Laramie, Wyoming

By Dan Denning

Thanks for all the greatest questions you sent last week for Rick Rule. I sat down with the founder of the Rule Symposium on Natural Resource Investing earlier this week. The transcript AND the video are below.

Enjoy…and see you next week!

Dan

P.S. Off camera, Rick told me this year is the first time in over ten that physical attendance to his conference has been completely sold out. Such is the interest in gold, silver, copper, uranium, natural gas, nuclear and the rest of the raw materials of civilization. I’ve participated remotely the last two years and you can do the same by signing up here.

Dan Denning: Welcome back to Bonner Private Research for the latest private briefing with an old friend, Rick Rule is joining us. Rick, I neglected to ask where you are joining us from today. Where are you at?

Rick Rule: I live in the outskirts of a little village called Anacortes, Washington, and I am mercifully at home today. Lovely spring day in the Northwest.

Dan: Well, I’m glad to hear that. And I know you’ll be on the road in July, which I want to tell our readers about in a minute. I wanted to thank you for joining this on short notice. We have a ton of questions from Bonner Private Research subscribers. If you’re new to Bonner Private Research and you have somehow avoided seeing Rick’s face or hearing his wisdom on the natural resource market, Rick is a longtime friend of Bill Bonner.

In his current iteration, he is the founder and CEO of Rural Investment Media. And more importantly, for investors, he is the founder of the Rural Symposium on Natural Resources, which again will be held this year in Boca Raton, Florida, July 6th through the 10th. I’m sorry to say that if you tarried and did not secure your ticket to attend the event in person, it’s too late.

You cannot go in person. However, because Rick and his team are on top of it, it is possible, and I highly recommend that you sign up for the digital attendance, which allows you to participate live in the entire event. And more importantly, which I’ve benefited from a lot the last few years, you can review and watch any session you want at any time for up to a year after the event.

There’s so much that goes on that in some ways, if you’re not going to be in the room, it’s the best way to get the most out of the event. Do I have that right, Rick? And is there anything I missed?

Rick Rule: No, I think that’s accurate. We’ve worked, as you suggest, very hard for the last five years on the digital event. And it’s nice, last year we had 1,400 attendees from 33 countries. We offer all attendees, live or live stream, absolute unconditional money back guarantee.

If people aren’t happy with the value that they received, I’m delighted to say, out of 1,400 digital attendees worldwide, we had three refund requests last year. So obviously our investment in technology and our investment in Paul Harris, who’s the one who coordinates the digital presentation with the live presentation, has paid off.

Dan: Yeah, it’s really seamless. And one of the benefits for BPR readers is, once you’re logged into the system to watch, you can also chat with vendors who are there. You can send them messages, or you can chat with other attendees.

So even though you’re not in the room literally, there’s a lot of interaction to talk about some big ideas. And boy, are there a lot of big ideas to talk about this year? So I want to start with one that’s new since we even agreed to talk this week and frame it as a question. Earlier today, I read, haven’t confirmed that the United Arab Emirates has expressed its intention to leave the organization of petroleum exporting countries.

So UAE is leaving OPEC. I’m going to ask this as an open-ended question, but you can do whatever you want with it. Who’s the biggest winner from this war with Iran?

Is it a country? Is it a commodity? And if it’s a commodity, is it energy in general or is it a specific form of energy?

Rick Rule: I’m not sure there is a winner. If I was going to be opportunistic in attempting to use the war to my portfolio’s advantage, my temptation would be to default to Canadian oil and gas producers.

It could be that the heightened political risk in the rest of the world offsets the already high political risk in Canada.

And Canada would seem to be a potential beneficiary of a temporary or even other than temporary increase in oil and gas prices. The other thing is that Canada’s political leadership has been leery to allow expanded oil and gas production. The former prime minister saying that there was no business case for the export of Canadian oil and gas.

He said that despite six foreign countries evidencing interest in that, but it could be that increased public knowledge of the insecurity that global consumers feel with regards to oil and gas will change the political equation around the potential export of Canadian oil and gas, particularly given the incredible budget deficits that Canada enjoys, if that’s the right phrase.

So if I was going to find a winner, I suspect it would likely be Canada. That notwithstanding, of course, I, like you, would prefer that peace occurred.

Dan: Yeah. And you’re quite right to point out from a human point of view, not even humanitarian, but just from a personal point of view, it’s always a little distasteful to describe war as having winners and losers from a financial perspective.

But it’s such a disruptive event in terms of energy policy that I think there’s some other questions I want to follow up with, but I wanted to follow up on behalf of Tom Dyson, who’s, as you know, the investment director of Bonner Private Research. He was curious about some news that came out this week.

And then another reader asked about this as well. Tom recommended in the first week of December last year, ARC Resources, which was one of eight oil and gas stocks. And then earlier this week, Shell has said they would like to buy ARC Resources. So does this fit into your Canada thesis and what do you think of the offer that was made?

Rick Rule: It does, and it’s bittersweet. ARC was my favorite of the Canadians. Very high quality management team. I used to tease myself by saying I competed against them. That’s not true. I got the business that was left over. Very, very, very high quality people, very, very high quality company.

They stumbled recently, last two years on one big investment, which left the opportunity for Shell to come back into Canada by taking over ARC. I guess if I have the choice between getting paid now and getting paid later, probably I prefer to get paid now. I will not be a holder of my Shell shares. I would have preferred to continue to own ARC. That’s not an offer. I will, likely this week, at the very least, collar the arbitrage between ARC and Shell.

While I think the offer is a fair offer based on current market, I think the upside for me as an ARC shareholder was greater than my likely upside will be as a Shell holder.

There are some aspects of Shell, which by the way, are attractive. It’s a much better company than it was five years ago. The emphasis on gas in Shell, their increasing capabilities in gas production and trading is good. Their re-emphasis on frontier offshore oil and gas exploration is good.

That probably mostly offsets their, how would you say, European politically correct motivations of the last 10 years, and the fact that they haven’t maintained their sustaining capital investments in the US.

It could be that a ship the size of Shell will never be as efficient as I would hope, or as efficient as ARC. All of the above notwithstanding, given that I have fairly representative investments across the oil space, I won’t be a Shell holder.

Dan: Okay. That’s a great answer. I know Tom will have more for our readers because he also at that same time in December of last year recommended some larger producing companies. And I guess that leads me to my second question before I get to the reader questions, is the amount of cashflow that the oil companies have generated in the first quarter since the war started.

But also the gold companies, I’m sure you saw that the story that Newmont Mining generated $3.1 billion in free cash flow in the first quarter, which is around $100 million a day, which according to the story I read was, on an annualized basis would be more than Coca-Cola. With all that money, are we now looking at the M&A phase of the precious metals market or indeed the energy market, where the larger majors with tons of cash start buying smaller companies?

And if that’s true, how are you incorporating that into your strategy?

Rick Rule: Yes and yes. It isn’t merely a consequence of larger free cash balances. It is also the case that in both the oil and gas industry and the mining business, that the companies for 20 years or 30 years in the case of the oil business, have underinvested substantially and their ability to maintain, never mind increase production, is going to be increasingly constrained by past sins.

The big companies are going to be incapable of growing organically because they don’t have the pipelines that they would’ve had four years ago. The only way that they’re going to be able to maintain their production and hence their cashflow in the out years is going to be by acquiring smaller companies. It’s also true that bigger companies have greater trading liquidity and hence more trading volume and hence lower cost of capital.

In expected businesses, cost of capital is a decided advantage. So either value arbitrageurs like myself bid up the prices of small companies relative to large companies or the large companies take over the small companies. I think we’re coming into a period now where we see heightened M&A activity really across the landscape, big guys taking over little guys, multi-asset producers, which are less risky than single asset producers, eliminating the value arbitrage by taking over the single asset producers.

And importantly, both strategic and horizontal mergers. You will see smaller companies taking over smaller companies simply to become bigger, to be included in more indexes and get more passive buying. But yes, what you say is correct. With regards to the cash flow around Newmont, I want to add one thing.

I am nervous that this cashflow growth flattens out because during periods of low commodity prices, what many companies do without disclosing it as well as they should is high grade, which is to say during periods of low prices, companies often produce their low hanging fruit. What that means is that when the price of commodities goes up and they shift back to lower quality material, they’re okay for a year or two, but taking the high grade material out of the low grade envelope and mining only the low grade remaining material, means that their costs relative to units of production increases.

And I’m afraid that in the gold business with the big legacy producers, we’re going to see that. That’s not an accusation. I don’t know it to be true. And I’ve meant to go through the Newmont income statement for the last five or six years and look at the variability between the grade produced in a given year and the median reserve grades over the life of mines.

If you see companies that report costs on a unit production basis, which is to say a per ounce basis, without taking charges for excess depletion, when they mine grades that are substantially above the median reserve grade, what they’re really doing is high grading.

And I’m embarrassed to say I haven’t taken the time to sort through the gold business to find out which guys were and which guys weren’t high grading.

Dan: Well, it’s useful to know. I hadn’t heard that term. Maybe just to follow up on that general thesis, I’d seen somewhere recently that Robert Friedland had talked about interruptions in the ability of copper mines or other mines to operate as a result of not only higher fuel prices, which were a factor, or at least a factor to their margins, assuming the fuel was available, but then some of the distillate products that are used in the mining industry.

One of our themes has been, it doesn’t seem that any of the second or third order effects of the closure of the Strait of Hormuz have yet resulted in either much higher commodity prices or actual scarcity in physical bottlenecks. Is that something you think might happen still? .

Rick Rule: Both are completely accurate statements. I would suggest to you that the increase in oil prices that we’ve seen as a consequence of the Gulf conflict have been anticipatory, which is to say the price has gone up because there will be shortages rather than there are shortages.

There were floating inventories and there were strategic petroleum reserves around the world, and the price increases that we’ve seen reflect a concern over supply rather than actual supply. In some fairly short period of time, if the crisis isn’t resolved, you’re going to go to rationing oil by price as opposed to prices in anticipation of rationing.

You’re already seeing loaded cargoes south of the Straits trading at $40 per barrel premiums to posted spot rates. So while the quote may be $100, that same oil delivered into Pakistan or Sri Lanka, or for that matter Perth, commands $140, which is to say a $40 premium.

If this conflict continues, I’m afraid you ain’t seen nothing yet. The second thing that a lot of people miss is that the response in prices is inconsistent, which is to say the lighter fragments, things like diesel and jet fuel have really been impacted, and that likely continues.

The crack spread, the premium, as an example, that jet fuel or diesel might command suggest that the refiners are making incredible margins if they can get product, which obviously they can’t. And so you’re going to see the shortages spread unequally across products by weight.

And I think I saw an announcement that KLM is planning to shut down a variety of European flights due to the absolute unavailability, the price due, but the unavailability of jet fuel. You may see some mines in Western Australia similarly constrained, not merely by the price associated with diesel, but rather as a consequence, both of the Gulf conflict and Australia’s idiotic shortage of refining capacity, constrained by the unavailability of diesel.

I don’t think you have any fear of that for two or three weeks, but two or three weeks is a fairly short time. I guess what I’m trying to leave your listeners with is, the price increases that you have seen aren’t necessarily reflective of the price increases that you will see if the crisis continues.

Dan: That’s a really good point. That’s one reason I’m doing this interview from Laramie and not Australia. I was supposed to go down there and didn’t want to get stuck down there again for a variety of number of reasons.

But let’s move on to the reader questions because there’s a ton of them. Some are general, some are specific. I’ll just go in the order in which they arrived.

“Hi, Dan. Could you please ask Rick Rule which investment he considers best? Gold, silver, copper, platinum, or uranium?” I think you have to choose from those. “And does he prefer the precious metals physically or as stocks?”

Rick Rule: Sadly, there’s no one-size-fits-all answer. It depends on the investor. Investors who don’t have sufficient savings should consider having some savings in gold. So for the new investor, for the less wealthy investor, for the investor whose lifestyle will be challenged by a decade where I believe the US dollar will lose 75% of its purchasing power, for a investor with a fixed income, a pension, gold. Gold, what you’re looking at is not making money. You’re looking at survival. You’re looking at the maintenance of some semblage of your lifestyle.

Dan, I was around in the decade of the ‘70s personally, and I was old enough to be cognizant. In the decade of the ‘70s, according to the Office of Management and Budget, the US dollar lost 75% of its purchasing power. Which meant that a pensioner that went into the decade in 1970, the basket of goods and services that he or she bought for $1,000, by the end of the decade cost $4,000.

What that means for many of your listeners is that their savings and their retirement income will be insufficient to fund the lifestyle that they would like to become accustomed to or are accustomed to over the next ten years.

And there’s no hope coming. I mean, people need to understand that. The entitlement system in the United States is $120 trillion upside down. So the idea that the state is going to come to your assistance is a misnomer. For you, gold. For an investor in a different circumstance, which is to say a Rick Rule, if I had one place out of all of those to be, I would probably be in the high quality uranium equities. The reason for that is twofold. The unsung beneficiary of the Gulf conflict really, and this is the way I should have answered your prior question, is uranium.

The incredible buildup of the French nuclear fleet and the Japanese nuclear fleet, now numbers three and four worldwide, were a consequence of the Arab oil embargo. When energy security became a national concern, the Japanese noted that they could store enough uranium because of its energy density in one warehouse to power Japan for five years.

That lesson was lost on Japan in the aftermath of Fukushima, and now they’ve got a slap in the face, a real dose of reality. And I suspect on a global basis, in addition to the other attributes of uranium, which is to say reliable base load power, non-carbon generation, we’re reintroducing the concept of energy security. And if you couple that with the fact that the structure of the uranium market itself has changed, where unlike any other commodity in the world, which trades primarily at spot, uranium trades in contractor term markets.

What that means is that producers and consumers can enter into binding contracts that specify price and term for a long period of time. With the boom in new uranium plant construction now, the lenders are frequently requiring the nuclear power plant builders to obtain enough supply in the contract market to amortize the loan, unlike any other commodity where price variability in the out years is extraordinary.

In the uranium business, both price and volume can be predetermined for the very long term. And that makes, to me, the high quality uranium equities, the people who will have the productive capacity to fuel the demand for nuclear power plants in the future, particularly attractive speculations.

Dan: I don’t disagree with a word of that. How does Sprott play into this, by the way? And you can elaborate on your previous involvement with them, but they have several ways for investors to participate in this and one of them is just a huge pile of uranium.

Rick Rule: It might be that the lowest risk, or certainly the lowest effort would be to buy uranium. Uranium is not a substance which you either legally or are advised to store at home. And Sprott is the largest owner of physical uranium that we know of, finished uranium on the planet. They own on behalf of investors 82 million pounds in a vehicle called the Sprott Physical Uranium Trust.

And buying this physical uranium, having Sprott store it for you in licensed locations around the world is a wonderful way to play this circumstance. It trades like water. So to the extent that you want to buy it and sell it, at least in mortals quantities, you can buy this stuff on the exchange, sell it on the exchange. You don’t have to do anything. They store it, they insure it, they do everything. So that’s a wonderful way to play it, probably, particularly for people who have no exposure.

The other way to play it is, in effect, the Exxon of the uranium business, which is Cameco [CCJ], the largest and highest quality full service uranium company on the planet. They do everything from explore uranium, to operate nuclear power plants, and sell watts.

The stock has had a tremendous run-up, albeit from a limited base, but current dynamics in the uranium market are not reflected in either the uranium price or in the Cameco price.

Dan: Yeah. I think that’s well worth following up on because one of the phrases I’ve seen in relation to what happens after the end of the war is, we have a global energy market in terms of demand, but the supply might turn out to be heavily influenced by regional geography and who your neighbors are and how much of a particular resource they have. So there may be more opportunities there later this year.

Rick Rule: Even a poor country like Sri Lanka, and you rely on thermal, which is to say coal, oil and gas for your electricity, 80% of your electricity. While $6 billion is not an inconsequential sum to spend to build a modern nuclear power plant, that’s a cheap one, by the way. And those prices, those costs will come down as the volume goes up.

