Title:   'Gets Much, Much Worse': Why Rick Rule Is Raising Cash Now
Show:    The David Lin Report
Guest:   Rick Rule (founder, Battle Bank & Rule Investment Media; former CEO, Sprott US)
Date:    2026-APR-15
URL:     https://www.youtube.com/watch?v=4hskXf74MX8
Length:  ~45 min
Note:    Auto-transcript, timestamps mm:ss. Saved for personal study. Recorded ~Apr 14 amid the Strait-of-Hormuz
         blockade: Rule is RAISING CASH (option premium on liquidity) on credit-contagion / junk-bond-ETF run
         risk and bank-solvency concerns (held-to-maturity marks, duration mismatch, derivatives); bullish
         uranium (Cameco) and the smaller-end gold sector; sold 80% of his physical silver in January.

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(00:00) Mark my words, if this goes on, I'm not saying it will go on. If this goes on, it doesn't get worse, it gets much, much, much worse. If we weren't already in a recession, that this conflict has tipped us into a global recession. The Fed has one choice, really, which is to print. There you would get a run on the bank with no FDIC.
(00:20)  I'm not saying this is going to occur, but it causes me a lot of concern. Rick Rule is back with us. He's a founder of Battle Bank, founder of Rule Investment Media, former CEO of Spot US. Welcome back to the show, Rick. Good to see you again. Always a pleasure to be, David, the better for being back on with you. Always a pleasure to have you here on the show not too long ago, a couple weeks ago, about a month and a half ago.
(00:41) You had warned us about the troubles of inflation uh that were to be that would be the outcome of the closure of the Strait of Hormuz. We're still at a point where the Strait of Hormuz is closed. Uh the ceasefire uh did not last very long. And uh now on the uh 13th of April, Trump has announced that the US naval blockade of the blockade of the Strait of Hormuz is in effect.
(01:06)  Inflation has now ticked up to the highest point since 2024. So, your warning was rather prescient. What is next for inflation? There's two ways to look at it. One, that oil is going to remain uh at $100 or near $100, and that's going to be the new reality. Or perhaps uh the spike in oil was transitory, but even if that were the case, some of the permanent damage to the economy has already been done, and that could roll over to the rest of the consumer goods that we consume.
(01:39) What's your take? Well, first of all, uh the increase in oil prices that you've seen is anticipatory. It isn't reflecting shortages, it's reflecting the imminent prospect of shortages. We have lived on strategic reserves and floating inventory until now. If the blockade goes on, if the conflict goes on, and if the oil on tankers north of the Straits of Hormuz continues to be bottled in, then you're going to see real oil price increases.
(02:11) Uh those will truly be ugly. Right now, the difference between, as an example, uh West Texas Intermediate and West Texas Intermediate loaded available for shipment to the Far East is as much as $40 a barrel. So, the $102 that you see uh on Bloomberg uh reflects 100 40 to 145 pre-shipping landed. If we go on two or three weeks and we use up the floating inventory, and countries that have strategic stockpiles use up their strategic stockpiles, you're going to see in much of the Southern Hemisphere and in the Pacific Basin very, very different oil
(02:50) prices. Mercifully, David, you and I live in North America, uh which at least is an integrated energy market as well supplied. When people look at the Straits of Hormuz and they hear the headline, 20% of the world's supply of crude moves through the headline, what they don't read is something much more stark, which is to say that in excess of 50% of the world's export crude flows through the Straits of Hormuz.
(03:14)  35% of the world's LNG, the substitute, flows through the Straits of Hormuz. Mark my words, if this goes on, I'm not saying it will go on. If this goes on, it doesn't get worse, it gets much, much, much worse. The the broader question about the economy is mixed. Uh I'm not an economist, I'm a credit guy, but I would suggest to you that if we weren't already in a recession, that this conflict has tipped us into a global recession.
(03:40) That will have the odd benefit of reducing demand a little bit, but it won't do good things for the rest of your life. Uh I also believe, as you and I have discussed before, that the stated rate of inflation is very different than the real rate of inflation. If normal people looked at the basket of goods and services that they consumed, and they compared that with the price increases in the consumer price index, they would see just how silly the reported rates of inflation are.
