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The Sean Morgan Report
The Sean Morgan Report
The Great Reset Ep 6 - Rick Rule On The Future of Commodities
"The Great Reset" is a show about the future of finance. Money is power, and there is a historic fight to control the mechanisms of power. What people, groups, and nations will control the financial systems of the future? And what will be their medium of exchange?
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Future of Finance. I'm joined by Rick Ruhl, who began his career in the securities business in 1974 and has been principally involved in the natural resource security investments ever since. He's an astute analyst and highly successful resource sector investor who's financed numerous exploration and mining companies over his 45 year career. And before we get started, I just wanna say that there are three reasons to go to badlandsgoldcom to request your free gold IRA kit. You'll learn how to safeguard your savings tax and penalty free, learn how to protect and grow your retirement and we'll send this kit to your house for free, zero shipping and handling. So that's badlandsgoldcom and request that free gold IRA kit. Well, rick, I've been really looking forward to our talk and I wanted to start off by asking about investing internationally. You know some people only feel comfortable investing, you know, in the domestic jurisdictions, but there are these other commodities, other opportunities that are abroad. So I was just wanting to get your perspective on which countries or regions you might think are overlooked or perhaps just have a lot of longterm potential.
Speaker 2:Well, I mean, I think, to start with an overview, which is to say that the world is a very big place and, to the extent that you confine yourself to the United States, you are confiding yourself to a market that's only 23% of the world's savings and investment assets. It's a market that's familiar to us, but, on the one hand, not going outside the United States to pride yourself of more than 75% of the world's economic activity, it also exposes you to risk. My friend, doug Casey, in a slightly off-color remark, once said that your assets, your passport and your ass ought to be in three different domiciles, and I think that there's some intelligence to that. I would probably agree with the commentators who suggest that the best savings and investment market in the world is the United States, and the most familiar, but if you have the ability to diversify your assets, both in terms of protection but also in terms of access to opportunity, I think that you need to consider it. The landscape, the international landscape, changes often, which means that there's no one size fits all answer to the questions that you asked In the first instance. Countries can become worse as opposed to better. Witness as an example Canada today, which is becoming worse. Two. With eight billion people on earth, there's probably eight billion answers to the question, in the sense that for some people, the psychological trauma of investing in societies that they know less well would overcome any material advantages that they might derive from it.
Speaker 2:Investors, too, have different risk tolerance and different time preference. For myself, as a natural resource investor, I need to go where the resources are, almost irrespective of political domicile. I've learned in almost 50 years now of resource investing that I would much rather take political risk, however dire it might be, than technical risk, which is to say, I'd rather have a great deposit in a lousy domicile than a lousy deposit in a great domicile. So, by virtue of what I do, my overseas investments are geared more to the quality of the asset and management team than they are to my political outlook for the domicile. I might say, finally, that I don't believe that there is a genuinely good domicile anywhere in the world. I think for most investors, the most dangerous government they face is the one that's closest to them. Many of your listeners will probably disagree with that, but I need to say at the outset that that's my own personal belief. There are no good domiciles, there are only less bad ones.
Speaker 1:Right. What about looking long-term demographics and maybe some areas that people might not think are going to be really important economies in the future? Do you look at anything like that?
Speaker 2:I do mostly from my own amusement. As I say, I now confine my investments to conventional financial services, which is to say banks, insurance companies, investment banks, asset managers, wealth managers and natural resources, and I'm more attuned to the company than the domicile. But I will say that for investors who are interested, as an example, in consumer products, consumer economies, they need to look at young, emerging and frontier markets. Specifically, if they have the courage, they need to look to Africa.
Speaker 2:Most investors' perceptions of Africa are clouded by images of poverty, political instability and all that's there. But what's also there is the most rapidly growing middle class in the world, an amazing cadre of young people with exportable skills. So, to the extent that you're invested in more conventional businesses than I, I think you need to look at emerging and frontier markets. You need to look at Indonesia, you need to look at Thailand, you need to look at India, if you have the courage, Pakistan, egypt, but in particular you have to look at the so-called Sub-Saharan Africa. Not for the fate of heart, but it's easy to say that technology investments in the 1980s weren't for the fate of heart either, and they worked out.