The price that Sri Lanka is having to pay right now in terms of economic output as a consequence of restricted liquefied natural gas and petroleum prices is one that I think will cause even a very poor country like Sri Lanka to rethink the calculus of the upfront capital cost as against the security of having nuclear power.

Dan: Yeah, I agree. I think it’s the best moment for a long time for nuclear. Let’s talk about something that hasn’t had a lot of great moments or had a very good moment earlier in the year and then a very bad moment. This is a question about silver. “If Rick sold out of his silver position earlier in this year, what was the reasoning behind the move and what does he see silver doing in the near future?”

Rick Rule: Well, you see, I don’t see the silver price as down because I measure it from $17. I just considered it as less far up. And again, the answer is individual. It’s not one-size-fits-all. For me, silver in my portfolio was a speculative position. I had it in a speculative bucket of my portfolio. Now, Tom, or pardon me, Dan, you know I’m a speculator. So my speculative bucket’s fairly large, but I’m fairly specific. I bought silver because it was hated, and I bought it because at least in terms of primary production, not byproduct production, but primary production, it was cheap.

The price of silver didn’t justify the capital cost associated with mining silver. And so either the silver price went up or the silver mines were shut down. Those were my two choices. But I bought it more because when I looked at social media posts concerning silver, they were sort of 19 to one negative, and a speculator learns to love/hate, at least a speculator that’s in a natural resource-based investment. So I bought silver thinking that as it became, if it became less hated, that the price would go up. And you know what happened? The price went up.

So when the price went up, the reason I owned it went away. If I thought the price was going to go from 17 to 50, and instead it went from 17 to 70, a lot of my reason for owning silver went away. So I needed to rethink my speculative position.

And here’s the interesting arithmetic I came up with. As a speculator, I was better off owning the silver stocks than silver because the silver stocks were trading on the market, assuming $45 silver and the market was paying 70 for it. Now there’s three circumstances that could happen. The price of silver could go up, that could happen, and the silver stocks would benefit.

The silver price could go sideways, which by definition meant I didn’t make any money on my silver. But the silver stocks priced at a $45 assumption could still go up, even though the silver price couldn’t go up, or the silver price could go down.

And if the silver price went down, the inherent discount implied in the price of the silver stocks meant that at least arithmetically, the silver stocks would lose value less rapidly than the stocks. And so when I sold, I sold 80% of my silver position, not my entire silver position.

When I sold that, I redeployed about half the money into silver stocks, high quality ones. I put a quarter of the money into savings, primarily gold bullion, but also short-term US treasuries, and I put a quarter of the money in oil and gas stocks, not because I anticipated the Gulf War, but rather because oil and gas was hated at the time. And again, I was buying hate and selling love.

That doesn’t presuppose that everybody else should do that. Most people were unwilling to buy silver when it was hated. They needed the psychological reinforcement of the price action to justify the narrative. The difficulty with that is that when you get the price action that justifies the narrative, most of the value of the narrative’s already gone.

Dan: Right.

Rick Rule: I hope that answers the question.

Dan: It does. No, it does. I mean, we could take a deeper dive on demand for silver and deficits, but I think we’ve talked about it enough before that that covers the specific question directed at you. Here’s a question about copper. It’s slightly longer, but I’ll read it anyway. “Given your view, I assume this is your view, on the structural copper deficit and the quote, ‘need to steal from host governments, by host governments,’ how do you weigh the optionality of the Cobre Panama restart against the rising jurisdictional risk in Latin America, with Franco-Nevada trading at a premium again and the stockpile processing approved, is the Panama discount fully gone or are we underestimating the cost of the new social license required to fully open?”

That’s a big question, and it assumes a lot of familiarity with terms you’ve used before.

Rick Rule: We haven’t seen the social cost reopen. We haven’t seen the agreement between the Panamanian government And First Quantum and Franco-Nevada. Doesn’t mean that there isn’t one, but we haven’t seen it. I believe that... I mean, this is still a very open political question in Panama. About 40% of the people in the country, people who I suspect are enumerate, oppose the reopening of the mine, which is to say that they’re putting rhetoric, environmental rhetoric or some other kind of rhetoric ahead of the fact that their country’s insolvent.

And ahead of the fact that the contracts around the agreement between Cobre Panama and the Republic of Panama are subject to international arbitration. And if the mine shuts down, Panama’s going to lose a bunch of money that it doesn’t already have. So from a fiscal perspective, the reopening of the mine is an inevitability, assuming that the voters in Panama become numerate.

Dan: That seems like a big assumption.

Rick Rule: Well, I suspect right now one impact is that that mine at $6 copper is going to make a whole bunch more money than that mine made at 3.50. And there’s probably a little bit to go around. One potential impasse of that would be to give the country of Panama some access to the upside, which is to say, in effect, give them a stream, the right, but not the obligation to buy some copper at a fixed price for a period of time in the future. That stream, depending on the nature of the stream, could be turned into cash now, which is to say the government of Panama, rather than keeping the stream, could sell a stream and raise money, and they need the money in the worst way.

I suspect that there is upside both in First Quantum and in Franco-Nevada, because I think that there’s a probability, not a certainty, but rather a probability that negotiations are ultimately successful and the mine comes back into production.

I have been assured, although I don’t know personally, I’ve been assured by the company that the mine has been on, what’s called hot shut, which means that they shut it down, but they kept the operations in good condition so that it can be restarted, including the plant, on fairly short notice. I noticed too, the Panamanian government has given First Quantum now license to process the stockpiles, which means that they’re going to turn the plant on.

And assuming that the impasse and negotiations is resolved, that the plant could relatively efficiently move from stockpiled material to new mined material without too long a delay, which would of course be a very good thing.

Dan: Excellent. That’s a thorough answer. I’ll just give you two more, and then we’ll release you to your adoring hoards on the internet who probably are requesting massive amounts of your time. This is a general one. If there is a stock market crash, how will gold, silver, and the mining stocks react? Will they fall significantly, but bounce back quicker than the general market? What’s your risk here?

Rick Rule: I think the answer to that is yes and yes. It’s important to remember that gold stocks are stocks. It’s important too, to look back at history. In 1987, as I recall, the gold complex held up for 24 hours before it got crushed too. It’s important to know that in the liquidity squeeze, the sell decision is seldom made by the speculator, but rather by the margin clerk.

And the margin clerk doesn’t have favors. The margin clerk looks for something that has a bid, and gold always has a bid, so it will be sold. In prior liquidity-driven crashes, two things have occurred. Assets that are regarded as higher quality assets, which often include gold, come back quicker.

The second thing that happens is the fiscal response to a liquidity crisis is very often artificially low interest rates and quantitative easing, also known as counterfeiting.

Traditionally, both of those responses have led to concerns about the maintenance of purchasing power in fiat currencies and have been very good for gold, which is to say that gold often bounces back first because of its perception as a high quality low risk asset, and then bounces back too as a consequence of the policies that the governments have enacted to shield the citizenry from the worst aspects of the liquidity squeeze.

Dan: Yeah. It’s a really interesting question from a political angle or monetary policy angle that with monetary policy being more effectively politicized in the US, you have a new Fed chairman, you’re going to have a lot of pressure to lower interest rates in order to goose GDP before the midterm elections. And then you’re in that 24 month period, really less, where a new president will be elected. And if there’s Republicans in control of Congress, they’re going to want the economy to be... Well, they want to run it hot. We would say CPI will be officially 4%, but probably more like 9%, which it’s hard to imagine gold not doing well in that situation.

Rick Rule: Dan, I’ve been cognizant now for, I don’t know, 55 years, something like that, maybe economically literate for 45 years. I’ve seen two periods of time in my life when the United States attempted to let the market set interest rates, and I wouldn’t hold my breath for that occurring this time through.

I would also suggest that we stop referring to the CPI, except as perhaps by the moniker, the CP lie. The idea, if you yourself, Dan, looked at the price escalation, a basket of goods and services that you consume now relative to the year 2020, the idea that your purchasing power was deteriorating at 2.5% a year compounded is stupid. You’ll remember that when it’s inconvenient to them, the index doesn’t include food or fuel. Well, I don’t know about you, but any index doesn’t include lunch is of no use to me whatsoever. And on top of that, it doesn’t include tax.

If I didn’t have to pay the tax, maybe I wouldn’t bitch quite so much about the index, but when people are thinking about inflation and they use as a baseline, the CPI, they’re making a huge mistake in their baseline assumption. I listen all the time to conference calls around major resource developers, and they’re all saying that the escalation in the construction inputs and the operating inputs that they’re facing, including labor, is growing by 12 to 15% a year.

How is it that the CPI stated rate of inflation is at 2.9 when the input costs associated with major heavy industries in the country are increasing at 12 to 15% compounded? The answer is they aren’t. It’s a joke.

Dan: Yeah. It brings me to my last question for you, and I’ll preface it by a story I read today on X, and I can’t remember if it was the Sumerian Empire, Babylon Empire. It was one of the empires in the Levant. And the paper record showed that as the empire was collapsing, literally collapsing, like the sinews of trade globally were falling apart. The world was becoming less connected as the empire fell apart.

The people in the center of the empire were busy sending effectively memos to each other about administrative affairs. And the modern equivalent of looking at spreadsheets and having a Zoom call or a Slack call about whether the rate of inflation in insurance premiums was accurate. They were missing the fact that the price level went up by 40% in two years and it entirely shifted. It is not coming down. But it gets back to the point you made about golden purchasing power, which is the last question I had from a reader.

“Please ask Rick what he thinks about buying PACS gold as a digital way to buy gold. The company argues they hold the physical and they are audited annually.” And my addendum to that would be, is there a better way for people to earn interest while preserving their purchasing power than a conventional bank?

Rick Rule: I’m fascinated by Tether and PACS and Argo. I mean, really, truly fascinated. What holds me back, although I am a shareholder in Argo, I can’t deny that. What holds me back is that none of them publish balance sheets or income statements. And the idea that somebody is holding my wealth for me in proxy where I can’t see the balance sheet or the income statement, which is to say, I don’t know anything about the solvency of my fiduciary is of no use to me whatsoever.

I remember back in 2011 helping the Sprott organization create the Sprott Physical Gold Trust and the Silver Trust, and I was talking about ways to make the trust more efficient, which would’ve increased counterparty risk. And the guy whose name was on the door, Eric Sprott, who was going to invest a quarter billion dollars in those products, said, “Rick, I’m doing this to reduce my risk. I’m not doing this to increase my risk.”

So I would argue that at present, digital gold is a speculation as opposed to savings because you don’t understand anything about the solvency of the fiduciary. And if the fiduciary ended up in chapter 11, the fiduciary of your savings would be a US bankruptcy court. I have enough experience with the mechanisms of bankruptcy courts that I don’t want to face that. So I would prefer to hold my gold... Well, I mean, at Battle Bank, we hold all our gold at Brink’s. It isn’t because the service that we get from Brink’s is better than the service that we might get other places, right now far from it. It is the fact that only Brink’s and Loomis have storage facilities that are owned in publicly traded companies where I can see the balance sheet and I can see the income statement, and where if they lie to me, it’s a federal offense, not a civil offense.

I don’t have to sue them. I don’t have my gold to increase my risk. I want any gold instrument I have to be redeemable, which means I want to be able to trade my piece of paper for the real thing, and I want the fiduciary to be solvent, and I want my gold to be stored by a fiduciary that’s solvent too. If you hold gold as a speculation, if you hold it merely because you think the price is going to go up, not because you think you might need it. If you’re speculating in gold, then you can consider less secure forms of ownership. I speculate in gold stocks. I save in gold, and those are very, very, very different motivations.

Dan: Yeah, I agree. And I think that’s a good answer. It’s exciting to me too. I love the idea of tokenized gold and being able to use that.

Rick Rule: Well, using it for money is something I really look forward to. I really, really, really do look forward to it. I look forward to a gold coin or gold token that is floated by a solvent reporting intermediary that’s redeemable. And I mean, the technology exists now. The regulation to allow it doesn’t exist yet.

Dan: Yeah. Well, let’s hope it happens soon. Let’s hope it happens before, but probably not, before July 6th through the 10th, which in case you missed the beginning, Rick will be the host of the Natural Resource Investing Symposium. And according to your website, if my math is correct, that’s 68 days, 20 hours and 53 seconds from now. So you have some time to register, but don’t wait too long because from uranium to silver to gold, copper, energy, oil and gas, there really couldn’t be a better time. I mean, actually maybe that’ll be my last question to you. How do you put this year in the context of previous events in terms of your level of enthusiasm or excitement about the opportunities that natural resource investors have right now?

Rick Rule: The content gets better every year. We’ve put on the conference for almost 30 years, actually since you all have owned it, since Agora owned it. And if you do something for 30 years, if you stood the test of time, and if you tried to make it better every year, after 30 years, it gets pretty good. We have learned the art of putting on conferences a little better and curating content a little better every year.

The online part of it gets better much more quickly because we’ve only been doing that for five years. The first year was a disaster. We couldn’t have done worse, but the conference will be better in that regard. It will be difficult for us to match the investment performance of the last two years, simply because the investment performance of the last two years was so exquisite.

What we can tell you is this, we can tell you that unlike any other investment conference on the planet, any public company exhibitor at our show must be owned in the accounts of the conference organizers. Now, there’s no guarantee that because I own a stock, it goes up, but there is a guarantee that I have vetted that company, an absolute guarantee.

And there’s no other conference I know of on the planet that has that same qualification, which I think is important. The second is that there’s no other investment conference I know of on the planet that has an unequivocal money back guarantee. If you think for any reason whatsoever that you didn’t get your money’s worth, I give you your money back. The third thing that we do that nobody else does is that I interview every single speaker and exhibitor at the conference before the conference, that you don’t have to pay to watch that, by the way.

You can go to YouTube, the Rural Investment Media Channel, and you can watch all those, but it’s meant to be used in conjunction with the conference because we give you over 46 hours, over four days, more content than you can absorb at the conference, much more.

The consequence of that is that we want you to arrive at the conference informed and be able to allocate your time better because you’re familiar with the speakers before you get to the floor, you’re familiar with the exhibitors before you get to the floor. And then unlike any other conference on the planet, afterwards, three months or four months afterwards, I interview every exhibitor again. I say, “Eight months ago, you said you were going to do this. At the conference, you said that you were going to do this. Now, here we are. Have you?” There’s no other conference that invests that much in the attendees.

There’s no other conference I know of that invests anywhere close to that much at the attendees. If you go to conferences to get away from your husband or wife, if you go for amusement purposes, don’t come to ours. If you buy the Sunday paper to do the crossword puzzle, our conference isn’t the place for you. If you come to make money in natural resource investment and speculation, absolutely do come. And if you don’t think I delivered value, let me know. I’ll give you your money back.

Dan: Well, if it’s not this year, there’s never going to be a time. And if it’s not this conference this year, I don’t think there’s any other conference that would make a bigger difference to the bottom line of individual investors than something like this. There’s just too many exciting things, risks as well, but the fact that you’ve done so much homework and that you’ve taken an hour of your time today to answer questions from BPR readers, Rick, it’s always a pleasure.

I always learn something and thanks again for your time. I look forward to talking to you next time. And for readers who are reading this or if you’re listening, we’ll have a link below to sign up for Rick’s conference. But Rick, thanks again for everything.

Rick Rule: Dan, thank you. I enjoy these conversations. One of the things that people who listen to me don’t know is how much work it is to be interviewed by a bad interviewer. And I enjoy talking with you. Sometimes my chore is to make the interviewer seem somewhat less stupid than he or she is. And it’s an absolute delight to be interviewed by somebody like you, and in fact, by your many listeners who also ask intelligent questions. So thank you for the ability to address your audience.

Dan: Oh, I’m flattered and I’ll pass that on to the readers because most of the questions were theirs. But Rick, until next time, we’ll talk to you soon, okay?

Rick Rule: Thank you, sir.

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Saturday, March 14th, 2026

Laramie, Wyoming

And just when the world was full of experts on the Strait of Hormuz, now we have the Bab-El-Mandeb. That’s the narrow exit at the southern end of the Red Sea, the eastern side of witch (in Yemen) is controlled by the Iranian-backed Houthis. Another oil choke point.