(04:09) I suspect if we achieved peace uh in the Middle East, that you would see a fairly rapid decline uh in oil prices. You might not see them decline back to 60, but I certainly think you would see them decline back into the mid-70s. Uh looking further out, for reasons that you and I discussed as much as a year ago, namely, the deferral of a billion dollars a day in sustaining capital, the prices that you see today will likely be present in 2029 irrespective of the conflict in the Middle East.
(04:45) So, as an investor, you need to juxtapose all of those things when you're considering making an oil investment. I will say this, David, uh my justification to you 9 months ago for buying oil stocks was first of all that they were hated, and second of all that the price had to increase as a consequence of sustaining capital uh deficit deficits.
(05:18) I didn't include war. Uh but I will say that oil clearly isn't hated anymore. As to where the price goes from here, I can't tell you how the Middle East thing's going to work out, so I can't give you a near-term impact. This article, let me get your reaction to this. This is from the New York Times. The Oil Shock Is Worse Than You Think Is the Title of This Article.
(05:41)  It highlights the divergence between current spot prices in the futures market. Importantly, this paragraph here reads, "The futures and spot prices are rarely exactly the same, but the gap between them has grown unusually big in the past few weeks, so much so that oil executives and analysts say future prices no longer accurately reflect the extent of the supply shock that the world is experiencing.
(06:00) " When you see a chart like this, Rick, the this divergence between the futures and the spot markets, what is your first reaction? Well, it has to reconcile. In this case, which way it reconciles is really a function of war. The futures market is of no use to a refiner that refines 300,000 barrels a day uh and has a million barrels in the tank farm.
(06:22) Uh what that is saying to that refiner is that by Thursday, he or she is out of business. Uh that's why you are seeing tankers that are outside the Straits of Hormuz commanding a $40 barrel a day premium to spot. Um it it's also why something like 40 or 50 tankers worldwide are diverting uh from the region of the Persian Gulf to the US Texas Gulf Coast so that at least they can lift a cargo.
(06:53) Uh if the war resolves itself, then the reconciliation between the futures price uh and the delivered price falls. Uh if not, I'm afraid both rise. Do you think the futures market is agreeing with your analysis earlier, which is that oil is going to come back down? To be honest with you, David, I have no idea, so I'm not going to expose my ignorance. I'm not going to comment.
(07:43)  The uh the impact of oil on the rest of the economy, are we going to see any of that um to the same extent as the late 1970s? I don't know, but it is not pleasant. If you take a shock to the economy like the increased amount of GDP that's going to energy before the economy can resolve itself to it, it acts like a tax. There's less cash available for other uses.
(08:11) The second-order effect is that it affects confidence. People are less willing to spend, they're less willing to invest, they're uncertain, so they do nothing. The consequence of what is in effect a tax, depriving the economy of resources, uh and depriving the economy of confidence, too, cannot in the near term have a happy outcome.
(08:30) I'd like to get your take on this article from Fortune. "US debt suddenly draws weaker demand as $10 trillion must be rolled over this year." This past week, auctions of two, five, and seven-year Treasury notes all drew weak demand, forcing yields to go higher than expected. The short end of the yield curve is under extraordinary pressure as soaring oil prices boost the inflation outlook. The two-year yield rose 50 basis points in the last month. What do you make of this story?
(09:14)  Well, I think, unfortunately, the story is accurate. Um make no mistake, I don't think that the Fed ought to set interest rates. I think the market should set interest rates. If they do, that would be higher. But what's important to note is that increasingly, the Fed is losing control of the interest rate. They lost control of the long-term rate a year and a half ago, when, although they were driving down the short-term rate, the long-term rate decoupled from the short-term rate.
(09:36) Now, you've had two straight weak Treasury auctions, uh and you have weak Treasury auctions in the face of something like $10 trillion needing to be refunded in the next 12 months. The Fed has one choice, really, which is to print. Uh if they allow interest rates to rise, they at least in the near term damage the economy and not coincidentally damage the government's ability to pay interest on the $40 trillion that they already owe bond holders.
