‘Reckoning Is Coming’: Rick Rule’s Shocking Forecast For Gold, Oil, Dollar

Here is a chronological list of distinct topics, claims, and statements from the transcript:

1. The gold market is guaranteed to fall by 30% or more at least twice in the next 10 years, potentially by 50%. This signals an impending reckoning in the energy and industrial materials markets.
2. Rick Rule, proprietor of Rule Investments Media, co-founder of Battle Bank, and former president and CEO of Sprat US Holdings, is introduced as a returning guest.
3. Planned discussion topics include future monetary policy, the economy, Rick Rule's decision to taper junior mining stock holdings, and a method for rating junior mining stocks.
4. The conversation takes place before the FOMC decision, meaning by the time it airs, the Federal Reserve's decision will already be public.
5. A significant policy divergence is anticipated, with the Fed projected to cut rates by 25 basis points, the Bank of Canada holding steady, the Bank of Japan raising rates, and the ECB potentially raising rates.
6. Kevin Hasset, a potential replacement for Fed Chair Powell, is expected to be more dovish.
7. The US interest rate declining while other major central banks remain flat or raise rates is expected to significantly weaken the dollar.
8. The dollar is projected to lose 75% of its purchasing power over 10 years, yet it will perform relatively well compared to other global currencies.
9. Other central banks' decisions to raise interest rates are not voluntary but necessary due to their sluggish economies; otherwise, their bond auctions would likely fail.
10. The United States is making a major mistake by signaling to global savers and investors a disregard for the US dollar's integrity and purchasing power, politicizing both the dollar and interest rates.
11. Interest rate cuts are considered a subsidy from savers to spenders. In a democracy, spenders are more numerous than savers, effectively placing savers at a disadvantage.
12. The US economy is "okay" but suffers from structural weaknesses, including millions of Americans lacking sufficient education for a middle-class lifestyle. The political class and culture prioritize politics over the economy.
13. Interest rate cuts primarily serve to subsidize middle-class spenders at the expense of savers and make government debt more affordable in the near term. This action signals the abandonment of concern for the US dollar's integrity.
14. In anticipation of the current market cycle, the speaker began adjusting his portfolio in 2022. He no longer holds bonds with a duration longer than two years due to deteriorating purchasing power and artificially low interest rates.
15. The recent strength in junior mining stocks was surprising, as precious metals bull markets typically take longer to impact this sector. When the financing window opened, the industry's willingness to issue stock indicated insiders believed their paper was less valuable than investors' cash.
16. The speaker, a significant investor in the junior space since 2000, sold 25% of his junior holdings, recouping all capital invested since 2020 and covering capital gains tax, effectively eliminating his downside risk.
17. Half of the proceeds from junior stock sales were reinvested into high-quality gold producers (Franco Nevada, Wheaton Precious, Agnico Eagle), shifting towards "beta" assets. The other half was invested in the oil and gas business, which he considers very cheap.
18. The speaker will not add new capital to junior stocks but will harvest gains and reallocate funds to more attractive positions. While he may participate in private placements, current pricing (due to high demand) is "appalling," making market purchases more appealing.
19. Monetary Metals offers a service allowing investors to earn up to a 4% yield on their gold, paid in physical gold, through a leasing marketplace, turning gold into a yielding asset.
20. Despite strong performance in underlying metals, there remains a compelling investment case for junior, mid-tier, and senior resource stocks.
21. The dollar's purchasing power is expected to decline for another 10 years, which will drive a nominal increase in the price of gold.
22. Historically, when generalist investors enter the precious metals market, silver's price tends to accelerate faster than gold's. This pattern has been observed recently, with silver escalating roughly twice as fast as gold this year.
23. The influx of generalist money into the space, validated by momentum in both gold and silver, is improving the industry's perception, boosting producers' free cash flow, and increasing valuations.
24. Continued earning surprises are expected in the precious metals sector. Analyst consensus earnings estimates for mining companies are based on a gold price between $3,000 and $3,200, making it easy for companies selling gold at $4,200 to significantly beat these estimates.
25. Mining companies are valued using a P-NAV (Price to Net Asset Value) or adjusted P-NAV basis. Agnico Eagle, despite doubling in share price, is comparatively cheaper on an enterprise value to P-NAV basis, as the net present value of its cash flows at $4,200 gold is more than double what it was at $2,500.
26. Banks using $3,200 gold in their net asset value calculations indicates low confidence that current $4,000+ gold prices will be sustained, or it's simply part of their standard modeling process.
27. The gold market will experience declines of 30-50% at least twice within the next decade. This is an expectation of volatility, not a timing prediction.
