by Tekoa Da Silva, Gold Seek:
Tekoa Da Silva: Rick I’d like to ask you today about the decade of the 1970s.
During the decade of the 1970s U.S. President Richard Nixon took the U.S. off the gold standard. There were bouts of wage and price controls, gasoline rationing, an oil embargo and political turbulence.
From 1970 to 1980 the price of oil went from roughly $1.21 bbl to about $40.00 bbl. Gold went from $35.00 oz. to over $800.00 oz., and the CRB commodity index moved up about 300% during the decade.
TRUTH LIVES on at https://sgtreport.tv/
Rick in terms of where you were at the beginning of the decade – I understand you graduated high school in 1971. You started college at the University of British Columbia, and you were contemplating a career at that point in natural resources tax law, is that right?
Rick Rule: That’s correct. Mercifully I was saved from a career in law by a lawyer who told me that I would be unhappy with it. But the rest of it’s all correct.
TD: While you were in college you entered into the hospitality business and became acquainted with some of the “Living Legends” of the Vancouver Venture Exchange, and with your hospitality business you were able to develop a quite a rapport with some of these “Living Legends”. Can you talk about that experience?
RR: That’s also true. I immigrated to Canada, and I had to have a job to get through school and the only marketable skill I had, was that I was a very large aggressive young man who had spent ten years boxing.
So my initial employment was as a bouncer, so I could work at night and go to school during the day.
Through one mistake after another, I came to own establishments rather than just working in them, and one particular establishment I owned became the chief watering hole for all the people who went on to make the Vancouver Stock Exchange what it was.
I need to say Tekoa that while my university education was around natural resource finance, I learned the intricacies of natural resource finance better serving alcohol to the people who were involved in doing it, than I did in college courses.
In retrospect, it makes sense that a tenured professor who was an academic would know less about the thrust and parry of finance then the people who were working every day in finance.
But I am delighted that my hospitality career both furnished the capital to go into the extractive industries, but much more importantly furnished me the knowledge that allowed me to be successful over the next 50 years.
TD: Rick in 1974 you started investor relations activities for resource companies, and in 1976 you became a full-time resource investor. This happened in the market context of 1974 – as you recall there was about a 30% decline in the Toronto Stock Exchange and about a 40% decline in the S&P 500.
The large American energy companies Exxon and Chevron participated in the decline despite the much higher oil prices. Did that decline impact your area of the resource market and did it create fertile ground in any way for your investment activities?
RR: It absolutely positively created fertile ground.
In the early part of the decade of the 1970s gold – but in particular – gold stocks were on fire. There was no particular need to translate rather complex natural resource stories into actionable ideas for investors because the market was doing it for them.
Beginning in 1974 the Fed tried to raise interest rates and the consequence of raising those interest rates was that a broad range of commodity stocks and other stocks declined precipitously in price.
It was the turmoil caused by those price declines that allowed me to work with people that became really truly legendary resource financiers. In particular Adolf Lundin – he would have had no use or no need for me in 1970-1972.
But by 1974, Adolph Lundin had a couple of companies in his stable and attracting investors was nowhere near as easy as it had been in the years before.
So in truth, it was understanding that a one or two year decline wasn’t going to derail the resource thesis – in other words having the courage to participate. And the market itself, having a need for my participation, meant that I was extremely lucky in the period.
TD: In 1971 Nixon took the U.S. off the gold standard. Was there popular discussion of that topic at the time? And how do you interpret that event in retrospect?
RR: The stage was set for that in 1965-1967. The country was coming off a 20 year equity bull market. The period from 1946 to 1966 was 20 years of unalloyed American glory – lower interest rates, low inflation, and American hegemony. Yes, the cold war was there, but it was really a period of American hegemony.
With that, came American hubris. We decided to fight a war in Vietnam and a war on poverty simultaneously. You’re too young to know this, but we lost both.