(10:14) If they don't raise interest rates and they have continued weak treasury markets, they have to resort to printing quantitative easing. Now David, if you did quantitative easing it would be called counterfeiting and you would be put in the penitentiary. Uh if you're an elected representative of course it's called fiscal management and you get reelected. But either way uh the outcome is not good.
(10:55)  To the extent that they allow interest rates to rise, they do dampen inflation, they slow economic activity, they have a deleterious effect on the bond market, on the housing market and on government's ability to service interest. If they don't uh they risk a real worsening of inflation — between a rock and a hard place.
(13:47) [sponsor — Vanguard Mining / critical minerals] Speaking of inflation, what are you doing with your cash? You told me offline that you're raising more cash, selling the losers uh but that makes me wonder how you're fighting inflation if you're in cash.
(14:08) What I want to be doing is buying the single asset mid-tier gold producers because I think that the market is under pricing them relative to the seniors. I think the gold price will do well. Uh I think that either those companies will re-rate or the big ones will take over the little ones. But that's not what I'm doing. I'm building cash.
(14:27) Um I have seen markets before where there's a crisis of confidence, where there's a liquidity squeeze. I'm not saying this is going to occur. I'm not even going to say it's a probability. But it's a strong enough possibility and the penalty for failure is high enough that I'm building liquidity. The last time I saw a concern about credit become a contagion was 2008.
(14:51) Uh and I watched in a fairly short period of time equities markets uh lose half of their price support. The consequence of going into 2008 well capitalized and also well educated was that 2009 was a single best investment year of my career percentage wise. Uh During periods when other people don't have liquidity, having liquidity is what means that you take advantage of the circumstances as opposed to being taken advantage of.
(15:20)  Now, the point you make is very valid. Uh I'm getting paid something like 4% uh on my liquidity in a currency where I believe I'm losing 8% of my purchasing power which is to say arithmetically I'm not making 4% I'm losing 4%. Uh I regard the 4% that I'm losing in real yield as being an option payment, an option premium, to preserve my liquidity in case that liquidity comes in handy.
(15:50) The circumstance that you're seeing now in credit is challenging in many ways. Uh I see the private credit conundrum as being partially the fault of very poor underwriting and I see that in the commercial banks too. But I also see it in rising interest rates which limits the availability and increases the price of credit which makes credit less financeable.
(16:19) To the extent that credit concerns uh go beyond folks like me to moms and pops savers that becomes problematic. In particular uh David and this is obscure but you need to hear about it. Uh there's a huge proliferation of products in the United States and Canada, high yield ETFs uh exchange traded funds that invest in for one of a better phrase junk bonds.
(16:46) Uh and they're owned by people who I inelegantly term yield pigs — mom and pop investors who are chasing 150 or 200 extra basis points in yield with no knowledge of the credit risks that they're running. These ETFs are extremely liquid. There's trillions of dollars in AUM and they trade billions of dollars a day.
(17:09)  The difficulty is that the underlying assets that they own, over-the-counter high yield bonds, are extremely illiquid. And if you have disintermediation, if the moms and pops that own these ETFs go to redeem them, the managers who run the ETFs may be unable to sell the bonds that would fund the redemptions.
(17:32)  There you would get a run on the bank with no FDIC. I'm not saying this is going to occur but it causes me a lot of concern. In that regard, it reminds me of nothing so much uh as the air in the CDO market before the 2008 real estate credit collapse. Repeat again, I'm not forecasting a credit collapse. I'm just saying that the possibility of it is high enough and the penalty for failure of it is high enough that I personally am building liquidity.
(18:11) Well you operate a bank, Battle Bank. Are the banks better capitalized now than in 2008? And is the FDIC more prepared now to backstop any such runs on banks? The answer to that is yes and yes. The banks are both better capitalized — I would argue not well enough capitalized but better capitalized. And collapses on the FDIC's radar.
(18:36)  Now the FDIC suggests that a well capitalized bank has equity at 7% of total assets. Many banks are not well capitalized which would suggest that they're running large balance sheets on a 5% equity slice. Uh our target equity slice at Battle Bank is 13% falling to 10%. So in other words twice what the FDIC's suggestion as to what well capitalized might be.
