Rick Rule: This Asset Class Is "The Cheapest I've Ever Seen It"

**Rick Rule** (0:00)
I think relative to the gold price, on an enterprise value to net asset value basis, which is the right way to view it, or on a price earnings or price EBIT basis, that the gold stocks relative to current gold prices are the cheapest I've ever seen.

**Adam Taggart** (0:26)
Welcome to Thoughtful Money. I'm its founder and your host, Adam Taggart. Well, it's a new year, and in just two weeks, a new American administration as well. What kind of impact will president-elect Trump's policies likely have on natural resources, the real things that power the global economy? To find out, we're fortunate to be joined by Rick Rule, one of the world's greatest living natural resource investors and a heck of a gentleman to boot. Rick, thanks so much for joining us today.

**Rick Rule** (0:56)
A pleasure, Adam. I enjoy these sessions, so thank you for having me back.

**Adam Taggart** (1:01)
Well, thank you, Rick. I enjoy them too, but I know that our audience enjoys them even more so. You're one of those folks that when it's been too long in between your appearances, the emails start coming fast and furious when you're getting Rick back on. So thank you for coming back on very early in the new year here. As I mentioned, new year and new administration. So there's a lot of questions I have about what may lie in store for natural resources. Before we get to the hard assets part of the discussion, though, if we can just start with the general question I'd like to kick these discussions off with, what's your current assessment of the global economy and financial markets?

**Rick Rule** (1:42)
Financial markets seem to be benefiting on a global basis from fairly easy credit. And the attempts in major markets to artificially reduce the cost of capital, the interest rate cuts in the United States in a strong economy, I think are indicative of the fact that governments continue to favor an easy money policy. While this is good for capital markets in the present, my suspicion is that we'll have to pay the piper with higher rates of inflation in the future. But I guess you should enjoy it while you can.
I think one of the major things that we've seen with global capital markets in the last two months is investors on a global basis expressing continued confidence in the US economy and anticipating at least nominally a stronger US dollar relative to their own domestic occurrences and a major flow of funds from global capital markets in the United States. I'm really amazed at the durability of the global economy, given some challenges. It's been a very long time since we conspired to have a recession. I'm no economist, so I don't know that we need to have one, but I'm relieved that we've gone so long without a major economic disruption. I'm interested, too, that the conflict in Ukraine and the conflict in the Middle East, a spate of Islamist coups in Africa, haven't constrained investment demand and investment flows more than they have. I'm delighted, in fact, that there seems to be enough confidence in the world that, despite some fairly obvious challenges, life goes on and people continue to prosper. That being said, I'm becoming perhaps even more cautious with my own mons, with my own money, than I have been in recent past. So I've been fairly cautious in the recent past.
I would guess that my final comment probably relates to investor psychology, which is to say that there seems to be a concentration of capital in the biggest momentum names. Things like the US dollar, the largest and most liquid currency in the world. Things like 10 or 12 stocks that dominate US capital markets. I'm not sure that this continued strength, but reduced breadth is healthy. But nobody asked me anyway, Adam. So I just observe it and report on it.

**Adam Taggart** (4:38)
Okay. If you don't mind, you mentioned that you're becoming more cautious with your own money. And you sort of mentioned that after ticking off a bunch of things that had surprised you on the upside. Oh, we haven't had a recession. Oh, global trade has been more resilient.
What specifically is making you feel like it's time to become more cautious with your own money?

**Rick Rule** (4:59)
I don't know. The observation has been that six months ago or seven months ago, I had been very eager to redeploy the proceeds that I enjoyed from the sale of a developed real estate portfolio. I wanted to deploy the capital because I was concerned about making 4% on money, where I believe that the purchasing power of that money was declining by 7.5%.