An Interview With A Commodity Master

When Rick Rule likes a stock, buy it.

Unfortunately, about two years ago, I didn’t take my own advice...

I was in the offices of Global Resource Investments interviewing Rick, the company’s president and founder.

Back then, he told me about an overlooked way to play the boom in Canadian oil sands.  While talking about mining stocks, he was bullish on a tiny gold company sitting on a huge store of gold in the ground.  They were both great ideas... I just didn’t pull the trigger and buy.

Now, I kick myself for not getting in. The oil play? It’s gained over 180% since then.  The gold stock? An easy double.

Rick’s track record in resource stocks is fantastic.  That’s why we invited him to speak at last week’s True Wealth Gold & Collectibles Conference in Long Beach, California.  It’s also why I asked Rick to sit down for a quick interview forDailyWealth.

You don’t see Rick’s name in the headlines of the Wall Street Journal, but he’s spent over 30 years analyzing and investing in commodities like copper, gold, oil, and water.   In addition to heading up his brokerage firm, Rick also acts as a banker...  When a small mining company needs money, they go talk to Rick. 

Here’s what he told us last week...

DW: Rick, how do you see the current commodity bull market differing from the one you saw in the 70s?

Rick: I don’t think it is.  It’s eerily similar, in fact. Supply constraints from decades of underinvestment... demand driven by a strong economy over time... and unconstrained politics of guns and butter.

The parallels between the Johnson administration and the Bush administration are terrifying from my point of view. So you have higher prices because of reduced supply, higher prices because of increased demand, and higher prices because of a weak dollar. Past is seldom prologue, but in this case I think past is prologue. It is very, very scary to me.

DW:  Regarding gold... do you buy the “gloom and doom” take that the dollar is a piece of garbage?... which should drive higher gold prices - or are you more of a dollar optimist?

Rick: I buy it probably to a lesser degree than most dollar bears.

My own personal belief is that the dollar is the worst currency in the world except all the others. I am certainly not optimistic about the outlook for the political process, which means that the fiat currencies are heading inexorably lower and gold is headed higher.  

I’m an old fashioned gold bug and I’m also a gold bull.

DW: If you had to bet a dollar... does oil go to $50 or to $100?

Rick: I’d take both sides of the bet. I think there’s a tremendous political risk premium in place with oil right now. But my belief is that the political risk premium is justified.  And absent continued political disruption in the Middle East, or Nigeria, or Mexico, or Venezuela the price of oil goes down and probably touches $50. 

I think you will have $50 oil in the future and I think you’ll have $100 oil in the future... the hallmark will be volatility. 

I don’t think you will have prices consistently under $50 for well, the rest of time, because the dollar is worth less and oil costs more to find.

DW: Thanks Rick.

In the interest of not taking up too much of your time today... we’ll just say that if Rick is right – and he usually is – here’s how you play it:

Keep a long-term position in gold, energy, and other real assets... and of course, keep reading DailyWealth for updates...

Good investing,

Brian