00:00 We're going to talk with my old friend Rick Rule today. Nobody knows more about natural resources. We're going to talk about how to get in front of a wave of capital that's headed for natural resources. And if you want to see a free presentation about that with lots of great ideas, go to projectvault2026.com.
00:21 projectvault2026.com and check out the free presentation with lots of great ideas about critical minerals and natural resources. We're going to talk with Rick about energy. You're going to get a totally different viewpoint from all the stuff about oil and gas in the Middle East that's been in the headlines lately. So, let's do it.
00:41 Let's talk with my old friend Rick Rule. Let's do it right now. Rick, welcome back to the show. Always a pleasure. Pleasure to be back, Dan. The pleasure is indeed mine. Thank you for having me back. You bet. You recently, the first thing I want to cover is that you recently did your annual conference, didn't you, in Boca.
01:09 How did it go this year? I need to say we've been putting on the conference now for 31 years. The conference began in 1995. And this is the first year that the conference actually lived up to all of my major expectations. Really? I guess the lesson in life, Dan, is that you work three decades, not one decade, to be an overnight success.
01:30 But by every measurement I had, this is the conference that I set out to build 31 years ago. So I'm sort of basking in the reflected glory of the conference. I need to say at the outset, I don't get all the credit for that. I'm the ring leader, but it was a great event. Figures it's the one I missed in the past few years, right? So that would be the best one.
01:54 Of course. That explains it, Dan. That explains why it was so great, too. Yeah. All right. Well, of course, what's happening in the world right now is just, to say it's interesting is a minor understatement. We are truly living the Chinese curse.
02:15 May you live in interesting times. I feel like we should start with energy because there's a lot of commentary about a couple of things: the seeming disconnect between futures markets and physical markets, and what the long-term implications of everything that's happened around the Strait of Hormuz and in the various countries around there might be.
02:49 Maybe I should just start by asking you if you're long oil and gas. I am long oil and gas in two ways. I have for my own account for many years bought mineral royalties and rights, and it amuses me and I make money drilling oil wells, or rather participating in the drilling of oil wells. So I'm in my own way very very very long oil and gas in a private oil company.
03:18 The name will amuse you. But I'm also long the oil stocks. It wouldn't surprise me if we were to see a more permanent resolution in the Gulf crisis to see the oil price decline a lot. But I'm okay with that. I'm not a trader. And for reasons that we can talk about in a minute, the oil price that we see today, which is a function of an artificial shortage and could end with an armistice, gives us a foretaste of the oil price that we're going to see in 2029 and 2030
04:02 when we have a structural supply shortage that can't be ended by an armistice. Now what will happen to the price of oil or oil stocks 6 months from now? Neither I nor the Ayatollah nor Ayatollah Netanyahu or Ayatollah Trump has any sense of what the near-term oil price is going to be. And I don't spend much time trying to figure out something that it's impossible to know the answer to.
04:33 But it's much more possible to know the answer with regards to 2029 and 2030. And that number I would suspect is substantially higher. The reason for that has nothing to do with a war. It has to do with the fact that the oil industry on a global basis including parastatals has underinvested in sustaining capital to the tune of over $1 billion US a day for a fairly long time.
05:03 It has to do with something else too. Investor stupidity. Investors are attracted to oil stocks that emphasize returns to shareholders, which is to say dividends and share buybacks. The companies that are doing that to the extent that they are diverting money from new project investment and sustaining capital investment are cannibalizing themselves.
05:30 Yeah. They're liquidating, right? And the market seems to favor cannibalization. I just for a whole bunch of reasons want to take, and am taking, the backside of that trade. If you reduce sustaining capital to the extent that we're doing — and by the way that circumstance has been exacerbated by the war; obviously Iran, Kuwait, Saudi Arabia, UAE aren't making sustaining capital investments, they have other uses for the money — and in addition to not making sustaining capital investments, they're
06:08 busy blowing up each other's facilities, adding to the sustaining capital investments that they'll need to make. Right. But if you don't make those investments it has a real impact on your production in the out years, and not just in the Middle East. The production renaissance in the United States is really a consequence of tight formation and shale drilling.
06:30 One of the characteristics of that is that after you've drilled the well and fracked the well, you get a substantial part of the net present value of the production of that well out in the first 18 months. If you don't both recomplete those wells on a timely basis but continue to drill new wells, your production falls even more precipitously in the shale basins than it does in conventional reservoirs.
