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Rick Rule - Scary Math & The Dow Fall Off a Cliff Here
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 part of the $10 billion strong Sprott Asset Management. KWN reached out to Rick to get his take on the decline that is taking place in key markets and what investors should expect going forward. Rule warned about the possibility of a collapse here. This is what Rule had to say: “Investors look at the Dow and the S&P hanging together and it takes their mind off some of the unpleasant facts, such as the debasement of the currency. It takes their minds off of the fact that the government only takes in forty cents for every dollar it spends or that we have $65 trillion of unfunded liabilities going forward.”
© 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 This material may not be published, broadcast,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 23, 2012
Rick Rule continues:
“The fact that life goes on and we don’t have to face these unpleasant truths, this takes our mind off of some fairly scary math. The question becomes, how long can this go on? The reality here is that the Dow could easily fall to the 7,700 to 9,000 area and it wouldn’t surprise me.
I think the continual injections of liquidity have been the reason for the remarkable calm in these markets. But I think we are gong to see a repetition of the time when the VIX was above 30. We will see absolutely incredible volatility going forward.
The only condition which was part of the 2008 decline that has gone away has been official sector liquidity. One has to wonder about two things in the context of a repetition of those events from 2008....
Continue reading the Rick Rule interview below...
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“The first would be, how much rope do the central banks have left? In other words, how much quantitative easing are they willing and able to do?
The second question is, how long before the world’s few remaining savers go on a sovereign debt purchase strike because of continued currency debasement? When we know the answer to those two questions, we will know the answer to when the day of reckoning will have arrived?”
Rule had this to say about gold and the mining shares: “Investors can make money in this environment, but they are going to have to be patient and disciplined. What would really help is a strong downside washout, instead of the grinding bear market that we’ve been having. This would mean a market clearing event. The prices we’ve seen, so far, have not been sufficient to produce a turnaround.
There were large advances in assets under management, among gold managers, in the last ten years. With regards to the smaller funds, redemptions are largely over because those funds have closed. But I think with regards to the gold funds that are with the large, multi-strategy shops, there is most likely a fair amount of redemptions still to go.
The correct way to approach these markets is simply to use common sense. Remember the thesis that caused you to get involved in the market. As an example, fiat currencies versus real assets such as gold as a store of wealth.
Ask yourself if the declines that we’ve witnessed in the market are reflective of some change in the relative values of paper money or gold. If you come to the conclusion, as I have, that there has been no fundamental reordering of the world, then what we’ve seen in this market is simply a sale.
You have lower prices on goods that you want to own. They’ve gone on sale and that’s good. If you aren’t willing to view the market in that fashion, you are probably not going to fair well in this environment. This will be a market of extraordinary volatility going forward, and only the strongest will thrive.”
Rule added this regarding James Turk’s most recent KWN interview: “Turk’s chart certainly points out the fact that gold has done relatively well compared to the gold stocks. You have to remember that savvy value investors are looking at price and cash flows, at today’s gold prices, which are at spectacular levels, relative to the last thirty years.
You are looking at a sector that is beginning to be priced in a way that reflects yesterday’s news, not tomorrow’s news. And for a change, tomorrow’s news is better than yesterday’s news. So, I certainly agree with the thesis that the mining sector, particularly in a historical context, is undervalued.
Investors have to remember that most of the gold stocks are terminal. The point of coming to a site like King World News, is for the individual to learn how to differentiate between the good, the bad and the ugly of gold stocks or at the very least, to acquaint yourself with advisors who can help you do that.”
Be sure to listen to this week’s incredible line-up of KWN audio interviews, which include Art Cashin, John Hathaway, Stephen Leeb, MEP Nigel Farage, Gerald Celente and Jim Sinclair. You can listen to these outstanding interviews by CLICKING HERE.
© 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