(19:02)  I will also point out however that not all assets in banks are created equal. An example would be their derivatives exposure. A bank that has a trillion dollars in nominal derivatives exposure will argue to the regulators that their ultimate liability is much less because their assets and their liabilities are offsetting. The difficulty with that is if one side doesn't pay, in which case the derivative liability becomes real.
(19:32) And when I look at the big banks and I see a bank with let's call it $500 million in equity uh and that is sitting behind a $60 trillion derivative liability, I wonder how well capitalized they are. I'm not comfortable with that.
(19:59)  I also look at the fact that in the United States and Canada both, banks are allowed to list debt securities on their balance sheet as held to maturity. So, a bank that owns a 15-year bond that's selling in the market at 65 or 70 is allowed to carry that bond on their balance sheet at 100 because they intend to hold it to maturity.
(20:25)  Which is to say that the mark-to-market losses in bond portfolios in a rising interest rate environment has not been accounted for on bank balance sheets. I also point to the fact that there are as yet unrealized losses to private credit and in particular to commercial real estate. We have been through a period in banking for 4 years where the ethos around large commercial real estate loans has been extend and pretend.
(20:55)  Which is to say that you've worked out an arrangement with the borrower that the borrower can't afford, but allows you not to write down the asset in your balance sheet. I would argue that extend and pretend is coming to an end even in a period where interest rates aren't rising, but interest rates are rising. So, to suggest that the banking industry is as solvent as we would like to believe it is is not true.
(21:19)  You asked me if the banking industry was more solvent. The answer is yes. Is it solvent enough? No. 2022 saw the banking industry under stress. When interest rates started going up and there was mismanagement of duration, which led to the collapse of a few regional banks. How do the banks today in 2026 in a rising interest rate environment prevent that from happening?
(21:42) Uh the truth is sadly that they don't. The banks, like the moms and pops, are yield pigs. The outside of the yield curve has higher yield. The banks believe as long as liquidity exists, that you can carry on your books a 30-year fixed mortgage, and you can fund that 30-year fixed mortgage with overnight deposits.
(22:12) When the deposit interest rate rises, the bank's spread gets constrained to the point where sometimes it goes negative. This mismatch between the duration of assets and liability bankrupted the US savings and loan industry. It bankrupted Silicon Valley Bank. It bankrupted First Republic Bank. This mismatch is one of the biggest challenges in front of the banking industry today.
(22:31)  Mercifully for me, I've been in banking for 40 years. There's enough money to be made running a bank the way Ohio State runs a football team — good blocking and tackling. You don't need to mismatch your assets and liabilities. I would suggest that that's like bending over in front of a steamroller picking up quarters. It's just a dumb thing to do.
(22:51) Okay, going back to your cash statement. You are stacking cash. Whenever successful investors do this, they believe the valuations of whatever sector they're focused on — in your case the resource sector — is probably not at the optimal value to get in. In other words, you think it's overvalued. Is that what you believe right now?
(23:31)  Yeah. I don't — I think the smaller end of the gold sector is cheap. Okay. It's just I don't care what I think. I want to sleep nights and stay calm. I have what is in a historical context too much liquidity in my portfolio. A financial planner — or frankly a Rick Rule looking at my portfolio 2 years ago — would have said you have too much liquidity, you have a lazy balance sheet. Right now, lazy feels just right.
(23:59) >> So, you're not doing this because you're expecting a 2009 moment to get in? Uh I think there is less than a probability of that occurring. I just think that the penalty for failure is too high. Buffett will tell you that during the time he's operated Berkshire Hathaway the share price has fallen 50% or more over 18 months four times. Anybody in the equities markets who isn't prepared for a 50% decline shouldn't be in equity markets.
(24:29)  I think there's a less than 50% chance of it occurring, but I think there's a more than 20% chance of it occurring. And if it occurs, I'm afraid it gets underway in earnest. The difference between taking advantage of a liquidity squeeze and being taken advantage of in a liquidity squeeze is simply liquidity.
(24:50)  Well, I remind the audience that Rick's call on silver and gold have been rather prescient. Late January, Rick sold 80% of his physical silver holdings. He said this on my show days after it aired, the silver went down 30% in a single day. Silver's currently trading at $75. It's been trading range-bound since mid-March. What are you doing now with your gold and silver holdings?
