00:00 I think the next 10 years are going to be very good in the natural resources business, but in order to enjoy that, you're going to have to take a lot of volatility into account and a lot of cyclicality into account. It's odd that people buy financial assets differently than they buy physical assets.
00:21 It would seem in financial assets as though everybody were in a store, the store announced a sale, and as a consequence of the fact that the goods were cheaper, everybody left the store. That's the wrong way to be. That is the wrong way to be. Hey everyone, my name is Anthony Fatsies and welcome to another episode of the What the Finance podcast.
00:45 On this episode, I have the pleasure of welcoming back Rick Rule. While most investors chase the assets that have already rung dry, my guest today has built a four decade career doing the opposite. Buying quality in hated sectors and waiting for the rest of the world to catch up. As he puts it, sadly the war in the debt will be good for gold and welcomes a lower gold price as a buying opportunity.
01:06 Right now, the road map is clear. Gold heading towards 12,000 to 15,000 structural oil shortages arriving by 2028 to 2029 on the back of years of underinvestment and uranium as a standout opportunity of the decade. He sees a current pullback in precious metals as a healthy consolidation within a secular bull market and has rotated from physical silver into the miners.
01:26 Rick Rule is one of the most respected resource investors of the past 40 years and the former president and CEO of Sprott US holdings. He isn't here to tell you what is already moving. Is here to tell you where the real money is made in patience, quality, and discipline. Rick, thanks so much for coming back on the podcast. >> Pleasure, Anthony.
01:43 Thank you for having me back. >> No problem. Looking forward to the conversation. I think last time we spoke it was just as the war in Iran has started. There was a lot of concerns about the cut off of the Strait of Hormuz, the cut off of supplies coming out of especially oil and gas coming out of Qatar and other countries in that region.
02:03 Have you been surprised by how well the global economy has been able to continue without that massive supply that was coming from there? >> First of all, three politicians have said the war is over. History has taught me to believe that politicians are lying when their lips are moving. So the fact that they said it is over doesn't mean it's over.
02:27 I certainly hope it is for a whole variety of reasons. I think too that, and we talked about this in our prior conversations, the price of oil rose in anticipation of having to ration by price, which is to say real supply shortages. If the war is over, we've probably averted that.
02:50 We lived off above ground inventories, including a massive draw down of the US and Chinese strategic reserves. I believe that we were about to see ration by price. And if the war is over, the 200 or so cargos north of the straits likely alleviate the immediate premise of shortage. We will need to rebuild inventories on a global basis because inventories have been very very very much drawn down.
03:21 What I think will surprise many commentators is the amount of demand destruction that these prices have caused to occur in emerging and frontier markets. Anthony, if the price of oil rises where you are and as a consequence, gasoline prices rise, when you drive to the filling station, you might cuss a little bit, but basically you fill your car up and drive away.
03:49 That's not the case in Malawi or Pakistan or Sri Lanka. These high prices have been responsible, I would suggest, for a lot of demand destruction. And I think that that demand destruction will stay on for a while. What that might mean, this isn't a forecast. I'm not an economist. What that might mean is that if restocking of storage inventory isn't robust that the demand destruction will overwhelm the supply increases and you might see oil prices fall faster than would otherwise be the case.
04:28 I don't know if that's true, but I do know from reports from people on the ground in frontier markets, something I have access to because I'm in the resource business, that demand destruction at these price levels has been much greater than people in the United States and Canada, as an example expect because our actions having more money are different than the actions of poorer people.
04:55 >> Yeah, great point. And I think as well a lot of that supply was actually going to Southeast Asia from the Middle East. So then that was another challenge of not only do they have to pay more, it's actually getting the commodities there.
05:10 I think at one point Sri Lanka paid over $220 per barrel for a tanker. So there's only so much they can do of that as you said. So then the Pakistans, the Philippines, the Sri Lankas, those type of countries are the ones who really see that demand destruction. And it doesn't seem to have been as bad as what we saw in Russia with the massive gas increases in 2022.
05:31 >> Correct. Correct. As I say, we tend to measure things in the very short term, Tony. And I don't know what the impact of this thing will be 6 months from now and 12 months from now. There's no way to know. And one of, I guess, the advantages that I have as a 73 year old is that I try to invest or tend to invest in four five six year time frames and if you do that your response to everyday news becomes less important then your response to the arithmetic around supply and demand in
06:08 any particular commodity. >> There's a lot of people talking about, as you said, the need to refill these strategic reserves in the US, in China, also lots of countries who were sort of caught with tails between their legs like Australia, like the UK, parts of Europe who didn't have that storage are potentially going to increase their strategic storages.