06:54 So the idea that the deferral of sustaining capital investments is going to impact Brazil and Iran and Saudi more than it's going to impact the United States and Canada is wrong. Because they don't have those wells. They have conventional? Well, they have conventional wells which actually deplete more slowly than our unconventional wells.
07:17 Our spending cycle needs to continue very very very high to maintain our current levels of production. Got it. Nobody's ever pointed that out, but I suppose it was something I feel like I should have seen because it's been widely known how that curve runs on shale wells versus conventional — but the further implication of it, wow, by the next few years is something I hadn't considered.
07:49 So but there are US-based companies, aren't there, that do make those investments, are there not? Many. Many. They're just not as popular as those that don't. All right. Which, if you're of a certain mind, is kind of a good thing. You want the ones that are maybe less popular, because they tend to become more popular when the news finally hits the headlines.
08:16 Dan, that's a hugely important point. I struggle in interviews like this to understand why listeners who want to buy more of a sector want it to go up in price in the near term. Yeah. If you want to buy something, wishing for price appreciation sounds strange. Do you ever see a kid go into a grocery store and ask the manager to increase the price of a candy bar from a buck to a buck and a quarter? But investors seem to do that.
08:50 And it's very odd. I guess people need the reinforcement from price signals to justify the value of a narrative. Unfortunately when the price adjusts to validate the narrative, the narrative just became less valuable itself. Right. And I'm actually glad you brought this up because I want our listeners to know that I think I met you, Rick, in like 1998 or something.
09:21 And from the word go, you've been trying to teach me and everybody else who would come within 20 feet of you, or 100 feet of you, to be a good contrarian, especially when it comes to natural resources. And I think I've kind of finally learned it and I've finally learned to just — I'll establish a small position.
09:45 I'll think, well, I have no idea where the bottom is. So when I buy something, especially a mining related investment, my mindset is I'm beginning to invest in this. It's not I'm throwing everything I'm ever going to throw at it right now. No, you're beginning.
10:08 And then over time, given that everything I buy goes down soon after anyway, you'll probably get a much better chance. And I am happy and proud to say that I finally developed this — I would almost call it a skill that I have now — where I'll say, "Okay, this is my preferred, just say like nickel mining investment or something, and it's 10 bucks and oh, now it's seven bucks, so I'm buying more.
10:36 Oh, and now it's five and I'm continuing to buy more." Like, I'm finally comfortable with that. It took a long time, I want to tell you. It took me almost 10 years and going broke, Dan. So don't feel bad. Yeah. Through the decade of the 70s, of course, that's when I cut my teeth in resource investing.
10:58 And it was a ridiculously generous time. Given that I was a young male, I believed that all the money I made in that bull market was due to my brilliance. Ignoring the fact that the gold price went from 35 bucks to 850. That had nothing to do with it, of course. Yeah. When that market collapsed, I found out just how bright I was, which is to say not very, and I went from being a very wealthy and hubris-ridden young man to being deservedly humble with a net worth below zero.
11:28 But it turned out to be very valuable. It taught me something I should have known to begin with, which is to say that markets work. That in markets the cure for high prices is always high prices. And the cure for low prices is always low prices. Once you understand that, the second lesson is just as important as the first, and that is that what is inevitable is not necessarily imminent.
11:53 Although it has to correct, it doesn't have to correct quickly, despite our preference that it did. When you understand those two things — that markets work, and that inevitable isn't the same as imminent — you are really on the path to making money in resources. And I'd go so far as to say if you don't learn that, you're never going to do it.
12:19 You may get lucky now and then, but over your career as an investor, you are going to bleed to death if you don't learn it. You know, Dan, when you first met me, I owned and ran a small boutique money management and stock brokerage firm. And I'm not a trader, but the one trading signal that I did pay attention to was I'd walk in the cage in our office.
12:46 For those people who don't know, the cage is where the trades are processed. And any day where there was a 5:1 preponderance of buy tickets to sell tickets, the next day I'd sell something. Wow. And any day that there was a 5:1 preponderance of sell tickets over buy tickets, I'd buy something. These extremes in sentiment are probably the only indicator that I've ever learned how to use.
13:17 I'm not, as you know, Dan, a trader, but sometimes the markets give you things that you're ill advised to ignore. Right. And they give them to you quickly, and what else can you do but respond rationally? If the silver price just went absolutely nuts recently this year and you had to be selling into it, right? I did precisely that in January.
