Rick Rule, Chairman of Sprott USA, a wholly-owned subsidiary of Sprott Inc. (TSX:SII) heads up one of, if not THE, leading financial institution in the emerging natural resource company sector in Canada and the world. He has zero hesitation in proclaiming the imminent reversal of the bad fortune that has been plaguing the S&P TSX Venture Index, the Canadian benchmark for such companies. Approximately half of the 364 issuers constituents of the index are natural resource explorers. The index has suffered a 70% decrease since the 5-year high of March 4, 2011 touched 2,464.
We live in an age where fundamentals are corrupted and distorted by the relentless addition of fabricated-from-thin-air currency by governments. There’s nobody alive who will dispute that fact. What is in dispute, at least as far as mainstream media is concerned, is the long terms implications of quantitative suffocating. I mean easing.
Does this technology bull market make any sense? Or is this the onset of Dot Com Bomb 2.0? If you look at the company fundamentals of the original dot com implosion in March 2000, there is a disturbing similarity to conditions now in the tech space. Earnings multiples of companies with earnings – a relatively novel development, compared to 2000 – are astronomical. And companies with no earnings are miraculously able to raise huge amounts of capital on a wing and a prayer – just like in the late 90′s.
The rubble of the Dot Com technology bubble explosion was the fecund womb that birthed the natural resource bull market that began shortly thereafter. Unfortunately for investors, few were lucky enough or prescient enough to capture long term value from that 10 year run, because so many were caught up in the next bubble – Real Estate. The shills for the ultimately value-destructive real estate bubble ranged from Jim Cramer on CNBC to Alan Greenspan, the then Fed chairman. If it weren’t for the selective application of securities laws in the United States, both would be guilty of market manipulation and incarcerated in a Federal Institution.
When that bubble collapsed in 2008, the near term beneficiary was the natural resource sector, which saw values across the board rise on average 300-400% before quantitative easing and market mis-regulation engendered a commodity price reversal in 2011.
The same thing is happening all over again with tech and real estate, with the significant differentiator that now the United States, China, Japan, and the United Kingdom are all printing money with such abandon that the bubbles forming around those sectors have twice as far to inflate volumetrically. The bubble will be bigger, but so will the extent of value destruction when that bubble pops.
Rick Rule: I’m Extremely Attracted to this Market
“I’m extremely attracted to this market,” he said at the Canadian Investment Conference in Vancouver on June 2nd this year. “this will now be my fifth personal cycle going back to 1971, and the same sort of thing from Sprott’s point of view. The old truism that day follows night – bear markets beget bull markets – is true, but this is particularly attractive. There was a lot of money raised in the last cycle thats been deployed. It’s on sale at a discount, which I think is a wonderful thing. Providing follow-up money to what earlier money was raised at is a good thing. But the second thing – and this is really important for your listeners to understand – is that past really is prologue. What we’re in right now is cyclical decline in a secular bull market. The same thing happened in the middle of the decade in the 70′s. Having lived through it once, I remember it, I feel it, and I’m delighted to be living through it again.”
Rule said that across the group of investing entities under the Sprott Inc. umbrella, there was approximately $1.5 billion in ‘dry powder’ to deploy, and the group is aggressively shopping for assets.
Investors seeking to align themselves Sprott’s and Rick Rule’s analytical prowess and premium deal flow will be able to check out the best in class resource opportunities at the Sprott Natural Resource Symposium at Vancouver’s Fairmont Hotel Vancouver July 22 – 25. The sponsoring companies are there by invitation only, meaning they have passed muster with Sprott Inc’s and Rick Rule’s stringent due diligence processes, and are held by the Sprott universe’s network of investors.
But it’s not just Sprott and Rick Rule who will be sharing their insights on the assembled companies and winning market strategies. Doug Casey, founder and chairman of Casey Research will be speaking, as will fellow Casey Research alumni Marin Katusa, who is focused on energy, and Louis James, who is a relentless global seeker of mining opportunities.
Frank Holmes of U.S. Global Investors will be presenting as well. U.S. Global Investors has been a perennial supporter of the natural resource sector and has delivered outsized returns to investors in its funds for over a decade.
Bill Bonner, founder and president of Agora Inc., another household word in the realm of resource investment, will also be on hand. Visit the Sprott Natural Resource Symposium web site to buy tickets to this premium event.
