YouSaid · the spoken record

Rick Rule

lines on the record: 90
first: 2022-07-11
most recent: 2022-07-11
sittings or episodes: 1
sources: podcast

Every line below is reproduced as it was said and linked to the record it came from. Nothing here is summarised or generated. Directory · Search · Corrections

“I think it'll be really challenging for them. I mean, I really do think it's going to be challenging. It'll be interesting to see the policy response. It will be interesting to see how quickly is an example they can buy LNG. Receiving infrastructure. It'll be interesting too the European political establishment is still opposing natural gas development in Africa It'll be interesting to see.”
2022-07-11 · Forward Guidance · Will A Recession End The Commodity Bull Market? | Rick Rule · IDENTIFIED FROM THE TRANSCRIPT
“Began to face their problems. It is also true, and it has been true for the last five years, that Germany has been the savior of the Appalachian Basin Coal Industry in the United States. As the United States began to shut down its own thermal coal generating capacity in the eastern half of the US, increasing amounts of our brown coal, our low quality dirty sulfurous ash laden coal has been shipped through the port of Baltimore to Germany. The irony of”
2022-07-11 · Forward Guidance · Will A Recession End The Commodity Bull Market? | Rick Rule · IDENTIFIED FROM THE TRANSCRIPT
“In Germany fell, the Germans were forced to import increasing amounts of baseload power from France, where it was generated by nuclear. Which I thought was fairly funny. And of course, they greatly increased their reliance on other fossil fuels, which admittedly generate less carbon, which is to say oil and gas from Russia, but put them in a position where when that supply chain began to be threatened.”
2022-07-11 · Forward Guidance · Will A Recession End The Commodity Bull Market? | Rick Rule · IDENTIFIED FROM THE TRANSCRIPT
“Coal use in Germany wasn't phased out too quickly, the left voters in particular still have some origins in a trade union past and had to pay attention to rural employment in the coal industry. Nonetheless, when Angela Merkel decided that her country's energy future would be solar, I publicly commented at the time relying on solar in a place where the sun doesn't shine in the northern hemisphere is a very interesting strategy from my point of view. And by the way, what do you do at night when the sun doesn't shine anywhere? The German response to the Fukushima nuclear disaster is, as you suggest, to shut down important parts of their nuclear fleet. Now, what actually happened is while the total market share of nuclear”
2022-07-11 · Forward Guidance · Will A Recession End The Commodity Bull Market? | Rick Rule · IDENTIFIED FROM THE TRANSCRIPT
“I absolutely did. As a matter of fact, what the Germans were doing six years ago, five years ago, seven years ago Was unsustainable. It was very obvious to me at that point in time that Germany would have what is, from my point of view, an amusing It's important to note too that because there's a fair bit of domestic coal production in Germany,”
2022-07-11 · Forward Guidance · Will A Recession End The Commodity Bull Market? | Rick Rule · IDENTIFIED FROM THE TRANSCRIPT
“So if Mr. Biden is making an ugly case about the Seven Cents, why wouldn't he talk about the dollar 24 that is the government take relative to the seven cents that is the industry take? You and I both know the answer to this. Mr. Biden doesn't care too much about the pump price, except as it impacts his ability to get re-elected. So on the one hand, he has to sing the green tune, which is popular with donors like the Tides Foundation and the Hewlett Foundation. And he has to sing a green tune too that's popular with left coast voters and East Coast voters, the so-called green voters, while at the same time he needs to pretend to be a friend to the consumer and taxpayer. This is an impossible job. What everybody listening to this interview needs to know is that he's not trying to do it. He's just trying to get re-elected.”
2022-07-11 · Forward Guidance · Will A Recession End The Commodity Bull Market? | Rick Rule · IDENTIFIED FROM THE TRANSCRIPT
“Against a $5 pump price, which is to say that the oil industry profit margin relative to the retail price of gasoline is seven cents out of 500 cents in a gallon of gas. Conversely, the cost of government, sales taxes, excise taxes, that type of thing in the average gallon of gas sold in the United States is $1.24.”