13:43 When you see these hyperbolic up moves — the Canadians call them hockey stick graphs — it's wise to know that the backside of a hockey stick is just as steep as the front, but it's a lot less fun if you're long. Yeah. There's something about that graph, there's something about something becoming rapidly more expensive that to an odd class of people makes it more attractive.
14:05 Yeah. Similarly, if you understand the reason for a hyperbolic sell-off, those are good times to buy. I know in my own markets, particularly in the small cap resource markets, you can have a 15 or 20% share price decline because some institutional investor got redemptions and had to sell into a market that didn't have bidders.
14:33 Had nothing to do with the company, had nothing to do with the broad market. It had to do with institutional investor redemptions. But a truism is that if there's more sellers than buyers, the market's going to go down. And one probably should take advantage of that. Yeah. Forced sellers.
14:57 I know Seth Klarman often referred to that in his career, and a few other what I would call bottom up fundamental sort of value types. They look for that situation knowing that if you know the fundamentals, if you know what the thing is worth and somebody else is selling it for reasons having absolutely nothing to do with it, well, it's a gift, isn't it? Right.
15:19 Which raises another question, Rick. What we have seen in the past few decades is the rise of so-called passive investing. We could quibble about the term passive another time perhaps, but let's just call it passive and we know what we're talking about.
15:38 People throwing money into 401ks into index funds every time they get paid year after year after year and as a consequence the indexes go up and we wind up with 10 stocks accounting for 40% of your 401k. And the question about where and how does it end is one question that some folks have given a very interesting answer to.
16:10 And another question is sort of the flip side of what we're talking about. We mentioned people selling for reasons that have nothing to do with fundamentals, but now I'm talking about the overwhelming mass of investors in the US buying for reasons that have no reference whatsoever.
16:32 They don't even know what they own. My friend Brian Beach has pointed out many of them don't know they're in the stock market. Okay? There's no knowledge of fundamentals. I promise you, if they don't know they're in the stock market. So this creates the opposite situation. But it seems like the opposite action, to sell into it, has just been wrong and wrong and wrong and wrong and wrong for decades here.
16:58 Well, I think you have to use it. I think you need to get in the way of the money. There was a point in time in my life when I was a little critical of the ETFs, even a couple of my own construction, because if they're as an example volume weighted, that's not necessarily a measure of value, and I thought there was something inelegant for myself buying as an example the GDXJ and paying a fee to somebody where 60% of the stocks in the ETF I wouldn't buy with a straight face. The idea that
17:40 I would pay somebody money to construct an artificial portfolio that I wouldn't buy seemed odd. I've learned actually that there's a whole bunch of people out there who won't do the work themselves.
18:02 And if they want to express their preference for a theme, buying an ETF is a lot better than doing nothing. In my own case with resource ETFs I came to a different conclusion, which is that as you know my former firm Sprott, where I'm still the largest shareholder, is a major sponsor of ETFs. I think between ETFs and trusts we probably have 50 exchange-traded investment products on the market.
18:35 Now the answer to that for me when I do the math — and I hate talking against my former firm in a sense — why would you buy four or five of our products and pay us a management fee when you could buy the parent company, own an indirect interest in all 60 of them and get paid a dividend? Yeah. This is fairly simple arithmetic. Would you rather pay or be paid? I've decided I would rather be paid.
18:59 And people who are interested in passive investing might want to take the added risk of owning the manager as opposed to the product, and being paid as opposed to paying. The second part of the equation that I think is important is that you understand in the construction of most ETFs that size matters. Trading liquidity, simple market cap and heft matters, and this has exacerbated an otherwise already in place trend to mergers and acquisitions.
19:37 Front running the ETFs, if you give yourself a two-year or three-year lag time, is really truly simple. If there are big valuation lags between small companies and big companies, either the value arbitrageurs arb that away or the big companies take over the little companies. End of discussion. That's over.
20:00 A single asset producer in the mining business is viewed as being riskier, which it is, than a multi-asset producer. That discount goes away when the single asset producer gets taken over. Right? So I just want to be clear for the listeners' benefit. So we're saying if a stock is not in the ETF and it has a more attractive valuation, the big stocks in the ETF are going to wind up buying it, or is that what we're saying? Correct. Yeah.
