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Thursday Conversation - Rick Rule

62

As the bull market for precious metals continues, many are frustrated by the underperformance of the mining sector thus far in 2020. To that end, here's legendary resource investor Rick Rule to help shed some light on this topic.

Many of you are familiar with Rick and his team at Sprott Asset Management. If you are looking for guidance and assistance in your resource investing, they are certainly top-shelf. So it was great fun to get caught up with Rick and ask him to address these three, primary points:

  • Where are we in this renewed bull market for precious metal?
  • Which size/type of mining company is currently in favor?
  • What will it take to draw institutional money to the sector?

Additionally, at the end of the podcast, Rick offers an email address where any listener can send him a list of resource stocks and he will reply with his current thoughts on each. He'll also send you two important charts so, if you're interested, be sure to contact him at rankings at sprottglobal dot com.

Thanks again to Rick for so generously sharing his time and expertise in this podcast. I'm confident that you will benefit greatly by listening.

TF

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SovereignLoblolly Pine
Feb 20, 2020 - 10:27pm

re Ned Naylor-Leland's view.

As Rick pointed out in his interview with Craig, there are about 1500 companies in the mining business and, while Rick didn't elaborate specifically on the numbers, I've heard him do so in other conversations where he points out that, perhaps, there are really less than about 80 to 100 of those companies that are worth any consideration.

Naylor-Leland understands that research the miners and the mining sector is a very rare discipline and there are not a lot of people who can successfully sort the wheat from the chaff. So... for most people, an index fund will provide them their best opportunity to not be hurt too badly.

TF
Feb 20, 2020 - 10:08pm

ole Raoul Pal seeing it, too

If the chart of 10yr bond futures doesn't make you pause for thought, I don't know what will. If this flag breaks, we are in for one hell of a ride.. South Korean corona virus is up 30% in a day. Global supply chains are going to get decimated... and bonds sense even worse... pic.twitter.com/McbGGzFAAB

— Raoul Pal (@RaoulGMI) February 21, 2020
Feb 20, 2020 - 10:06pm
Feb 20, 2020 - 10:01pm

from Twitter

Grinding to a halt.

Singapore air freight traffic plunging.

Biggest drop since the Great Recession.

Started falling even before coronavirus.

Wait until the February print. pic.twitter.com/w64i4va8E1

— Otavio (Tavi) Costa (@TaviCosta) February 21, 2020

A Canadian woman returning from Iran just tested positive. This just further indicates Iran is now a new epicenter for #SARSCoV2 #COVID19. https://t.co/511M18jfj5

— Eric Feigl-Ding (@DrEricDing) February 21, 2020

Per local reports, many Iranian doctors are misinformed on #coronavirus. Medical staff do not understand the severity of COVID19. Testing availability is scarce. The medical personnel at Qom’s hospital, infectious disease department where the two patients have died (Photo). pic.twitter.com/a7VMxKpMmm

— Max Howroute▫️ (@howroute) February 20, 2020

JUST IN: South Korea #coronavirus cases pass 150. South Korea announces 52 new COVID19 cases overnight, bringing the total number of infections in the country to 156.
Korea’s CDC: “There has been a sharp jump in new cases of coronavirus in South Korea since Thursday”. (AP Wire) pic.twitter.com/oqiJVxyLjC

— Max Howroute▫️ (@howroute) February 21, 2020

Very very subtle warning. 🦀 pic.twitter.com/IEkWATD24E

— Domenico Calia (@CaliaDomenico) February 20, 2020
Feb 20, 2020 - 9:56pm
Feb 20, 2020 - 9:36pm

now under 1.50%

Again, this is THE big deal. If the 10-year falls to 1.25%, CDG will be well over $1700.

At 1%, CDG will be back to the 2011 highs.

Montross515
Feb 20, 2020 - 9:24pm

To Eric

When KL breaks below $35 is it a buy? I liked it at $51, but have kept buying.

Feb 20, 2020 - 9:14pm

10-yr now 1.502%

Will be very interesting to see if it closes below 1.500% tomorrow...

Loblolly Pinehappycamper515
Feb 20, 2020 - 8:32pm

KL and AEM are nowhere near...

I gather your point is that there is much more upside with owning individual companies like KL and AEM? Maybe so, but I've neither the time nor inclination to track and research (as if fundamentals drive price nowadays.) And, I'd likely be mightily PO'd to see a company I own report solid numbers, a doubling of its dividend only to be hit for 2.5 percent of its market cap while gold prices continue to rise to new highs.

So, I'm primarily saying that Ned and Rick seem to contradict one another on this issue.

anarchitect
Feb 20, 2020 - 7:49pm

Individual miners or an ETF?

The risk with owning an individual miner is that an operational or political problem at a mine will really hurt its price. Even one with lots of mines, like Barrick, is not immune to this (e.g.. with Pascua Lama). And sometimes management is shite, so the problems aren't confined to even a single mine. The majors are also notorious for imbecilic acquisitions. This makes any well-run mid-cap a good pick, because it might get bought out at a nice premium. WDO is a good candidate for this reason.

An ETF, however, mixes good choices with the shite ones, so it will underperform a smaller set of names chosen more carefully.

I would buy an ETF unless I could spread myself over, say, 4 or 5 names. The same thing goes for developers. For explorers, you may want twice as many, because some will go to zero and others will go nowhere as they keep on issuing more shares.

The exception to this is royalty and streaming companies, particularly the large ones: FNV, RGLD, and WPM. If one of their royalties goes south, their portfolios are large enough that they'll get hurt less than the miner in question. They're also the closest things to blue chips in what is a very volatile sector, so they should be the primary holdings in any PM mining portfolio.

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