28. During the 1970-1980 gold bull market (a 28-fold increase), the price of gold fell by half in 1975 when US interest rates were raised. Many who deserted gold then missed an eight-fold rebound to $850 an ounce over the subsequent five and a half years.
29. Investors must be psychologically prepared for significant gold price drops (30-50%) and should own gold for insurance. Ideally, one would hope for gold prices to fall, as their rise often indicates severe problems elsewhere in a portfolio.
30. Gold prices could reach $5,000-$10,000 depending on policymakers' responses. If the US raises interest rates significantly to accommodate dollar deterioration (similar to Ronald Reagan and Paul Volcker), the dollar's integrity could be restored; otherwise, a "real reckoning" is likely.
31. US society faces a critical financial dilemma: $38 trillion in on-balance sheet liabilities and $120 trillion in net present value of entitlements, totaling over $150 trillion. This is precariously offset by $161 trillion in private net worth and $5 trillion in federal government gross income.
32. The ability to service $150 trillion in debt with $5 trillion in income, while offering interest rates below the dollar's deterioration, relies on trust built over decades (1982-2022) rather than arithmetic.
33. If trust in the dollar erodes, potential outcomes include failed Treasury auctions or a liquidity squeeze on the scale of, or greater than, 2008. Listeners need to be psychologically prepared for these possibilities and structure their portfolios to mitigate these risks, with precious metals as a cornerstone.
34. While other fiat currencies like the Swiss Franc or the Japanese Yen might seem like safe havens, holding any fiat currency means enduring a negative real interest rate. This cost functions as an "option premium" for maintaining liquidity during potential squeezes.
35. The next 10 years are expected to mirror the 1970s, characterized by volatile currency movements. Savers will need to be flexible. The US dollar's absolute strength will be poor, but its relative strength against most other currencies will be good.
36. Individuals and businesses should maintain liquidity in multiple currencies to defend against government actions and policies. The most dangerous government is the one closest to an individual.
37. A reckoning is coming in both the energy and industrial materials markets. Society has underinvested in these fundamental "material stuff of humankind" for 30 years.
38. Oil companies, including state-owned ones, are estimated to be underinvesting in sustaining capital by $1 billion to $2 billion per day.
39. Despite official estimates (including from political leaders) predicting peak oil demand by 2030, this is unlikely to occur within the speaker's lifetime. Consequently, oil and gas companies are substantially underpriced.
40. Unless new project investment and sustaining capital investment in oil and gas increase, energy prices will be higher, potentially sharply higher, within the next 2 to 2.5 years.
41. An estimated $6 trillion to $11 trillion (conservatively $6 trillion) has been invested in alternative energies over the past 45 years. This substantial investment has only reduced fossil fuels' market share by 2%, from 83% to 81%.
42. Investors who choose to ignore the oil and gas sector are doing a disservice to their personal balance sheets.
43. The long-term outlook for energy demand and electrification depends on sustainable global population growth, but current fertility rates in major countries are significantly below replacement levels, indicating a future global population shrinkage.
44. While declining population is a real challenge 10 years out, it is currently offset by a billion people worldwide gaining access to electricity and by rapidly enriching populations in many countries that still have above-replacement fertility rates. As poor people get richer, their purchases become more material and energy-intensive.
45. For the next 10 years, where most investment net present value is concentrated, declining birth rates will be more than accommodated by general economic growth and per capita wealth increases, particularly in developed nations.
46. China is an example of a country that has lifted 100-150 million rural poor into the 21st century over the next decade. This trend, multiplied across other developing nations like Nigeria, Malawi, and Brazil, suggests that demographic challenges become a primary concern 10-15 years in the future.
47. The immediate concern for the next decade is three decades of underinvestment in resources, set against continued demographic growth and increasing wealth across all demographic classes.
48. Rick Rule offers a free service at ruleinvestmentmedia.com where he personally ranks natural resource stocks (1-10, 1 being best) and provides comments. He requests no crypto, tech, or pot stocks, and asks for patience with a 7-10 day response time.
49. He does not rank entire portfolios because he lacks knowledge of individual investors' aspirations or risk tolerance, focusing solely on individual companies.
50. Rick Rule's work can be found at ruleinvestmentmedia.com and the Rule Classroom, which provides nearly 300 hours of free instructional programming.
51. Rick Rule also promotes battlebank.com (for US and Canadian listeners) as an alternative to traditional banks. Battle Bank allows saving in 20 currencies, earns interest on checking accounts, and uses gold or silver as collateral for revolving credit facilities.