20:25 Correct. And there's now two types of M&A, at least in the markets that I follow. There's the first which is strategic, which is to say an Agnico Eagle that has a plethora of infrastructure in the Abitibi taking over a company that has an attractive deposit but a deposit that couldn't advertise the construction of a mill.
20:50 Agnico takes it over because it has a mill within trucking distance and it doesn't have to build a $350 million mill. In other words, a deposit is more valuable to it than it is to the current shareholders. Those are strategic acquisitions. But there's tactical acquisitions. Now, the growth of Equinox Resources, the recent takeover of Orla — you combine companies that have absolutely no operating synergy.
21:14 But they know that by combining they have an attractive product pipeline and they're producing a million ounces a year. In other words, you construct a new major and that will get index inclusion and it will get passive buying every two weeks from, as you point out, workers who don't even know that they own gold stocks or stocks. Yeah.
21:34 These are trends that while they make you and I laugh are trillion dollar trends. And understanding what it is, and understanding the likely — not the certain, but the probable — outcome, and tailoring part of your investment thesis to getting in the way of the money is something that I think all thinking investors have to do.
22:00 Well said. I just want to underscore this for the listener. Did you hear those two things? One of them was buying the undervalued smaller company that is not in the ETF because the bigger company in the ETF is going to own it. That was one. And the second one was buying the folks basically building a bigger company, building a major company that will then attract all the liquidity of ETFs and so forth.
22:29 Correct. Very interesting. Getting in the way of structural trends. Yes, that are caused by the trend of passive investing. Yeah. I'm not suggesting necessarily that you buy the passive investment. But if you're lazy — in fact, if you're lazy, there's a certain argument, Dan, an accurate argument, that not all forms of wealth are material.
22:52 Which is to say, some of your listeners are probably smarter than you and I. They spend time with their children and grandchildren. They read books. They garden. They fish. They don't want to spend their whole day going over 10-Ks and 10-Qs. For those people, if they spot a trend that other people haven't spotted and they want to participate in it without wrecking their lives studying the individual companies, the ETFs probably have a place. Right? Everybody's different.
23:19 Absolutely. Not everybody is Rick Rule. Simply put. Yeah. All right. Now so we talked about energy and all this passive stuff too. There's some other things happening — like we've heard a lot of talk over the past, well basically since Trump got into the White House, about building critical materials mining and processing capability in the United States.
23:55 My kind of take on this — things are being done, money is being shoved around here and there. Okay, I won't deny that. But here's my take on this, Rick. Like I look at refineries, right? Like building a new greenfield refinery, which they say they're going to do at the Port of Brownsville, America's first refining — you know, that's the sixth name of that entity.
24:22 It's been through bankruptcy. It's been going since like 2016. They tried to build a pipeline to that same site and storage and a terminal. They couldn't do any of that. But now they're going to build a massive, it's like 260,000 barrel a day refinery, a multi-billion dollar thing. I think the number thrown around for that Reliance was going to put in was like 40 million and it was like a whisper through the Financial Times or something.
24:46 And then there was a smaller project up in North Dakota that never went anywhere. There's barley growing on it now. That's where it went, in 10 years. And I just think to myself, if anybody was going to build a refinery, it wouldn't be these little fly by nighters. It would be the people who could write the check tomorrow, right? So I don't think the greenfield is ever going to get built during my lifetime.
25:09 And then do I correctly extrapolate that into other industries or no? And am I completely wrong? If I'm completely wrong, please tell me. But that's where my skepticism about this whole building critical mineral processing in the US comes from. Well, that's a big topic. The first thing I need to say is that from a taxpayer point of view, I'm scandalized.
25:30 You have an investor that can't deliver the mail, can't educate the kids, and they somehow think that they can control the economy. By the way, with my money. Yep. With all due respect to our president, he's bankrupted a lot more businesses than I have, and I don't have any particular interest in hiring him to be my money manager, particularly with as much of my money as he purports to want to spend.
25:58 The second thing, however, is different. As a shareholder of existing companies, there's nothing industry likes to see quite so much as dumb money. And there's no money in the world dumber than government money.
26:24 I've had the odd experience in seven years in the uranium business of going from being perceived as an absolute pariah — a fellow who I believed myself would grace a post office wall in a wanted poster — and now those same morons want to subsidize me. I must say I felt cleaner when I was vilified. But they're proposing to spend 700 something million dollars with a company that I basically saved from bankruptcy eight years ago.