2022-07-11 · Forward Guidance · Will A Recession End The Commodity Bull Market? | Rick Rule · IDENTIFIED FROM THE TRANSCRIPT
“Similarly, when he continues to suggest, even at the time when he's looking for relief in bump prices, that the oil industry is a sunset industry, that it's not going to be around in 2035. What he's saying is that anything that you invest now that has a legacy asset value in 13 years is going to disappear. He needs to acknowledge that the year of peak oil demand is probably 2040, 2045. I mean, he needs to acknowledge fact. Finally, he suggests that oil industry profits are the cause of high prump prices. In most of the country, the pump price, that is to say the percentage of oil industry profits as a factor in the total price of gasoline is around seven cents a gallon.”
2022-07-11 · Forward Guidance · Will A Recession End The Commodity Bull Market? | Rick Rule · IDENTIFIED FROM THE TRANSCRIPT
“Through well, what he's asking them to do is to make Which is precisely what they're doing. But the suggestion that the reason for high oil prices is Exxon's reticence to invest Silly. No oil company has been allowed to build a new refinery in the United States in thirty five years. But demand for gasoline has increased substantially. What that means is we have a shortage of refining capacity in the United States, which means that refining margins are very, very, very high. If Mr. Biden wanted to see gasoline prices lower, he could help the oil industry permit a new refinery, or at the very least, help permit debottlenecking of existing refineries.”
2022-07-11 · Forward Guidance · Will A Recession End The Commodity Bull Market? | Rick Rule · IDENTIFIED FROM THE TRANSCRIPT
“You said that ExxonMobil were doing things contrary to what President Biden asked them to do, but could I ask you to be more specific because when he was running, President Biden said no more oil never. But now that the price of natural gas is so expensive, now he's calling these companies greedy. So which President Biden is Exxon agreeing following through?”
2022-07-11 · Forward Guidance · Will A Recession End The Commodity Bull Market? | Rick Rule · IDENTIFIED FROM THE TRANSCRIPT
“The people who have made money in the oil business over time, and some of the tourists, which is to say the generalist investors who are now coming into the oil business, I'm going to say as an example, Warren Buffett are looking at more sustainable yields. Certainly his big investment, Occidental Petroleum, is one that is investing fairly aggressively in terms of sustaining capital investment. Mr. Buffett seems to understand the conjunction of deep value share buybacks, dividends, and sustaining capital investments in drilling opportunities that have extraordinary current yields.”
2022-07-11 · Forward Guidance · Will A Recession End The Commodity Bull Market? | Rick Rule · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, yeah, I mean, it's odd. Many of the oil and gas analysts believe they get paid for the quarter. And so they try and figure out what stock's going to do the best in the quarter. That isn't really how oil industry investment works. You have to invest for the five or six-year timeframe. You have to look at total return over time. And so a lot of Wall Street analysts look at stocks that have momentum. And they look for the cause of momentum, which is to say increasing dividend yields. And they buy stocks, even though that dividend yield is transitory.”
2022-07-11 · Forward Guidance · Will A Recession End The Commodity Bull Market? | Rick Rule · IDENTIFIED FROM THE TRANSCRIPT
“Due dividends. In other words, in effect cannibalize themselves. And roughly 80% of the issuers that we look at, the public issuers that we look at in the oil and gas business are doing precisely that. They're decapitalizing. They're returning unsustainable amounts of capital to shareholders. And while the share prices of those companies seem to do fairly well, generating yield in a yield starved world, we don't as investors regard that as sustainable. So we're choosing to invest our own money in companies that strike a decent balance between rewarding investors for their patients at a trying time and continuing to grow the business. And mercifully, there's a fairly long list of companies that meet that criterion. Mercifully too. They're fairly unpopular with investors.”