Speaker 1:Do you travel to these exotic places? Do you travel to Africa and meet with management teams of companies there, for example?
Speaker 2:I used to very frequently I used to have to travel a lot. There's no way to understand a deposit better than visiting the deposit yourself, not paying attention to what the so-called experts say, but rather to put your own feet on the ground and have people who were on your payrolls foot on the ground, people loyal to you as opposed to loyal to the issuer. I travel less for business now and more for pleasure. I'm just back from Indonesia for pleasure.
Speaker 2:I'm on my way next to Thailand for pleasure, but I'm lucky enough after 50 years in business, to almost always have local contacts in the places that I travel to for pleasure, which allows me to get the locals' view, if you will, of the economy, the politics and the outlook, which is something that I've really enjoyed. I also need to say there are certain advantages, perhaps few to age, but one advantage to age is what we used to call a Rolodex, which is to say a range of contacts. I've been lucky enough over 50 years to develop really a very formidable pack of contacts friends in various places, so that if I don't know something or if I don't know somebody, I'm usually one or two phone calls away, which is a huge advantage.
Speaker 1:Right. I'm curious about Indonesia because this is an area with a huge population that's growing fast. What was it like there as far as the economy, the economic activity, where there are a lot of cranes and construction Did it seem to be growing fast. And what was the attitude of people? Were they optimistic about the economy?
Speaker 2:I think, answering the last question, first, I was in Northern Sulawesi and dealing with Indonesian Chinese who are tenacious and perpetually optimistic. I think, had I been on the island of Java which I was not that you would see incredible economic exuberance. I think that Indonesia has reached escape velocity, which isn't to say that there won't be some challenges. In periods of rapid economic growth, the acquisition of wealth doesn't conformably align, which is to say, some people do better and some people do worse, and that always generates tension. There are two continuing social challenges in Indonesia.
Speaker 2:It is, as most of your listeners will understand, a Muslim country, but that's not homogeneous and it's not necessarily bad. Are there so-called bad actors? Are there anti-Western actors in Indonesia? Of course, will there be so-called terrorist incidents? Of course.
Speaker 2:Should that deter anybody from investing in Indonesia? Absolutely not to the extent that they invest in industries they understand, with people that they understand. Ignoring Indonesia, if you can afford to speculate, if you have sufficient capital that you can afford to diversify out of your own market, I think is an extremely intelligent thing to do, depending on the industry that you choose to invest in. It's an amazing developing consumer economy. It is also beginning to be, interestingly, an exporter of human-related services, which is to say, there's a super pool of engineers there, as an example, and rather than export the engineers themselves to the United States, increasingly, american engineering firms are outsourcing chores to Indonesia and India and places like that, and that's a real trend that people need to pay attention to and something that will at once help the developed economies in the West, where the populations are aging, and also help the developed economies where they have the ability to export know-how, as opposed to people.
Speaker 1:I've definitely seen a lot of Indonesians on Upwork and these different freelance websites. There's a lot of people who speak English who are already working with Westerners in that capacity, so I think that is important to pay attention to. Just a different topic now about battery metals Different types of batteries being developed right now for transportation. It's kind of a race to see which technology will be adopted, with Toyota developing perhaps a different type of battery than Tesla. Is there a way to invest in battery metals that the investor wins, no matter what technology is adopted? Just curious because I'm not familiar with this.
Speaker 2:The answer to that is yes, that's copper. The common thing about electricity is that the most cost effective way to transmit it is via copper. It isn't necessarily the most efficient, but it's the most efficient relative to the unit cost of the commodity that transports it. There are other materials that transport copper more effectively, but they're very expensive, as an example, gold. I think it's a mistake to look at the battery market as a monolith. I think what you're going to end up with is 15 or 20 battery markets. You're going to have a micro storage market, which is to say the type of battery which might go into your phone or your computer. You are going to have a transportation battery, a light transportation battery, which is to say the type of battery that might be used to power a Tesla. You're going to have a very different battery for that portion of the heavy load over the road transportation system. You are going to have a different kind of battery, perhaps entirely for, as an example, shipping, and a different battery again for distributed storage, which is to say the battery that might power a small business on an intermittent basis or a house on an intermittent basis, and then a different battery again for grid storage, which is to say a utility scale battery.
