April 19, 2013 | By Tekoa Da Silva
I had the chance this week to connect with legendary junior resource financier and investor, Rick Rule, Chairman of Sprott US Holdings, part of the overall Sprott Asset Management group of companies.
It was a fascinating interview, as Rick discussed exactly what he’s doing right now in the resource sector, and why so much money is made as a consequence of “selective and aggressive buying during these market bottoms.”
Speaking toward fund “disintermediation” of mining and natural resource shares, Rick stated that, “What’s happening now…[is] the small hedge funds and mutual funds…are experiencing redemptions. When you are experiencing redemptions as a manager, you don’t sell what you want to sell…you sell anything that has a bid, [as] you have to raise cash to fund your investor redemptions…One of the weaknesses of the mutual fund model in a cyclical industry like precious metals or natural resources, is that although the industry itself requires a contrarian technique, you’re at the mercy of the mob, and you’re at the mercy of the market. We’re seeing this in the capitulation selling that we’ve been [watching] this week.”
When asked if we’re finally seeing the spasmodic, event-type selling which marks major, historical bottoms, Rick said, “Yes sir. We’re coming right into it now. We’ve been experiencing it, [and] I expect we’ll continue to experience it for a while. I expect the spasmodic sell-off to give way to the summer doldrums, where the market drifts a little bit lower through the summer, albeit on no volume. Then I expect the market to begin to pick up in September, in a stealth bull market that nobody notices, where the sellers are simply exhausted, [and where] weak buying volume overcomes weaker selling volume.”
With regard to the absolute desperation being seen by weaker hands in the market, Rick explained that, “The type of speculator who got drawn into the precious metals and natural resource markets in 2009-2010, which were blow-off tops, are of course capitulating now. This is all good by the way…given that I want to own these assets, and given that my assets aren’t for sale at any prices like these, I’d love to see it lower…if you’re trying to increase your assets, you want to buy them on sale.”
According to Rick, this is one of the best markets in twenty-years for a contrarian speculator, with the last great one being, “The 1990 bear market [which] was an obliteration. You’d open up Stockwatch, and every week twenty companies got the dot. They got suspended [from trading] because they didn’t make their filing fees, or they couldn’t pay for their audits. So twenty listings a week went to listings heaven, truly brutal…and it was great because it chopped out all the flotsam and jetsam (junk), and when the market began to recover in 1992-1993—the recovery was absolutely vicious to the upside. You make so much money coming out of these cataclysmic sales, if you are selective and aggressive at market bottoms.”
Sharing a story of astounding wealth creation during that 1990 bear market, Rick concluded by saying, “On the floor of the PDAC in 1990-1991…there were three guys writing checks [I was one of them], and I made so much money as a consequence of that in the next 3-4 years. It was insane…so as you can hear in my voice—it’s wartime [right now].”
This interview, conducted with one of the world’s greatest performing natural resource financiers, may mark an absolutely historical moment. It is required listening for serious investors and market students.
To listen to the interview, left click the following link and/or right click and “save target as” or “save link as” to to your desktop:
To follow Rick Rule and Sprott Asset Management, visit: SprottGlobal.com
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Tekoa Da Silva
Bull Market Thinking