[Music] what I'd like to talk to you about today is where we are in this market but when I say we I don't mean the world I mean the people in this market how many people here from Vancouver okay most of you and how many people live within two hours driving a Vancouver if you yeah okay okay so that that that works so here's what I'm going to tell you you have no excuse no excuse whatsoever if you work and think not to make a million or two in this market in the next five years no excuse when I was thinking about what I was going to talk about and I thought well you know politics is in fashion so I could talk about the terrible teas Trump Trudeau and I'll talk about that a bit but I want to talk about you because ultimately Trump isn't going to make your mistakes ultimately Trudeau isn't going to do your work for you your risk your reward different sides of the same coin are really conveniently located conveniently located to the left of your right ear and to the right of your left ear be afraid of trump be afraid of Trudeau but be much more afraid of yourself don't look for Trudeau to make your fortune or Trump to make your fortune look to you to make your fortune and I want to talk to you a little bit about how you do that particularly how you do that if you have the Good Fortune to live in Vancouver I I would say that the biggest problem for Vancouver punters is the incredible proclivity of the Vancouver Community to live on narrative as opposed to fact you know if you look at the junior business worldwide by the way I'm going to make yall sick before I make you well so get ready if if you look at the junior industry worldwide there's what maybe 3,000 public companies something like that you know Australian aim us Vancouver probably 3,000 and I would argue with you that probably 2700 of them are valueless if you merged every public Junior in the world one company now Junior exploro okay you're merging all these Petty dreadfuls into one company this company in a very good year would lose2 billion in a bad year it would lose1 billion so what should you pay for this company should you pay eight times losses 12 times losses in a good Market you might take 15 times losses for this company the point is that most of this stuff is Flats of and jet some most of it should not be owned under any circumstance that fact obscures a fact that's much more relevant to you 10 or 15% of the issuers in the Junior market generate so much positive utility that they add legitimacy and sometimes even luster to a business that loses $2 billion a year the game in speculation is to sort the wheat from from the chaff and that's where Vancouver comes in the wheat and the chaff are both located here you're competing against investors in De Moine or doozledorf or some place that's distal to where the value is created and where the risk is everyone that competes with you has to at least metaphorically come to Vancouver and you have a huge Advantage because you are already here you have a disadvantage too in that Vancouver has probably the greatest population of what would we call them used money salesmen on the planet people who are very skilled at narrative people who will tell you a wonderful story about what Gold's going to do but they don't have any gold so the point is that you need to be able to separate the wheat from the chaf and you need to ex exercise the advantage that you have in Vancouver how does that work life is about probabilities it's not about certainties investing is about math it's not about narrative and so we're going to talk about that and we're going to talk too a little bit more about your durable competitive advantage and how to use it and I'm not going to talk about every commodity today I just don't have time in 20 minutes but I'm going to talk about an example of math in the context of the gold Market I realized that you would prepare you would prefer if I just said that Gold's going to go to $220,000 or something and made a simple declarative statement everybody could clap and I could leave but I'm not going to do that gold traditionally has done well during periods of time when people are concerned uh about the purchasing power of their Savings in Fiat denominated savings instruments and I'm going to make the case for you that people have reason to be afraid and as they become afraid they will become more gold oriented it's interesting by the way factoid a lot of times people say to me now Rick when do you think the gold price is going to move and I sort of sagely scratch my old chin and I say I think Gold's going to move in the year 2000 last 25 years gold has moved from $250 an ounce to $2,700 anoun gold is up what 8.3% compounded a year for 25 years and these morons say one when is gold going to move it's going to move over the last quarter Century I think it's going to move more going forward and faster but that's a different question people ignore the fact that gold has moved from $250 to $2,700 for some reason that's inexplicable to me I guess it's the Triumph of narrative over math but let's get back to the math here's why an American should be concerned about gold I don't have the same numbers for Canada and I try not to insult governments uh in countries where I'm not resident preferring to insult my own here's the math uh around US dollar debasement at the federal level in the United States we owe on balance sheet $36 trillion you should write 36 trillion down just to see how big a number that is because people's eyes glaze over when I use that number $ 36 trillion and that number what we owe Grows by $2.5 trillion dollar a year remember both of those numbers because they're going to become important because as bad as those two numbers are it gets much worse really truly much worse I'm smiling because the alternative is you know suicide or something the off balance sheet liabilities of the US government the net present value of the off-balance sheet liabilities of the US government by the way if you want to picture those me they're old folks Medicare Medicaid social soci security military pensions federal pensions that number not according to some fat bald old libertarian that number according to the Congressional budget office exceeds a hundred trillion dollar net present value of off-balance sheet liabilities unfunded exceeds A1 trillion so add 36 trillion terrible number to 100 trillion a worse number and you get $136 trillion sorry we're going to do some more math here the Internal Revenue Service funny how they call it a service isn't it anyway the internal the Internal Revenue Service has suggested and they would know this fact that the net worth aggregate net