Oil and Iran obviously came up in the Private Briefing Bill and I recorded earlier this week. So did the Fed. And debt. And much more!

The full transcript is below. Or, you can click on the video to listen and watch.

Enjoy!

Dan

P.S. Closing the southern end of the Red Sea, along with the Strait of Hormuz, would leave Middle East oil stranded…unable to get to Europe and Asia. Obviously a huge story to follow over the weekend. And it will have big implications for our Trade of the Decade and the new oil and energy stocks Investment Director Tom Dyson has added to the Official List.

Dan Denning: All right, we’re live. Welcome back to Bonner Private Research. This is the State of the World quarterly podcast. I’m Dan Denning, the research director of BPR, back here in Laramie where it’s snowed, but things are nice and secure. And I’m joined today by our founder, the man himself, Bill Bonner in Ireland. Bill, welcome back. How are you?

Bill Bonner: Just fine. Thank you, Dan. It’s been raining here every day, practically every day since last November. So we have plenty of water in the ground.

Dan Denning: Well, you’re lucky. It’s been a very dry and mild winter in Wyoming, and that always translates to a dangerous fire season, which brings me to my first question. We’re talking about things are on fire in financial markets. I want to start with a term you’ve been using for a long time, and it’s key to our analysis of what’s going on in the US economy and in the US stock market. And that’s the primary trend in interest rates.

So you’ll recall that in August 2020, as you pointed out many times, the 10-year yield on the US Treasury note hit 0.51%, which was an all-time low. Today, it’s 4.25%, 730% higher. I did a little research and showed that in the 1970s, when there was last an oil crisis and stagflation, so inflation with no growth, it hit 11%. And by the time Paul Volcker was finished raising interest rates, the 10-year yield was almost 16%. So one more piece of information for you. And then my question.

I did a little calculation that showed that of the US debt that has to be refinanced in the next 10 years, if the 10-year yield were 5%, it would increase the interest cost on that debt by half a trillion dollars. If the 10-year yield were 10%, it would increase the annual interest cost by $2 trillion. So we’d spend $2 trillion a year just in interest expense on the national debt. Given that we can’t afford that, is the primary trend in interest rates still up? And if so, how high do you think they’ll go?

Bill Bonner: Well, Dan, there’s a lot that I don’t know there, but as you say, it started in July 2020. The all-time bottom of yields happened. And all we know for sure is that these interest rate cycles, these yield cycles are very, very long. And the previous one had been in existence since the day I was born. I was born in 1948, and the interest rates had hit an all-time low right around there. I don’t know whether it was before or after I was born. And I don’t know whether my birth had anything to do with it, but it got down to very, very low levels and went up again for a long, long time until 1980 and then started going down.

And so the whole cycle ran through my lifetime. And now we’ve started a new cycle. And if it’s anything like previous cycles, it’ll take a long, long time to get wherever it’s going. And we presume, we don’t know, but in real terms, you’d expect the cycle to go back to about where it was and be about 10%, 15% real interest rate. Now, what that is in nominal terms will be a whole different thing because we’re now looking at inflation at a level, possibly at a level we haven’t seen before. We don’t know.

But there are a lot of things that are happening now that make us think that inflation could be much, much worse. So the idea that this cycle has already run its course and that we’ve already seen the high in yields is not, to me, very believable, not credible because we’ve got a long way to go just to get back to normal interest rates, let alone top of the cycle. So my guess is that we’re looking at a long, long period with lots of ups and downs in which interest rates generally go up, real interest rates generally go up.

And there’s a lot of noise in the system because the inflation rates are not only going up, but they’re hard to figure. We’re already seeing that, just hard to keep track of whether prices are really up, are they really down? For whom are they up? For whom are they down? And so on. So to me, I’d say the best bet is that real rates are going up. The best bet is that they’re going to continue to go up. And I wouldn’t get too self-satisfied about it. I think that they’re going to eventually go down, but that could take another 10 years, could take another 15 years, something like that. So that’s my best guess. And it’s just guesswork.

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Tom Dyson: Hi, Rick. Thanks for joining us.

Rick Rule: Tom, it’s a pleasure to be on with you. I’m a huge fan of your writing and Bill’s writing and of your staff, so it’s an honor to be on.

Tom: The feeling is mutual. I read and watch almost everything you put out. You just get more and more prolific as time goes on. It’s amazing.

Rick: Well, when I resigned my position at Sprott, three years too late, but better late than never, I learned at Sprott that I was spending half of my time on administration, which didn’t make anybody any money, and it constrained what I was able to say. Now, I have freedom and time. Maybe you can teach an old dog new tricks.

Tom: Yeah. You just started a newsletter too. Better late than never.

Rick: Yeah, I think that’s right. Not wanting to be necessarily marketing newsletters in the old Agora format, which is to say three adjectives per sentence. I decided to make this newsletter free for a while. If we decided to make it a subscription publication, what we’re going to say to the people is, “If you’ve enjoyed this for free, perhaps you’d care to pay us a little.”

So yes, we do have a newsletter, and it’s enjoyed a lot of growth. We’ve got a lot of love, people emailing us saying, “I still can’t believe you do this for free,” but we do. It’s a way to talk to the people who are interested in what we have to say on a consistent basis in a format that they can digest easily.

Tom: For viewers, it’s a Substack newsletter, and it’s just simply called Rick Rule. Is that right?

Rick: I don’t know, to be honest with you. I’m lousy at branding. It wouldn’t surprise me if I called my newsletter Rick Rule.

Tom: Your username is @RealRickRule.

Rick: @RealRickRule, that’s correct.

Tom: I’m a subscriber, and I would urge all readers to sign up, particularly as I followed you into a new energy trade here, which is the real reason that I wanted to talk to you specifically about some of the companies that we’re talking about. If I could fire out the names. I’m at the learning stage, and I just like to pick your brain on specifically some of these companies. Sometimes when we talk or when you talk to Dan, it’s more of a big macro conversation, talking about uranium and the dollar and all that stuff. Today, I’d really just like to talk about companies.

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Laramie, Wyoming

by Dan Denning

Well, I didn’t expect a Canadian software company to be the next big opportunity after oil and gas. Or really, because of oil and gas. Chris Mayer, the latest guest in our Private Briefing series and the fund manager at Woodlock House Family Capital, explains below.

Chris and I go way back. So when I knew I’d be in Baltimore for the week (last week) I asked if he’d come down to the library at 14W to catch up on camera. We talked about what went right, and not so right, in 2025. And we talked about what he’s excited about in 2026.

Underlying the whole conversation was one word: cash. What to do with it if you have it? Or how to find companies that are generating more of it. And how to pick managers that know how to invest it (or return it to shareholders through dividends and buybacks).

Thanks again for sending your questions in a head of time and enjoy the transcript (and the video) of our Private Briefing below.

Regards,

Dan

P.S. One small clarification. The ‘demise of Warren Buffett’ cover story I mention from Barron’s was not published in 2000. It was published on December 27th, 1999. The Dow made its then all-time high on January 14th, 2000. Fattened up with tech stocks, the Nasdaq composite didn’t make its all-time high until March 10th (many rusted on bears sold ‘old economy’ stocks and capitulated into the momentum trade of the day). The S&P made its own all-time high two weeks later on March 24th. And then commenced a miserable lost decade for investors.

Dan Denning: Well, hello everybody. Welcome back to Bonner Private Research. I’m Dan Denning, the research director at BPR. As you can see, we’re here in the hallowed halls of 14 West Mount Vernon, the famous library where my guest today has had many conversations with myself and with our founder, Bill Bonner. So Bill and I sat and went over our list of questions earlier today, and thank you to readers who sent questions in ahead of time, so I’ve incorporated some of those questions to ask Chris today. But for those of you who haven’t met him, please let me introduce Chris Mayer from Woodlock House Family Capital. Hello, Chris.

Chris Mayer: Hello, Dan. Good to be back on with you.

Dan Denning: Oh, good. Someone’s got the energy.

Chris Mayer: In person for once.

Dan Denning:Yeah, it’s been a while. The last few times we’ve talked, it’s been remote.

Chris Mayer: Virtual, yeah.

Dan Denning: I’m in Wyoming, you’re in Maryland. I know I said I wouldn’t do this, but I’m going to make you do it anyway. Can you give the very, very short background on your relationship with Bill Bonner and your current role as a fund manager?

Chris Mayer: Yeah, very short. So I was a reader of The Daily Reckoning way back when, and I remember I used to send Bill things. I was a freelancing at the time too, so I had articles published there. One time, Bill was like, this was around 2004, “You should meet Addison.” Addison was coming from Paris and we were just starting up Agora Financial, we were doing that whole thing, that’s where I got to meet you. So made the leap over to Agora and was writing newsletters up to about 2016 or so, and then I worked with Bill in his family office for a while. And then, we started Woodlock House, January 2019 is when it started.

Dan Denning: Right. Well, we’re going to talk about both the family office and how Woodlock House is doing, because those are what we’ve talked about before and we’re at the end of the year, so there’s obviously always a lot to talk about, but we want to talk about performance. And actually, I want to start with that, because I don’t believe these play a big role in your strategy, but for BPR readers, gold and silver, who have had spectacular years, gold up 60%, silver last I checked was up almost 100% for the year, the mining stocks have kind of reacted. You’d think these companies, their free cash flow is going to explode if these prices are much higher than the models at the start of the year. So just to start with, any comment on the performance of those investments, and any attraction to either the metals themselves or the mining stocks?

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Laramie, Wyoming

Yesterday (Thursday) I got on the horn with my old friend Addison Wiggin. For many years, Addison was Bill’s chief co-conspirator at The Daily Reckoning, whe…

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Laramie, Wyoming

By Dan Denning

Greetings from Laramie and welcome to the weekend! I hope you had a great Thanksgiving with family and friends. It snowed overnight here in Laramie. A good day to stay inside and watch some great college football rivalry games.

Before that, I’m getting caught up with the events of the last twenty-four hours. We learned that Ukranian naval drones (the Magura 5 sea drone tuype) attacked ships in Russia’s ‘dark fleet’ of oil tankers in the Caspian Sea overnight. There are over 600 ships in the ‘dark fleet’ transporting Russian oil around the world.

And remember that ‘cooling issue’ I told you about in yesterday’s research note? The Chicago Mercantile Exchange (CME) closed trading in futures—including precious metals—due to what it called a technical issue at a data center. But was there more to it?

The silver bugs on X have noted that$24.5 billion was borrowed at the Fed’s Standing Repo Facility (SRF) before the futures markets re-opened yesterday morning. The SRF exists to provide emergency liquidity to financial institutions, in exchange for good collateral. Those institutions might need to borrow from the Fed to say, cover a short in the silver market before the price gaps upward (silver opened 5% higher when the market DID open).

I’m looking into it this weekend. It raises the issue if markets are really markets and prices are really prices (a skyrocketing silver price is a sign of systemic weakness in the paper money system, a price signal the authorities would be keen to suppress). But it’s also a reminder that in a world where most things—drone attacks on Russian ‘dark fleets’ and possible price manipulation/suppression in silver—you can only control the things you can control.

In the first of several upcoming Private Briefings, I talked with author and privacy expert Gabriel Custodiet earlier this week. We’ll be following up between now and Christmas with a new version of the ‘Going Dark’ report I published a few years ago. It will show the ten practical steps you can easily take now to improve your financial and digital security in 21st century America.

But between now and then, please enjoy our wide ranging initial discussion below. Weirdly, privacy is a controversial subject with some readers. It may not be your cup of tea. But it has clear financial and liberty implications in this day and age. Please feel free to leave comments and questions below. We can address them in our upcoming re-release of ‘Going Dark.’

Regards,

Dan

P.S. For reasons that will become clear later, there is no video version of the Private Briefing. It has been transcribed in full (with minor edits for brevity and clarity) and I’ve included an audio link you can listen to or download.

Dan Denning: Welcome back to Bonner Private Research. This is Dan Denning, the Research Director here in Laramie, Wyoming. And by popular demand in today’s Private Briefing, I am joined by a privacy expert. We have a lot to talk about. We got some great reader questions. But let me first introduce my guest. He’s the author of a book that was published in September called Privacy and Utopia: A History. And everything you hear us talking about today, you can find more information at WatchmanPrivacy.com. And the man behind this whole project is Gabriel Custodiet. Gabriel, welcome to the show.

Gabriel Custodiet: Dan, it’s great to be here. I’m the privacy guy. We talk privacy, cybersecurity, cancel culture proofing, basically using technology for our benefit as freedom seekers, so happy to be here. Familiar with your audience. I help a lot of people who are investors and things of this sort, so excited to talk to you.

Dan Denning: Yeah, that’s great. Well, as the readers may know, and as you may know, last week I published a short note about what we mean when we use the word technocracy, and it’s a very broad term, so it has privacy concerns, it has financial concerns, liberty concerns, a little philosophy in there, cybersecurity. It’s a huge topic. And one thing I wanted to mention to readers before we get started and viewers, is that the format today is slightly different. This isn’t a video, it’s an audio and we’ll get into the reasons for that later. But before we take a deeper dive, I thought since you’re a new guest for our audience and privacy is not a topic we’ve dealt with specifically, let’s start at the very highest level with a question. How do you define privacy and why is that important to ordinary Americans and investors right now?

Gabriel Custodiet: Privacy, I see as a social term. This is something that I determined as I wrote the book you mentioned, Privacy in Utopia, as I was trying to figure out what we mean by privacy. And basically we already have terms like solitude, for example, where you’re alone and you’re inaccessible to others. That’s not what privacy is. When we talk about privacy, we’re talking about living in a society that allows us to participate, but also does not expect us to give up that much of our personal data. So you think of the early United States, they had this idea of being American, they had this idea of being part of something bigger, and yet they didn’t have all these things like ID cards and all the rest foisted upon them. That’s what I determined privacy is, is basically it’s a social environment in which you’re able to participate while not being expected to give up that much of your personal data.

And in my view, that is a rare blossoming thing in the world, as is human freedom. And I think it requires a certain group of people who are rational, who have a moral consciousness, and that is by no means every place on earth, so that is what I consider to be privacy. Why is privacy important? Well, this is another question that I get a lot, and fortunately I don’t really have to answer this question that much these days because I consult with individuals. And I’ll tell you what, Dan, when I’m consulting with a lady who is fleeing for her life because of an abusive, vindictive spouse, and it’s literally life and death, her finding any place to live, and this is more common than you would think, I don’t have to explain to her the value of privacy.

When I talk to the dozens and dozens of people that I talk to who are scammed in all sorts of ingenious ways, because there is a cyber crime industry across the world that is around $10 trillion and growing, it’s going to happen to you sooner or later, when I talk to these people, I don’t have to explain to them when they’ve had $10,000 scammed from them. I don’t have to explain to them the value of privacy and cybersecurity. When I talk to people who are trying to set up cryptocurrency payments because they have been kicked off of their payment processor again and again and again and literally kicked out of their bank, de-banked, I don’t have to explain to them the value of some of these things. I was just reading the other day, there were these two affluent Russians who were in Dubai, and they were known for flashing their private jets and things of this sort. They got wealthy through cryptocurrency.

They were found dismembered, their bodies were found dismembered in the desert of Dubai. If we could resurrect them, I don’t think we would have to explain to them the value of privacy. Or the gentleman who was the creator of a cryptocurrency hardware wallet in France who was kidnapped, his finger was cut off and he was held for ransom because he has his face on the internet and people know when they see him, that that is that guy. “That’s the co-founder, that’s the guy we want to kidnap.” Or the people, Dan, living in let’s say Oakland or San Francisco, who are Asian and who are purposefully and specifically targeted because Asian people are among the most wealthy people in that area. So people follow them home where they see signs that, “Oh, this is an Asian family, a Korean family,” because they see signs of that, the way that they decorate their house or whatever the case may be.