(25:14) Uh I increased my gold holdings because gold functions for me as liquidity. It's a savings asset. The silver occupied a speculative place in my portfolio. Uh I bought silver originally because silver was hated. When it ceased to be hated, the reason to own it in my account went away.
(25:36)  So, I had to say, "What's the best use of speculative cash?" Uh the decision was made easier for me because there was a hyperbolic up move in silver — what you Canadians call a hockey stick graph. I've learned that the backside of a hockey stick graph is just as steep as the front side, but it's a lot less fun if you happen to be long.
(25:57) So while many people get attracted in a positive sense to a hyperbolic up move, I get attracted in a negative sense to a hyperbolic up move. I decided specifically that since the reason I owned my silver went away, that there were better speculations for me than silver. So, I exited silver for other uses of capital. I did not exit gold.
(26:34)  In fact, 25% of the money I made selling my physical silver, I used to buy physical gold. Let's talk about uranium. There's a sense of growing resource nationalism spreading from Brazil to Africa to the Middle East about how countries should preserve their critical minerals. How does uranium fit into the global picture of critical minerals?
(27:03) Uranium is actually the greatest beneficiary, I think, over time of the Gulf conflict. The Japanese nuclear fleet and most of the French nuclear fleet was built as a consequence of the Arab oil embargo of the early '70s. Uranium offered the only commodity that was energy dense enough that a nation could store all of the fuel that they needed in one warehouse to sustain the country's economy for 5 years.
(27:32) We're relearning that lesson right now. No country more thoroughly than Japan. The most important near-term determinant for the uranium price is simply the refueling pace in Japan among Japanese reactors. There's a 41 reactor fleet. They've restarted 16 plants. The Japanese now have the impetus to start their remaining nuclear fleet.
(27:54)  And that takes uranium now, not uranium 3 years from now, not uranium that's contingent on a data center or small modular reactors. The energy security afforded by uranium at the same time that the world is desperately short of base load power and would prefer non-carbon generating power means that the clearest of all beneficiaries of the Gulf conflict is uranium. And that will play out in the market over the next couple of years.
(28:20)  Well, this came in from Bloomberg. Nuclear industry to add 15 reactors next decade. More than 50 new reactors are set to go into service worldwide from 2027 through 2030. I wonder how permanent is this trend. Germany was a leader in nuclear production and that peaked a couple years ago, and then their nuclear energy production has declined to near zero.
(29:19) I'm not European. There was a whole succession of stupid energy choices that Germany in particular made. Ironically, carbon was something that was important to the Germans. So, now they're having to burn more coal than ever. Their grid is substantially less reliable and German people's electric bill is up fivefold in 12 years.
(29:45)  Nuclear has gone in a very short time from a period when I, as a nuclear proponent, expected to see my face on a post office wall on a most wanted poster — and now my government wants to subsidize me. What it suggests is that there's a population around the world who is more technologically sophisticated and concerned about carbon loadings, and one that recognizes that the world needs more of all forms of power.
(30:52) If you combine those two things — non-carbon generating cheap baseload power — there's one alternative, which is nuclear. That doesn't make me anti-solar, anti-wind, anti-oil-and-gas or anti-coal. The fact is that material standards of living around the world, if they're high, are energy dense.
(31:17) On the one hand, there's a billion people on Earth with no access to primary electricity. We will electrify the world the next 20 years — that's going to require more electricity of all sources. At the same time, people who live in parts of the world that are already electrified want a higher standard of living, and that is very energy dense.
(31:35)  I'm a skeptic as to the amount of energy that's likely to be consumed by great big data centers. I have a belief that if you throw $5 or $10 at a problem, you find ways to develop solutions cheaper. I suspect some of the great scientists alive today will find a way to make artificial intelligence and data acquisition much less energy intensive. That to me is a bright spot.
(32:24)  >> That's already happening. On that note, RAM chip makers have been suffering. You recall Micron stock went down because Google announced a new turbo quant model that requires less memory. And who knows what that's going to do to copper or other raw materials. Copper demand is supposed to increase between 2 and 2.5% compounded for 10 years without AI. You had data centers on top of that.