worth of American citizens taxpayers is 141 trillion doll so here's the first math assignment 141 trillion which is what worth 136 trillion which is what we owe anybody want to tell me what's left over5 trillion this is not narrative this is arithmetic and the inputs are not mine they're the government's but it gets worse it gets worse so the numbers are 141 on top minus 136 ugly sum $5 trillion a year it's irrelevant some for two reasons gross Federal revenues at the in the United States before any expenditures happen to be5 trillion happen to be5 trillion do and if you add the sum of the increase in the deficit which is that $2.5 trillion that we talked about before I made you sick and you add to that the Congressional budget office estimate of the fact that the off balance sheet liabilities the US government increased by2 a. half billion trillion dollars a year trillion billion three zos what the hell right the number that you get is that this $1 136 trillion debt increases by $5 trillion dollars a year five trillion is a convenient number for the speech because five trillion is the sum that was left over when you subtracted 36 trillion from 141 trillion does this make any of you wonder how this might work out over time I I gave a speech similar to this uh I don't know a couple months ago and somebody said to me you know Rick it's been so for 20 years that reminded me of the Hemingway talk how do one go broke slowly and then all of a sudden the reason that I bring up all of this arithmetic and the reason that I tie it back to gold is it seems to me that there's two ways the United States hases out of this problem we could be honest never done it before but we could try we could default we could say to the bond holders too bad so sad no money strong L to follow we could say to folks like me yeah we realize you paid into Medicare Medicaid all that stuff all your life but there's no doe left you're not getting your money politically sort of challenging for the political class you know so what I think happens is what happened in the decade of the 70s when we had a similar but less severe problem what I think happens is that we honor the nominal value of these obligations by inflating away the net present value of the obligation in other words some old codger named Rick rule who gets paid I don't know what they pay me 4,000 a month for my social security or something they'll continue to pay it just like they did in the decade in 70s but the spending power that they pay me with will fall substantially which is to say $4,000 in nominal money will buy me S or 800 worth of goods we did this once before in the US in the decade of the 70s I can see in the audience there's a few folks old enough to remember this like me in the decade of the 70s according to the Office of Management budget uh over 10 years the purchasing power of the US dollar declined by more than 75% again this piece of math is not from a cranky old libertarian it's from The Office of Management and budget not coincidentally I would suggest uh in that same period the gold price went from $35 to $850 an ounce do not quote Rick rule is saying in the next 10 years that the gold price is going to go up tenfold that's not what I said what I did say was that I believe that the purchasing power of the US dollar will fall substantially and it will fall at a rate that is substantially greater than the interest yield on savings products like the US 10year Treasury at the beginning of the talk you remember I said the gold price traditionally has done well when people are concerned about the maintenance of the purchasing power of their savings and in that context uh with $1 136 trillion dollar in net present value of liabilities I think that the arithmetic suggests that you need to be substantially concerned I don't know what the similar numbers are in Canada my suspicion is on a per capita basis they're probably worse but I don't know that to be the case but it doesn't matter in a sense uh the US market is 24% of the world's savings and investment Market one more little piece of arithmetic before I go on to something else gold is way way way under owned JP Morgan Chase says that the market share of precious metals and precious metals related investments in the US market is about one half of 1% which is to say one half of 1% of savings and investment Assets in the US market are comprised of precious metals and pre precious metal Securities we haven't needed them as investors for the last 40 years in us we've had other stuff to do the four decade mean market share of these assets and this is an estimate JP Morgan Chase doesn't have the numbers but it's an estimate their estimate of the 40-year mean is 2% so I'm not going to be one of these crazy rabid gold bugs who says you know the US Treasury Market's going to go to zero the US dollar is going to blow up the US economy is going to go away the uh-uh it's not what I'm saying I'm saying that we're going to have at least a reversion to mean and if we have a reversion to mean demand for precious metals and precious metals related assets including Penny Dreadful gold mining stocks quadruples what do you think happens to price if demand quadruples I think the increase is going to be pretty interesting so I think that the case for gold isn't a narrative case it's an arithmetic case and I think it's an inescapable case Cas let's add on two other layers the first layer as everybody in this room I think is painfully aware is that the gold equities have lagged the gold price if the gold price doesn't fall there is likely a catchup we could call that a double bump if the gold price does well and more people become interested in Gold stock in Gold stocks which is normally the case uh they come from a base that's cheap even relative to Gold so what does this have to do with all of you you know this is all big map This Is The Stuff of JP Morgan Chase and Goldman Sachs Trump and Trudeau well not really this is why you have no excuse not to make a million dollars in the next five years you have access you're right here 40% of exploration Finance in the world takes place in Canada about half of it in Vancouver about half of it in Toronto which is to say on a global market right here within 10 blocks of where we're sitting 20% of the transactions in the world takes place you are competing against people and you are in the epicenter I was sitting in in the back of the room back there admittedly more people know me maybe than other people Bob Dickinson a legend comes up hands me a press release what you can do living in Vancouver is you can walk into a coffee shop or more probably a bar and you can engage