I don’t have to explain to those people the importance of being careful about what you publicly expose. Or the people who are using a service like Microsoft 365 where Microsoft literally says in their service agreement, “We will shut down your accounts for hate speech.” And that’s this nebulous term that I don’t even... It basically means what they don’t want you to say. So you can have your Microsoft Office account shut down. I think technically you could have your Windows operating system shut down because of what you say, and they’re always online, always surveying software that you’re using. We could talk about the 11% of people who are stalked. I don’t have to explain to them why privacy is important, or the family that had a baby monitor hacked because they were trying to be high tech and the guy was telling their baby that they love them.

I don’t have to tell these people about the value of privacy, or the 12,000 people in the UK who are arrested every year for what they say online because I guess these people have never heard of a VPN or they’re posting in their real name with their real accounts, which is the epitome of foolishness, especially in today’s climate, especially in places like the UK that are taking George Orwell’s 1984 as advice and not as a warning. And I’ll leave people with a final thought here. Mark Zuckerberg also said something like this about a decade ago.

He said, “Privacy is not a social value.” And then what did he proceed to do? He literally purchased every house that was adjoining his house in the Bay Area so that he could have his own compound. Later on, and this is what he’s doing right now, he purchased a several hundred million dollars compound in Hawaii so that he could have privacy. So privacy, we all want it, we all desire it. It’s really a silly question I think, when people say, “Do I want?” Of course you do, of course. The question is what are you willing to give up and how far do you want to go? And I think we’ll talk in this episode, I think I’ll convince people that you probably want to go pretty far.

Dan Denning: That’s an interesting point that I hadn’t thought about before too, that when I first came to the issue of privacy, or really in the sort of late ‘90s, I guess, it coincided with the introduction of the internet. Prior to that, privacy was what you did in your own time and it was nobody’s business and there was this sphere of life where you didn’t have to explain yourself or get permission from anyone to do what you wanted to do. But so much of our lives now are conducted in the digital realm and we put so much of our lives out there that it’s important for people to understand that there’s an upside to that, which we all know.

And then there’s this growing risk to our personal security and especially to our financial security. So I hope we can get into that more as we have our conversation. But let me ask you a little bit more personal question because those are all valid points.

You’re a professional in that industry, you obviously have learned how to help people with specific steps and things that they should do. How did this start for you? Why did this become an important issue to you? Did you do this kind of work in the corporate world, in the government, in the military, or was there a specific incident that prompted you to become the privacy advocate that you are today?

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Saturday, November 1st, 2025

Dear Reader,

Below you’ll find the video and the transcript for the most recent State of the World Private Briefing with Bill Bonner. We got to as many of your questions as possible—gold, real estate, devaluation of the dollar, the best performing stocks of all time, and digital currencies.

We also spent some time on politics…and more importantly….the theory of megapolitics, where history, geography, technology, psychology and the economy collide. Bill explains what he means by that below. Please leave any questions or comments you have below.

In the meantime, thanks to everyone who sent in questions! Much appreciated. Sorry if we didn’t get to your question this time but please keep sending them in.

Until tomorrow,

Dan

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Sunday, August 31st, 2025

Laramie, Wyoming

By Dan Denning

Greetings and good morning. Below you’ll find the transcript of my interview with Rick Rule on ‘critical minerals,’ uranium, and the gold price. You can watch the video as well, if you prefer. Feel free to comment below or ask questions.

By the way, the chart above is from the USGS report I asked Rick about. It’s information dense but helpful. Why?

It’s what the USGS calls ‘a data-driven risk assessment of mineral commodity supply chain disruptions.’ The graph plots various mineral commodities based on two factors: the probability of a supply chain disruption and the potential economic impact of such a disruption. The minerals are represented as dots on the graph, and their location indicates their overall risk.

The x-axis shows the median probability of a scenario occurrence, in percent. This represents the likelihood of a supply disruption occurring. The y-axis shows the net decrease in U.S. GDP, in millions of current 2025 U.S. dollars. This represents the potential economic damage to the U.S. economy if a disruption were to happen.

I’m not sure you can accurately forecast potential disruptions to critical minerals, or that you can assess their likely economic impact on GDP down the penny. But that’s not really the point of the exercise. The point of the exercise is to identify which minerals/metals/elements are likely to be fast-tracked because of the risk of a supply shut off.

The minerals in the upper-right quadrant of the graph—samarium, lutetium, rhodium— represent the highest risk. That means they have both a high probability of disruption and a high potential economic impact. Those three happen to be essential in the production of American weapons.

It was an ambitious project to reduce 1,200 potential ‘disruption scenarios’ for 84 different critical minerals. For our purposes, it will help determine which deposits and projects are worth investing and speculating on going forward. That’s the important point Rick covers in detail below, including how to go about investing in this theme.

Enjoy!

Dan

P.S. A few readers wrote in about the International Living conference in Dublin in October, having trouble with the link. Try this one. I’ll check with my friends at IL on their end. But everything seems to be working now (for me).

P.P.S. If someone forwarded you this email and you’re not a paying subscriber to Bonner Private Research, you can become one today. Here’s how.

Dan Denning: Hello everybody. This is Dan Denning from Bonner Private Research. Welcome to our latest Private Briefing with one of our favorite guests. In fact, he was the first guest on our Private Briefings, and he's on today because I reached out to him earlier in the week and he made himself available to talk about a subject that I think is important to investors, and very interesting, right up his alley. Rick Rule, welcome back to Bonner Private Research.

Rick Rule: Pleasure. Thank you for having me back, and congratulations on the great services that Bonner Private Research is offering to the individual investor community. I'm a huge fan.

Dan Denning: Oh, thank you. I'll pass that on to Bill and Tom. I know they keep up with your very busy schedule and your very high public profile. If you're a new reader or a listener and for some reason you're not already aware of Rick, let me introduce you to him quickly.

He's a longtime friend and collaborator with Bill Bonner. They met back either in the late seventies or early eighties at the New Orleans Investment Show. Bill tells that story fondly. Rick has been a very busy man in the last 30 years. He is currently the founder and president of Rule Investment Media. Some of you may know him as the president and CEO of Sprott US Holdings. He no longer holds that position, but if I'm not mistaken, he's still the largest shareholder in Sprott, and over the years.

Rick is the organizer of what many longtime readers will remember as the Vancouver Conference, which more lately is the Rule Symposium on Natural Resource Investing, which has relocated to the warmer climes of Boca Raton, Florida, where I was able to join him a few years ago.

We have a lot to talk about. If you like what you hear from Rick, there's two places you can hear more from him. Follow him on Twitter at @RealRickRule. He's so famous and popular that he has many impersonators, so make sure you get it. It's then if you want to search for the Rule Symposium on Natural Resource Investing or Rule Investment Media, you'll get more information on some of the things we're going to talk about today. Rick, let me take a breath and ask you, why were you eager or did you agree to come on with such short notice to talk about critical minerals?

Rick Rule: Well, it's a fascinating topic, first of all, politically. It's also a fascinating topic geopolitically, and really it's the second topic that interests me. As an example, the attempt by China to muscle its way into the global supply chain, much the way, by the way, the United States did in the 1950s and '60s, and the way Europe did in the 1970s and the way Japan did in the 1980s, is an important story in natural resources, and there is a lot of impact from that that needs to be discussed among investors and speculators. Understanding the geopolitical interplay and understanding the impact on finance and supply is important.

The second is a sea change, perhaps temporary, in US public opinion around extractive industries. One of the actually critical, as opposed to politically critical, commodities on the planet is the uranium business. I bring it up because it illustrates my second point. Five or six years ago, as a uranium investor and speculator, I was in effect vilified. Public opinion would suggest that I was profiting off Hiroshima, Nagasaki, and Fukushima. Fast-forward six years, and the same political forces that would've vilified me now want to subsidize me. Now, Dan, I need to say, I felt cleaner when I was vilified than I do now that I'm subsidized. But the old man in me, the cost of capital part, says that I would prefer to be subsidized than either persecuted or prosecuted. Your question brought up that feeling.

To emphasize in a non-personal way the importance of this, there is a deposit in Idaho in a company called Perpetua. Idaho for twent years, as a permitting jurisdiction, has been challenging. It's gone from being part of the Old West to being a place where shop is spelled S-H-O-P-P-E, with the change in public opinion around extractive industries, but particularly around critical minerals.

This deposit has as a by-product something called antimony, which most of the political players couldn't have spelled ten years ago. After a 12-year permitting hiatus, when the permitting regulations were rejiggered as a consequence of critical minerals, that permit was forthcoming in eight months, and this is an important political consideration. There was a brownfield uranium project in Utah that in the former permitting regime probably would've taken 12 to 15 years to permit, that got preliminary approval in three weeks, and I think that this is something that resource investors and speculators need to consider.

I need to say one more thing, Dan, before we drill deeper down into this, and that is that the Trump administration, while being partly ideological, is much more transactional. I think that this list will be very fluid. The list of critical minerals that enjoys either subsidy or regulatory relief, and I'm not sure that additions or deletions of the list will have an awful lot to do with the reality of the American economy or global geopolitics, and much more to do with the political process of rewarding one's friends and punishing one's enemies. Don't look at this list and don't look at the regulations around the list or the potential subsidies around the list as being geared primarily economically. My suspicion is that they'll be geared primarily politically.

One more comment. Understand that US participation in critical minerals won't be limited to US soil. There are not sufficient reserves and resources of the materials that are currently politically considered to be germane to the US economy on US soil. So a correct viewing of the topic from the point of view of investors and speculators has to do also with the impact of US actions and the impact of the competition between US and China on reserves and resources and processing capacity in other countries. Sorry for that long-winded introduction, but I read your first question and there were three things that jumped immediately to mind as challenges to answering it.

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Laramie, Wyoming

By Dan Denning

Greetings from the High Plains for Laramie. Yesterday I sat down with my old friend Rick Rule to talk about ‘critical minerals.’ This was prompted by the decision of the US Geological Service this week to reclassify seven minerals as ‘critical’ to the US economy and national security (silver, potash, and copper were the ones that jumped out to me).

Given what Rick said about the gold price (and how high it could go from here), the conversation turned out to be timely (the continuous gold closed over $3,500/oz today). It was a long briefing, for obvious reasons. And we didn’t hold back taking a deep dive into what it’s going to take money investing alongside the US government with this new big policy shift to support some minerals and industries.

I’ll have the transcript for you this weekend. Sorry I couldn’t get it ready sooner. But given the price action in the precious metals market, I thought it was better to send this to you now. Look for the transcript this weekend.

Dan

P.S. The chart I referenced early in the conversation is the one below. It’s the ratio between the S&P 500 and CRB Commodity Index. My question to Rick was whether he believed in the thesis that another commodity ‘super cycle’ was imminent and if so, will it be driven by supply/demand dynamics or inflation. And finally, whether energy, agriculture, base metals, or precious metals would be the best way to ‘play’ it.

Thursday, June 19th, 2025

Laramie, Wyoming

By Dan Denning

Dear Reader,

My latest Private Briefing with Bill Bonner is below. In it, we talk about Bitcoin, AI, Michael Saylor and Jim Chanos, and whether information has any value at all to investors.

Enjoy!

Dan

P.S. I used AI to generate an image in response to a comment Bill made in our discussion about the value of information. The image is tongue-in-cheek. But stay as safe—and prepared—as you can out there.

Dan Denning: All right. Welcome back to the show. This is Dan Denning. It is Tuesday, June 17th, 2025. I'm here in Laramie, and today for the State of the World quarterly podcast, I'm joined by our founder and namesake, Bill Bonner in Ireland. Bill, how are you?

Bill Bonner: I'm fine. Thank you very much, Dan.

Dan Denning: Well, you're welcome. And for new readers and listeners, just as a reminder, we do this once every three months with Bill to kind of step back from the day-to-day price action in the markets and look at some of the bigger issues that we're following at Bonner Private Research. And I did solicit questions from readers and I got a lot of them. So thank you to people who wrote in and had specific questions for Bill.

What I did, to make sure we covered as many of them as possible, is I consolidated them into a series of subjects which cover the main topics. So we're going to go through them today and before we do, I want to start with an Argentina question for you, Bill, because last time we spoke with you, you were on your way.

Since then I saw a report that said the International Monetary Fund has said that Argentina's economy will grow by five and a half percent this year and four and a half percent next year. The deficit is down. Is he going to pull it off? Is Milei turning that place around? What was your impression while you were there?

Bill Bonner: Well, my impression is that it's more complicated than the media typically suggests because that's what you'd expect. I mean, there's a huge establishment of government and private enterprise and private citizens who depend on a very big state government, big government in general, and they're not going to stop depending on it overnight. I mean, they have organizations too. They have ideas, they have theories, they have ways of influencing policies. They have representatives in the Congress down there, and they're not going out without a fight.

So it's not as simple as you might think. I mean, I think that Milei is totally on the right track. He's doing it the right way. He's not hesitating, he's not fooling around, he's not changing the subject. He's going right to the heart of the matter, which is that they spend too much money. And he's cutting that down, and he got a budget surplus in his first year. It was the first surplus they've had in like 50 years, and it was an amazing thing that he did.

And I think he's on the road to success. He's a bit nutty as a person. He has his own ideas and flaws, but his ideas about how to run an economy I think are correct. And if they're allowed to play out, Argentina will be coming into the world financial market, the world system, the world economic system as a powerful new competitor.

Dan Denning: Well, that's promising. And I think we'll come back to that later with respect to where I am right now, the United States and whether it can follow a similar path or whether things have to get worse before they get better.

Bill Bonner: Dan, I'll give you one little example while it's on my mind because I just got a note yesterday, which was that Argentina has a law they instituted not too long ago, which says that foreigners can't own large tracts of land.

Well, a large tract of land is what you need if you're going to be farming at scale in Argentina. And this law has caused a lot of trouble because there are a lot of people, including me, who own large tracts of land and then we can't sell them. We can't give them to our children, for example, because that would be passing them to a non-Argentine.

But anyway, so Milei, bless his heart, got that law changed so that now foreigners can own large tracts of land in Argentina, but the courts decided that this move was illegal, unconstitutional, and that now it's in the courts. And we won't know for a while whether which part of that sticks, will it be that you can't or that you can. Well, we'll find out, but that's where we are generally in the Argentine situation, somewhere in between figuring out which laws can be changed and how and so forth.

Dan Denning: That's interesting because I've been following a little subcategory here in the US where in Congress, not from the executive branch, but in Congress there are senators and congressmen who are trying to prohibit Chinese nationals or Chinese companies from owning farmland that's on or near US military bases because they see it as a risk like what happened in Ukraine, that you've got this truck that has a bunch of drones and so who knows? It's all very Tom Clancy, but in that case it's being driven by the Congress and not the executive. So I'm not sure what the judicial branch will say, but nobody knows these days what's going on.

Bill Bonner: By the way, there are military bases everywhere in America, so it will be hard to find agricultural land that's not near our military base.

Dan Denning: Yeah, that's a good point. There's a lot of them in Wyoming as well. Well, let's move to markets because for readers that have been with us since the beginning or readers that are brand new, they'll know that the Dow Gold Theory is kind of our North Star for what things are worth, whether it's gold or whether it's stocks or other assets.

So just to bring you up to speed and other readers who are watching today, we're about at the halfway point of the year. Platinum, which Tom added to our strategy recently is up 40% this year, gold is up 29%. Silver, which has been sluggish and a laggard for years, is up 27% and it's moving again today.

In the meantime, stocks aren't really doing much. The Nasdaq is up 4%, the S&P's up two and a half percent, and as of today, the Dow Jones is down about half a percentage point. The important ratio is the Dow Gold ratio started the year around 16, and now it's at 12.5. So that primary trend toward five or below five, which we think will happen is happening.

My question for you is so far this year, most of that move has been with gold going higher, not with stocks going lower. What do you see happening for the second half of the year? Is it stocks are overvalued and going lower, or gold is being repriced as a reserve asset and is going much higher?