Speaker 2:The idea that there's going to be a one size fits all battery or a one size fits all technology, I think, is a problematic assumption. It may be and I'm not saying it will be. It may be at the utility scale that a vanadium based battery wins the fight. It might be in smaller applications than a solid state lithium battery, as opposed to a lithium powder battery, wins the fight. Who knows what happens at the micro scale? I mean, I don't know the answer, but I think what you have to do is look at probabilities and understand that there are no certainties with regards to technology.
Speaker 2:Looking forward, so, thinking about the anodes and the cathodes, it would appear that there is a good future, irrespective of the technology in transmission, that is, input and output from a battery. For graphite and graphene, it would seem too that there will be lots of applications, if we have the availability of it, for Cobalt, nickel and copper, of course, will play an important role. And it would appear too that, while the growth in lithium demand won't keep pace with the growth that we've seen in lithium demand for the last seven years, or at least the juxtaposition between supply and demand, given the massive amount of supplies that are coming online. It would appear that lithium, either in its current technology or in the context of a more solid state, a more metallic lithium, will have a future in the battery business. The other thing I think is that investors who are interested in the electrification theme need to, while considering batteries, look beyond batteries.
Speaker 2:We, sean in the United States, in the developed world, think about the battery play and the electricity play in the context of vehicle transportation. It's important for us, and it's important in the context of your former question about frontier markets, to consider the broader issue of electrification. There are a billion people on earth with no access to primary electricity. There are two billion people on earth with access to unaffordable or intermittent electricity.
Speaker 2:I would say that an important theme of the next 20 years will be the extension of the benefit of electrification to the entire planet, the connection of a billion people to the grid, the upgrading of the grid in terms of its ability to transport but also generate energy. Once you have extended the access to electricity to these people, simply wiring their houses, and then the plethora of gadgets that must be employed by these people to enjoy the benefits of electricity. It's important that one looks beyond vehicle transportation, not ignores vehicle transportation, but looks beyond vehicle transportation and thinks about the impact of electrification on humankind in a very broad sense. That's how you really understand the opportunities and the scale of the opportunities.
Speaker 1:Right, it seems like copper is a good play there, getting one billion people connected to electricity. Let's talk about oil and gas. I watched an interview you did last week where you talked about the amounts that we've been able to use oil and gas. Less was just by one percentage point. Could you quote that statistic better for me? Can you explain to me in the next 50 years, for example, where you see oil and gas compared to now?
Speaker 2:Some of the so-called big thinkers a disparaging term that I use for people who try to run other people's lives the World Economic Forum, President Biden, Prime Minister Trudeau, John Hallimerkel my favorite energy physicist, Greta Thornberg would have you believe that the end of fossil fuels will occur. At least, according to Biden, peak oil demand will occur in 2032. I would suggest that peak oil demand occurs in about 2065 and then tapers off slowly. I would suspect that for two reasons at least. Two reasons, perhaps three. The first reason is that in the last 40 years, humans have invested just shy of $5 trillion on alternative energies, those fuels which our president believes will replace oil. That $5 trillion expenditure has reduced the market share of fossil fuels in the energy mix from a high of 82% all the way down to 81%. In other words, a $5 trillion capital investment has reduced the market share of fossil fuels by 1%. Meanwhile, population growth and GDP growth worldwide is running at about 2.5%, and it's important to note that when, in particular, poor people get more money, the things that increase their utility, the things that improve their lives, are very materials and very energy-centric.
Speaker 2:The whole world, John, wants to live like you and I, and it's difficult for me to say, given the lifestyle that I enjoy, that they shouldn't be allowed to the opportunity to increase their materials to the end of living. To do that requires energy. If you look at what happens to a very poor family in the rural frontier markets, when they get sufficient disposable income, they go from barefoot to wearing sneakers, they go from sneakers to a bicycle, from a bicycle to a 50-CC motorcycle and from a 50-CC motorcycle to a Toyota Hilux. All of that requires materials. When you get more money, you might buy some little gizmo from Apple that weighs 15 grams, that doesn't consume any stuff. You buy services. You and I have too much stuff already.