26:52 This is bad for America. This is good for Rick. So I have mixed minds as to the circumstance that you talk about with the refineries. We haven't built a new refinery for a long time. We need to do it. But the government doesn't need to do it. No. The government needs to enforce existing law but gets existing policy.
27:21 Now Trump is talking about subsidizing the copper industry. I actually for the first time in my life sent an email to a sitting president, Mr. Trump, and I told Mr. Trump that there is a copper deposit in the United States called Resolution. He's probably not familiar with it.
27:45 It's one of the largest undeveloped copper deposits in the world. Well over a billion tons, average grade 1 and a half percent, more than three times the average grade of mined copper in the world. And it sits in a wonderful location between two copper mines. There's a highway goes over top of it, a rail goes over top of it, power, water. There's a town nearby where copper miners live.
28:06 Very handy things if you're going to build a copper mine. And the mine has been permitting for 28 years. Think about the destruction of shareholder value on a net present value basis. At an 8% discount, an 11-year delay in the start date takes away all of the net present value, 100% of it.
28:32 This one has been in permitting for 28 years. The government, although I love the fact that they're dumb enough to give me money, doesn't need to. They just need to get out of my way. Yeah. Exactly. If Exxon thought — and I use Exxon just because it's an easy name — if Chevron thought, if Exxon thought, if any of those guys thought that they could be permitted to build the Brownsville refinery,
29:05 it'd be built. It'd be done. They wouldn't need to go to insurance companies. Guys who are in the business of producing oil and gas and refining it and selling it to motorists — this is a good business. They'd be there like white on rice. Yep. They don't need any help. They just need the government to stop shooting at them.
29:26 Yep. Yeah. And it gets messy, too. Because first there's this raft of so-called environmental regulations and difficulties of that nature. But then at the local level, there's always groups of people showing up in courtrooms, and so it really just gets so messy and that's why you don't see any of those.
29:52 And that's why I think they need to enforce existing law. I mean, yes, I'm in the oil business. I believe every oil well and gas well drilled in the United States should be bonded. I think that the way that you enforce environmental considerations is that you make the industry pay upfront for any potential damage.
30:15 This is fairly simple stuff. Yeah. Make the user pay. I think that would do more than all the sort of save the butterfly mandates in the world rolled into one. Make the offender, when an offense occurs, pay — but make them pay upfront. We have a wonderful insurance industry in this country.
30:41 I'm part of it. And we know how to price risk. Not always well, but it's better that the private side prices risk than the Department of Education or the post office pricing risk. Yeah. Those price signals aren't real price signals. This thing we have called the market, as you pointed out earlier, works, and the price signals may not be perfect but they do the best job in the world.
31:09 So do we have — it sounds like, certainly personally there is very much a get in the way of the money pouring in thing. We've established that. But there is a broader sort of let's get in the way of some of this money for our listeners and other investors. Right. So, if you're asking me to do that, let's do it.
31:30 If you believe, as I believe, that there's going to be a structural shortage in the oil and gas business beginning in 2029, that's a really simple trade. The way you play it really depends on how much risk you're willing to take, how much volatility you're willing to endure, and how much operational risk you're willing to endure.
31:50 The easiest thing to say to an audience as big as yours is buy Exxon. Yeah. Just relax. A company with a 30-year track record of intelligent deployment of capital and really intelligent management of political risks is making the sustaining capital investments, and they've actually made a discovery in Guyana that's big enough to move the dial on a company the size of Exxon.
32:13 So one thing that people might do is buy Exxon. If it goes lower, buy a little more, enjoy a decent but by oil company standards stingy dividend. And let just wait till their sustaining capital investments relative to their competitors makes you a boatload of money in 2029 or 2030. Yeah.
32:38 If you want to be a bit more aggressive, I think that the theme US natural gas is a theme that's done well but has more legs. We're producing too much gas now, but we're building out the infrastructure to export it at the same time that we're building out the infrastructure in the United States to use it. And that imbalance changes.
32:58 And when that imbalance changes, people who got in the way when it was unpopular are going to make a boatload of money. And you don't need to get too fancy. Devon merging with Coterra. Yes, an oil producer too, but an important gas producer in the Permian Basin, Midland Basin, Delaware Basin. It's important to note that this merger they did with Coterra doesn't just make them bigger.