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Sunday, May 25th, 2025

Laramie, Wyoming

By Dan Denning

In the age of technology, is mining an ancient business, destined to be unprofitable and frustrating for investors? That’s what the chart above made me wonder. I saw it last week a few hours before I spoke to our latest guest for a Private Briefing (transcript and video below).

The chart shows that the mining industry is at historically low levels as a percentage of the total value of global equities. There are thousands of mining stocks—large ones and small ones—but their market value has never been lower relative to the rest of the market. Everyone wants growth and high tech.

Could that change?

Of course it could!

In the Private Briefing below, I talk to Edward Bonner from Sprott Global Resource Investments Limited about how individual investors should evaluate mining stocks and how to build portfolios leveraged to the best sectors for this year and the years to come.

We didn’t discuss the obvious—that when retail interest in mining stocks finally DOES increase, you’ll have an ocean of liquidity heading for a small universe of investable assets (typically a formula for the kind of bull market you’ll tell your grandchildren about).

But I also asked Edward why mining is such a bad (difficult) business. It was a useful and detailed conversation that I hope you’ll enjoy as you’re relaxing on this Memorial Day weekend. We’ll resume our normal publishing schedule tomorrow.

Until then,

Dan

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Thursday, May 8th, 2025

Laramie, Wyoming

Dear Reader,

After my interview with Rick Rule on Monday, I ran an AI screen of all the North American-listed mining companies that can be classified as silver-mining stocks. I also asked the Agent to include any companies whose operations were primarily in North, Central, or South America. That gave me a list of 52 companies with a combined market capitalization of $252 billion.

But here’s the thing. Ranked by market cap, the top three companies on the list were Freeport McMoran [FCX], Southern Copper Corporation [SCCO], and Newmont Corporation [NEM]. Those three companies have a combined market cap of $153 billion. And the silver they mine is a by-product of gold and copper mining (an important point Rick made in our discussion). The other two companies in the top five—Wheaton Precious Metals [WPM] and Royal Gold [RGLD]—are streaming companies with a combined market cap of around $50 billion (streaming companies have exposure to higher metals prices without the operational risk).

That means 60% of the market cap of the ‘silver’ sector is concentrated in stocks that are not primarily silver miners. Strip those five companies out and you’re left with 47 companies with a combined market cap of around $53 billion. The largest market cap of the remaining 47 is $10 billion and the smallest is $20 million. My point?

In past precious metals bull markets, getting retail investment liquidity into a small number of publicly listed stocks is like, ‘getting the Hoover Dam into a garden hose.’ That was Rick paraphrasing our mutual friend Doug Casey. It explains why long-suffering silver equity investors are willing to suffer so much, for so long.

If you enjoy the interview below, you can sign up for Rick’s Natural Resource Investing Symposium here. Rick mentioned that this year’s conference is focused on silver. Not because it’s popular. But because it’s hated. That’s what makes the opportunity so compelling right now.

Until tomorrow,

Dan

P.S. The universe of investable silver stocks is so small that one strategy—if you have money to play with/lose—is to allocate a lump sum to the whole sector and buy all 50 or so stocks. No research. No drill results. No paying attention to political risk or earnings or management. Just a pure bet that silver stocks will 10x if and when retail liquidity starts chasing metals prices higher in a precious metals bull market. Of course the far more prudent thing to do is see which companies Rick has vetted and has invited to his show in July, and then listen to their presentations, review their projects, speak to their management in person, do your own research, and then make a decision.

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Tuesday, May 6th, 2025

Laramie, Wyoming

Well this is awkward. Yesterday, on short-notice, I had a 45-minute Private Briefing with BPR stalwart Rick Rule. It was, by popular demand, almost entirely abou…

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Friday, April 18th, 2025

Laramie, Wyoming

By Dan Denning

Dear Reader,

If politics haven’t taken a pause to collect their thoughts for the Easter weekend, markets have. You can see from the chart above that the Dow Jones Industrials is poised at the so-called ‘death cross’ where the short-term moving average has crossed below the long-term moving average in a bearish technical signal (perhaps a bit on the nose for Good Friday, but it is what it is).

What comes next?

I decided to step back from the price action and news flow to look at the long-term investing picture with my old friend Chris Mayer. Long-time readers will know Chris from his old newsletter Capital and Crisis. Or, you might know him more recently as the founder and fund manager at Woodlock House Family Capital.

Chris partnered up with Bill Bonner to start Woodlock House in 2019. He goes into the thinking behind the fund and some of its best-performing investments, as well as what expects for the rest of the year. I also asked Chris some of the questions you submitted by email.

Enjoy the conversation and have a peaceful and happy Easter.

Dan

P.S. Late in our conversation I tried to recall the name of a Platonic dialogue in which a specific phrase appeared. I got it wrong. It was not the Meno. It was the Apology. Apologies!

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Tuesday, April 1st, 2025

Laramie, Wyoming

Dear Reader,

Early this morning I caught up with my old friend Charlie Morris, right after his presentation at the Mining Forum Europe 2025, being held in Zurich. Charlie agreed to let me turn the camera on record. We had a 30-minute conversation on gold, Bitcoin, how to beat the indexes, and more. We also traded predictions on what the best performing element on the periodic table would be for 2025. Wait till the end. Both the video and the transcription are below.

Enjoy,

Dan

PS If you want to learn more about Charlie’s risk-weighed strategy for buying Bitcoin and gold (in what proportion, and how often to rebalance), visit www.boldetf.com For more of Charlie’s monthly work on gold alone, visit www.bytetree.com Please note there is no financial relationship between ByteTree and BPR. I just love Charlie’s work and his investment acumen and thought you might enjoy hearing our conversation.

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Saturday, March 29th, 2025
Laramie, Wyoming

What’s a ‘broken play’ in mining terms? Why is antimony so important to the military? What are the Chinese making in their new ‘dark factories?’

These are some of the topics that came up in my hour-long discussion with BPR friend and favorite Byron King (a contributor to Strategic Intelligence, edited by our friend Jim Rickards). Byron gives you an in-depth introduction to rare earth elements in this month’s Private Briefing.

You can watch the video by clicking on the image. Or you can read the transcript below it. The transcript has been lightly edited for clarity and brevity. As always, we respectfully request that you don’t share these Private Briefings—a benefit of being a paying subscriber—with others.

Enjoy,

Dan

P.S. After the transcript, I’ve published some additional, initial research into US-based companies with exposure to rare earths, or companies with projects in the US. These are not recommendations and should not be treated as such. They are part of our ongoing project to understand the impact of Trump Administration Executive Orders on rare earths, critical minerals, and strategic metals. Look for more research in the coming months.

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Laramie, Wyoming

Earlier today I hosted a live call with Matt Smith from Doug Casey’s Crisis Investing.

During the chat, the gold price made an intra-day high of over $2,950/oz. Later in the chat, Matt made the case for why gold could go as high as $21k/oz.

Why?

How?

When?

What should you do next?

All good questions!

You can click on the video above to watch (I’m having a transcript made as well, but wanted to send you this as soon as possible).

Here’s a breakdown of the key topics we covered, with timestamps so you can jump to what matters most to you.

Timestamps & Major Topics

[00:00:00] Kicking things off – Matt and I set the stage for the conversation.

[00:01:00] A little about Matt – If you don’t know his background, here’s a quick rundown: entrepreneur-turned-regenerative cattle farmer in Uruguay, working with Doug Casey, and a big believer in getting geographically unlinked from centralized systems.

[00:02:00] What is regenerative farming? – How Matt runs 250 head of cattle with zero external inputs, and why this model matters in today’s world.

[00:04:00] The Mar-a-Lago Accords – Trump’s team has a real plan to reset the monetary system. It’s not just talk. We break down what’s coming and what it means for you.

[00:07:00] Why they want to devalue the dollar – Trump’s people think the dollar is way too strong, making U.S. exports uncompetitive. Their solution? Drive it lower. Here’s how they’re doing it.

[00:11:00] Will this actually work? – Whether they pull it off or not, the fact that they’re even trying is a game-changer.

[00:13:00] Gold’s role in the reset – Trump’s team isn’t stupid. They know gold is key to restoring faith in the financial system. We go deep into how they might use it.

[00:16:00] What’s really in Fort Knox? – Elon Musk and Rand Paul want an audit of U.S. gold reserves. If it turns out the gold isn’t there (or if there’s way more than expected), what happens next?

[00:18:00] Gold’s breakout – Is this rally the start of something huge, or just another head fake? Spoiler: this one looks real.

[00:21:00] Infrastructure & energy – Trump wants to rip out the regulatory roadblocks and supercharge energy and AI. This could be the biggest infrastructure buildout since the 1950s.

[00:26:00] Mining stocks – They’ve been dirt cheap and ignored for years. That’s starting to change. Here’s why it’s a massive opportunity.

[00:28:00] The final gold bull market? – Doug Casey has called this the last great gold boom before gold gets re-monetized. If he’s right, this is your last chance to play it.

[00:33:00] The risks no one talks about – Even if Trump’s team pulls this off, does it just lead to an even bigger, more centralized government? We dig into it.

[00:38:00] Redeemability – Will this new system actually let people redeem dollars for gold, or is it just another illusion?

[00:41:00] The China model? – Trump’s approach has a lot in common with China’s industrial strategy. Is that where we’re heading?

[00:45:00] Wrapping up – Everything’s about to change. Are you ready for it?

Bottom Line

Gold’s on the move. There are reasons why. But there are a lot of dots to connect. And the picture they make isn’t entirely clear. This call with Matt helped us understand some of what’s happening, what to expect next, and most importantly, what you should do with your money now.

Enjoy!

Dan

PS Matt and Doug Casey collaborate on Crisis Investing. As a courtesy to Bonner Private Research subscribers—and because Bill and Doug go way back as friends—they’ve set up a special offer for BPR readers who want to subscribe. You can do so here. And if you enjoyed the video, let me know. We’ll do more in the future.

Laramie, Wyoming

By Dan Denning

Good morning from the High Plains. We have a surprise for you today. Bill and I had to chance to do something we haven’t done in awhile during my recent trip to Baltimore. We actually sat down face to face and talked about the big investment issues for 2025.

Normally, our quarterly conversations are done on Zoom. But you can only get so much done on Zoom. It’s not very personal.

So we set up shop in the library of the Marburg Mansion in Baltimore’s historic Mt. Vernon neighborhood and hit ‘record.’ You can watch our conversation by clicking on the image at the top of this letter. Or you can read the transcript below.

You’ll see we had a surprise guest this time around. Hopefully we’ll see more of him later this year. But I don’t want to steal his thunder or take any more of his time. Without further delay, please enjoy our latest Private Briefing for paid subscribers.

Regards,

P.S. Dan Bill has had a lot of critics recently. But new readers may not realize that Bill has always had a lot of critics. In this Private Briefing, I asked him why that is. I think you’ll be surprised with his answer, and what it may mean for investors for the rest of 2025.

TRANSCRIPT BEGINS HERE, LIGHTLY EDITED FOR CLARITY

Dan Denning: Hello and welcome back to Bonner Private Research. I'm Dan Denning, the Research Director, and long time readers and viewers will understand that I am not in the high plains of Laramie right now. We're not in Kansas anymore, we're in Baltimore. And in fact, I'm in the sort of inner sanctum of the entire enterprise. I'm in the library of the Marburg Mansion, which in 1999 at this very table, I met with our guest today, Bill Bonner, to talk about a new project at that time which was called The Daily Reckoning. I can't believe it was 26 years ago, but it was in this room. We also met Alan Greenspan in this room. That was a little bit later in 2017. But my point is a lot of our most interesting private conversations have been had in this room, including one with Tom Dyson in 2019, which was the start of the Bonner Private Research project.

Bill Bonner: Well, Dan, on that subject, it's just important to point out that it wasn't just us and just now, because this room also was where Woodrow Wilson wrote, with Marburg, the League of Nations Convention.

Dan Denning: Oh. That I did not know.

Bill Bonner: Which did not go anywhere, thankfully. But a lot of things have happened here.

Dan Denning: I didn't know that. I knew that our history goes back 25 years, but it's a great setting to talk about big ideas, and we have a lot of important ones to talk about today. To start with though, we also have a special guest who you can see, and that's Bill's son, Jules Bonner. And I have some specific questions for him about our project and some of the things he's working on. But Jules, welcome to Bonner Private Research.

Jules Bonner: Thank you, Dan.

Dan Denning: You're welcome. We're going to start with you. I have four or five questions for you. For Bonner Private Research subscribers and for people who've been reading Bill for a long time, you're probably well aware that he started a Family Office years ago to deal with some of the investment and other issues that come with having money and trying to decide what to do with it. Bill often refers to some of his sons who advocated for a slightly more aggressive position in cryptocurrencies. So I wanted to start with you, Jules. You don't have to answer this, but you are on camera. And the question is, are you one of the Bonner crypto bros? And if so, what is your current position on them today?

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Tuesday, February 11th, 2025

Boulder, Colorado

by Dan Denning

Here’s something I learned last week: India ran a $32 billion trade surplus with the United States in 2023 on $118 billion in two-way trade. President Trump has called India ‘a very big abuser’ of unfair tariffs with the US. And as you can see from the chart above, India’s currency, the rupee, recently made a new multi-year low against the US dollar on speculation that Trump tariffs would hit India hard.

Indian President Narendra Modi arrives in Washington tomorrow to meet with ‘The Donald.’ India is expected to agree on importing more us energy, and possibly weapons, to build on its mutual goals in the region (to thwart China). The rupee reversed its swoon in trading yesterday. Is this a good time for US investors to look at Indian stocks?

Last week I talked with one of Bill’s long-term business partners from India, Ajit Dayal. We had a wide ranging discussion, as you’ll see from the transcript and video below. It’s a slightly longer Private Briefing than normal. But timely as well, given Modi’s impending visit.

Enjoy,

Dan

PS I’m headed back up to Laramie later today. In the meantime, you can learn more about the newly listed fund Ajit and his team have put together by going here. The ticker symbol is QINIX. Please note there is no financial relationship between Quantum and BPR.

TRANSCRIPT BEGINS (lightly edited for clarity)

Dan Denning: Hello, everybody. Welcome back to Bonner Private Research. I'm Dan Denning, and as you might be able to tell, probably not because of my blurred background, but I'm back at the mothership at the wor ld headquarters of Bonner Private Research in Baltimore. Because of the time difference and because we planned it well, it's my privilege today to introduce a longtime business partner of Bill's and one of the premier investment experts from India. He's been at it for over four decades, Ajit Dayal. Ajit, welcome to the show.

Ajit Dayal: Thank you, Dan. Thank you for having me, an honor, my pleasure.

Dan Denning: You're welcome. I'm going to give you a chance to introduce yourself because you're going to do a better job than I would, but I will let our readers know that Ajit has some background in the US. He got his MBA from the University of North Carolina in 1981, and then in 1990 when it was an entirely different world, this is before China was in the World Trade Organization, before a lot of the issues we're dealing with today, he started Quantum Advisors in India.

Just recently, the reason he's talking to us today, we have good news for US investors. They now have access to Indian equities through a fund that's been launched by Ajit and his partners called the. The website is QASL.com and if you want to find more about it, which we'll tell you about in a little bit, click on the India Fund. It's a fund of anywhere between 25 and 40 companies that give institutional and individual investors in the US exposure to what's going on in India.

That's what we want to talk about today because as Bonner Private Research readers know we've been banging the drum about excessive valuations in the US, but from his end, Ajit's been working on how to value companies from the bottom up and do so with integrity. I know that's an important word to you. Let me turn it over to you first and allow yourself to introduce yourself and tell us a little bit about your background and how you started working with Bill Bonner.

Ajit Dayal: Thank you for that, Dan. I think there are a few things. One is that when I started Quantum in 1990, India was very much the closed economy. We had the Berlin War fall in October '89, and prior to that, India was sort of Soviet Union facing in terms of government policy. After the Berlin War fell, I guess we looked around the world and said, "We have to choose which path we want to move. This was a failed path. Let's move towards sort of Westernized capitalism."