Speaker 2:But when the poorest third of humanity gets more disposable income, which they're doing fairly rapidly the things that add utility to their families are material. They take the calorie count in the family from, say, 1,200 per capita to 1,600. They might replace a thatch roof with a metal roof. They might replace mudwaddle with cinder block. All of these things are material and energy intensive. And as the world begins to approach higher material standards of living, the demand for all forms of energy, including alternative energies, including fossil fuels, including nuclear, will grow, and it will grow inexorably.
Speaker 1:Yeah, it's just logical that people are going to want a car, people are going to want air conditioning, some of these things that are basic to us, but all those big populations in China and India and Pakistan and Indonesia and Nigeria, that's a lot of people going from lower class to middle class and being able to get a car and being able to get air conditioning, in these different things all at the same time, so that's a boom. I mean, people are always talking about a recession and things are. You know, maybe because things are so uncertain right now with our debt situation globally, people feel like, oh, there's going to be a big problem financially globally. But then when you look at that story that we just talked about, that's a big boom story, isn't it?
Speaker 2:long term, it is and, sean, it's important to understand that a recession is not inconsistent with the essence of humankind. In my life as an investor, which is to say now going on five decades, I've experienced four markets where the market capitalizations in my sector have declined by half. They were traumatic to go through, but when you look back at a stock chart beginning, say, 1970 and ending 2024, you almost can't see those downturns. So when people begin to juxtapose their investments with the time value of money, but also with the power of compounding, what you see is that you need to accept recessions, you need to accept stock market declines, but you need to understand that they're transitory and the ascent of humankind isn't transitory.
Speaker 2:If I've learned anything in 50 years of investing, it has to do with patience and tenacity. My friend Doug Casey famously says a bear market doesn't make wealth go away. It makes wealth change hands. Those who lose it are unhappy about those circumstances. Those who gain it are, of course, less unhappy. Whether or not you lose it or gain it has more to do with your own attitude, your own tenacity and how hard you work than it does to do with the broad economy.
Speaker 1:And you were talking about in another interview I saw, about how lithium is overpriced right now, or at least it's not underpriced when you compare it to these other commodities gold, silver, uranium, copper. I mean, these aren't your words, these are my words, but could you maybe rattle off a few commodities that you think are, have been in a boom and could go down maybe, or won't grow that fast, and then some commodities that are just severely undervalued and we're looking at growth.
Speaker 2:Let's deal with you ready with the pardon me, the lithium argument first. My suspicion is that the world was never short of lithium as a resource as we came into the so-called shortage five or six years ago and, by the way, there was a shortage of finished product. In terms of reserves, both Alba Marley and SQM, the two largest lithium producers in the world, reported 85 and 75 years of reserves respectively. There wasn't a shortage of lithium. What happened is that the demand for lithium based chemicals increased so fastly, so fast, pardon me that we had a shortage of processing capacity. We had severe bottlenecks in processing capacity. What that meant was that the prices for various finished lithium products increased by 400% over seven years. Markets work and that increase in price made deposits that hadn't been economic and stimulated the search for lithium In terms of raw lithium. Now we are developing enough projects on a global basis that my suspicion is that the market will be at least adequately supplied. If the new technologies that are being explored by the oil and gas industry for extracting lithium from the saltwater brines co-produced by oil and gas particularly the efforts of Exxon we're going to have an awful lot of lithium I mean an awful lot of lithium Meanwhile, because the lithium stocks have performed so well over the last five years, the expectation for success is governed by the success that investors have enjoyed in the immediate past, and my suspicion is that investors need to look forward with regards to a balance of lithium supply and demand, rather than backwards, to an imbalance, and remember that markets work.