06:28 So is this something, I know you said you look more longer term, but would you see maybe a higher price for longer as these countries fill the storages or it just depends? >> I've been thinking about that a lot and the truth is I don't know. I don't know as an example what the United States might use for money.
06:48 Refilling the strategic reserve. Although we earned money by selling down the strategic reserve, I don't suspect that Mr. Trump put that money in a rainy day fund to refill the reserve. So the honest answer is I don't know. >> Yeah, great point. And yeah, he had trouble doing it during COVID when prices were negative.
07:10 So I imagine he'll continue to have trouble doing that now. We saw precious metals surprisingly actually not increase in price during this period. Normally they're seen as a risk-off asset that actually performs well during these periods of geopolitical risk and concern. Yeah, how, why do you think they maybe didn't experience that increase in price or that we'd expect them to experience during such a period? >> Tony, I'm not an expert in investor psychology, but I suspect that the fear
07:47 that really moves gold prices is the fear of maintenance of the purchasing power in fiat instruments. My experience has been that geopolitical concerns give people an excuse to do what they were otherwise going to do, but it doesn't have a very long-term impact on markets. It's fear of the maintenance of purchasing power.
08:10 I think specifically with regards to the gold market in the first half of 2026 that rising US interest rates led to a rising US dollar. Gold is denominated in dollars and as a consequence you have to look at both the numerator and the denominator as the real US dollar quote rose the price of many things that's denominated in dollars as a consequence fell.
08:40 Secondly the higher US interest rates and relatedly by the way the higher US interest rates made yield-oriented instruments less unattractive relative to gold than they had been. So it makes absolute sense to me that the increase in interest rates and the increase in the attractiveness thus of the US dollar was hard on the gold price.
09:03 It's my own belief that at some point in time in the not too distant future that you're going to see the US government lose its nerve with regards to the interest rate. And I believe that there will be concerted political pressure 6 months from now, 12 months from now, 18 months from now to lower the nominal interest rate.
09:28 And if I'm right, if that happens, you'll see a very different gold chart. Yeah. Yeah, and just, we're talking at the time literally where the new Fed chair Walsh is having his first meeting and I'm just reading here now what it's saying is apparently they're looking to abandon the bias towards lower rates.
09:46 So apparently there used to be some writing in the text they released which said that they would on average look to lower rates, but that's something that they're not going to do. So a lot more of a hawkish take from Kevin Walsh. How do you see that impacting, I guess? Yeah, as you said, the monetary value.
10:03 >> I'm old enough to remember Alan Greenspan, a legitimate gold bug until he became Treasury Secretary. People who become immersed in politics do what is politically expedient. So my suspicion is that Walsh, despite his academic background and despite his preference for interest rates that more properly reflect the supply and demand of the dollar that over time like Greenspan he will become politically motivated and the political class wants in fact needs lower interest rates. Understand that low interest
10:46 rates are really a function of subsidizing spenders at the expense of savers. In a democracy, spenders are always more numerous than savers. And if they vote their own self-interest, guess what they do? >> Yeah, they'll definitely continue to spend. And that's what we've seen from the average person as well as from governments.
11:10 If we go back to the oil and gas, I know it's something where you say underinvestment has been a major theme over the past few years. So I imagine that despite this short-term uplift that you'd say your bull case for these or certain companies is still valid for the coming years. Is that still what you're seeing? >> It was exacerbated in the very near term.
11:33 I think the oil price might fall farther than other people think it might fall as a consequence of demand destruction. But if you look out in a time period that was forecasted in the first conversations that you and I had, the fact that the oil and gas industry has historically by historically two two and a half years, three years deferred a billion dollars a day in sustaining capital investments means that the type of shortages that we experience as a consequence of war, we're going to experience in the future as a consequence of deferred sustaining
12:06 capital investments. And that circumstance became much worse during the war. Fairly obviously, Iran wasn't making sustaining capital investments. Nor was Saudi, nor were the UAE, nor was Kuwait. In addition to the increase in sustaining capital investment deferral, we need to rebuild all the stuff we blew up.
12:27 There was substantial damage to production, distribution and storage capabilities in Iran, Qatar and the United Arab Emirates. So in addition to deferred sustaining capital investment, we need to invest to restore those destroyed facilities. This exacerbates the circumstance in the out years. Specifically, I would suggest that the prices that we're experiencing today, we will experience inevitably, if not higher prices by 2029 when the cumulative effect of a billion dollars a day in deferred sustaining capital investments hurts our ability to
13:06 produce oil irrespective of war. >> Yeah, great point. And it's still going to take them a long time to get on. And these countries, they've sort of missed out on tens of billions of dollars of revenue as well. So, it's going to be quite interesting in how are they going to allocate that capital and then how are they going to actually be able to ramp up their production as they, >> you know, we can fix this.