2022-07-11 · Forward Guidance · Will A Recession End The Commodity Bull Market? | Rick Rule · IDENTIFIED FROM THE TRANSCRIPT
“Well, I think investors, first of all, need to segregate between those companies that are returning unsustainable amounts of capital to shareholders, and those companies which are rewarding shareholders at the same time as they're investing in the future. You have companies like Exxon, despite Mr. Biden's continual bullying, that have invested twice free cash flow in sustaining capital investments and new project investments. In fact, they have done exactly what Mr. Biden has pretended to ask them to do. But that has been the exception, not the norm. Mostly if you pay attention to incentives, you'll understand what executives do. And what the institutional investors have asked the energy companies to do is decapitalize, which is to say, do you share buybacks?”
2022-07-11 · Forward Guidance · Will A Recession End The Commodity Bull Market? | Rick Rule · IDENTIFIED FROM THE TRANSCRIPT
“And you are investor in a lot of these companies. I'm sure you talked to the CEOs frequently. How do these people who work at these oil companies, how do they react to the current environment when both government as well as shareholders? I mean, it's not as if shareholders themselves, they ask for capital discipline themselves. They want pay down debt. They want dividends. They don't want an increase in production, which would mean they have to front up more money. At what point do you think it would ever what would have to happen for oil companies to really invest in production like they were in during the 2000s, let's say?”
2022-07-11 · Forward Guidance · Will A Recession End The Commodity Bull Market? | Rick Rule · IDENTIFIED FROM THE TRANSCRIPT
“And that CapEx that wasn't happening in 2020, that wasn't reducing the supply of oil in 2020. It's reducing the supply of oil now, reducing the supply of oil in 2024, right? That's correct. It pays forward.”
2022-07-11 · Forward Guidance · Will A Recession End The Commodity Bull Market? | Rick Rule · IDENTIFIED FROM THE TRANSCRIPT
“It's worthwhile to note that the big thinkers in the United States, be they the California governor, gruesome, I think is his name, or Biden are suggesting politically to the voters that they're doing everything that they can to lower prices at the pump. At the same time, that they cancel access to drilling inventory for the oil industry. They caution the insurance industry not to insure oil and gas operations. And they tell the industry that it's a sunset industry. If the legislative body that governs an industry says we are going to outlaw you in 10 years, it isn't an environment that's conducive to spending a billion dollars a day to build inventory that you believe that the government will steal.”
2022-07-11 · Forward Guidance · Will A Recession End The Commodity Bull Market? | Rick Rule · IDENTIFIED FROM THE TRANSCRIPT
“So even today, with operating margins above 50%, as generous as I've ever seen them in my career, the industry is believed to be underinvesting in sustaining capital investments and new project investments to the extent of about a billion dollars a day. In other words, this year we as an industry will have underinvested $365 billion.”
2022-07-11 · Forward Guidance · Will A Recession End The Commodity Bull Market? | Rick Rule · IDENTIFIED FROM THE TRANSCRIPT
“In a business where every day your basic business depletes, maintaining supply requires constant effort with regards to sustaining capital investment. So we're behind the eight ball. We're trying to make up for the deficit now. The second thing is that the big thinkers of the world, the Joe Bidens, the Justin Trudeau's, that noted energy physicist Greta Thornberg, people like that have said to the oil industry, you will cease to exist in 2030 or 2035. You will have a trillion dollars in stranded capital. And while they have said that, some of the biggest lending institutions in the world have begun to sell sanction, which is to say, despite the fact that the oil business is extremely profitable now, the cost of capital is extremely high.”
2022-07-11 · Forward Guidance · Will A Recession End The Commodity Bull Market? | Rick Rule · IDENTIFIED FROM THE TRANSCRIPT
“We will be lucky to maintain supply in the near term. Lucky for perhaps three reasons. The first is that the COVID-inspired downturn in oil prices cost the oil industry dearly, both in terms of free cash flow which disappeared, but also in terms of investor sentiment, which is to say that oil share prices fell raising the cost of equity and debt became much less available. In fact, the junk bond market for energy disappeared. The consequence of that was that the oil industry spent perhaps two years Deferring new project and sustaining capital investments of about $3 billion a day. Which is to say that well over a trillion dollars worth of sustaining capital investments weren't made.”