We turned a lot to the western world with our reforms in July 1991 onwards. It's strange because India has been by and large a socialist government running a capitalist economy in the sense that no street, if you go around the streets of India, the people who will shine your shoes and people who come and wash your cars and all that stuff, and they've never done an MBA.

They don't know cash flow, but they know survival. They know that markets can give them a job if they have a skill set and they offer that skill set. Imagine the guy who's polishing your shoes in India, understands cash flow, understands inventory, and understands pricing, right? You had that framework at the level of the people, but you had a government that can't afford, so historical reasons became socialist in terms towards Soviet Union. But I'll talk a bit about how I met Bill.

Around that time in 1990, I also set up a research only website for India now called Equity Master. It's a bit like Value Research in the US where you pay subscriptions and you get independent research, et cetera. It was really designed more for high net worth and retail investors in India want to build their own portfolios.

We had a subscriber from India who actually moved to the US and she came to work with Agora and she sent us an email saying, "You really should meet this guy called Bill Bonner." I flew to DC on one of my various trips to America and I went to meet this guy called Bill Bonner in Baltimore and we hit it off instantly. Bill had just launched that fantastic book of his, which is the Empire of Debt. When I read that book before meeting, I was absolutely amazed at the thought process and his writing style and all the stuff he was doing and had done. I think we just shook hands on a deal in a few minutes, like you know that Agora will pick up a stake in that research arm of ours, which has nothing to do with the investment company. When we started Quantum in 1990, we were all one entity and the regulators in India, SEBI, Securities Exchange Board of India, like the SEC, was born after us.

When the regulator came in, they started having silos. If you manage money, they do this company. If you're doing independent research, do it in that company. We had to split the companies up into different arms, and that's the connection with Bill. Yeah, I've known Bill for many, many years. I don't meet him, sadly, as much as I would like to, but I spoke to him a few weeks ago and said, "We're going to fix that in 2025." He said, "Yes, we will meet more often." But that's how I met Bill going back in history.

I'd just like to run through a bit about what we see in India, what we have been seeing and studying and where we think India is likely to go given our experience of decades of actually looking at India as an investment destination. I'll just share a couple of slides. I love doing slides because I think pictures are worth a thousand words, and much as you and I speak very well and articulate things, images are fantastic.

This is just a map of India for people who haven't seen a map of India, pretty long country south to north. South is very hot and north is very, very cold. That's Kashmir and the Himalayas on the northeast and all those dots are basically places where we have gone to visit and see factories of companies. We don't do desk research, we actually go out and understand what's happening on the field.

Of course, there are many parts of India where we haven't yet covered the dots, but it's a big country and we have covered a significant part of the geography out there. This was a chart that was done a few years ago by a guy from the University of Groningen, Mr. Angus Maddison, sadly no longer alive. He went back 500 years or so in history to look at the share of different geo-regions of the world in global GDP. Red is China and the yellow orange is India.

You can see how in the 1500, 1600s before the Industrial Revolution, China and India basically had half of the measured global GDP in the world. You talk about the new silk route and the silk route, and that was all part of what constitute global GDP. Then you had the Industrial Revolution that I alluded to, and India and China lost out in the Industrial Revolution.

Then the US is born, as you can see in the 1900 chart, you see the gray on the top. That's United States coming in and becoming a larger part of the global pie. Of course, the world order changed after World War II, and then you US became much more dominant after World War II, and then later on you had China joining the WTO and the red begins to expand. After Mao's massive mishap of the great leap forward, which really was a great jump backward, you had the US-China trade treaties, you had Nixon going to China 1971 July along with Kissinger. You had changes within China. You had China joining the WTO. Within India, you had a similar context as I referred to. You had the fall of the Berlin Wall, you had India looking more westward and more to the US and the OECD and Europe as to what the business model for the country should be.

As you extrapolate that in the future, and these are our estimates going out to 2050, in terms of what the sizes of China and India could be in global GDP, of course, trade wars, tariffs may change some of these moving past. They may not, on a decade point of view, they may not make a difference. But the point being that India and China have arisen and they are a significant part of global GDP growth.

If you look at where India is compared to China, so on many fronts, we are decades in some cases behind China, right? China began its path ahead of India. We began in 1991, and as I indicated, China began to change after Nixon's visit to China in '71 and thereafter when it formally joined the WTO and took a great leap forward. India is decades, in many cases, behind China on multiple fronts. The question to really ask is India getting there or are they going to be massive speed bumps and pitfalls along the way?

Dan Denning: Ajit, can I stop and ask you a question. You mentioned the word and I just wanted to interject and ask a question about it because it's very timely right now that two things really, India is the "I" in BRICS, and of course right now we have the new Trump administration seemingly conducting trade wars via tariffs with key US trading partners, which would be Mexico, Canada, and China. The C in BRICS, from your point of view, in the short term anyway, is India implicated at all in potential tariffs from Trump or is it largely outside that whole regime?

Ajit Dayal: Well, Trump has after he won the election and joined the campaigning called India ‘rogue’ on trade fronts. Again, we're a small part of US trade, but we have a surplus with the US. Our services exports to the US have generated more income for us. Basically President Trump is trying to say, ‘Hey, I need to balance this trade,’ and that's what the tariffs are all about. ‘You better buy more goods from me rather than having all these surpluses and me making you rich in the process.’

Then there was an old saying that I remembered when I went to North Carolina to the University of North Carolina for MBA, which said, "America educates its adversaries." What Trump is also saying is that America's also enriching people who can become its adversaries in that sense, whether it's a Panama Canal or whether it's China, I'm buying your stuffed toys, you become rich and then you go out and you start sort of bludgeoning me in the superpower domain.

To go to your point, India has issues with the US. Pre Trump's nomination and swearing in, we've already begun to reduce tariffs on certain US goods, so therefore, preempting Trump's anger in some sense, trying to calm him down. Our prime minister's arriving in the US on the 12th of February for a couple of days to meet President Trump. Just a few days ago the US government announced that they are sending 18,000 illegal immigrants who've come in from India back on military transport planes to India. Our prime minister is coming with a plane and he probably will take a couple of the illegal immigrants back with him to get some goodwill.

I think there will be some dislocation, but recognize that India's share in global trade is not even one-tenth of that of China's. We're very small in terms of our impact and as an economy, while there are certain sectors and certain industries which do rely on exports, we are very much a domestic driven economy. We don't have the infrastructure that China had to build out supply chains for the multinationals. Right from SARS in 2003, when the multinational keeper altered sources to Covid, India hasn't quite made the cut as yet, but we will talk more about that.

Dan Denning: I'll let you get back to your presentation, but I think that's a really important point to make with respect to the fund that you've set up. Because for the last two decades, American investors who tried to make money in Chinese stocks, and of course the Chinese government through the communist party had a program of fixed asset investment, which had a policy goal, didn't really have anything to do with cash flows for Chinese companies. It was always very hard for American investors to make money from Chinese companies whether they were doing business in China or America.

What I really liked about what you and I talked about before the call was that you're looking at businesses in India, the largest democracy in the world, one of the largest countries in the world that are generating cash flow from their business in India, not through their exports to the United States. There may be companies that do that, but primarily you're just talking about businesses that are growing in an economy that's growing and trying to buy them at a great price. It's really just an investment problem, it's not a policy problem.

Ajit Dayal: Correct. Yeah, absolutely. We do have stocks in the portfolio IT services they export primarily to the US and Europe and Japan, but those are few and far between. But I'll just talk about the India story a bit at this stage. This series of bar charts goes back to 1980, that's about ten years before I started Quantum. It shows GDP growth rate while each government was involved. That's in India and that's the orange bar and the blue bar shows global world average GDP growth rate. If you just eyeball this over the... We now have the 12th government that was elected in June 2024 on the extreme right, but look at the first 11 bars, you'll see that global GDP has always been lower than India's rate of growth in GDP, irrespective of which government was in power and what the time period was.

This is across all cycles in terms of economic cycles and market cycles. You've had high interest rates, you've had low interest rates by the Fed, you've had a weak dollar, you've had a strong dollar, you've had LTCM collapse, you've had the Asian crisis, you've had SARS, you've had Iraq, Afghanistan, you've had a bunch of things happening in the world including Covid and Lehman. India just kept going at a relatively decent rate of growth and certainly twice the global average. The other interesting part about this, which is completely contrary to what the press indicates, that in India on the X-axis, when we have the letterings of the governments over the years, the black indicates single-party governments and the red lettering indicates coalition governments and the press always tells us, "Oh, India needs a strong government and India needs single-party."

Actually, the data's telling us, if you look at it that whenever you had red coalition governments, the probability of exceeding that long-term average in the green line of 6.2% per annum real rate of growth at GDP over 44 years, the red coalition governments had a better chance of crossing that red line, crossing the green line than you had single-party governments. During single-party governments, you actually grew less than the long-term average. That's something which people don't get. Then we said, "No, there's a reason for it." It may not be scientific reason, but we can tell you that a coalition government is so busy staying in power fighting among themselves to not to disrupt it, to fall as a government, that you leave us alone and you leave us alone.

Remember I spoke about the shoe shine guy on the street who comes to clean your car and clean your shoes and clean your windshield? He doesn't have to worry about stupid government policies, but when you have single-party governments, they have the power and they have the ability to come out with bad policies, then you can just see that when look at the black lines, look at the black lettering and you can just see how most single-party governments and all of them, actually, have had lower rates of growth than the green chart of the 6.2% 44 year average.

Now, of course, we have a coalition government on the extreme right since June 2024, and we're hoping they start behaving like a coalition. So far they are not. Prime Minister Modi in this third term as a coalition government, as a true coalition, is still not functioning as a true coalition. He's still coming up with dictates and what he wants. You never hear the coalition partners talk about economic policy. We're hoping they start behaving like a coalition government so that we can get maybe beyond that 6.2% rate of long-term. We believe that 6.2% will continue, but we'd love to see seven half eight, though it'll take a lot of things to get there.

Dan Denning: Can I ask you a question about that because I think it's important for BPR readers. We talk about political risk a lot. India is the largest democracy in the world. It's geographically diverse, it's religiously diverse, it's politically diverse, it's linguistically diverse. It's a real melting pot. In your view, when you guys look at it as an investment question, you may talk about this later, so if I'm preempting you my apologies, but where is the risk in India? Is it political? Because from what you're saying here, divided government's probably better for the market or is it demographic and social?

Ajit Dayal: I think there are two risks, and I think you hit the nail on that. I'm going to show it in the next chart, actually. You did hit the right point. This chart on the left side, we have China's GDP growth plotted in the black line and the green line on the left is MSCI China index in dollar terms. On the right side you have India, the black line again plots GDP growth, and the green line is MSCI India index returns in dollar terms.

Now, if you look at this, a few things hit you straight. GDP growth rate in China has been phenomenal. Look at the scale from a hundred, you've got to 1600. On the right side, India's hundred is 800 same time, right? China's grown in that sense twice in terms of end result compared to India.

But look at the share price returns in China as measured by the MSCI China index. There's no correlation between GDP growth and stock market returns, which is the reason why we invest in any economy generally speaking, is when there is GDP growth rate growth, you expect that there will be growth in company revenues when there's growth in company revenues, all else being equal, you'll have growth in operating profits of companies. When you have growth in operating profits, you have growth in earnings per share, you have growth in earnings per share, you have a growth in share prices. That's the common logic as to why we look to invest in areas of the world that are rapidly growing because you want to benefit from that rapid growth.

Well, you know what? In China, you don't seem to get that benefit in the public markets. You may have done it in private deals and venture capital, but certainly not the public space. The public markets are the ones that are the most accessible and the most liquid for any investor to get in, get out. You don't need connectivity to be invited to be in the best venture capital fund or the best fund or have a $10, $20 million slug of capital to invest in those funds.

But when you go to public markets, you can buy a fund on the New York Stock Exchange or any fund approved by the SEC, a thousand dollars, $2,000, $10,000, 50,000, whatever number you want. It's not a high cap. But look at the India correlation, very strong compared to the China correlation. This is what we spoke when you asked about the risk in India. We prepared these charts prior to the May 2024 elections six, eight months ago. We prepared these charts to indicate that everyone wanted strong man Modi to win again.

We said, "No. The reason why you have this disconnect in China is assume you're Jack Ma and you said something bad about the government, you get a tap on your shoulder, you're taken away for a few months, your brains are rewired, your company's shareholding is rewired, your company's revenue streams and business contacts are rewired and it's taken away by the Chinese state or some of the friends and families of the Chinese state."

Therefore, the public market just lost a rate of return that Jack Ma would've in a free world been able to capture in Alibaba, Alipay as an example. In the case of India, we don't yet have that. We have enough cronies and that's why the integrity screen that I refer to is important to make sure you leave the home country of the US and you invest in a distant land and then you end up investing in cronies. That doesn't make sense.

Cronies can come and go and governments can change, but our fear factor was that if Prime Minister Modi came back to power on his own, as I showed you that black line graph and the black lettering, then he would be a strong man. In this chart we've taken Brazil on the top left, he spoke about the BRICS, Brazil on the top left. We've taken Russia on the top right, we added Turkey because we have China on the previous slide on the bottom left. India again for good measure and a reminder on the bottom right.

The reason we chose Brazil, Russia, Turkey, China was because of commonalities. They had strong men, strong leaders in power. Everywhere we have a strong person, a strong leader, there's a disconnect because in Russia, if you say something bad about Putin, you are shipped off to Siberia. Your assets of aluminum or oil or gas are taken away from you and given to the state of friends and family or Putin.

Same thing in Turkey, you say something bad against Erdogan, he doesn't like what you said he owns 99.5% of the media is owned by his friends and family. Our fear was that if Prime Minister Modi won the third election on his own as the BJP, as a sole party, you would end up in that direction because you've already seen a drift of crony capitalism. Crony capitalism is everywhere in the world including the US, but we were seeing a sort of increase in market share, if you will, of regulatory capture of a few of the crony groups that exist in India. That's what our integrity screen tries to sift out. I hope I gave you the answer. One risk, which seems to have faded the political risk of having a strong man that's gone away for now.

But the other risk that you spoke about about the demographics and social, that's very, very real and it's there. When Goldman Sachs came up with this BRIC report in 2000 5, 6, 7 and glamorized the fact that India had a lot of people, and there are still a lot of articles on that about the demographic dividend, we looked hard at the data and said, "Well, you know what, there are 10 million people looking for a job every year."

That's roughly 27,700 people looking for a job every day coming into the workforce. If you do not find them jobs and they're 24 years old and 23 years old and 25 years old, there'll be chaos. The Arab Spring will look like a Sunday picnic. The Arab Spring was the uprising in 2002 three, which led to changes in certain parts of the Middle East and North Africa in terms of political regimes.

But that, to us, are the big issue, that since 2004 five when the demographic dividend was discussed. Who's talking about avoiding a demographic disaster? I'll take the US as an example, and the OECD broadly speaking, in the United States that are 10,000 people retiring every day in the western world, Canada less so, but more Europe and Japan. You've got a pension problem. The pensions are underfunded and the obligations are more because people are living longer and the healthcare costs are increasing. The pensions have a problem of paying you enough money to live a certain lifestyle. But if 10,000 people retire every day, and let's take a population that's 85 years old and 90 years old and is getting a pension check of a hundred dollars a week, for example. If the pensions are underfunded and instead of sending a hundred dollars a week by obligation, they send you a check of $70 a week, what exactly will you do as a ninety-year-old individual in America?

Not much. You're not going to go and fight on the streets. You're basically going to fade away. You'll have to figure out what to do, but there's nothing much you can do. But in the Indian context of young people, you are energetic, you want that job, you are eager, you are upset. There'll be riots on the street.

We just had our budget in India or last Saturday, February 1st, and we look at one indicator. That one indicator we look at is how much is the government spending on hundreds of millions of poor people? This time the answer is 1.3% of GDP and it tends to be between 1.2 and 1.3% of GDP. We keep on looking at that. If the government spends that 1.2, 1.3, 1.5% of GDP, you are buying time. You're paying these people enough money to live and survive until the government or you the private sector have figured out how to empower them with skills and to get them jobs.