13:28 It's just unlikely that we will. If you look at surplus producing capability in Venezuela as an example and Iran for that matter, with the availability of capital and the correct allocation of capital we could take care of this but we can't take care of it in the short term when people speak bullishly as an example about increasing Venezuelan production the amount of deferred sustaining capital and the amount of new project investment that needs to be made up for in order to effectuate that is staggering. And you
14:09 need to do it soon and smart people need to do it, not government people, smart people need to do it. And the probability of that taking place in time is I think very very low. >> Yeah definitely definitely the case. Okay so 2029 is, I guess, where you, is that where you'd see the end of the current cycle? Do you think it could continue further? Just >> I think 2029 is and I could easily be wrong by a year.
14:43 I mean easily could occur in 2028. It could occur in 2030, 2031. At some point in time the cumulative weight of underinvestment will impede places ability to produce. That includes the United States. In both the United States and Canada, the preference for institutional investors has been for oil and gas companies that maintain very very high levels of distribution to shareholders either by way of dividends or share buybacks.
15:17 What you do if you fund these returns of capital at the expense of sustaining capital investments is that you in effect cannibalize your company. In both the United States and Canada, the production growth that we've enjoyed over the last 10 or 15 years has been largely as a consequence of unconventional plays, shale plays, basin centric plays.
15:39 These are places where as a consequence of the convergence of technology we've eliminated frankly the exploration risk but we have replaced that exploration risk with extremely predictable but capital intensive high depletion production. It's not unusual for one of these multi-stage lateral wells as an example in the Permian Basin or the Delaware basin to generate 80% of its net present value in the first two years of production which means that you need to maintain an incredible pace of development drilling and our challenges
16:17 there are really twofold. One, at sort of 60 or $70 oil, which is to say the oil price that was prevailing before the war. It is estimated that the oil industry in the United States had drilled out 85% of their tier one locations, which meant that only 15% of the undrilled inventory remains. When you have that depleted tier one inventory in the face of the amount of drilling that you have to do given the precipitous declines that you face what that means is that the impact of deferred sustaining capital investment
16:56 at least at that price doesn't just impact countries like Angola or Nigeria or Venezuela it also impacts countries like the United States now at higher prices at $100 it skates a lot more drilling locations into tier one status. Tier one status is a function of drilling cost. It's a function of taxation.
17:22 It's a function of the cost of capital. And it is a function of geology and a function of the price that one gets paid for their product. Periods of higher sustained oil prices also increase the incentive for companies to maintain or increase sustaining capital investment.
17:50 But our capital reinvestment pre war was not sufficient. We'll see what happens over the next year. >> Yeah, definitely. Great point. And so I imagine you think that the service companies as well providing drilling facilities for them could also benefit from this. >> I wish I understood the service business better because what you say is true.
18:14 I am not really good at understanding process and technology despite 50 years of effort. The consequence of that is that my own portfolio is concentrated in the best of the best of the service companies. The Halliburton, the rigs, the Schlumberger. I'm sure there's more money to be made in the smaller, more nimble companies that offer better technological optionality.
18:34 It's just I'm too old and dumb to identify them. >> No, I'm sure that's not the case. They are complicated beasts unfortunately. Are there any certain regions that you think would benefit a lot? I know you've mentioned Venezuela, the US, other potential countries, many other regions you think >> for me because I understand it well, I'm overinvested in Canada.
18:55 I think there's a headline political risk, their prime minister who's anti-oil. I'm hoping as an ex-banker that he understands that his idiotic spending programs will require him to fund at least 60% of it. And the best chance that he has to do that is to allow the oil and gas industry to expand and the social take to expand.
19:14 If I'm wrong, I'm going to get creamed. Those companies meaning the Canadian companies sell at a discount to their American peers despite the fact that they have more undeveloped locations relative to the size of their reserves which is to say the companies are more undervalued. The difficulty is the headline risk.
19:35 The other place I'm personally allocating capital and your listeners may not want to do this is that the last sector of the oil business that's really hated is the small cap or micro cap conventional explorer which is to say nonshale based explorer particularly offshore and particularly in emerging and frontier markets.
20:00 This is highly risky but the change in technology particularly amplitude versus offset seismic technology has meant that the success ratios in offshore basins is dramatically higher than it was 15 years ago and that hasn't been reflected in the market. So one thing I am doing is I've reviewed 31 small companies involved in conventional exploration offshore in emerging and frontier markets and I have been investing, I shouldn't say investing, pardon me, I have been speculating actively in that group of companies.
