Rick Rule on Bail-Outs, Business-Cycles and 10 More Years of a Golden Bull
Daily Bell, July 04, 2010 – with Scott Smith
Rick Rule
The Daily Bell is pleased to present an exclusive interview with Rick Rule (left).
Introduction: Rick Rule began his career in the securities business in 1974, and has been principally involved in natural resource security investments ever since. He is a leading investor specializing in mining, energy, water, forest products and agriculture. A popular public speaker, Mr. Rule is a featured presenter at investment conferences and resource investment forums throughout the world. His firm provides unique insight into the workings of the natural resource marketplace. Global Resource Investments provides investment advice and brokerage service to individuals, corporations, and institutions worldwide. Rick Rule has originated and/or participated in several hundred transactions over the past 30 years, including both debt and equity in private, pre-public and public companies. These private placement activities have involved companies on six continents. The Daily Bell previously interviewed Rick Rule and that interview can be read by clicking here.
Daily Bell: We interviewed you nearly a year ago and we appreciate the opportunity to update viewers. It's been a most eventful time. How are things going at your company, Global Resources?
Rick Rule: It's been a pleasant year for us, if you can view what's gone on in the world as being pleasant. We largely anticipated the volatility, and we largely anticipated the fact that the recovery, such as it is, is a fraud. Our clients have maintained fairly large cash positions. We have lots of dry powder and suspect the volatility will continue and the cash will come in very handy. Customers have stuck with us through a very tough time and we regard ourselves as having been fairly successful stewards for them.
Daily Bell: Any new ventures you want to mention?
Rick Rule: Your question is two weeks early. Watch this space and you will see us in a fairly major transaction in the next 2-3 weeks, which I can't discuss for regulatory reasons. You must be speaking to God or something; you are just two weeks early with the question.
Daily Bell: Can you update us on the progress of the natural resource sector?
Rick Rule: The natural resource sector has a sort of stay of execution, if you will, from the stimulus. The demand may not be real demand but there is liquidity in the sector. All the printing that has been going on in the near term has been helpful for the resource sector.
Daily Bell: Does Canada remain a dominant player? What do you think of Canada's regulatory evolution?
Rick Rule: I think Canada is a dominant player because Canada has the infrastructure necessary for financial services resource success. The regulatory infrastructure is one thing, but the institutional infrastructure and the financial services infrastructure is another.
My views on regulators are fairly well known, and I suspect echo those of The Bell; I must say that the Canadian regulatory climate relative to other regulatory climates, is a blessing for Canada because Canadian regulators understand resource industries. I prefer the self-regulated environments of Dubai and London to the Canadian regulatory environments, but I have to say that Canada is very competitive.
Daily Bell: What do you think of the new financial regulatory regime being contemplated in the US? Are you a fan of the increased invasiveness?
Rick Rule: It's very difficult to answer that question in words that are suited for a family publication such as yours. It is the regulators that got us into the situation that we are involved in.
You know if you and I had a business, let's say a pension business that was run with the accounting standards of, for instance, social security, we would have committed a felony; we would have been in jail. The idea that the political leadership of the United States is in any condition to regulate anything would be comical except that it is so dangerous. An example would be Enron, a fraud that was for all practical purposes abetted by the Securities and Exchange Commission.
When that fraud took place, they passed a whole bunch of laws that were completely unrelated to the fraud that was perpetrated. The situation that we have just been through is a balance-sheet recession. Too many people had too much debt, at every level: personal, corporate and government. The federal response to that was to make it easier for people to borrow more.
I'm having a recollection of my University days, where I tried to cure a tequila hangover with white rum and it was temporarily successful, but it was not ultimately successful. That is exactly the type of cure that is being envisioned for the United States. The idea that you shepherd these big Wall Street firms and provide oversight, and at the same time you subsidize them with federal deposit insurance, is literally lunacy and very, very dangerous. The whole illusion of consumer protection is dangerous. My own experience with SEC personnel is that they are generally competent and well meaning but its existence in my point of view is a form of confidence game.
Investors are best protected when they are terrified and weary and the SEC – Doug Casey refers to it as the Swindlers Encouragement Committee – puts a veneer of protection in place where no protection exists at all. It deludes people to believe that something is happening for their benefit...
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