That is India's only risk today. I spoke about the political risk, of course, which comes every five years and comes in every economy during election time. But this is a fundamental risk. There's a people in the CFA world and the MBA world that I come from, people assume that volatility, the up and down movement of share price or a market is risk. That's not risk, just standard deviation volatility, something going up and down.

Risk is an economy that implodes because of social unrest. Risk is investing in cronies, in crony capitalists who steal from minority shareholders. Those are the risks that we try to sift out and look at and worry about when we invest in India. I'll just flashback in history a bit. In 1990, I was all of 30 years old then I just started Quantum in the month of February.

I wrote an article for what was then called the Asian Wall Street Journal. Now of course it's just the Wall Street Journal. I wrote, as you can see from the title, Loosen the Reins on India's Bull Market. It was a plea to the government that, listen, India's ready to thrive, just reform, give us reforms. In 1991, July 18 months roughly after I wrote the article, we had the best reforms. India had seen the big bang of India's reforms. That's what's led to this massive run up in India's presence. Still, as I indicated, very small compared to China, but compared to where we were, we were inconsequential a one $50 billion economy today, 3.4 trillion at that time we were in stock market terms, we had a 0.1% weight in the all country world index Indian stock markets represented 0.1% of total market cap in the world.

Today, we're nearing 2% and probably going to rise as GDP increases. India's on its way to exercising its space in the global stage. I'll jump a bit if I can to my years when I was living in working in Florida with Tom Hansberger in Fort Lauderdale, in Florida, where Tom Hansberger, who was a co-founder of Templeton, Galbraith, Hansberger, and then when they sold to Franklin, the firm changed and Tom set up his own shop called Hansberger Global Investors in '94. I met him in '97 and he invited me to come and learn value investing from him.

I got to live on a beach, which is a great deal, a fantastic time in Fort Lauderdale. I got to drive three miles to the office every day and learn from Tom value investing. While I was with Tom, Vanguard hired Hansberger as the outsourced manager for their international value fund in July 1999. I'd gone there for the final pitch to the Vanguard headquarters. People don't know, but about a third of Vanguard assets, quarter assets are actively managed. They don't only have ETFs, they don't only have index funds.

Dan Denning: That's surprising to me. I didn't know that. I just thought it was a passive indexing strategy.

Ajit Dayal: It is, but they always try to find something cute and something nice, which they can't replicate on an index. They found us as a value manager for that. They hired Hansberger and they said that I should be the lead manager on the account. I learned from them what is the most important thing for an investor to figure out about an investment firm?

These were the four P's because I asked them, "Why did you choose Tom? You have hundreds of managers to choose from. Why did you choose Hansberger Global Investors as your outsourced manager?"

They said, "Well, we know Tom's history, we know the people, his history of what he did with Sir John Templeton creating this phenomenal firm which is sold to Franklin. We know the philosophy, long term value investing. We know the research and portfolio construction processes to convert that philosophy, whether rubber hits the road, to ensure that you indeed are picking value stocks."

Show me your research process. Show me your portfolio construction process. Most importantly, once I see that you are a value manager, I have a certain expectation from you. I know when the Magnificent Seven are doing very well. In those days it was Nasdaq, it was 1999. When Nasdaq was doing phenomenally well, we expect you as a value manager to underperform. If you outperform Nasdaq in its .com bubble days of 1999, then you are not a value manager. You're doing something strange and I'm going to fire you. I'm going to retain you because you're doing what you're supposed to do, because I also have a growth fund. I have a Vanguard National Growth Fund, and the growth manager better do better than Nasdaq, not you. You have basically you have the building blocks of asset allocation as I spoke about India. What is India's weight and the global global GDP going to be?

What is China's weight? Should your portfolio reflect that? What should an asset allocation be? In a very similar way when you allocate capital to a manager, the manager better behave in a particular way. It's that predictability, not the number, but the predictor pattern. If you read in the headlines, "India is doing very well and markets are at an all time high," you should expect the value manager to be selling trimming and underperforming because cash doesn't increase in value like a rising stock market week after week. You should expect that.

When you read that India's in a bit of a crisis and the markets are coming down, you should expect the value manager rubbing his hands or her hands with glee and saying, "You know what? I'm going to invest more capital because I see more opportunities." Also, because he built a value portfolio, the decline should be less than the market, broadly speaking. That's what they taught us in terms of the print.

Dan Denning: I just wanted to add a quick point on that, that when I started working for Bill in 1997, tech started out performing everything else including value. They were different tech stocks, technology, media, telecom. There was a famous value fund manager whose best performing position was America Online for two or three years in a row. I always thought it was a bit of a misnomer that he was calling his fund a value fund when his largest position and his best performing position was a media stock. It's an important thing to look for.

Ajit Dayal: Absolutely. Since you mentioned that, I'm going to just talk about and relate to this, the integrity screen. A year before I was starting Quantum 1989, I was 29 years old, I met a gentleman from South Africa who worked for Credit Suisse. I wish I remembered his name so I could quote his name out here.

He asked me, he said, "Young man, what do you wish to do?" I said, "Set up my own investment firm," which I did in 1990. He said, "I have one piece of advice for you when you shake someone's hand and you get your hand back, count your fingers. If you don't have five fingers, don't shake their hands again."

I didn't quite understand what that meant. I set up my firm in 1990, I did a joint venture with Jardine Fleming, and we actually launched a New York Stock Exchange listed fund, a Jardine Fleming India Fund way back when in 1994.

There were things going wrong with crony capital and some of our investments. I didn't like the way founders were behaving and I wanted to sell the stocks and my partners did not want to. I just left the joint venture. I couldn't handle that integrity screen violation, if you will.

But when I left the Jardine Fleming joint venture at the end of '95 and came back, Quantum 2.0 version in 1996, and Subbu, my existing partner and work partner since now 29 years, joined in 96, we put up the integrity screen. This was a way for us to not only understand valuations of a portfolio, we hadn't met Tom Hansberger yet, but we understood valuations. We were not value investors per se, but we also recognize there's certain protection of minority investors or certain behavioral patterns of companies that could harm us as investors and companies.

The integrity screen was started in 1996, and if you look at the indices today, whether it's, I don't want to give names, but the indices that are popular which track India, 25 to 30% of those indices have companies in them that fail our integrity screen. Their integrity score is low, and we will not be buying their stocks because we don't think they protect the rights of minorities. Index investing is a strange thing because I don't think it works in a market where governance is an issue and protection of minorities is an issue. You spoke about that one value manager who held AOL, okay, that was a style drift.

Let's talk about another manager who had Enron. He had Enron as a big position in '99, 2000, and he kept on buying at every decline of Enron all the way down to cents on the dollar and lost much of his reputation because of that one bet. Because Enron would've failed the integrity screen and integrity score if you had really studied Enron and tried to figure, of course, very, very few people knew what was happening.

But if you had managed to figure out Worldcom, Enron, as I mentioned here, Yukos and those equivalents exist in India very much today. They're thriving and they're flourishing in India today, but we stay away from them. That's why this integrity is important.

Then the valuation metrics that Tom Hansberger taught us, which we exhibited when doing the Vanguard International Value Fund and Tom's other global emerging market portfolios when I was Tom's partner. Then we broke out a 2004 to Quantum version 3.0 and raised capital under our own brand name for the first time since our birth in 1990. Literally, 14 years later is the first time that we raised capital in our own name. We've integrated that valuation with the values of an integrity screen, if you will. That's something that's, I think, quite different about us from many other managers, not only in India, but I would say in the space that we operate in.

Dan Denning: Is that partly because the equity market in India is suddenly become much more interesting to global investors or purely because of the number of businesses that are listed companies, just to keep up with them would be difficult, but you have to add this layer to make sure it's a real company with good managers?

Ajit Dayal: No, you asked about risk, and I think risk is, as you mentioned, the political risk of having strong man leader who deviates you to Putin style, Xi style policies and Modi was that risk and is disappeared down. Then the other risk I spoke about was job employment creation and the demographic disaster that could happen. The other risk, of course, is that you, as I said, you leave the laws of the homeland in the US and you invest in India and then you suddenly find that some guy's getting rich, but you're not getting as rich as that person who's a founder of the company. You ask yourselves why?

Well, because they're taking money away from you. They have third party related transactions with private companies where they get supplies or they sell goods at non-market prices and they're stealing from you effectively. I think that's a real risk.

I think for us, when you look at the India opportunity, much as it may look exciting to invest in an airport, for example, or in a port and you say, "Wow, this is going to be fantastic," or a toll road, there's going to be more traffic and more goods and more people, and that's all fantastic, but you have to ask yourselves the question, "How did that person get the license to build that airport? How did the person get the license for the telecom business?"

If you think about in the US you have a lot of cable companies and telecom companies, and it may be more of a freer market, but it's still a regulated market. You can't just come in and do what you wish to do In India also it's more regulated. You can't just do what you wish to do. There's regulatory capture.

The mobile phone market is not a question of who is actually buying the best mobile service. It's a question of who's captured the regulation for the spectrum, for the mobile service. It's not about who's got the best airport, it's about who's captured the license to build an airport in a city and ensure that no one else will come anywhere close to them, giving them a monopoly of all landings in that area.

If you question that, and if you don't find that to be transparent, well, you know what? There are elections every few years in India. It's a democracy as you said, and governments can change, and tomorrow Ajit may be the favorite party of the new government and the license of the old guy can just go away and be given to Ajit.

That's a real fundamental risk. We measure risk very differently, like I said, it's not that... It does hinder our opportunity, of course, because we're not investing anywhere we wish to. We're investing in companies where you can trust the management not only to build a good business, but to actually ensure that you get your fair share as a 0.1% or 1.2% or 10% shareholder in the company. That's important from our perspective.

Dan Denning: That's a great point. I want to ask you about the other, well, maybe the other side of the coin with that, aside from risk and integrity, which are filters that dictate what you're going to invest in and what companies make the grade. The other obviously is valuation.

I wanted to ask this question in the context of what US investors are dealing with here. That as you know, since 2008, really since the US housing market collapsed, and you had this incredible response from the central bank in the form of lower interest rates and quantitative easing…US dollar denominated assets, stocks and bonds, but more recently just stocks have just crushed everything in the world globally.

As a momentum play and as a growth play in the last two years, really the last four but more the last two, it's even more concentrated in large cap US tech, what we know historically, and I'm sure you know this, is that when you've had a decade of extraordinary returns that ends with a peak in valuations, whether it's price to book, price to sales, market cap to GDP, dividend yield, all these traditional measures of whether stocks as an asset class are expensive or cheap, we know they're expensive in the US and that the next 10 years of returns are likely to be below average or below historical average.

Is that the main driver for American investors to look at Indian equities now? Or is it that the valuations in India are much more compelling than they are in the US? Or is it some combination of both?

Ajit Dayal: It's a combination, but I think very broadly speaking is going back to what we spoke about earlier. When GDP is increasing, so you have to look around the world and see where there's growth. Growth is a wonderful tailwind for management of companies to grow businesses and to have better profits and better stock market returns. Of course, to that, you had the integrity screen and you had risk of currency, political stabilization, destabilization, etc, etc. But you're looking for growth pockets. The US is clearly one growth pocket in the world today, and China's a slowing growth as we showed where China was compared to India. It's already had 10, 20 years of advantage of growth compared to India in many fronts. On the other side, if you look at India, it is a growing market. Of course, Africa, parts of Africa are growing.

Japan is not growing, Europe is not growing. Where do you invest? You invest where there's growth and that's that correlation between growth and stock market returns, the charts that we showed earlier. You invest in India also because history suggests that economy that has grown twice that of the global average and probably twice that of the US has.

We've got this chart from January one or December 31st, 1999. From January 1st, 2000, we've shown you the Indian indices. The first three are Indian indices. The first two are local indices of the Bombay Stock Exchange. Then you have the MSCI India in the green. Look at the MSCI India in the green and look at NASDAQ below that and S&P close and emerging markets in the red and China depicted to the Shanghai Stock Exchange composite, all in dollars. After currency lost and Indian rupees lost roughly three, three point half percent against the US dollar in this 24 year time period.

But look at the end point, the end point of the MSCI India index and the end point of the S&P and the NASDAQ, we've done better in dollar terms and that's because Indian GDP has done better. Of course, there are moments in time, you mentioned the Magnificent Seven where NASDAQ or parts of the US market will do far better than India, but over decades see the compounding factor of just being invested a market more.

You could see India, if you look at the volatility, the jump of the green in 2008 after Lehman, the fall in the green was also significant percentage terms as it was in the US. It's a lumpy chart, but you have to be very patient and you have to understand initially why you invested. It's the thesis of investing and selecting the manager and the fund, still the same.

If it is, then just stay committed because the underlying story hasn't changed. It's a combination of GDP growth rate and opportunities that come along with it. I think governance matters. I'm not able to show our track. We've got a long track record of 24 years, [inaudible 00:45:26] are coming up. In fact, we are not supposed to show our track record here, so it won't be there. But it's an interesting market to look at.

Just look at the indices, right? The indices and I mentioned the indices have cronies in them. Despite that, or maybe because of that, whatever they've done pretty well, but it's a compelling place to be. I think if you try to figure out what's happened in the Indian space, what are Indian mutual funds? The mutual funds are a relatively new idea in India, only started in 1993. We had a government of India Monopoly, not even a mutual fund, a fixed rate of return kind of product for decades from 1964 until 1993.

Then we opened up the mutual fund industry in India, 1993. If you look at the flows, the blues are positive inflows from domestic retail investors into mutual funds, and the reds are redemptions. On the left side you can see it begins very slowly in 2003, that's like 10 years after it first started. Then you had the BRIC meeting in 2006, 7, 8, and you can see the surge in blue. Then you had the collapse of Lehman in the red, we circled a ten-year blank. It's a seven, eight year blank where people were redeeming from Indians had lost faith in their own market, if you will, at their own economy. Modi wins. He inspires a whole bunch of Indians to think of India as a superpower and brings a lot of know gumption, if you will, to the Indian speech and Indian volume. You have that flows that are turning very positive, and of course Covid everywhere in the world, you had redemptions for a while, but look at the peak flows that are going on.

When you juxtapose this with what the foreigners have been doing in that same time period, the blue line shows the foreign portfolio investors, called FPI's in India. You can see their line was going pretty upwards. The Indian line, the domestic funds were flattish and then that surge, and you can see that money. Money flows with GDP growth rate with company earnings has led to PE ratios being relatively expensive compared to their long-term average of 20 that started in 2001 as per this chart.

That had been periods during SARS in March 2003, which was the first pandemic in global modern history and global capital market, his modern capital market history, Lehman, of course the GFC, and then Modi gets elected at the trough, if you will, of the Indian market and the domestic reasons.

Then Covid and other pandemic that hit us badly. You can see how certain points in time the markets look really attractive. As a value manager, one would expect to find better opportunities when markets are less fancy, and have fewer opportunities if you're disciplined. The disciplined research investment process, I spoke about the Vanguard four P's, you would have less opportunities when markets are too excited.

Dan Denning: Can I ask you a question about this chart really quick?

Ajit Dayal: Yeah, absolutely.

Dan Denning: Do you expect the E part to get better in the next 10 years? The earnings on the multiple will come down because the earnings are going to go up less than-

Ajit Dayal: We had seen a decade of not much good earnings growth. Funnily enough, from the time Prime Minister Modi became prime minister 2014 until about 2000... Well, let's keep Covid out of it. 2019 and March 2020. For those six, seven years, India's EPS did not grow much at all.

Then of course there was a big Covid rebound of EPS, but it's only now that you can start seeing EPS growth being better like it was in the previous decades. We had subpar EPS growth and a lot of flows coming in, which is why you've had this expansion in price to earnings ratio because the EP has not kept pace with the flows of money related to the expansion of PE. But again, if you go back a longer time in history, 30 years in history, 35 years in India's history, there's a very remarkable correlation between earnings per share, the earnings per share growth number of the index, and the level of the index, just how we saw the GDP chart of India with the MSCI India index returns in India.