2022-07-11 · Forward Guidance · Will A Recession End The Commodity Bull Market? | Rick Rule · IDENTIFIED FROM THE TRANSCRIPT
“And sticking in the world of oil and perhaps natural gas too, are you seeing production start to ramp up? And if you aren't, why? Because the price of oil was up until recently something around $120 where it must be pretty profitable to put on new production there, right?”
2022-07-11 · Forward Guidance · Will A Recession End The Commodity Bull Market? | Rick Rule · IDENTIFIED FROM THE TRANSCRIPT
“Deposit. You have to permit the deposit. You have to finance the deposit. You have to build a deposit. One example would be the resolution copper deposit in the United States, in Arizona. It's in copper country. You know, it has every possible infrastructure advantage associated with it. It was discovered 25 years ago. It's a world-scale deposit over a billion tons at over one and a half percent copper grade in a world where the median grade is half a percent. So it's three times the average grade worldwide. And it's been in the permitting process for 20 years with no end in sight. The point of this isn't to make fun of American politics, but rather to suggest that in capital-intensive cyclical businesses, markets work, but they work in the very, very long term.”
2022-07-11 · Forward Guidance · Will A Recession End The Commodity Bull Market? | Rick Rule · IDENTIFIED FROM THE TRANSCRIPT
“That we forgot to have a recession. And let's say that demand for copper, both in terms of electric vehicles, but more importantly, in terms of global electrification for the poorest of the poor, continued. I would suggest that the incentive price for new copper mines, the price that copper needs to achieve to bring new mines into production is probably between $4.5 and $5 a pound. It doesn't mean that existing mines don't do fine at $3, but it means to bring on new production, which we need, we need much higher prices. So let's say for fun that the copper price went to $8 a pound. $7.5 or $8 a pound. The response in the market is not instantaneous. It takes, in many cases, a decade of high prices to increase supply. You have to find the...”
2022-07-11 · Forward Guidance · Will A Recession End The Commodity Bull Market? | Rick Rule · IDENTIFIED FROM THE TRANSCRIPT
“In our business, six to nine months is the short term. Investor perceptions are such that it's an eternity. But the truth is that these are capital-intensive cyclical businesses. So let's say, as an example.”
2022-07-11 · Forward Guidance · Will A Recession End The Commodity Bull Market? | Rick Rule · IDENTIFIED FROM THE TRANSCRIPT
“One saying is that the cure for high prices is high prices. That is, if the price of copper goes to $20,000, the copper miners are going to do everything they possibly can to get every single ounce of copper out of the ground that they possible. To what degree does that hold over the, let's say, midterm, let's say six to 18 months? Because if that rule always held, right, you would never have a commodity supercycle, like from 2000 to 2007.”
2022-07-11 · Forward Guidance · Will A Recession End The Commodity Bull Market? | Rick Rule · IDENTIFIED FROM THE TRANSCRIPT
“If the price of palladium were to double, it wouldn't change the price of the car for sale on the car lot. The consequence of that is that at least in the near term, demand is much less elastic than you would suspect. And supply shocks have outsized impacts on prices. Further down the road, of course, prices matter a lot. Very high sustained prices do two things. Over the course of a decade increased supply. At the same time, they encourage conservation and better fabrication practices. But in the near term, it's really supply the dictate's price.”
2022-07-11 · Forward Guidance · Will A Recession End The Commodity Bull Market? | Rick Rule · IDENTIFIED FROM THE TRANSCRIPT
“Supply disruptions really, really impact price a lot. Remember that prices have set on the margin between supply and demand and a 1 or 2% increase in supply over demand can have an impact. But supply shocks are important. One comes to understand that utility of resources when one looks at the near-term inelasticity of demand around price. People tend to derive almost as much with oil at $130 a barrel as they did with oil at $60 a barrel, which is to say the real personal utility around personal transportation is very high relative to the cost. Similarly, if you look at special materials, an example might be platinum. Palladium. It probably takes $150 worth of palladium to build the catalytic converter that enables the sale of a $60,000 or $70,000 car.”
