Rules on Market Trends ft. Dale Pinkert & Rick Rule

0:00Join over 20 ,000 attendees for the world's largest crypto event, Token 2049 Singapore, on the 18th to 19th of September. Balaji Srinivasan, Solanas Anatoly, Arthur Hayes, and over 250 others will hit the stage as Token 2049 takes over the iconic Marina Bay Sands in Singapore. With over 500 side events during Token 2049 week, Singapore will transform into a crypto hub from the 16th to the 22nd of September, capped off by after 2049 and the Formula One Grand Prix Race Weekend. Everyone will be there. This is the one event you can't miss this year. Visit realvision.com token 2049 for 15 % off tickets only with the code realvision.

0:48Link in description.

0:58Hi, Warriors. I'm Dale Pinkert. Good to be back with you. And I have the good fortune of being able to someone I met three decades ago that doesn't remember me. But I guarantee you this, Rick, you'll remember me after this interview. I look forward to it, Dale. All right. So Rick Rule of Rule Investment Media. And you can find Rick on X at RealRickRule. And it's great to talk to you, Rick. You know, I remember from back in those days, you were also in natural resources and the miners. And so you have wisdom and experience. We're all still learning, but you've seen several cycles being around like you have, like UNI dinosaurs.

1:47Where do you think we're at right now? The market got recently rattled hard, especially tech. Really had a pretty big sell-off in NVIDIA, the poster child for Happy Days Are Here Again and AI. and the market's trying to recover from the bloodbath on Monday. Was this a financial earthquake? And all I have to say is, you see this chair here, Rick? The VIX. Okay, welcome to Real Vision today. You have the Real Vision if you see we traded at 64. And I was thinking of using this for a book cover and call it a broken clock is right twice a day, and that's enough. So does it show how fragile the state of the markets are, Rick, that a 10 % sell-off could generate this type of fear level in the market?

2:50I think it speaks to a lot of things. I think it probably speaks to the leverage nature of many people's participation in the market, which is to say volatility spikes when people's fears are grounded in reality. Think about how real those fears might be. Think of yourself as an example, being one of the large trading banks with$40 trillion in on-balance sheet derivatives. Everything is fine as long as the counterparties pay. But if the counterparties don't pay, you begin to have an issue. Think, too, about all the retail holders who have margin debt. When things get offside, if you have margin debt, you don't make the sell decision.

3:35The margin clerk makes the sell decision. That's right. I've been, frankly, very incredulous as to why volatility in the market has been as tame as it has been, given the fact that I think that there are a lot of underlying pressures on the market that would make it more volatile. As an example, the economy itself, I think, is in much better shape, at least for rich people, than people think it is. That's bullish. The advances that we've seen in the applications of technology have generated real wealth with less capital. That's bullish. The debt and the deficit are unsustainable. That's bearish.

4:23A lot of the market performance has been market performance with no breadth whatsoever. Well, that was what was supposed to have happened a couple of weeks ago when the Russell had a record day. What a fish hook. But this was really the unwinding of leverage of the end carry trade, right, Rick? People would go out, they borrow yen, 0 % interest and buy assets. I think that's very true. You misunderstand the importance of the marginal buyer. It's not like a market is driven by 100 % of the buyers and 100 % of the sellers. Markets are driven on the margin. And the unwinding of the carry trade among institutional investors had much more impact, as you wisely have pointed out, than people thought it would.

5:15Okay. All right. So with all of this going on, people have been looking towards precious metals as a haven. And when you have days like we had yesterday, you don't sell what you want to, you sell what you have. And we had a pretty good decline in gold. It's been struggling here lately. To me, Rick, technically, if we take out 2360, I think there's going to be a back up the truck by entry in the low 2200s. Do you have levels that you're interested in being a buyer in gold? Or is it like a lot of gold guys don't wait to buy gold, buy gold and wait? Well, I've already done the latter. I began a systematic purchase of gold in 1998.