We had the very similar chart of earnings, so there can be dislocations. Those dislocations are where, as a disciplined investor, as a disciplined manager, you take advantage on behalf of your investors and your clients to file in or jump in or step out as the case may be if things look a bit awkward in terms of valuation.

Also, just to close that topic on valuation. Within the market, there are certain sub-sects, small cap, mid-cap where P/E ratios are significantly higher. There's been a correction the last couple of weeks and months, but there's still a gap between what the small cap and mid-cap people are dreaming. There's a new company born or new company doing an IPO, and oh, they're going to take over the world, they're going to take over the optimism and the flows from that optimism.

A lot of it is unwarranted. What we've seen since the last few months, we've seen the MSCI India index correct by about 17% in dollar terms, but after having a exceedingly phenomenal ride in a post-Covid recovery. Yes, the US market has the Magnificent Seven, and we did a chart of the MSCI US index. You can see there's a complete surge in the index. Why?

Because US companies don't only rely on US GDP for earnings. The Magnificent Seven are relying upon a global audience for their growth. You have that surge in the index of the MSCI US, and if I had that chart to show you, it would be a dramatically upward sloping chart breaking away from GDP completely opposite of China, where you saw GDP high and market cap market index low. The American one is opposite because of the fact that Facebook, Meta, Alphabet, Google everyone the global, they got a global audience unless there are rules and that is put in as in the case of China, etc.

Dan Denning: That's a great point. It makes it hard for when you're using different factors to determine your style or to conform to the style where you say, "Well, it's a US company, but it derives a bunch of its earnings from foreign sales."

I want to shift a little bit to the fund itself that you have and the construction of the portfolio that when you're talking about this difference in valuations between the small caps and mid-caps. When I started out working for Bill in the late nineties, the growth stocks were all the rage because that's where the money was to be made.

Everybody wanted to make as much money as quickly as possible. They were willing to pay a large premium for companies who were capable of growing earnings and profits at a double-digit rate. I'm sure that's not the case with your fund based on what you've said, but can you tell our readers a little bit more about the number of positions that are in the fund?

Are they large caps? Are they mid-caps? Are these companies that you can buy through an ADR or some other US vehicle? Or are there things that they can get through the fund that they're unable to get in the US? If so, what makes it more attractive for US investors?

Ajit Dayal: From our strategy and our approach perspective, when are often asked the question, "What's a guy like you doing in a place like this sort of thing, what's a value manager doing in a growth market?" A value manager doesn't mean that I'm buying distress. A value manager means I'm buying the growth. I believe strongly in the India story.

I left the US in 1984 after my MBA to go back to India to a dead economy. I began working and preparing Quantum's birth effectively and then fighting for the reforms in India. Then after being trained by Tom again going back to India, I could have been living on a beach in Florida having a great life as Tom's CEO and heir apparent of his company and growing the business on a global basis. But India is my heart and soul.

India is where the growth is, and I see it and we all see it, actually now the world knows about it, but we are very careful about the valuations. I indicated about the governance levels and protection on minority rights. You can fight for protection of minority rights in the US in a faster way and a quicker way. In India, you go to court, it'll take decades, right?

You have to be careful on the way in, do your due diligence before you jump in very carefully. Luckily, if you're on a liquid market and public markets are liquid in India, you can exit the stock if you make a mistake, unlike venture capital, private equity if you make a mistake or stock.

But to go back to the thing, so as a value manager, we also worry about liquidity. That is the underlying stock that we're about to put client capital in, is it liquid? The reason why liquidity is very important, and you can go back and look at what happened in the BRIC period and after Lehman, is that many small cap funds that were launched for India invested in small caps. Their NAVs were decimated because it shares were so illiquid when the fund manager began to exit the stock, the act and fear of the exit or volume brought the price down of the small cap stock by 80 to 90% with a very fractional volume of transactions because the fear was the person going to offload.

There are some small cap funds in India, and we've done a study on this. There are some small cap funds in India, which a few months ago had in their top 10 positions, stocks, which would take anywhere from a hundred trading days, which is nice. That's our rule is 90 trading days.

But there are some stocks that would take 3000 trading days to exit in a market which trades 220 days in a year. 3000 days is like 14 and a half years to exit that position. You can imagine when they go to sell that stock because there's a redemption and they have to meet the redemption, they're killing the NAV.

You read, you go to the website and you see the NAV of the fund and you say, "I want to exit. It's a good NAV." But then you go to place a redemption order and many people do the same thing and the fund manager goes to sell. By the time he sold the stock, the NAV that you saw and the NAV at which you actually redeemed, there'll be a gap. You could see that in the Lima tab. We have a rule of liquidity.

We have valuation integrity score, integrity screen and score and liquidity. Then if we end up in small caps, that's fine. We have no problem buying small caps as long as we meet the liquidity criteria and valuation integrity screen. We don't have a focus on market cap. Our ideas, how do you find great value of good businesses which are going to make money in a sensible way and share with investors, with minority investors without stealing from them and give me the option to exit that stock, deploy capital or exit that stock without moving the price.

When you look at the universe of available India managers and you begin to evaluate them on different criteria, those are the ones that we apply to ourselves. Of course, people have different methods of selecting a manager. I spoke to you about how we have built Quantum based on the four P's of Vanguard and making sure that we really have that fifth P, which is patient long-term capital that doesn't get scared of market movements if the underlying philosophy and the underlying thesis, and the underlying care taking of the portfolio hasn't changed.

Dan Denning: That's a fantastic point. Those are fantastic pillars for an investment philosophy. I know that Tom Dyson, our Investment Director, has tried to adopt some of that with our risk rating, which we assign to positions that we follow. Liquidity is a huge part of that. The last thing you want to do is either move the market or not be able to sell when you're ready to sell or to get a different price than what you think you ought to get. I'm glad to see that that's an issue that you guys have addressed from the bottom up. By the way, I have let Tom know to get in touch with you and your team.

Ajit Dayal: Fantastic.

Dan Denning: Another point that I think our readers will appreciate that we have what we call a Trade of the Decade, which is a ten-year perspective on something that we thought was very cheap, which will be much more expensive or fully valued over a period of time. The chart you showed going back to 1500 tells me that maybe we should add a trade of this century to see India and China are gradually and then suddenly reemerging as global economic powers. That that might not be fully reflected in the valuations of the companies.

To find those companies, you've got to do the work that you're doing. I wanted to remind readers in case they forgot from when we started, if you want to find out more about what Ajit and his Quantum friends are doing, go to Qasl.com and then click on the India fund and you can read more about both the construction of the portfolio, the minimums that investors can put into the fund and find out more information about how to participate in this story.

Every country has a home country bias and for whatever reason, investors don't want to hear about stocks in other countries. They get confused about the risk, whether it's political risk, or currency risk, or regulatory risk, or just how to easily invest money in another country that shouldn't get in the way of a compelling opportunity when you see it. I thought this was a great time for you to talk to our readers about what you're seeing in India. Is there anything else you want to add before we wrap up? We're near our one-hour hard stop.

Ajit Dayal: I remember in 2006, Agora bought a busload of people to India on a discover India tour holiday and come and meet company's holiday. Come over and see what's happening in India. Plan a trip again. It'll be fantastic to host you there.

Dan Denning: All right, well, we'll get on that. I'm going to go see Bill right now and don't be surprised if you see us. But in the meantime, thanks very much Ajit. We'll be in touch soon. Thank you.

Ajit Dayal: Thank you very much for having me. Thank you everyone for listening. Thank you so much.

Chiswick, West London

By Tom Dyson

Dear Reader,

Happy Saturday. Below you’ll find both the transcript of the Private Briefing I recorded with Chris Weber last week. For new paid subscribers, Private Briefings are where we sit down for a longer conversation with friends, analysts, and great investors we’ve met over the years. We try to publish one new Private Briefing each month.

Chris is an old friend and the most intelligent person I think I’ve ever met. He has the memory of an elephant and a supernatural ability to forecast the markets, which he’s been quietly doing successfully for almost 60 years. In this conversation, we unpack some of his great market calls and I ask him what he’s excited about now.

We discuss the brilliant free-market economist and philosopher, Murray Rothbard, who was like a ‘second Father’ to Chris and two unusual investment ideas...one is a deep sea mining company and the other is a new bank that makes it very easy to exchange currencies.

Enjoy!

Tom

P.S. Please note our discussion of stocks does not constitute financial advice or an investment recommendation and I’ve never discussed either of the individual stocks mentioned with subscribers to Bonner Private Research. I haven't done any of my own research into either of the individual stocks mentioned. The Metals Company [TMC] is a current recommendation of The Weber Report and Chris Weber may own stock in it personally. For our updated Official List, including the new recommendation I DID make, see the February Monthly Strategy Report. Comments and discussion are available to all paid subscribers on any posts we publish

TRANSCRIPT BEGINS

Tom Dyson: So I thought what I would do to start is run down some of the calls you've made in the past, because I think our readers may find it almost unbelievable how many times you've gotten the big calls right. So correct me if I get any of this wrong, please.

Chris Weber: Sure.

Tom Dyson: So the first one I've got written down is you bought gold in the '70s. And then you sold it in 1980?

Chris Weber: Yes. That's right. If you want to know the exact thing, I knew from when Paul Volcker took over the Fed ... I knew from October of '79 that he was really going to tackle the problem. So at that point I bought a lot of options on gold and silver too. I didn't know when the peak was going to be, but I knew it was going to happen. So each time the option contract would expire, I would buy a new contract. And at some point it got to be very expensive and it was just a single contract left by the time, on January 21st that the gold and the silver price had peaked, and then it began to crash. And so that was my way of exiting the bull market. But, prior to that, I had only purchased the actual metals.

Tom: Coins. Correct? And did you buy them at $42 an ounce?

Chris: No. No. It was even cheaper than that. It was still at $35 an ounce. It was illegal, technically, at that point for Americans to own, but it wasn't illegal for them to own the so-called numismatic coins. And in the town that I was in, in Phoenix, Arizona, a coin dealer, he was offering the old British sovereigns, roughly a quarter of an ounce, the pre-1931. That was the year that the UK went off the gold standard and those coins didn't have any premium on them, and you could buy them at four-to-one margin. So I took the few hundred dollars that I'd saved from my paper route. I was 16 at the time and I just went, I purchased them. And I don't know how or why, but whenever I thought it had gone up too much I sold. And then the price would fall back and I would buy again. And the price went from '71 to the end of '74, from $35 to $200, and the coins at four to one. It was fantastic and it set me up from then on.

Tom: I'd like to come back to this in a minute. But, I'm just going to just move through your trading history. And then after 1980, you made an incredibly bold move. Having sold out of gold. You then bought US government treasury bonds.

Chris: Well, at first it was only the T bills, because they were paying 20% the three-month. But, in that period, I became convinced that for a number of reasons, the interest rates had gone up too far and the relationship between the short-term rates, the three-month rates and the long-term rates, the 30-year rates was such that, while both of those interest rates would fall, the short-term rates would fall faster and farther than the long-term rates. Because it's very unusual to have such an inverted yield curve, where the short-term rates are 20% and the long-term rates are 11, 12, 13%. It's usually the longer term that has the higher interest rate.

And so I did what are called straddles in the futures market. I would buy the one and sell the other, so that I would profit if the short-term rates fell relative to long-term rates, and the T-bond prices would rise, relative to the fall in the T-bill one. And that was a great, great trade too. It was a very messy period from '80 to '81. It was only at the end of September of '81 that the long-term treasury bond peaked at just over 15%. I say that the bond peaked, but I actually mean the yield on the bond peaked. And it was after that that they began to fall and they fell until 2020 for almost 40 years, which was almost exactly the period before then that they had been on the rise. I don't know if that's a coincidence or not, but interest rates started to rise in 1942 in the US.

Tom: The chart forms a perfectly shaped cone, almost like Mount Fuji. I know I asked you about this the other day when we saw each other. You didn't hold the bonds all the way for 40 years?

Chris: I was always interested in currencies. And what happened was, starting in October or November of 1978, the US dollar actually began to rise. And by March of '85, it was so high you could go to Europe to two, three-star Michelin restaurants and it would be almost as much ... I know this sounds insane, but it was almost as much as going to a McDonald's in the US. The dollar was so high and, of course, I had bought US government treasuries in the US currency. So by March of '85, I thought, "Well, I'm going to take advantage of these very, what I think are too cheap currencies." The pound almost got to parity at that point. And the mark and the gilder from Holland and the Swiss franc, also very good currencies that were just too cheap, because I was over there at that time and I saw it.

So what I did was to buy the same instruments, but diversify amongst four European currencies. And so I still got everything from the bond. The interest rates was a global phenomenon, interest rates falling. So the price of the bond went up and everything, but the kicker was that the currencies went up, in some cases, almost 100% over the next few years. So as good as it was to be in the US dollar, it was even better to buy the currencies when they were cheap, and having the bonds do the same thing, but having the currencies do essentially what they had done from 1971 to '78. And so I had seen it happen before, so I took advantage of it. But, this time with the veneer of the bonds on top of that, whereas before, I didn't want to be in any bond, because interest rates were soaring during most of that earlier period.

Tom: What an incredible trade. And I can't wait to come back and talk about the dollar in a minute, because the dollar is once again very strong and the currencies are weaker. I don't think they're as weak as they were in the mid-1980s...

Chris: No. Not nearly so. But, yeah. That was an extraordinary time. It was on the cover of Time magazines, Americans everywhere boosted by the King Dollar. It was so cheap it was a joke. It was too cheap. The only time I've ever seen that since was in New Zealand in early 2002, and I did the same thing then.

And I wrote about it at that time. I had my newsletter. You could have a wonderful hotel room, a bottle of wine for a song. The New Zealand dollar was 40 cents. And within a short time it became 80 cents and you got all the coupon on the bond and the rising price of the bond all on top of that.

But those days, the last time there was a big currency move was 2008, when the euro went up to $1.60, having essentially gone up 100% from its low of 2000 when it got as low as 82 cents. But, ever since then, there haven't been any huge swings.

All right. You could say that the euro being $1.60 cents back in 2008, it's now a dollar and three or 4 cents. But, it's been a long time since 2008, whereas before you got these big, big moves in a matter of two, three, four years. So something has really changed in the currency markets. There hasn't been these big swings that are over a short period of time, ever since 2008.

Tom: It's a shame actually, because it would be great to have the volatility back in the currency market again.

Chris: Well, you sure had it from 1971 until 2008, which is what? Almost 40 years.

Tom: Yeah. Well, moving on then, and I know you were in that Euro trade as well. But, so just quickly, the other big calls, I know you got heavily into gold in, was it 2002 or 2003?

Chris: Oh, no. 'O1. April and May of 'O1 for gold and November of that same year for silver.

Tom: I read my first issue of your newsletter back in that time. So I remember that. And of course, that trade is still open and ongoing so we’ll come back to that in a minute. But you made an incredible call to get out of the stock market in 2007.

Chris: Right. November the 17th or the 21st, something like that. I put out an issue that just said, "Everybody out." And I was very, very, very lucky in that. It seemed to me that it was a time that the stock market was just overblown.

Tom: And then, did you get back in at the bottom in 2009?

Chris: Yes. In March of '09, pretty much at the bottom. I didn't know what to recommend specifically, but I thought that the whole thing was over. So I said you could pretty much be safe by buying anything. I ended up recommending the S&P and a few other things, but it would've been smarter to have actual things at the time, instead of just saying, "You're free to buy anything you want."

But, by that time I wasn't even sure, because it was a terrible time. The markets had just become so blown out. Even very good companies were being thrown out, which is always what happens. Yeah. People start just to sell everything.

But before that in the '90s, I spent a lot of time in Asia, especially Malaysia. And I could see that infrastructure was a big thing. So just to recommend the cement companies that they were using, which was Holderlin at the time, I think it's called Wholesome now from Switzerland. The best of every basic infrastructure thing, from telephones…even banking. I could tell that they were getting wealthy at an astoundingly fast rate, and not just Malaysia, but Thailand, Indonesia also. So that was an easy thing to see.

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