2022-07-11 · Forward Guidance · Will A Recession End The Commodity Bull Market? | Rick Rule · IDENTIFIED FROM THE TRANSCRIPT
“Fed funds at 9% certainly would be interesting. So the Fed cannot really affect the supply situation really at all. Fed chair J Powell has said as much the way that the Federal Reserve will resolve supply demand imbalances is by destroying demand. But that assumes that demand is a relevant or a primary driver in the price of commodities. Over the course of your career, what have you seen? Which is a more powerful driver of price, supply or demand? Of course it's both, but if you had to pick one, which would you pick?”
2022-07-11 · Forward Guidance · Will A Recession End The Commodity Bull Market? | Rick Rule · IDENTIFIED FROM THE TRANSCRIPT
“I think that the impact on the economy could be quite severe. I don't know that we'll see that, but But it would be interesting.”
2022-07-11 · Forward Guidance · Will A Recession End The Commodity Bull Market? | Rick Rule · IDENTIFIED FROM THE TRANSCRIPT
“As a consequence of artificial liquidity and artificially low interest rates. And one wonders if you had a reversion demean in terms of interest rates, how the economy would react. I would suggest that we have some prologue in 1982 and 1983 to look at. And if you look at that as prologue, it's not pretty. solves the problem and it solves the problem in two or three years but those two or three years are pretty bloody i'm not trying to say by the way that the current fed has the courage of paul volcker i'm not trying to say that you're going to see positive real interest rates which is to say as an example a 12 percent yield on the u.s tenure treasury what i'm trying to say is that to the extent that the fed actually does engage in a reduction in quantitative easing”
2022-07-11 · Forward Guidance · Will A Recession End The Commodity Bull Market? | Rick Rule · IDENTIFIED FROM THE TRANSCRIPT
“Then I think you're going to see a very different commodity price. I'm not smart enough to tell you what either the tactical or the political outcome of the tensions in the Ukraine are. But I think in the near term, commodity markets are probably more sensitive to that than anything else. In the longer term, I think maybe you are seeing the markets anticipate the possibility or even the probability of a recession around higher interest rates. We have seen central banks around the world, but particularly in the U.S. be fairly aggressive with regards to allowing interest rates to rise. There's a lot of concern among many commentators, myself included, about the impact that that might have on an economy that has grown, I would suggest, primarily.”
2022-07-11 · Forward Guidance · Will A Recession End The Commodity Bull Market? | Rick Rule · IDENTIFIED FROM THE TRANSCRIPT
“From hysteria engendered price increases. If the Western response to the war is that these threatened cutoffs become real cutoffs, which is to say if there's a real hiatus in the flow of Russian oil and gas, even just to Europe, never mind cutting off Chinese or Japanese supplies, if there's a hiatus in the shipments of agricultural metals, in particular potash.”
2022-07-11 · Forward Guidance · Will A Recession End The Commodity Bull Market? | Rick Rule · IDENTIFIED FROM THE TRANSCRIPT
“A lot of it will have to do in the near term with any outcome that might occur in the war in Ukraine. I think six months ago people thought that the flow of material out of Russia would stop as a consequence of the war. But it forgot to stop. People overestimated the near-term impact of political constraints, which didn't become economic constraints. As an example, people priced in to the oil price up to $130, the impact of Russian oil not flowing. Russian oil flowed. In the nickel price, the platinum price, the palladium price, the market priced in the impact of a hiatus of supplies of these commodities from Norilsk. But that hiatus, at least thus far, hasn't occurred yet. So what you're seeing now, I think, is markets backing off.”
2022-07-11 · Forward Guidance · Will A Recession End The Commodity Bull Market? | Rick Rule · IDENTIFIED FROM THE TRANSCRIPT
“Yes, and the price of commodities is often very linked to economic growth. So in 2021 and late 2020, the commodity bull market went alongside a reflation where growth and inflation were very buoyant. Likewise, now over the very recently over the past month, over a matter of few weeks, we've seen commodity price declines that were quite sharp, copper following something like 20% oil, I think down something like 8 or 9 percent today. How do you think about the relationship between the fallen commodities that we've seen recently and the potential chance of a recession? Is it sort of hinting at a recession or is it just sort of a minor blip that you think in the longer term will create opportunity?”