Speaker 2:That isn't to say that lithium producers won't make money. That isn't to say that a lithium deposit that's in the best quartile worldwide in terms of production cost and return on capital employed won't make shareholders a lot of money. What it does mean is that lame halt and blind lithium one of the lithium companies that's emerged in the last 15 months before that was a gold explorer, before that was a crypto miner and before that was a marijuana stock. It means that the probability of the success of management team that until two and a half years ago couldn't spell lithium is very, very, very low. I think historically in the resource business, one needs to understand that markets work and if you have a market that is temporarily oversupplied, particularly a market where demand for the commodity is assured because it's necessary for the incentive humankind, but where the pricing structure in the industry is so bad that the cost to produce the material worldwide meets or exceeds the selling price of the product, which is to say, industries in liquidation. When you have an industry in liquidation, where the cost of producing the product is higher than the price received, only two things can happen the material can become unavailable because the industry doesn't earn its cost of capital, or the price goes up. Those are the only two choices. At the same time, those industries because people are rearing looking rather than forward looking tend to be hated or at least ignored or bored in the market, which is to say, the future price escalation is built into the market while the expectation of success is nil. That's where the money is made in resources.
Speaker 2:If you look back 18 months, from 18 months ago and you look at uranium, uranium had been in a bear market Since Fukushima, which is to say a very long time. There was a mini-boomlet in uranium in 2019, 2020, where the narrative brought in a bunch of speculators, but that market failed. So part of the market around uranium was bored. A different part of the market around uranium was disappointed, which is to say the speculators, and a third part of the market around uranium hated it. They thought of it as the stuff of Hiroshima, nagasaki, three Mile Island and Fukushima. It doesn't get better than that.
Speaker 2:The price of uranium declined to something like $15 a pound. Meanwhile the total global cost of production I don't just mean the mine cost, but I mean the cost of capital, unsuccessful exploration efforts, reserves for mine closures was about $60 a pound. So the industry made the stuff for $60, they sold it for $18. Being miners, of course, they tried to make up the deficit on volume, which doesn't work, and uranium and uranium stocks became pathetically cheap. But better than being pathetically cheap, they were roundly hated, roundly hated. The price of uranium now, over two years, has rebounded from a low of $15 or $16 to its current $74.
Speaker 2:And the hate? Well, the hate probably still exists among the Greta Thornbergs of the world, but among investors, a tripling in the commodity price does a wonderful thing for perception and I would suggest that the easy money in uranium has been made. The transition from hate to fascination is one of the most attractive stock charts on the planet. But I suggest that the uranium bull market probably has two or three years to run, simply because the increase in the uranium price from $18 to $70 occurred so rapidly that the industry hasn't been able to invest sufficient time and treasure to increase production, which they need to do. So my suspicion is that the internal dynamics in the uranium market mean, as an example, with term rather than spot pricing.
Speaker 2:The people who put new minds in production can do so on a contracted basis, which will guarantee at least 70% of the top line. That's important. If you have price certainty over a 10 or 15 year timeframe to utility, it's more financeable than selling into a spot market. I think the market doesn't understand that, so I would certainly point to uranium as an example of the thesis that you buy something that's hated. It's important to that as you enjoy the profits that accrue to being right. Buying an unloved commodity becomes loved. It's important that you take some profits. What happens if you own a stock in your portfolio and the stock goes up is that, in your own mind, the being right reinforces and you begin to invent other reasons to continue to hold the stock because you enjoy the feeling of a stock that's going up in price. Remember that markets work. There will be a time, as there was, as an example, in 2008, when the uranium market, and hence the uranium stocks, are horrifically overpriced, but while that's happening, the market is minting new uranium companies and the shareholders, who've enjoyed five fold increases in the uranium stocks, are looking desperately for psychological excuses to keep owning them rather than selling them.
Speaker 2:So let's return to your question what's hated right now? Well, coal, roundly, roundly hated. Many investors don't know that the biggest year in recorded history for coal demand was 2023. In October of pardon me 2022, in October of 2023, which is to say this month, demand this year has eclipsed last year's demand. While there are highly publicized closures of coal mines in places like the United States, the world is building electrical generation from coal plants at the rate of one plant every day and a half on a global basis. Regardless of what you think of coal, coal demand, both for steel and for power generation, is rising and will continue to rise for substantial length of time. Your listeners will say what about carbon? To which I say yes. What about carbon? The coal-fired capacity additions that are taking place are taking place in markets that are underserved with regards to electricity Markets like China, markets like India, markets like Sri Lanka, markets like Malawi, and people in those markets point out that when the big thinkers talk about carbon generation, the Western people talk about carbon generation per capita, which is to say, pardon me, per nation.
