Fleckenstein and Rule: Miners Are a Call on Unintended Fed Policy

Published on
August 21st, 2020
Duration
49 minutes


Fleckenstein and Rule: Miners Are a Call on Unintended Fed Policy

The Interview ·
Featuring Bill Fleckenstein and Rick Rule

Published on: August 21st, 2020 • Duration: 49 minutes

Bill Fleckenstein, president of Fleckenstein Capital, sits down with Rick Rule, president and CEO of Sprott U.S. Holdings Inc., to talk about the macro drivers of the recent precious metals bull market and what to look for when investing in miners. Using their decades of experience in the industry, Rule and Fleckenstein explain why regardless of a specific price target and because precious metals investments as a percentage of the total market for savings and investments is far below the average over the past 50 years, reversion to the mean has precious metals exposed investments poised to march higher. Rule provides his explanation as to why Warren Buffet, who has called gold a pet rock in the past, has recently allocated a portion of Berkshire Hathaway's portfolio in Barrick Gold Corporation. Fleckenstein argues that there is a problem with using traditional NAV-based analysis and provides viewers with strategies to find hidden value when analyzing miners and to avoid the pitfalls that many investors fall victim to when investing in the space. Filmed on August 19, 2020.

Comments

Transcript

  • WM
    Will M.
    5 September 2020 @ 19:29
    Great discussion with clear “ nuggets” for the audience. I am broadly aligned with their recommendations but need to consider bigger exposure to the streamers..... and Equinox. Dan Oliver also runs a fund called Myrmikan Gold Fund. Check it out. Dan has structured it to benefit better than GDXJ for small miner exposure. I own both and can certainly see the difference ( although there is also more volatility).
  • GH
    Galen H.
    25 August 2020 @ 09:53
    Anyone not bullish on gold and why?
    • MZ
      Mark Z.
      26 August 2020 @ 07:56
      Paper gold market means demand will ne met with fake supply... Wont change until everyone redeem s.... That ain't happening
    • WM
      Will M.
      5 September 2020 @ 19:24
      Sorry Mark don’t agree gold redemption won’t happen. It will happen if the big transaction houses can’t deliver the physical and a panic starts accordingly. Alastair McLeod has some great backing to this thesis.
  • RM
    Robert M.
    21 August 2020 @ 21:48
    If viewers are into gold, highly recommend Fred Hickey's newsletter. It is $150 per year and well worth it. Does a great job covering gold and technology.
    • WM
      Will M.
      5 September 2020 @ 19:19
      Second that, I subscribe to Hickey. Also strongly recommend MSA Precious metals GSM newsletter by Michael Oliver
  • LH
    Leigh H.
    21 August 2020 @ 20:12
    These two are top shelf. I have a hard time figuring how they get any down votes at all!
    • JM
      John M.
      22 August 2020 @ 00:32
      Seriously! Who in their right mind would give either of these guys a thumbs down?
    • WM
      Will M.
      5 September 2020 @ 19:18
      Bitcoin anti gold folks probably represent downvoter majority
  • PC
    Peter C.
    21 August 2020 @ 07:50
    Great Interview! I always get educated & entertained by Rick Rule:) As a simple retail investor my take away is go long the large mining stocks. The fundamentals & government policy are with you. De-risk by diversifying, going with the big establish companies,.... eg Streamers - Franco Nevada & Wheaton Precious Metals; Majors - Barrick & probably even better on the financial outcome basis someone like Kirkland Lake given their recent purchase of Detour Gold when gold was in the $1,500 range; and maybe some funds like GDXJ the Vaneck Junior Gold Miners ETF to get into some of the smaller caps in a diversified way.
    • AR
      Alexander R.
      21 August 2020 @ 16:31
      AEM is probably should be added to the big miners Plus PAAS for silver exposure
    • PC
      Peter C.
      21 August 2020 @ 17:35
      @alexander r. I agree & have a smaller exposure to AEM & PAAS that increases today due to short puts going in the money. Rick mention the value of people like Ross Beaty's network, influence,.... and I clearly hear the respect for Ross from Bill's comments :)
    • JS
      John S.
      21 August 2020 @ 22:53
      I like a barbell approach - Royalties and Streamers plus a few quality producers like PAAS then a basket of prospect generators to add convexity towards a discovery
    • AM
      Alonso M.
      22 August 2020 @ 14:14
      Alamos in the low CAD12 range. Then wait for one of the big guys to acquire them.
    • PP
      Patrick P.
      24 August 2020 @ 11:46
