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Sprott’s Rick Rule: “We are less well prepared to handle a crisis than we were in 2008”

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In a June 25, 2015 interview by Patrick MontesDeOca of the Equity Management Academy with Rick Rule, President of Sprott Asset Management, USA, Rule discussed the Euro-zone crisis and the relative financial security of the United States, but also the need to own physical precious metals.


 

When asked about the Euro-zone crisis, Rule said the most important issue was how long could central bankers and financial leaders in government “continue with the easy money program and continue to depress interest rates,” and “How long until private sector borrowers respond to market forces and demand higher yields given the increasing vulnerability that borrowers have to overleveraged balance sheets?”

MontesDeOca raised the issue of the crisis spreading to the United States, but Rule said, “I think we have the ability internally if we put our own house in order to survive Eurozone instability.”

Rule said we have had three years to prepare for a Greek default, and private sector banks have done “a very good job” of shifting potential costs to taxpayers. He said banks have followed the “Fascist response: privatize the profits, shift the risk to the public sector.” He said a Greek default will not have real ramifications in the private sector, but may affect sentiment.

When asked if a major economic crisis is coming, Rule explained, “I’m not an economist. I’m a credit analyst.” As an analyst, he said, “We are less well prepared to handle a crisis than we were in 2008” because debt levels are higher now than in 2008. Therefore, the ability to add liquidity and generate economic activity has been damaged because “we have played that card so much.”

Looking to history, Rule said the 1960s shared similar traits with today, in terms of easy money, which led to instability in the 1970s. He does not believe current conditions will lead to an economic apocalypse, but he said that the 1970s were “very good for the price of precious metals.”

He advised holding physical precious metals “not for collapse, but to bolster the purchasing power of the US dollar.” He mentioned that in the 1970s, Motel 6 rooms near his home cost $6; now they cost $69. The dollar’s purchasing power has decreased 90% in 30 years. Rule advised listeners to be aware that “the purchasing power of your dollar depreciates at 3% or 4% every year,” so you should keep some money in gold and silver.

Discussing the paper market, Rule said the gold and silver paper markets will lead most of the time, whether they are moving higher or lower. He also pointed out that over the past “14 or 15 months, gold and silver have been in bull markets in every currency except for the US dollar,” which is a phenomena eerily similar to the market of 2000. At that time those who held precious metals were “worn out,” yet gold was up in every other currency. Then in 2001, gold and the US dollar began to rise against other currencies. Gold rallied from $252 up to $1,900 an ounce by 2011. Rule did not predict such a rise, but he believes circumstances now are similar to 2000.

Rule argued that all currencies are weak, with the US dollar the “prettiest mare in the slaughterhouse,” but “don’t bet it will continue.” He sees confidence in the market as “artificially high.” Many people believe that since financial leaders appeared to have saved the world from an apocalypse in 2008, they can do it again if there is another financial crisis.

Rule argued that at other times when most people were wrong, a few have made fortunes. George Soros’ famous run on the British pound was based on his belief that broadly held support for the pound was wrong. He was wrong for two years, and then he was “a billion dollars right.” Rule also mentioned those who bet against real estate debt in the early 2000s made billions when the real estate and bond markets crashed. He warned that the crash can come quickly because confidence can vanish overnight.

Rule believes that gold will not replace the dollar, but that “It will lose the fight less badly.” Precious metals account for about one-third of 1% of US savings, so if that percentage rose to even just 1%, demand would triple and prices would rise.

In comparing gold and silver, Rule said, “Silver is in effect gold on steroids.” In bad markets, silver underperforms gold; in bull markets, silver outperforms gold. Silver is cheaper per unit to acquire, so if there is a bull market, poor people have more access to silver than to gold. If there is a bull market and more and more poor people use silver as a medium of exchange, silver will outperform gold.

SPECIAL EVENT – Rick Rule Live June 25, 2015 at 10:00 am PDT

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You are invited to an exclusive Equity Management Academy webinar featuring special guest Rick Rule, one of the wealthiest, street-smart professionals in the business.

Rick Rule

Rick Rule:  “at age 62 this is my fifth natural resource up-cycle and it will be my last.  I can tell you that in my experience the length and the severity of the down-cycle is the determinant of the up-cycle, and by that measure this up-cycle should be one for the history books….”    

Details

Title: Rick Rule Live

Overview: Hear Rick’s views on the global markets with emphasis on precious metals and natural resource investing. The audience is encouraged to send questions ahead of time, either by email or Facebook.

Date: Thursday, June 25th

Time: 1 pm (EST), 10 am (PST)

Duration: 1 hour

Cost: RSVP

About Rick

Mr. Rule has dedicated his entire adult life to many aspects of natural resource securities investing. In addition to the knowledge and experience gained in a long and focused career, he has a worldwide network of contacts in the natural resource and finance worlds. As Director, President, and Chief Executive Officer of Sprott US Holdings, Inc., Mr. Rule leads a highly skilled team of earth science and finance professionals who enjoy a worldwide reputation for resource investment management.

