> What I was speaking to is the access to all of the programming for a year. I think that's another critical component. I spent a lot of time looking for slides of the economic presenters, Dan booth and going through it frame by frame and snapping the or would snipping the photo from the screen. So there's a tremendous amount of information there.
>> You know Trey, I put on the conference, then I have to play the tapes. There's no way in four days that a 73-year-old brain can retain 46 hours of programming. I I can't do it. And if you apply I mean you get out what you put into it and applying yourself is how you maximize your benefit and the tapes are absolutely critical in that process.
>> Terrific. Well, thanks for spending such time with us and being so generous with all of the people that you interview with and being such a good steward for the industry. We really appreciate it and can't wait to see you in a couple weeks in Boca.
>> Trey, I I really look forward to being your host in Boca. I've enjoyed all of our conversations on the air and off the air and I look forward to continuing both of them.
>> Terrific. See you soon.
>> Bye-bye.