33:26 They had interfingered leases which makes them much more efficient. You can drill three-mile laterals as opposed to one-mile laterals. Another name in US natural gas — and I know our old mutual friend Porter Stansberry has liked this company — EQT up in the Northeast, transporting gas from the northeast which never had any, to the northeast where they've always used some. Now they have it.
33:50 I mean, this is a really good business, taking gas from Ohio to Ohio, from Pennsylvania to Pennsylvania, or if you're really really really fancy, Pennsylvania to Massachusetts. Nice business. It's going to be a much better business 5 years from now. If you can take political risk, look north of the border.
34:08 As cheap as our companies are relative to the cash flows as they'll enjoy in 2029, the Canadian companies are cheaper because there's headline political risk. The guy who runs that country, the circus barker Carney, has the same philosophical predisposition as his predecessor Trudeau did. The difference is that Carney can count. Whereas Mr.
34:33 Trudeau couldn't count. Mr. Carney understands that his social spending goals require money. And what Canada does well is produce oil and gas. So despite the fact that he's philosophically opposed to them, he's fiscally now in favor of them. If the political risk manifested by the political class in Canada goes away, the incredible disparity in valuation between the Canadian producers and the United States producers begins to go away.
35:02 But there is that headline political risk. People need to understand that. And the more attractive parts of that market are probably smaller, which means that investors have operational risk and they have to do some work. But if they are willing to do the work, the icing on the cake that has to do with terrain in Canada that's much less drilled than in the United States but that has the infrastructure — that is by any measurement metric substantially cheaper, playing catch-up over five years in what is already a good market, I think is
35:38 particularly attractive. Are there names? Yeah, that's what I was — are there names? Sure. The big ones: Cenovus, not a great company, but stupidly cheap. Canadian Natural Resources, a better company, big company, covers the length and breadth of the Canadian play. Those are there.
36:02 I personally prefer smaller companies. We talked, I guess, a year, year and a half ago about ARC Resources. Somebody else liked it too — Shell. They took it over, lock stock and barrel. So that one's gone. But Freehold Royalties is still there. Great company. Tourmaline, maybe best return on capital employed of a decent-sized company in the Canadian oil space. Just fantastic operators.
36:24 Birchcliff, Peyto, PrairieSky Royalty. There's seven or eight names up there that if somebody is willing to hold them till 2030 will by then think that you and I were very good guys for having talked about them now.
36:48 All right, that's a lot of names. Thank you. I may have recommended about half of them in various places in my newsletters. Good. Well, it will inure to your benefit over the next five years. Yeah, we actually had ARC right up until it was taken over. That was a good one.
37:06 You know, I used to compete with them. I flatter myself by saying I competed with them when they were in the finance business. What basically happened is I got what they didn't take. Competing with them for 30 years let me know I wanted to be their shareholder. I got to know them very well, because when I say I competed with them, they trounced me. All right. For our listeners' sake, if you want to get in the way, you want to see a really good presentation with a lot of ideas, just go to projectvault2026.
37:33 com and it basically is a presentation about getting in the way of the money, the way Rick has described a couple of times here, and it's got a lot of good ideas. Projectvault2026.com. All right. Wow. That's a lot of good names. The one thing that I wanted to mention just to sort of complete the loop on Exxon Mobil was you mentioned the dividend was stingy, and earlier you had said well all these companies are paying out dividends instead of making sustaining capex.
38:10 It's hard for people to see, isn't it, that the bigger dividend is the less desirable situation — but it is that the stingier dividend accrues to the shareholders' benefit more so than the more generous dividend over time. That is accurate. It's important to note that this is a capital intensive business and if you defer your sustaining capital investments, you're not able to pay the dividends four or five years out.
38:37 So it's important that people understand that there's one company in the world — and this is much riskier — Petrobras, which has a habit of paying too much dividend because the Brazilian state is the largest shareholder and is rapacious. But they've been so efficient upstream that they are increasing their production and their reserves while making smaller sustaining capital investments than would be the case, and still paying decent dividends.
39:10 They weren't until the last two years growing reserves and resources, which is to say the capital drought was cannibalizing the company. They've become so effective, so efficient with the drill bit, that they are able to make what I would consider suboptimal sustaining capital investments while still growing the company and still paying an outrageous dividend.
39:33 Your risk here is that the political class in Brazil looks at this and decides to up the level of theft that's occurring. Now understand this theft benefits you too, to the extent that the government takes more money out by way of dividends. You get more dividends too. Right. You mentioned when you discussed Canada the differential created by the perceived political risk, and if it ever went away, boy would there be a nice benefit for shareholders of Canadian oil and gas companies.