Mr. Rule is a frequent  speaker at industry conferences, and is interviewed for numerous radio, television, print and online media outlets concerning natural resource investment and industry topics. He is frequently quoted and referred by prominent natural resource oriented newsletters and advisories.  Mr. Rule and his team have long experience in many resource sectors including agriculture, alternative energy, forestry, oil and gas, mining and water. Mr. Rule is particularly active in private placement markets, having originated and participated in hundreds of debt and equity transactions with private, pre-public and public companies.

To make your reservation click HERE

 

GOLD AND SILVER SPECIAL REPORT

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6/08/2015

October Dollar Crisis: China Preparing for Something Big

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This October may see the beginning of the end for the U.S. dollar as the world’s reserve currency. Twice every decade the International Monetary Fund meets to discuss their Special Drawing Rights (SDR) currency basket. Currently comprised of the dollar, Japanese Yen, British Pound and Euro, if China has their way a few months from now, we may well see the Chinese Yuan take its place among the world’s most trusted currencies.

Read more HERE.

 

The Gold Cartel and $3,500 Gold

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In a recent interview, Bill Murphy of the Gold Anti-Trust Action Committee (GATA) predicted that a tipping point is near that will end the Gold Cartel’s suppression of gold and silver prices, leading to $3,500 gold and $100 silver.

Greg Hunter of USAWatchdog.com interviewed Murphy, who has extensive hedge fund experience, including with Bridgewater, one of the largest hedge funds in the world.

The US Justice Department recently granted UBS immunity in a criminal investigation of “manipulation of, or fraud in” the gold and silver markets.

Murphy said manipulation has been found in “the energy market, the mortgage market, the interest rate market, the currency market,” but “probably the biggest of all…is what they’re doing in the gold and silver markets.”

Why is gold being manipulated?

“Gold is looked at as a barometer of US financial market health,” Murphy said. “When gold goes up sharply…it’s always bad for the bankers and the politicians in power….So many years ago they decided they were going to keep the gold price under control as much as they could.”

Murphy explained that in 1994, Allan Greenspan and Will McDonough of the New York Fed joined the BIS (Bank for International Settlements). This was prohibited under US law at the time. And that was at about the same time that Robert Rubin, the Treasury Secretary who came from Goldman Sachs, starting leasing gold to suppress the gold price as a foundation of the strong dollar policy.  “The essence of it was to rig the gold price because it affects so many markets, like the dollar, like the bond market, and it’s become a bigger and bigger deal. The more they suppressed it, the more they’re getting themselves in bigtime trouble…because they are going to run out of physical gold and silver as time goes by, and the market will go bonkers.”

Murphy calls the manipulators the Gold Cartel, made up of the Fed, the Treasury, the big banks, the BIS, and other central banks. He said, “They keep going through the supply of central bank gold to keep the price down….At some point it’s going to hit a tipping point, the same with silver, and the thing is going to go crazy.”

Murphy said that if gold had just kept pace with inflation, “it would be double what it is today. That’s how artificially low the price of gold is today, and so is silver. And once they lose control of silver, it’ll go from $22 to $100 very fast….It’s astounding what they’ve been able to do, and they’re very good at it.”

“Complex derivatives have aided them in their schemes,” Murphy said, but “They’re afraid that when the gold market convulses it’s going to set off a derivatives nightmare in the interest rate markets and so on….[with] one default after another [like 2008]….Because derivatives have exploded, something like $250 trillion, they don’t know what the outcome could be if they start getting this kind of reaction. So they are…maniacal in trying to keep the price of silver and gold aligned.”

In relation to the current investigation, Murphy said, “I am so skeptical after all these years, and it’s a question of where they go with this. If they are just talking about the gold fix itself—big deal. The ramification of how they are interfering with the markets all the time is the real issue. Why are they doing this now? Well, probably because it is so obvious, and they been doing it in so many other markets they feel compelled to do something. . . . This is going to effect a lot of people, if I am correct, when this market blows up. Maybe they see something coming with allocated accounts and the gold isn’t there. . . . They know it’s coming, and maybe they are trying to preempt something here so they don’t look so bad.”

With the massive printing of money and low interest rates, gold and silver should go up. Art, real estate, and the stock market all are going up, yet gold and silver are not. “It makes no sense,” Murphy said, “unless you know what GATA knows….As frustrating as it is to stay with it, these markets will explode….This can’t go on too much longer.”

Murphy said that gold should be $3,500 and silver $100. When gold hit $1,900, he said, the cartel got more aggressive. When they start to lose control next time, the move up will be much faster than in the past, although “We don’t know when that tipping point will hit.” He did predict, however, that “When they lose control of silver, that will be the tipping point, then gold will follow.”

When asked about fears of the government confiscating gold, Muphy said, “I think the rest of the world would laugh at us. I give it zero chance….The price would go bananas.” He argued that the cartel’s goal is to keep gold out of the limelight, so why confiscate gold and put it right in the center of the limelight?

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