      If you want direct exposure to one of the greatest miners ever (Ross Beaty) then buy his largest investment in gold ... one that he has said will be his crown jewell ... Buy Equinox Gold EQX....
    • WM
      Will M.
      5 September 2020 @ 19:11
      Not sure why this comment is flagged “Hotly debated”. I have said before some of the RV comment flags are inefficient. Nonetheless great comments and I think I have aligned my mining stock holdings accordingly.
  • NR
    Nelson R.
    29 August 2020 @ 23:00
    Congrats to Bill and Rick on a great exchange, outstanding.
  • RK
    Robert K.
    26 August 2020 @ 17:16
    Fleck mentions Tahoe / PAAS around minute 42. Anyone interested in PAAS should check out the security issued as part of that deal, which amounts to a *very* long dated call on PAAS/silver. Symbol PAASF As a former butt hurt Tahoe shareholder, I'm biased, but I think the discount on PAASF is very attractive.
    • RK
      Robert K.
      26 August 2020 @ 17:23
      Escobal (silver mine): https://en.wikipedia.org/wiki/Escobal_mine (only 360+ moz of Ag)
  • RY
    Roy Y.
    26 August 2020 @ 12:57
    Love Rick Rule ...
  • LP
    Lynn P.
    22 August 2020 @ 18:12
    The obvious question: What miners is Ross Beatty (sp?) in now?
    • IH
      Ian H.
      22 August 2020 @ 22:38
      EQX
    • JH
      Jess H.
      24 August 2020 @ 12:16
      EQX and PAAS
    • MS
      Michael S.
      25 August 2020 @ 05:29
      MMX
  • JG
    James G.
    24 August 2020 @ 23:16
    I've been a big Bill F. fan since his articles in MSN Money days.
  • LH
    Lik H.
    24 August 2020 @ 10:31
    I enjoy the free flow discussion and also appreciate the candid comments esp. from Mr. Rule and as usual Bill has done well to drive the discussion and present some good nuggets from the conversation. Keep up the great momentum.
  • SJ
    Srinivasa J.
    23 August 2020 @ 06:20
    Excellent Interview I am new to Precious Metals and Mining, a few things from your conversation. Thank You Mr. Fleckcenstein and Mr. Rule
  • dm
    dude m.
    23 August 2020 @ 01:09
    Great interview! Bill, we see a collection of vinyl behind you. Can you give us a sampling of them? Next week, we'll ask for Rick's Picks, too.
    • BF
      Bill F.
      23 August 2020 @ 02:19
      good catch, i have lots of vinyl but its all rock and roll from various time periods..
  • BH
    Bin H.
    22 August 2020 @ 19:04
    The like vs dislike is a good sentiment index
  • BB
    Bob B.
    22 August 2020 @ 02:56
    Fantastic interview - great value for macro investors. I am huge fan of the two!! If they are granted another interview session I'd love to hear more on time horizons. When to jump into specific PM stocks seems as important as to choosing them!
  • LA
    Lawrence A.
    22 August 2020 @ 00:58
    Just want to say thank you RV for all that you do. For a low cost of a basic subscription, I feel like I am getting cheat codes from the rich. Truly remarkable times we are living in.
  • NI
    Nate I.
    21 August 2020 @ 23:46
    "I would certainly rather discover a mine in Katanga, in Southern Congo, than I would in California". - Rick Rule, 8/21/20 Truth bomb of the year! I was just having a Twitter fight today with someone who is clueless about how untenable the CA business environment has become. Doubtful I would move to Katanga, but I left CA in 2015 and I can't say that I've missed that bureaucratic cesspool.
  • SD
    Steve D.
    21 August 2020 @ 17:13
    I posted this identical comment on the interview between Raoul Pal and James Rasteh. So, for those that saw it there, I apologize for the redundancy. But, I think it's an important concept for folks to get into their head and wanted to leave it again for those who may have missed watching that interview but did watch this one. Gold is just above the highs of 2011. The miners in aggregate have been in a bear market since 2011 and those that have survived it have zealously cut costs and cleaned up balance sheets. Estimates I've seen are that average all in sustaining costs in 2011 were roughly $1,300 per ounce so miners on average were making $600 gross margins. Today those average costs are roughly $950 so the margins have grown to $1,000 per ounce. Back in 2011 the ETF he (James Rasteh) mentioned, GDXJ, reached a high of $179; today it is below $60. So, while margins are 67% higher today than in 2011, many miners are selling 67% below where they were then. He (James Rasteh) said the same thing in a different way but that's the deal. The miners don't need a higher gold price to be more profitable than they have ever been right at the time when most sectors will be in a dramatic profit recession. The light will shine here soon enough.