6:06Right. And a financial planner who looked at my portfolio would tell you I was stupid to own any gold. I'm the largest shareholder as an example of Sprott Inc., which is a brand name for gold investment. If gold does well, Sprott should do very well. I own gold, however, because I'm an old man and it helps me sleep nights and stay calm. I add to my own gold portfolio during periods of time when gold experiences substantial weakness. I don't have to buy at any price. Whether or not$2 ,200 is the right level, I just look for charts like the chart you just showed me. I look for charts where assets that I want to own are in total, total, total disarray.

6:54That's how I do it. Very unscientific. But, you know, Dale, it's worked for me over time. I should comment, too, about the NVIDIAs and the things like that in the world. I invest in natural resource-based businesses, and I invest in conventional financial service businesses. Banks, insurance companies, investment banks, asset managers. I do that because those are businesses that I understand. If I don't think I understand the business, if I don't think I understand the business, I won't buy the stock. I'm one of those guys who believe that you make money by exploiting the delta between the price of something and its value.

7:34That presupposes that you have the ability to analyze the value. The consequence of that is that when people ask me broad market questions, I don't have to feign ignorance. I am ignorant. I don't know the value of NVIDIA. I don't know the value of Microsoft. And the consequence of that is that I'm not tempted to buy them at almost any price. Okay. All right. So when you're looking for value in miners, a lot of people say it's very important to know who the jockey is. And someone who has a track record like Pierre Lassonde. Um, is that a very important feature of companies that you buy that you have to know who the jockey is and you're betting on the jockey?

8:18Uh, as you go further down the market cap trail, absolutely. I would say below a billion dollar market cap, the jockey is more important than the horse, but it's interesting, Dale, that you mentioned that because when you look at some of the larger companies, what you find is that CEOs that are competent with long duration outperform their peers, even in large companies, over a period of time. If you look, as an example, at Franco Nevada, not just the initial investments that they made in the royalty and the Carlin trend, which were magnificent, but also the redeployment of capital, what is called the recycle ratio.

9:00The amount of ounces of gold that they can buy from the margin of the sale of one ounce they produce has been spectacular. If you look, too, at the corporate culture, which is to say that they run the entire company for 11 basis points, that lesson is transferable, too. If you look at the oil and gas space at the two-decade-long outperformance of ExxonMobil relative to other large oil companies or in the gold production space, the three-decade-long outperformance in capital allocation at a Nico Eagle relative to its peers, What you say becomes very true. In addition to the hard statistical work that you have to do with balance sheets, income statements, and resource statements, you have to look at the capital deployment allocation decisions by the CEO, provided that the CEO is still with the firm and young enough to continue to make a difference.

9:56So very valid point. Thank you. Okay. It looks vulnerable to me. In the near term, probably is. Yeah. Yeah. Yeah. I'd like to ask a question. What's that? I'll have to defer to you. Okay. Back over 130 would look a lot better. And that's what I want to ask. A lot of people bought miners. Here's a pretty good example. Most of them rallied real big for March, right? We had this nice March rally. and a few of them, what's wrong with First Majestic? Do people ever call in and ask you about it? This has retraced almost 100 % of the gains, I mean, compared to something like an Endeavor where it's still a pullback or Fortuna where it's still a pullback, well above the lows for a year or so.

10:53What's wrong with this stock? I'm wondering why it's given up. Is it bad earnings or not making money even after that silver rally? I would say that the challenge with First Majestic is that they made an investment decision some time ago to buy Jarrett Canyon. Okay. At Jarrett Canyon, they haven't yet been able to throw enough cash, love, and attention to prove that they can make that mine work. uh so really three bad things are happening by focusing on turning around jared canyon they're having to go they're having to neglect some of their other operations uh they the market has has a concern that they will ultimately be unsuccessful and at the same time they're experiencing operating losses there should first majestic be able to turn around jared canyon should they be able to affect the same changes that they affected at San Dimas, you will see the stock do well.

11:55But there is no indication so far that they have unlocked the mysteries of Jarrett Canyon. Hey, everyone. We're going to take a quick pause and hear a word from our partners. We'll be right back.