20:33 Okay, super interesting. And yeah, I guess a lot of these companies are looking for new deep water discoveries basically. And that's where these companies come into play and potentially could either find something and then sell off a portion of it or could potentially be acquired by these big players.
20:51 >> That's precisely what they do. The high-quality companies use their own technical acumen but particularly their persistence and tenacity to get involved with host governments in relatively immature basins. And they do the preliminary de-risking work, which is to say they shoot the seismic. They negotiate the fiscal terms with the governments and then the smart ones at least attempt to bring a major or a large independent in to do the really truly heavy lifting.
21:26 It's precisely that type of company, pardon me, as you suggest that I prefer to speculate with. >> Yeah. So, super interesting. And then, we mentioned gold, mentioned silver. You'd say that it's obviously a devaluation of the dollar in the near term, debasement of the dollar.
21:46 Do you think that the recent low that we saw could potentially be a low or you, as you said, you're just looking more in the longer term? >> I have no idea. I mean, I really have no idea. I don't know what will happen in the intermediate term with interest rates. I will say myself that what I would define as inflation, which is to say the deterioration in the US dollar, is a much higher number than is evidenced by the CPI.
22:17 And I believe that one measure of gold ultimately is whether interest rates are positive or negative. And my suspicion is that the real rate of inflation, the real rate of the deterioration of the US dollar is somewhere between 8% and 10%. While the interest rate, at least the interest rate reflected by the US 10-year Treasury which is the bellwether interest rate is 4.
22:42 4. So I continue to believe that the real interest rate is sharply sharply negative. Most people don't share my opinion but I suspect over time they will. I remember in the decade of the 70s the spectre of inflation was in front of us from the whole period 1968 to 1972. It wasn't until five years of experienced inflation that inflation came to dominate the minds of investors and savers.
23:13 And I suspect that we'll have the same sort of delayed reaction this time, although I can't say when it'll kick in. >> Yeah, of course, that's always a challenge. And miners, how have you been tracking the gold and silver miners? >> I'm delighted by the price action. They've fallen substantially. I believe that the mining industry, the gold mining industry as an example, the legitimate parts of it will do very well over the five or 10 year term.
23:39 That means that I'm a structural buyer. I wasn't a structural buyer. Well, I was a structural buyer in the early part of this year, but I was priced out, which is to say I couldn't express my preference because the market liked them too much. The fact that the index of gold and silver producers has fallen substantially and has fallen indiscriminately, which is to say the relatively high quality companies and the junk companies have both fallen has meant that many companies that I wanted to buy that were outside of my
24:11 price range are in my price range or coming into my price range. And I would expect the second half of 2026 in my own portfolio, we'll see substantial net purchases. In October of 2025, you may recall that I sold 25% of my mining juniors. I did that because the indexes around the junior gold producers were screaming higher.
24:42 And I always sell hyperbolic charts, at least hyperbolic up charts. We don't have that kind of chart now. We see a sideways to down chart where despite the fact that the companies by most conventional valuation metrics are doing better and better and better, their share prices are getting worse and worse and worse.
25:05 That's a wonderful circumstance for me. Better values at lower prices. Yeah, that's definitely where you want to be. And it's then getting in and in your focus on Canada as well or are you a bit more geographically mixed on the miners? >> Where I think I'm going to end up being more exposed is West Africa.
25:25 The political news out of West Africa is horrible. And I suspect that the political news out of North America is going to get worse. For me it's a question of the size and the quality of the prize relative to my own interpretation of the risk. When people hear news out of a place like Ghana, they don't understand that the risk there is merely different than the risk in the United States and Canada.
25:57 The direction there is worse. But often the same amount of net present value can be obtained in West Africa at 50% of the market cap of the same net present value in jurisdictions that white people are more comfortable in. >> Yeah. And in West Africa it seems like we're seeing quite a lot of investment in oil and gas.
26:22 So then you'd imagine the next step would be the miners and some of that's probably more risky because it's on shore and harder to actually get out of the country. Well, there's some nice exploration results taking place in West Africa. You know, the industry has been exploring in a fairly concerted basis in West Africa now since the decade of the 1990s.
26:45 And it takes usually 10 or 15 years for green fields exploration to start to work. And exploration there truly now is in high gear. And the results that we're getting in West Africa are pretty spectacular across a wide variety. There's also been in terms of stability, I don't mean political stability, I mean the end of regime wars, a lot better opportunities now in places like Sierra Leone and Liberia, places that even if you wanted to explore before, you couldn't explore as a consequence of civil war.