(32:47) I talked to Robert Friedland the other day and Robert was telling me that with the projected demand for data centers, we will consume more copper in the next 15 years than we've consumed in the history of humankind. If you take data centers out of the equation, it will take 30 as opposed to 15 years. In either case, the case for copper and the case for uranium is very clear.
(33:13)  When it comes to uranium and copper producers — let's focus on uranium. Is it conceivable that abroad, in Kazakhstan and China and other countries where uranium production is much cheaper, North American companies are competing against companies that have much higher margins and lower operating costs? How do North American producers, the Camecos of the world, stay competitive?
(33:43) Well, I would argue that Cameco is the most competitive uranium producer in the world. Certainly they have higher systemic costs than most, but they have a wonderful track record of on-time, on-budget completion. Kazatomprom was the lowest cost producer, but Kazatomprom seems to have had a major exodus of middle managers, and they have been unable to restart Inkai successfully, which was shut down during COVID.
(34:15) The bottom line to all that was, were I a uranium investor — and by the way, I am — I would focus on Cameco. I was uncertain about Cameco the first time we talked some years ago because I wondered when a uranium mining company buys an engineering firm like Westinghouse, how they're able to manage two businesses. Turns out they managed pretty well.
(34:37)  So what Cameco seems to have done is transformed themselves from a miner of U3O8 to a seller of watts — fully integrated, which is extremely important. It's also important to note that material that they regard as waste would be regarded as the ore by most companies. Some of the uranium that they mine is of such high grade that you have to mine it robotically — you can't put humans down there, it kills them. That's a wonderful challenge to have.
(35:16) The challenge with uranium investors is that, similar to other resource stocks, we don't know who's got the better deposit, who's got the better grade. How do you apply geology to uranium? That would take a whole show — we did a whole 8-hour-long uranium boot camp to teach investors precisely how to do that.
(36:38)  [Rule Symposium discussion] We have portfolio managers and securities analysts who have real-world experience in natural resources and precious metals for 40 years, not 4 months. We made no attempt to secure a speaker on the war because we don't think in the near term there's much one can know. If the Persian Gulf situation lasts another 4 weeks, and we run out of floating inventory, and economies like Korea and Pakistan and Sri Lanka and India run out of strategic supply, the impact of that crisis will be very well known, and unfortunately not very pleasant.
(38:31) What do you think is the next Strait of Hormuz? Certainly the Malacca Straits are critical in terms of taking material to China, but there is the long way around. There's no other concentration that I know of, save perhaps the English Channel or Gibraltar, that offers the same narrow focus. The Strait of Hormuz transits well in excess of 50% of the world's export oil supply. Similarly LNG, sulfur, sulfuric acid, helium, nitrogen and nitrogenous fertilizers.
(40:01)  And a separate problem: this isn't just a geopolitical threat between Israel and Iran. This is potentially a focal point in a millennium-long schism between Shia and Sunni Islam. This is a historically unstable region that is unusually important in the transshipment of the raw materials that run the world.
(40:47) Well, finally, the service that you provide, which is to rank junior investing stocks. Have your submissions changed in terms of trends? What has happened really is that the volume has just increased. People are increasingly uncertain. The portfolios submitted to me are usually heavily populated with very low market capitalization, very volatile stocks. What began to change 6 or 7 months ago was the number of energy stocks in the portfolio — a consequence of my own increasing focus on energy.
(42:27) Tell us where we can find your work. Go to ruleinvestmentmedia.com, list your natural resource stocks, and I personally will rank them 1 to 10. Please, no crypto, no tech stocks, no pot stocks. That's meant to be used in conjunction with the Rule Classroom — almost 30,000 investors, over 300 hours of free educational programming. We also have, every 90 days, a boot camp — one coming up about copper, an 8-hour deep dive. And our granddaddy product, the Natural Resources Investment Symposium in Boca Raton, Florida, July 6th through 10th.
(45:04)  So, please do make sure to check out all of Rick's work. Thank you so much, Rick. Appreciate your thoughts today. David, I really look forward to hosting you down there. Thank you for inviting me. And thank you for watching. Don't forget to like and subscribe.