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Rick Rule continues:

“The Super Committee talks collapsed and that temporarily unnerved the markets, and of course there is the ongoing comedy in Europe.  It appears as though the Germans are stuck in a very tough position over there which would involve them allowing the European Central Bank, in effect, to print.  Given the German experience from the Weimar days of hyperinflation, this runs counter to German political will.

So  I think on the one hand you have a lot of cash looking for a home and on the other hand you have a lot of events happening on a fairly regular basis that unnerve people.  Hence, the defining characteristic of the market that we are going to see is even more volatility than we’ve seen in the past.

I suspect that for a great deal of 2012 you are going to see the VIX (volatility index) above 30.  This will unnerve many participants and greatly enrich many others, of course, I hope KWN readers are in the latter camp.”

Turning to the metals, Rule stated, “I think there are a lot of people, paradoxically, who have gone for the liquid lie, which is the US long-term bond.  The US long-term bond has done relatively well this year.  It’s regarded by the mainstream press as a flight to quality.  I don’t see it as high quality myself, but I think there has been some crowd movement out of the gold trade into the bond trade which is a mistake....

Continue reading the Rick Rule interview below...


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“One of the things that you’ve seen in terms of weakness in gold has been the fact that many of the physical gold traders have experienced a liquidity crunch.  This has forced many people to the sidelines.  The way I see it, with the competitive debasement of currencies on a global basis, gold holders on a two to three year time basis should do very well. 

Gold holders in the short-term may be hurt as a consequence of continued strength in the US dollar because of the ongoing problems in Europe.”

When asked about the mining shares, Rule remarked, “The high quality shares are cheap.  It doesn’t mean they won’t get cheaper, but I think we are really setting ourselves up for a lot of money to be made in 2012 and 2013.  There is a lot of money to be made in the gold and silver business at these prices and my own bias is that gold and silver prices are going higher. 

Stocks are cheap on a historic basis and the senior mining companies are wallowing in cash.  So these miners have the need, the will and the means to make takeovers.  Those who have or make good discoveries will be taken over at substantial premiums by bigger companies.” 

Rule also noted, “The default of Jefferson County in Alabama is probably a harbinger for more American municipal and regional defaults.  I have a sneaking suspicion that municipal bonds will be the equivalent sub-prime mortgage crisis in the next five years in the United States.  In other words I think there is as much bad municipal paper as there was bad mortgage paper.”  

© 2011 by King World News®. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed.  However, linking directly to the blog page is permitted and encouraged.

Eric King

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