27:35 So I would say in many regards my favorite exploration theater in the world is probably West Africa largely because other people hate it. >> It's always where you find the cheap options potentially. That's the way. So you talked about uranium previously as well that you're sort of quite a, you've been a large backer in the past.
27:56 Are there any other commodities including that that you're sort of quite interested in at the moment or you think there could potentially be sort of less loved and undervalued? >> Yeah, sadly, Anthony, nothing in our sector is hated anymore. There was a lot of easy money to be made in the sector 5 years ago.
28:12 Silver was hated, uranium was hated, oil was hated, natural gas was despised. There's not enough hate left. Even coal is regarded fondly now in investment circles. So I would suggest that across the spectrum of natural resources easy money, the really truly easy money has been made. I define easy money as when a sector is so broadly hated that all of the sellers having expressed their opinion have already sold.
28:45 When you exhaust the sellers markets have only one way to go which is to say higher. That period's over. In terms of several commodities, uranium included, the sure money, the certain money is ahead of us, but the easy money's been made. >> Yeah, it does seem that post 2020 there's just a realization of wow, you actually need to be, have assets and real things to create things.
29:10 You can't just rely on underinvesting for years and years and years and on software. You actually need to continue investing. You continue these assets especially with AI that we've seen recently. Well, I'm not going to comment on part of that statement, which is to say technology and AI because I don't understand it.
29:26 Somebody was asking me the other day, what I thought of Nvidia's valuation. And I said, I can barely pronounce it. So, the idea that I could opine on the relationship between price and value is a non-starter. I can't say that SpaceX is undervalued or overvalued because I don't understand the net present value of settling Mars.
29:45 I confine myself to subjects where I believe I have an opinion as to value because if you believe as I believe that the money is made on the delta between price and value. If you don't have an opinion as to value, the price information is useless. So I really can't compare them. >> Yeah, very refreshing.
30:03 A lot of people have opinions and with no expertise. So it's, yeah, refreshing to have the opposite opinion. But Rick, thanks so much for coming on. Covered quite a lot the whole commodity sphere geopolitics etc. My last question is what is one message you want people to take away from the conversation? >> Well, I think the next 10 years are going to be very good in the natural resources business but in order to enjoy that you're going to have to take a lot of volatility into account and a lot
30:34 of cyclicality into account. It's odd that people buy financial assets differently than they buy physical assets. It would seem in financial assets as though everybody were in a store, the store announced a sale and as a consequence of the fact that the goods were cheaper, everybody left the store. That's the wrong way to be.
30:55 That is the wrong way to be. I try to make everybody's life a little easier myself in that anybody who wants can personalize and access my opinions as to their own resource investing strategies. If you go to my website ruleinvestmentmedia.com and list your natural resource stocks, I will for free rank them, one being best, 10 being worst, and I'll comment on individual issues where I think my comments might have value.
31:22 That's ruleinvestmentmedia.com. Separate from that in the rule classroom you will find over 300 hours of instructional programming for free. ruleclassroom.com. Finally, once every year I put on a 4-day long investment conference which is the culmination of all of our investment activities. We've been doing it for about 30 years and I won't go into all the benefits of the conference except to say that all of the live tickets are sold.
31:54 It is only available to you via live stream from the comfort and convenience of your own home. What I will say is this. We will give you more information over four days than you can absorb over 4 days. The consequence of that is that recordings of the conference will be available to you if you are a paid subscriber for the balance of 2026 and you're going to need them.
32:15 I will also say that our commitment to you, the attendee, is exhibited by the fact that we interview all of the participants in the conference. The paid exhibitors and many of the speakers before the conference. Those interviews are available to you on YouTube at the Rule Investment Media channel. The purpose of this is that before the conference, you can listen to enough of the interviews that you can allocate your time and effort at the conference more conveniently.
32:47 And finally, this, if you do attend the conference via live stream and you find that despite all of my efforts that in your mind the conference didn't live up to its billing, there's no risk to you because I will give you your money back. If at your sole discretion you think that I didn't earn the tuition I charged you, I will refund you that tuition.
33:12 I'm delighted to say in 30 years of unconditional money back guarantees, we have delivered enough value that we've only had to refund about one tenth of 1% of the tuition charged. But that guarantee is your guarantee that we have enough confidence in our content that we know that it can make you money. That's ruleinvestmentmedia.com.
33:33 >> Yeah, perfect. Thanks so much for laying that out. Definitely description below. So if anyone wants to go to the symposium or find out more about Rick, they can access that there. But thanks again for coming on. Really appreciate your time. Pleasure.