Speaker 2:Which is to say, they look at the US national output of carbon and they compare it with the Chinese, and the Chinese are producing more than the US. And the US is that China needs to cut back. The Chinese and the Indians would say that you need to measure carbon production per capita, per citizen, not per nation. There's a certain logic to that. They point out that their carbon production per capita is less than a quarter of the United States and, with regards to China, they also point out that some of that carbon production occurs making products that American consumers consume, meaning that we owe part of the carbon debt, not the Chinese. People in frontier markets also point out that the carbon loadings in the atmosphere are historic, and the historic carbon loadings have been contributed mostly by rich people in the West.
Speaker 2:To the extent that the carbon debt is going to be paid on a basis that those people consider to be equitable, I would suspect that in the United States, the gallon of gasoline would be $25 and a kilowatt of electricity would be 50 or 60 cents. So what about coal? Tell me how American voters would feel about $25 gasoline, so that they could subsidize the generation of non-carbon electricity in markets that have no historic legacy of carbon production. Talk to me about how US voters and ratepayers would feel about 60-cent-kilowatt-hour electricity. My suspicion is not good.
Speaker 2:The logical outcome of that, irrespective of the wishes of the big thinkers, are that coal demand will continue to increase.
Speaker 2:Meanwhile, coal in the market is stupidly, stupidly cheap. By coal I don't mean the commodity, but I mean the stocks of coal producers which are being sold wholesale. Glencore, a major multinational mining company, a year and a half ago bought a 40% interest in a world-scale coal mine that they owned the other 60% of it's a mine with 30 to 35 years reserves and they paid one and a half times cash flow for that mine. This is insanely cheap. The big thinkers of the world will tell you that if you buy a coal mine, maybe you have five years of reserves left, which, on a net present value basis at a 10% discount, means that three times cash flow is probably the right price to pay. I would suggest that the coal demand is going to increase for the next decade and then taper off very, very, very gradually, which means that when you get through a 10-year net present value calculation, you look at the terminal value of the deposit and it's the same as it was at the beginning of the exercise.
Speaker 1:I can see how some resource investors might be interpreting the cost per joule of energy like the actual unit of energy that is produced. What's the cheapest way of investing in energy at this moment? It could change depending on politics, depending on how things are going, but then, as you said, it's usually cyclical and then you can reinvest whenever there's a new flavor of the month. Any thoughts on that type of way of looking at this?
Speaker 2:What's hard about coal, certainly in the way you describe, is access to capital. There are about $60 trillion of investments worldwide that are beginning to be geared towards the big thinkers view of the world, which is to say in a so-called environmentally correct fashion. The environmentally correct fashion doesn't take any note of poverty, of course, but that's a whole different discussion. But the cost of capital for coal producers and oil and gas producers and the availability of capital is increasing, which is to say that those companies will enjoy if that's the right phrase experiences probably a better phrase capital markets conditions that are different than those that they've experienced in the last 10 years. As a checkwriter, as a supplier of capital personally, a higher cost of capital, that is, the higher cost of something that I'm producing or providing, isn't a bad thing, and investors need to decide which part of that question that they find themselves on.
Speaker 2:I also think that the coal business will increasingly be hampered by a stiffer regulatory environment that they have existed in the past. That will, of course, kill the marginal producers, which is very good for the large volume, low-cost producers with access to capital. You need to look at the supposed headwinds that the industry faces and understand that those headwinds favored the efficient incumbent suppliers Probably, then you need to orient your allocation of capital towards those companies where the so-called headwinds become tailwinds. Most investors, I don't think, are probably going to avail themselves of the opportunity in coal, because it's too small a market for them.