12:19trading opportunity? You'll be able to trade it in just two clicks. Feel ready? You can move to real money with as little as$100 once your account is approved. And the great thing is that in addition to crypto, Plus500 gives you access to a wide range of instruments. S &P 500, NASDAQ, gas, and much more. Explore equity indices, energy, metals, forex, and beyond. With a simple and intuitive platform, you could trade anytime, anywhere. Experience the fast, accessible futures trading you've been waiting for with Plus 500. With over 20 years of experience, Plus 500 is your gateway to the markets. Visit us.plus500.com to learn more.

12:55Trading and futures involves the risk of loss and is not suitable for everyone. Not all applicants will qualify. Plus 500, it's trading with a plus.

13:08okay so you know see if i found the best investors and traders are not lazy and that and that they spend a lot of time in research and looking into things and uh their man hours you know traders they call it screen time whatever it is um i would say that you spend a great deal of your time and you're passionate about looking for the rough diamonds out there that people don't see, that's hard for an individual retail investor to do, isn't it? Probably easier than you think. Yeah, really? But the investor has to do it. This will sound like an unblemished commercial, but I have 200 hours of instructional material.

13:58Okay. At the rural classroom. Somebody who wants to learn how to do the work can learn how for free, but they have to do it. Individual investors, too, think that they don't have access to information when, in fact, they do. If you call particularly a small company and ask to speak to the CEO, if he won't speak to you, he's told you something. He's told you that he doesn't want to lower his cost of capital by attracting investors. The truth is that in my recent conference, I interviewed 52 exhibitor CEOs before the conference, and 52 of 52 said in the interview the correct place for a retail investor to get information about the company was with the CEO.

14:47You need to understand that a passionate CEO doesn't care about politics. He doesn't care about baseball. He doesn't care about popular culture or movies. He or she cares about their company. If they don't want to talk to you, it's because they don't care. And they've told you something valuable, which is to say you should discard them because they don't care. Okay. So should we discard every company that employs an investor relations department? The investor relations department's job is to do outbound communication. All right. Among other things, I often call the investor relations department to set up an interview with the CEO.

15:27Okay. They can provide a useful function. They don't always do so. Okay. All right. So why don't we talk about what a lot of people are crying about? I went through X and people are talking about how much was given back on the uranium trade. and I pulled up a few and to me the damage, you know, I'll pull up best of breed, be Cameco, right? Yep. Would you consider them best of breed? I would. Okay. So pretty good break. Probably the lower cap ones got hit harder, right? Like here's an ETF. I don't know if it looks worse or not. About the same. And here's Denison. Do you like Denison? I can't own Denison because they're trying to employ a technology in the Athabasca Basin at depth in situ leaching, but I don't know if it'll work.

16:31Denison feels to be more like a technology stock than a uranium stock. Interesting. If it works, the chart will look very different, but I hate that word if. Yeah. So I don't own Denison. Okay. All right. I'm just asking, and is this supposed to, because I've talked to people about the uranium market before, and Sprott quotes it, but during the interviews, it seemed like it never, physical really never trades, that the quoted price is based on maybe there'd be a trade there. What you say is very interesting. People pay slavish attention to the spot price because it's easy information to get hold of, but it's increasingly information of less value.

17:23The screen that you have up, the Sprott Physical Uranium Trust, does more volume on a daily basis than uranium does at spot. One could say that the Sprott price is the new spot price. Like that. In effect, the important information in the uranium business now is the term market, the private contracts entered into between uranium producers and uranium consumers. That market, however, is opaque. The companies aren't required to release price, volume and time information to the market. So the uranium market has become very, very opaque for precisely the reason that you have suggested. The spot market, which is the frame of reference for the market itself, is very tight and very illiquid, and the market is dislocated.

18:16The second thing about uranium is that the uranium market waxes hot and cold. When the uranium price has to go up, that is to say, when the market ought to be most bullish, investors don't care. After the price of uranium does go up, the fact that it went up justifies the narrative, and people pile into the market at the top, only to lose faith and to sell. Is it a true correlation that higher other energy prices are constructive for uranium because it really is an energy play? So if WTI, which has been in a fairly severe bear market, is under pressure, that it takes some of the buying pressure out of the uranium market?

