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Rick Rule - I’m Too Old To Wish For Chaos, But It’s Coming
Today King World News interviewed one of the wealthiest and most street-smart pros in the business, Rick Rule. Rule is founder of Global Resource Investments, which is now part of the $10 billion strong Sprott Asset Management. KWN reached out to Rick to get his take on what is happening in key markets. Here is what Rule had to say: “I guess two things stand out to me. The first is it’s amazing how much complacency the various central governments can buy with the liquidity they are pumping into the market. You have the situation in Spain, which is looking like Greece on steroids, and nobody seems to care because of the liquidity coming into the markets.”
© 2012 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 This material may not be published, broadcast,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.
April 18, 2012
Rick Rule continues:
“I’m too old to wish for chaos, but it’s coming. I think the market’s response to situations that make otherwise rational people seem nervous, is fairly amusing. What we are seeing right now is the rising tide of liquidity floating most ships, particularly the conventional ships.
The gold market, as an example, has had every excuse in the world to selloff, but it has remained resilient. I think that’s fairly interesting. On the one hand you have a reasonable amount of complacency. In other words, the fear trade that drives people to gold hasn’t been happening as a consequence of the rebound in equity markets.
We have also had extremely strong bond markets, which is a direct result of the liquidity....
Continue reading the Rick Rule interview below...
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“I’m a little surprised that the liquidity we are seeing in the markets, particularly the resumption of short-term credit and inter-bank credit, hasn’t led to increased commodity fund buying of gold. What I’m saying is I’m a little surprised that more of the liquidity hasn’t found its way into the gold market.
We talked earlier about the complacency that’s been engendered by the liquidity we are seeing in the markets. Most likely, the liquidity has gone into the biggest and broadest asset classes like bonds and high quality equities. It has, therefore, avoided fringe markets, even fringe markets as large as the gold market.
You know, Eric, for investors who are frustrated, past is probably prologue. They need to have a sense of what happened in the 1970s market. If you go back to that bull market, you will remember there were numerous occasions, probably 25 or 30 in that decade, where the precious metals prices fell 10% or 15%. The equities associated with gold and silver fell even further.
The grandaddy of all of those declines was in 1975. Now, what’s instructive to know is that nothing changed with regards to the fundamentals for gold and silver. What changed was the official sector’s interest rates and people’s perceptions of the value of gold and silver.
If you were in the market and had the cash and the courage to stay in the market from peak to trough, that is from the bottom of 1975 decline, five years later you were up eight-fold. It’s tragic that some people had the idea behind the bull market, but didn’t have the cash or the courage to stay the trade. Can you imagine getting shaken out of a trade where you were right, and then missing five years of an eight-fold advance?
So, for people who are frustrated with the volatility in this market, especially the downside volatility, simply remember that what is changing are people’s attitudes, not the fundamentals. The market doesn’t care if you are frustrated. The market doesn’t care about your time frame.
The market doesn’t care about anything. The market is merely a facility for buying and selling assets. If you have the courage of your convictions, if you believe, as an example, that gold is a better store of wealth than fiat currencies, then stay the trade.”
© 2012 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