Speaker 1:I was just thinking about how certain jurisdictions they don't have this type of sense that coal is so dirty and so bad. Maybe in Russia, for example, they don't have that perception like they do in Western Europe or the United States with all of this Greta Thunberg type of stuff. Maybe looking at these other jurisdictions where they're building coal power plants is a good place to invest your thoughts on that.
Speaker 2:Probably, if you understand enough about those jurisdictions to buy utility in them. I don't, so I prefer to concentrate my own investments in mining companies that I understand. Probably the best way to invest in coal for most investors would be to buy shares in multi-commodity producers that are efficient producers of coal. Plencor, of course, would be one, dhp would be one.
Speaker 1:Right, that's a way of diversifying too.
Speaker 2:Yeah, in effect, you get their coal businesses for free. Another way, a niche way, would probably be to be by the shares of the great copper zinc producer, tech, which has a large coal business, and that coal business, because of its higher cost of capital let us to say it's lower multiple will be spun out of tech. It'll be sold, and I think it'll be sold for price. That surprises capital markets and, in that sense, probably a newer, to the benefit of tech shareholders who are willing to be sophisticated enough to speculate on the arbitrage around the spin off of tech's coal business.
Speaker 1:Well, if you're bullish on those other commodities as well, it could be a good play. Just a quick break to talk about a very interesting free documentary by Porter Stansberry. You'll never guess who these two men are who are attempting to destroy America and capitalism itself. Check out this research back documentary to find out who these two men are and what you can do about it. The name of the documentary is the Two Men and the link to watch it for freeze in the description box below. So, rick, it's been such a pleasure to pick your brain about these topics. Before we end the interview, I just want to get your announcements, your action steps, what you're working on. I know you've got a business disrupting the banking industry. Battle banks. Anything you want to share at the end of this interview?
Speaker 2:Go ahead Well to the extent that your audience is interested in discussing natural resource investing with me, I'll give them an incentive If you go to my website, ruleinvestmentmediacom, one more time ruleinvestmentmediacom. You can list your natural resource stocks there and I will personally rank them one to 10, one being best, 10 being worst. No charge, no obligation. I'll also comment on individual issues if I think my comments might have value. I've done this now for 80,000 people over the last six and a half years and I need to say I've probably learned as much as I've taught. So this is an open offer. I would love for people to take advantage of it. As you suggest too, I'm celebrating my retirement by backing people starting a new bank. I've done this a few times in my career. This is my seventh major banking investment. We're starting a bank called Battle Bank.
Speaker 2:Some of your listeners will remember a former effort of ours called Everbank, which was started in 1998, one of the first online banks where, because we didn't have branches, because your computer or your phone was our branch, we were able to reduce our non-interest expense substantially, and the consequence of that is that we were able to be in the best quartile of deposit interest payers nationwide. But we then and now decided to have one deposit product, not 15 or 16 deposits a high yield money market fund. We think it's theft not to pay you interest on your savings, so we will do that. At Everbank, we pioneered a certificate of deposits in foreign currencies. We didn't think that Americans should be forced to confine their savings to a jurisdiction that was only 23% in terms of savings and investment assets worldwide, pardon me. So we offered, and will offer again, savings products in 22 currencies, not just the US dollar. Many people will remember that in 2014, we sold Everbank to TIAA-CREF, a wonderful organization representing a million and a half pensioners nationwide. The consequence of that, however, is that the services which Everbank offered that made it unique were no longer necessary and have been allowed to attenuate. At Everbank, At Battlebank, we're going back to our roots and my suspicion is that many of the 275,000 people who we attracted to Everbank will become customers of Battlebank. But we're going to do something new too, Sean, that I'm really excited about.
Speaker 2:For some reason, my competitors in the banking business don't think that gold is good collateral. I think it's really good collateral. It's liquid and for holders of gold, silver, platinum or palladium in segregated accounts at Brinks, Loomis or Viomatt, which is to say publicly audited, publicly traded depositories where we can understand the solid seal with depository. We will lend money against your precious metals holdings. If you want to borrow money, you can To increase your precious metals holdings. If you need access to liquidity but you don't want to sell your gold or silver, Battlebank regards your physical gold, silver, platinum and palladium as very, very, very high quality collateral. You could also establish a credit line against it, which means you can have access to capital without borrowing money that you don't need now, so that that money is available to you.
