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Rick Rule - Why We’re Aggressively Buying Gold, Silver & Miners
With continued volatility in gold and silver, today King World News interviewed one of the most street smart pros in the resource sector, Rick Rule, Founder of Global Resource Investments, which is now part of the $10 billion strong Sprott Asset Management. When asked what he is doing with his own money and what to expect in gold and silver going forward, Rule responded, “The fact is that right now, where we are (his firm) in the market, my bigger accounts have very, very large cash positions and I am going to use this as an opportunity to diversify more of my cash into bullion or bullion related instruments.”
© 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 This material may not be published, broadcast,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.
September 27, 2011
Rick Rule continues:
“What we are seeing in the markets right now is exactly the type of psychotic break, the type of non-fundamentally related volatility, that has over the last twenty or thirty years given us the entry points that have, in fact, built our track record.
George Soros said that he built his fortune by finding widely held perceptions that were wrong and betting against them. The idea that 30 year US Treasuries are safe seems to me to be a widely held perception that’s wrong. Jim Grant famously characterized US Treasury Securities as, ‘Return free risk.’
What I am doing by buying bullion is taking the back side on a trade of a widely held perception that I believe to be wrong. I am further, if you will, taking that trade on steroids by buying the smaller market cap advanced stage developers or small producers.
Volatility is something that you and I have talked about a lot in the past year. We’ve talked about exactly what is happening here today. I think what’s causing the volatility in these markets in the very near-term is a constraint in credit. The European banks, in particular, have been big providers of credit in the commodities business.
They do this, as an example, for fabricators for inventory, to producers so they can carry inventory and to the intermediaries, the physical commodities traders to carry inventory. The European banks have less availability of near-term credit themselves and so they are cutting back credit lines to their commodity related customers.
The sell decisions aren’t being made by portfolio managers, instead they are being made by margin clerks....
Continue reading the Rick Rule interview below...
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“The set of circumstances you are seeing now in commodity markets, this extraordinary volatility, is a function, in the very, very near-term, of increasingly constrained credit markets and that is going to continue for a while.
I see a bit of a rebound this week as gold is oversold, and then the decline may resume, but I’m not sure I see gold settling on a daily basis below $1,500. What’s important here, Eric, is that the action that we are seeing now isn’t fundamental action, it’s volatility.
The junior producers, the sub $1 billion or sub $250 million stocks, are absolutely being decimated. In particular, the stocks that are being decimated are in frontier markets in places like West Africa or South America or Asia. So I’m going to be concentrating my efforts on the most decimated sectors in the precious metals markets. Bullion markets are being decimated with people moving into long US dollar instruments. I’d like to be on the other side of that trade, and I’m going to.”
© 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