2022-07-11 · Forward Guidance · Will A Recession End The Commodity Bull Market? | Rick Rule · IDENTIFIED FROM THE TRANSCRIPT
“In my life, those declines have been big opportunities. I'm a hopeless optimist in the longer term, which means that despite the fact that my outlook is perhaps fairly gloomy in the near term, I look at what I see as an impending economic slowdown as an opportunity. Many people don't see them that way. You know, Buffett famously said he needs his fortune by being brave when others were afraid and afraid when others are brave. Most people don't view it that way. Most people are afraid when they're afraid. And they're brave when they're brave, which is why most people underperform buffet.”
2022-07-11 · Forward Guidance · Will A Recession End The Commodity Bull Market? | Rick Rule · IDENTIFIED FROM THE TRANSCRIPT
“Jack, I joke, you know, I'm always cautious. I'm a credit analyst by background, which means I'm always dubious. I'm always a skeptic. I joke about myself that I've correctly called 17 of the last three declines. And so my outlook is always cautious. I've learned, too, however, that in”
2022-07-11 · Forward Guidance · Will A Recession End The Commodity Bull Market? | Rick Rule · IDENTIFIED FROM THE TRANSCRIPT
“Supply shocks. The only way the supply shocks, interestingly, I think, can be alleviated is through worldwide recession or depression. And in that sense, you don't alleviate the supply shortage. You just postpone it. So I would say if you're a patient investor, if you're an investor who can stand volatility, and in particular if you're an investor who can stomach political risk, the next five years may be the best time that we have ever seen to be a natural resource investor. The caveat to that is, of course, that suggests that we are able, which we may or may not be able to do, to avoid a global synchronized recession or depression.”
2022-07-11 · Forward Guidance · Will A Recession End The Commodity Bull Market? | Rick Rule · IDENTIFIED FROM THE TRANSCRIPT
“Which did two things, it eliminated for a little while demand, which is to say that commodity prices absolutely plummeted, even in the face of impending shortages. It also constrained supply lines. Either as a consequence, as an example not being able to mine underground because of COVID-19, or in the case of oil with constraints on demand around air travel. So, you know, the most dramatic commodity rise I've seen, price rise I've seen in my career, has been the last two years in oil from briefly sub-zero to $130 a barrel. This really truly is unheralded. Predictable, completely predictable, but unheralded. I think the opportunity in front of us is interesting too. I think it's interesting particularly because the investment community worldwide is still substantially underinvested in natural resources. So that natural resource stocks are out of favor at the same time that we see almost inevitable”
2022-07-11 · Forward Guidance · Will A Recession End The Commodity Bull Market? | Rick Rule · IDENTIFIED FROM THE TRANSCRIPT
“They say that history doesn't repeat, but it rhymes. And I think that that's accurate. I think in a very broad sense that we are coming off a couple of decades of underinvestment in natural resources. And the consequence of that is that shortages have begun to appear and will continue to appear. We tend to forget that there's almost 8 billion of us on Earth. And everything material that isn't grown must be mined. And as the population of the world grows and as the affluence of the world grows, the requirement for mind commodities grows and the impacts of two or three decades of underinvestment begin to appear. The supply side was exacerbated, I think, by COVID-19.”
2022-07-11 · Forward Guidance · Will A Recession End The Commodity Bull Market? | Rick Rule · IDENTIFIED FROM THE TRANSCRIPT
“Rick, you've seen a lot of commodity cycles in your storied career. Can you just, how does the past two years shake out for you? We've had incredible supply constraints. Oil has gone from negative, what, $38 a barrel to over $100, well over $100 barrel. Are there periods in history that you think, oh, I sort of seen this movie before, or is this something completely new even for you?”
2022-07-11 · Forward Guidance · Will A Recession End The Commodity Bull Market? | Rick Rule · IDENTIFIED FROM THE TRANSCRIPT