Speaker 2:Let's say you own a million dollars worth of gold and silver and let's say that a wonderful opportunity comes up to buy a condo and ski company in ski country for your family. But this opportunity is one that you need to jump on right now. With a credit line, a gold back credit line, you can go ahead and buy the condo, borrow against the gold and silver and refinance it later at your own leisure, paying down the original loan. This type of financial flexibility against an asset class which is owned by 500,000 Americans, I think, is an example. First of all, the niche products and services offered by Battlebank, but also the customer focus around Battlebank. So anybody who is curious about that can go to Battlebankcom or at ruleinvestmentmediacom. When you have listed your natural resource stocks In the question of comment section, simply write in bank. We'll put you on the Battlebank wait list. It's delightful to note that when we started Everbank, our backlog of interesting customers was zero. At Battlebank, our backlog of interested customers now exceeds 11,000.
Speaker 1:That's great. The banking industry needs to be disrupted. That's a good example. The fact that people should be able to borrow against gold. It's one of the best forms of collateral you could imagine. So the fact that you would be one of the only people doing it, one of the only banks doing it, really sets you apart, sean.
Speaker 2:I don't need the bank. But I walked into a branch of a big box bank that I've done business with since the 1960s. Not too long ago I had a liquidity event and I was looking at their savings products. First of all, my branch manager, a very nice woman. I think she would have brought me tea and cookies had I asked. When I asked her about the savings products, she literally didn't understand them. Not difficult, because there were 16 of them, but she pointed me to a white service phone. It turns out that five of those savings products five of the 16, proposed not to pay me any interest on my savings.
Speaker 1:Now what's the point right Now? What's benefit?
Speaker 2:to me is a savings account that doesn't pay me interest. I'm exposed to the credit risk around this bank, but I don't get any reward for it. At Battle Bank, we don't have 16 products. The only reason that you would have 16 products is to confuse your market. We have one product, a high yield money market account that pays you interest. If you want to write a check, do it. If you want to wire your money, do it. It's your money, we're using it. We pay you rent on it. There's one product. It's easy to understand. That's one of the other reasons why banking needs reform.
Speaker 2:While I'm on my soapbox, the Fed the people who insure your deposits suggest that a well-capitalized bank has a 7% equity slice, which is to say 7% of the money in the bank is real money, which is to say equity. They say a well-capitalized bank is 7%. I think a well-capitalized bank is 10%. I think savers deserve a pad to secure their deposits. I think that borrowing short, which is to say banks being funded by overnight deposits when they own long-term assets, is stupid too. Arise in interest rates, as occurred as an example with Silicon Valley Bank or First Republic Bank, wipes out the bank. The idea that you borrow short and lend long is pathologically stupid. We have never done that.
Speaker 1:That could be one of your slogans to attract new customers. You don't have to do a run on this bank. We'll stay solvent for you, because that's where we're at right now, as scary as it is.
Speaker 2:Our informal slogan is sanity-based banking. Banking is a very, very, very good business if you mind your P's and Q's, if you just do blocking and tackling the way Ohio State used to do football. Banking is an extraordinary business. If you clutter your balance sheet with trillions of dollars of derivatives long-tail derivatives, where you can't possibly know the outcome, you run systemic risks. You run too much risk for your shareholder. You run too much risk for your depositor. You run too much risk for society. Frankly, you run too much risk for your borrowers, who want a stable relationship with their source of capital. There is no point in running a bank stupidly.
Speaker 1:People don't want their savings kept in a casino. We need companies like BattleBank to step in there and disrupt this weird industry. Rick, thanks for the offer to analyze people's portfolios. We'll put a link in the description below ruleinvestmentmediacom. You can check out BattleBankcom. You can get my breaking news updates at SeanMorganReportcom. God bless everyone and we'll see you next time.
Speaker 2:Sean, thank you for the opportunity. I've enjoyed the process.