    • PC
      Peter C.
      21 August 2020 @ 17:47
      Thanks Steve for reiterating on the expected profitability and cash flows of the miner and re-posting here. Do you think the gold frenzy in 2011 was higher & therefore valuations were higher so today's potential bump up is less than 2011?
    • SD
      Steve D.
      21 August 2020 @ 18:30
      Thanks Peter, I'm watching the Rule and Fleckenstein discussion now. Excellent! I follow them both as much as I can. The direct answer to your question, in my view, is yes. The environment was likely more exuberant then than now. But then again the money printing today and almost certainly in the future could drive gold a lot higher although I'm not letting myself assume so. But, there is such a huge margin for error I think the potential opportunity is multiples of risk taken. Very simplistically, which is the only thing I'm capable of, if I look at GDXJ relative to margins it was at $179 with gross margins at $600. If you do the math of that relative to $1,000 margins it would say that "if" $179 made sense then $300 makes sense today ($179 / $600 X $1,000). With current price below $60 that looks to me like a gigantic margin for error that dwarfs anything else I see today. Hope that helps.
    • PC
      Peter C.
      21 August 2020 @ 18:54
      I'm with you Steve and totally agree with your logic. I also like Rick's "don't be greedy" recommendation in the vid. Accordingly, my smaller position size on GDXJ & selling well out of the money calls against it. Thank you.
    • RM
      Robert M.
      21 August 2020 @ 21:46
      Rick answers Peter's question around the 10 minute mark (left in video) about how carried the industry was in the past.
  • RM
    Robert M.
    21 August 2020 @ 21:42
    Great interview by two experienced investors in the gold arena. I am totally on board with investing alongside Ross Beaty. His interview on RV is worth watching. Got me into PAAS before the run-up.
  • DH
    Dominick H.
    21 August 2020 @ 21:31
    There are so much to learn from the 'gray hair'! I followed Bill's daily blog and found it's really insightful. Thanks to Bill, Rick and Real Vision for this fantastic interview. It would be really helpful to bring them back periodically as the gold and commodity cycle unfolds.
  • CB
    Chris B.
    21 August 2020 @ 19:24
    Excellent content, educational and entertaining. Have always enjoyed listening to both these guys and a rare chance to hear them talk to each other.
  • GG
    Greg G.
    21 August 2020 @ 18:26
    Would love to have 8 more hours of Rick and Fleck sharing their wisdom of the PM space. Tantalizing tip of the iceberg is all we got to see, but thank you for that! Excellent.
  • FL
    Fabrizio L.
    21 August 2020 @ 17:55
    first class!
  • JW
    J W.
    21 August 2020 @ 17:29
    "Quantitative easing ....which if you and I did it, would be called counterfeiting" - had to rewind the the video because I could not stop laughing. Thanks Rick !
  • LX
    Lai X.
    21 August 2020 @ 15:56
    Always a pleasure to hear Rick Rule talking.
  • OM
    Owen M.
    21 August 2020 @ 15:16
    Great discussion. RR is always well spoken.
  • AB
    Ameet B.
    21 August 2020 @ 14:17
    What an excellent week of content it has been. Thank you and hats off to the Real Vision team!
  • CE
    Carl E.
    21 August 2020 @ 13:42
    Rick Rule is great. I don't know if he still offers it, but if you go to http:sprottusa.com/rankings you could fill out a form and he will rank all your commodity investment from 1 to 10 and send you a copy of the Barron's Gold Mining Index and a 100 year Commodity chart. Fantastic Interview, Great Job Real Vision.
    • CE
      Carl E.
      21 August 2020 @ 13:46
      Sorry, wrong link. this should be it http:sprottusa.com/rankings just went there and it worked.
    • CE
      Carl E.
      21 August 2020 @ 14:00
      Just filled out the form and this is the auto response I received: Thank you for you interest in Sprott. Shortly you will receive an email detailing the portfolio information you provided, along with Rick Rule's ratings and comments on specific securities. One of our investment professionals will be contacting you to discuss your portfolio and the investment products and services offered by Sprott.
  • NR
    Nathan R.
    21 August 2020 @ 12:43
    Not sure who has the better hair, Bill or Ricardo Montalban in Star Trek. Great conversation. Thank you
  • MO
    Mathias O.
    21 August 2020 @ 11:46
    the ruler
  • cg
    charles g.
    21 August 2020 @ 11:05
    Great interview.
  • TE
    Thomas E.
    21 August 2020 @ 10:50
    This was extremely high quality. One of the most insightful interviews in RV.