40:09 We're calling that a low probability event. Right? I don't know. I'm no fan of politicians, as you know, down either side of the 49th parallel. Right? Or forecasts, I would assume. Yeah. Okay. If you look at Carney's actions in the last 6 months and you look at his background — CEO of Brookfield as an example — you see a guy who may not be a good capital allocator but knows good capital allocators.
40:43 If you look at his spending programs which are absolutely obscene, he knows he has to raise the revenues. The prior Trudeau, Pierre Trudeau, almost bankrupted Canada, and this lesson hasn't been lost on Carney. It took Trudeau's successors to get Canada back on track. I think that Carney will be less opposed to major projects, including hydrocarbon projects, than would otherwise be the case simply because he knows how to add and subtract, which his immediate predecessor, Justin Trudeau, obviously
41:28 did not know how to do. Right? Less opposed. We take the wins where we get them. Less opposed. If that's the best we can do, less opposed. Bring it on. To what extent have we framed the lack of sustaining capital investment at some of these firms — to what extent is it not a choice? In other words, to what extent is it driven by awareness of these political risks that we're talking about or other regulatory issues? I think there's a related issue. I
42:05 think institutional investors have made a mistake in oil and gas. Institutional investors to some extent control the purse strings and I think the major banks have had a role to play. I think that a lot of the discussion around oil and gas was — I think that the thought leader was that noted energy physicist Greta Thunberg and her ilk: Angela Merkel, Justin Trudeau, Joe Biden, Gavin —
42:42 scientists. Yeah. Gavin and the rest of that crew. And I think they told people, and I think people believed, that the end of fossil fuels was over, that peak oil demand would occur in 2030. And in that case you didn't need to make sustaining capital investments — who needed to maintain production when demand was falling?
43:04 The difficulty with that is that the markets didn't act that way. I'm 73 years of age. I don't think the peak oil demand will occur in my life or frankly, Dan, for your life either. So cash flows that occur post 2030 will still have value. The detractors to this point of view say what about alternative energies? And I've, as you know, invested in alternative energies, occasionally wisely.
43:39 What I've noticed about alternative energies, and this is interesting: we've now spent somewhere around 10 trillion over 45 years in alternative energies. A lot of money. And we've reduced the market share of hydrocarbons from a high 45 years ago of 83% to a low today of 81%. In other words, a 10 trillion investment over 45 years has reduced the market share of fossil fuels by 2%.
44:06 Demand for all forms of energy is growing. And this isn't all about data centers. This is about making the poorest of the poor less poor worldwide. A billion people on Earth have no access to primary electricity.
44:30 I think we'll fix that over 20 years. But that means we're going to need a lot of power. We're going to need a lot of energy. Wind? Sure. Hydro, to be sure. Oil and gas? Yeah, that too. Even coal. I mean people need to realize, their narrative notwithstanding, that poor people want to be less poor. And materially substantial lives are energy dense.
44:55 All forms of energy, including hydrocarbons. As you know, Dan, I'm competing in the banking business again. Yeah. Side note: should you ever want to retire, don't start a bank. But one of the things that really attracts me is that one of the businesses I know well is energy lending. And competitors that over the last 40 years would have trounced me had I gone into their territory —
45:20 the Bank of Americas, the JP Morgan Chases, the Citicorps, the Wells Fargos — are moving away from energy credits. I guess they listened to too much Greta Thunberg. But capital — I was going to ask, yeah — capital is becoming less available in that industry. Something which I treat with utter delight as a banker.
45:46 But I think the thing that you talked about earlier, which is the fact that a lot of spending decisions are being driven by institutional investors and institutional investors in turn are being driven by the narrative that peak oil demand has arrived — I think that supposition is wrong.
46:07 I think it's easy to bet against, and I am delighted that some of the biggest minds in investing — you notice I didn't say the brightest minds, I said the biggest minds in investing — seem to be following their investment lead from that dropout physicist Greta Thunberg. Okay. Yeah. So that is a good answer to my question.
46:27 So in other words, yeah, the capital is not making its way there partially for the perception that these things are going away, for which really amount to right — political reasons. There's no reason for them to go. We don't want them to go away. We need them. They're essential parts of our standard of living.