19:09From a fundamental point of view, only in the very long term. From a market viewpoint, from an emotional viewpoint, what you say is absolutely true. People look at uranium, they look at coal, they look at alternative energies, and they lump them all in the energy basket. The truth is that they don't actually compete with each other very directly. But that doesn't matter to most people. Most people's investment thesis is got a hunch, bet a bunch. I like that. Do you know that, you know, I've talked to Jack Schwager. Do you know who he is? I do not. He wrote Market Wizards. Anyway, he said that trading is the only business or investing where people feel they could read a book over the weekend and be ready to go Monday morning.

19:57It's like brain surgery. Could you read a book about brain surgery and go into the operating room on Monday? Perhaps the only reason I've been successful is the low capacity of my peers. Yeah, do you play off sentiment? And what you read is that, I know I feel uncomfortable when I have too much company and I'm hearing a lot of agreement. I'd rather have the other pushback coming at me on a lot of my trades. How about you? Dale, so true. I look at sentiment partially as reflected by charts. The chart that's most appealing to me is either a crash or a boom. When stuff has positive momentum, I'm a seller.

20:46Right. When stuff has extraordinary negative momentum, I'm a buyer. It's very odd to me, Dale, that when your listeners go out to buy physical goods, say cans of tuna fish or a winter coat, they're pretty good shoppers. They look for value. They look for sales. When people buy financial goods, however, they call sales bear markets. They're afraid to buy stuff cheap and they're afraid to sell stuff that's dear. I've existed in the markets for 40 years. My first 10 years were spent like they were. I've existed in the markets for 40 years, taking the backside of those sentiment trades. Okay. Well, then let me ask you this.

21:27Are you married, Rick? I am. All right. Well, then I probably shouldn't show this to you because this is called the widow maker. All right. Yep. Wouldn't want that to happen. But natural gas historically, here's one that fits the Rick Rule type of investment that we're talking about before the recent rally from a dollar that we were at maybe 20-year lows on that gas. Will Europe have another warm winter? Is Russia going to play nice? Isn't that historically cheap? What do you think? Absolutely. And because I, as an investor, think in five-year terms, I'm completely unconcerned about what might happen in that gas market in 2024.

22:20got you uh i so it could make a new low and to you that wouldn't be well maybe i should rethink it to you it would be uh well if i liked it here what a great place to add on i'm buying productive capacity that'll have a 30-year tail uh and so for me the difference between a buck a thousand and$1.50 a thousand doesn't matter much. I understand the reasons that natural gas is so cheap. I understand too, which Congress will never get, that the cure for low prices is low prices. And the cure for high prices is high prices. I look for commodity prices that are unsustainably low. I look for commodities that are priced below the cost of production.

23:10because in that circumstance, either the prices go up or the commodity becomes unavailable to humankind. Natural gas is the perfect market for me. I don't buy natural gas itself, but rather I buy companies that are cash flow positive at current low prices, which is to say companies that outcompete their peers that have 10 year or 20 years or 30 years of reserves to take advantage of the inevitable rebound in natural gas pricing. And this is, as you suggest, for me, a target-rich environment, Dale. Hey, everyone. We're going to take another quick break and hear a word from our partners, and then we'll be right back.

23:57Okay. Well, could this be another target? Joseph of biblical days is my hero as far as a commodity trader. He had the same style. He was buying wheat when it was in abundance and stored it and had it there when it was necessary. So our agricultural commodities on your radar, they're more weather related. You could have a drought and not be able to produce. But I have to think with the dollar turning and exports that may begin to get better in the U.S. because of a weaker dollar, that agricultural commodities might be a steal down here. I tend to focus more myself on markets where the supply doesn't change year by year.