in a conversation with people who are responsible for 20 % of the dollar volume of exploration that takes place in the world people say to me well Rick you can get in to see them because because you're Rick rule yes I am Rick rule but it's a excuse to be honest with you these companies who are out here in the hall they're paying $10,000 to be here to talk to you for two days do you think if you called them and went to see them at their office and they didn't have to spend $10,000 that they'd say no I mean give your head a shake these people want to talk to you if they don't want to talk to you they're telling you something very valuable they're saying that they don't care about shareholders which means they're going to fail are you with me this is what access is about and let's talk about what you do with the access first of all yeah I got enough time left people the truth is that about 5% of the people in the mining business are successful about 95% are failures remember how I talked about the fact that the business loses $2 billion dollar a year you got to find the good people how do you do that track record track record reputation you live in a town where you can see the people who work hard and you can see the people who are drunk every night this is the easiest form of due diligence on the planet when you develop context in the industry use the context and use your common sense price somebody says to me well my company's cheap market cap is only $6 million I say well what is in your company that's worth $6 million well I have an option to acquire a deposit that if everything goes well could be in other words the net present value is nothing nothing but if the gold price goes up well what if the gold price goes up you don't have any gold you're looking for gold so in terms of using the advantage living in Vancouver this is where I said that your risk and your reward is to the left of your right ear and to the right of your left ear somebody says my company has a market cap of $20 million okay humor me with this if you liquidated the company if you sold the assets to other people for cash what are they worth I'm not trying to say that you have to buy you know dollar bills for dimes I'm trying to say that at the beginning of the beginning of the exercise you want to be involved with people who have been serly successful and you want a reasonable deal if the market cap is $20 million and the assets are worth nothing you're starting $20 million behind the eightball what's the probability that you're going to make money starting $20 million behind the eightball I'll give you a hint more math zero zero second big mistake I see I'm out of time speaking of time but it's time most of you invest with really good narratives really good narratives could be an exploration narative narrative it could be a a commodity price narrative in my life the shortest period of time that I've seen necessary to add value in a company is one exploration season say nine months much more commonly if it's a if it's a commodity related theme the time frame is five months uh pardon me five years the idea that we invest in a five-year narrative but we have trauma Holding stock over a long weekend is problematic if you assign yourself a problem where the answer comes to you in 18 months or 24 months or 36 months or 50 months you need to understand that the project takes that much time to mature Buffett says the eighth wonder of the world but the first wonder of the financial world is compounding and you can't compound if you have trauma Holding stock over a long weekend the final thing I want to visit with you about very briefly about a scale uh one of the big mistakes in this town has been that people have invested in small mines wonderful narrative you know Wonderful narrative we're going to use the free cash flow from this to build BHP without issuing more stock really seductive never works if you're going to take the risk in mining big mine makes you big money small mind makes you small money big Minds have big risks small minds have small risks if you're going to take big risks you want to make big money so let's sum it up narrative less important math and probability very important your advantage is around probability it's access you live here use it you either know who the good people are or you know how to use how to know the good people if you ascertain price uh or pardon me if you ascertain value before you worry about price you're going to be ahead of the game if you understand the size of the prize and you understand what it'll take to achieve the prize you will be able to monitor it you'll be able to monitor your Investments much better than people in other places as I say as I said at the beginning if you live here and you work hard particularly because you're starting in a bare Market when stuff is cheap uh you have no excuse excuse not to succeed in this business they tell people when you do public speaking you tell them what you're going to tell them you tell them you told them what you tell told them and then you ask them to do something so I'm going to ask you to do something too uh anybody who cares what I have to say about natural resource investing can go to my website rule investment media.com and for free I'll evaluate your natural resource portfolio not the stocks you want to buy but the stocks you own write them down all rank them one to 10 one being worst one being best 10 being worst I'll comment the individual issues uh if I think my comments might have value it's free there's no obligation sometimes it's worth less than I charge uh there's a complete money back guarantee by the way since I don't charge you anything but I look forward to communicating with you and finally one other thing you can see I'm not in a suit and tie I'm a walking advertisement for something called b battle bank which I think opens in April or May if any of you are unhappy with your current bank I think that's the whole crowd uh if if any of you remember your prime minister deciding if you did things incorrectly that your money and your bank account was his uh consider battle Bank believe me if you as Canadians open an account in a US Bank and Mr Trudeau or Mr Carney uh or whatever clown comes to run you next and they try to freeze your account you can imagine what my response might be to them ladies and gentlemen thank you for turning up early Saturday uh uh and as I say you have absolutely no excuse not to make an absolute boatload of money in the next five years whether you do or whether you don't is all up to you I hope you choose the good door between do and don't thank you [Applause] [Music] again e