46:48 Let me see. We are almost at time here. Actually, we are at the perfect time to ask our final question. It is the same question for every guest. You've answered it before. If you don't remember it, it works better that way. So I hope you don't remember it.
47:09 It is the identical question no matter — like even when we don't have a financially oriented guest, same identical question. It's just for our listeners' benefit: if you could leave them with a single thought today, what would it be? If you've already said it, feel free to repeat it, or if you want to think about it, take your time. Two things I think. All right. The first is take risk that's commensurate with the amount of work you're willing to put in. Dan, I've graded almost a 100,000 portfolios in 35 years. I've learned a
47:43 lot about how investors invest. One of the big mistakes that investors make is they don't think, they feel. And that's very very very difficult. The second is in finance the most important thing to understand is compounding, and compounding takes time. If you think in two-month or three-month terms, you take away your greatest ally, which is the passage of time.
48:13 Most people think that their time preferences matter and they don't. Of course, everybody wants immediate gratification. But if you want something that isn't available to you, you waste a lot of angst trying to know the unknowable. If investors began to act in four-year and five-year and six-year terms as opposed to that same metric by week,
48:45 they would do substantially substantially better. Amen to that. And if you're a subscriber to anything that I publish, please take that to heart because I want to hold things for years in the newsletters and show people that it's okay if it falls 20% or so. Everything's fine.
49:06 There's a lot of downturns on the way to a big multibagger result. Well, thanks for that. And thanks for being here. It's always a pleasure to talk with you. A pleasure, Dan. If I might invite your audience — I mentioned I've graded almost 100,000 portfolios and I'd be happy to grade yours, too.
49:24 If you go to my website, Rule Investment Media, and you list your natural resource stocks — ruleinvestmentmedia.com, list your natural resource stocks, I'll rank them for free, which is a very good price. Sidebar: please no crypto, please no tech stocks, please no pot stocks. This is natural resource stocks only.
49:44 But I'm delighted to provide the service. I found over time I learn as much from the process as I teach. So, ruleinvestmentmedia.com, list your natural resource stocks and I will for free rank them. I'll also comment on individual issues if I think my comments have some value. That is an incredible offer, an incredible bargain.
50:04 I highly recommend absolutely everyone in the sound of my voice taking advantage of it. If you own natural resource stocks, there is no better resource than this and no better price. All right, thanks a lot, Rick. We will be talking with you again real soon, I'm sure. I look forward to that, Dan.
50:25 Thank you. Thank you for our conversations over the decades. Oh, you bet. Thank you. I really mean it. I want you to take advantage of Rick's offer. If you own natural resource stocks, go to his website and enter them in and he'll grade your portfolio. This is like Warren Buffett offering to grade your portfolio of value stocks for free, or great businesses or whatever you want to call Warren Buffett's thing.
50:55 There's no better resource investor to be doing this for you. I've known Rick since 1998 and he has taught me many many things about investing in general but mostly about natural resources. And he mentioned being the largest shareholder of Sprott Inc. I recommended the stock in 2018 and every time I see the guy who was CEO then, Peter Grosskopf, he tells me that I beat everybody to that stock.
51:26 It was only after I recommended it that all the big banks got in and recommended it. He's always thrilled with me every time he sees me for that reason. At any rate, I love talking with Rick. I feel like I could have him on — he's one of the — I feel like I could have him on every quarter, every month, maybe even.
51:47 I honestly, we could do the Rick and Dan podcast practically, because he is very well informed about all the natural resource sectors. But I really wanted to focus on energy right now because there's a lot of talk about it and it pays to have a guy who has a much more rational view of the situation and a different view that's not based on the headlines, that's based on a farther out timeline, commenting and telling you what to do and giving you lots of ticker symbols.
52:17 Right? He mentioned Exxon. He mentioned Cenovus, CVE in Canada, Tourmaline, Birchcliff, Peyto — all those are Canadian companies. And like you said, if you don't want to make it too hard on yourself, just buy Exxon because it's a fantastic company and they have done a fantastic job for decades now allocating capital in oil and gas.
52:44 So, lots of good ideas, lots of ticker symbols for you to think about. Another great interview and another great episode of the Stansberry Investor Hour. I hope you enjoyed it as much as we really truly did. And remember, hit like and subscribe and sign up for our free daily email. Opinions expressed on this program are solely those of the contributor and do not necessarily reflect the opinions of Stansberry Research, its parent company or affiliates.