24:54And I tend to focus, too, on the means of production rather than the commodity. Okay. So I am... The weather would make it not your style. Yeah, and I'm an owner of farmland rather than an owner of commodities. And as an owner of farmland, I am more inclined to permanent crops, things like apricots and almonds, than I would be to crops where you can change supply by increasing the amount of acres planted or by the inputs of fertilizer. In other words, I'm a longer-term investor rather than a trader. Okay. So if I blew up, I could get a spot on the farm as a tenant farmer? rules farm you and i are both a little old to be stretching fence dale

25:48anyway i just wanted to have a little backup i'm not blown up so anyway uh let me ask you how currency comes into i know you're uh let me guess i mean who cares what fiat is stronger or weaker It's all crap. Well, I maintain a lot of liquidity, Dale. Okay. I do it because although I believe the real yield in every fiat currency is negative after the deterioration of purchasing power in that currency, I think I have to stomach negative real yields to have what I call an option premium. if I have liquidity and there's a real liquidity break in the market and at businesses that I want to own, or at least their shares fall by say 50%, if I have the means, the liquidity to take advantage and I have the courage, I can take advantage.

26:48My single best investment year in my career was 2009 coming off 2008. You just been in cash. I had the ability. I was able to, when everybody else was afraid at the end of 2008, I was ready, willing, and able to push the button. And the consequence of pushing the button was that 2009 was a superb year for me. I have mostly U.S. dollar liquidity because I think that although my real yield in U.S. dollars is negative, it is less negative than it would be in euros, Swiss francs, pound sterling, yen, You follow me? I disagree. I think you'd have capital appreciation in things like the Aussie buying it here.

27:41I think the dollar voted last week, Rick, and it's spoken. It broke down last week. So I'm looking for subpar dollar index. I prefer the commodity currencies, but I think you could see a 120 euro. We need to have this conversation repeatedly over five years. Well, I don't think it'll take that long. We're starting a new bank called Battle Bank, which will allow Americans to save 18 currencies. Okay. Just like every bank did, our former bank. Right. So what's the difference between your bank? And, you know, I was interested. I got the email. I kind of brushed over it. How are things going? And what do you love about being in that business?

28:29I've been in the banking business for 45 years. And if you can resist the temptation to make stupid mistakes, it's a very good business. The last bank that this bank built, that this team built, was EverBank. And they built a$28 billion institution from a standing start. at the beginning of the time that they built Everbank, which, by the way, offered foreign currency CDs and 22 currencies. We're only going to have 18 currencies to start. But at the beginning of that exercise, that bank had a zero customer backlog. Battle Bank now has a 14 ,000 customer backlog. So when the FDIC allows us to start business, I think we'll start it with a bang.

29:12And we will do it precisely because people like you, Americans, would like to save in euros. They'd like to save in yen. They'd like to save in Canadian dollars and Australian dollars. And we give them the ability to do that with FDIC protection. Nice. Other major banks do it, but they have a million dollar minimum for those accounts. We have a$5 ,000 minimum. Yeah. Yeah, it's great to make foreign exchange available to people because if I'm right, just a simplistic Forrest Gump type technical view of the dollar. I like simple. I don't know about you, but simpler, the cleaner, the better for me.

29:56I'm not complicated. I save in U.S. dollars, Australian dollars, Chilean pesos, and Canadian dollars because I invest in all those currencies. So, you know, for me, liquidity in these different currencies is in effect a cost of business. I've been able to affect that for myself. But many people don't want to go through the aggravation of opening a Chilean bank account, a Canadian bank account, and an Australian bank account. So Battle Bank does it easily. You can do it simply with a U.S. account. Okay. Well, I think we're eventually we're going for this destiny is 100 bar, big round numbers. and take it out eventually.

30:41So let me ask you this. I mean, we're headed towards funny time, the election season. And let me ask you, I mean, you know, you're a banker. So you should be able to answer this question. We know that the desire of the ticket of Donald Trump and Vance would like to see a lower dollar. They talk about it. It's a plank for economic plank for them. How I remember things like the Plaza Accord, but that took cooperation with, you know, other countries, other central banks. How does an administration executive branch and the Treasury engineer a decline in the dollar? Because I think they're going to get it.