Eric King: “Rick, you just traveled to Europe, what was your takeaway from that trip?”
Rule: “I was really doing three things: I spoke at a family office conference in France. I also spoke to people and institutions in Great Britain. I then traveled to Belarus (east of Poland).
The trip to France was largely to speak to ‘old money.’ This is the kind of money that continues from generation to generation. What I noticed there was a sort of mixture between pessimism and optimism....
“The Europeans have been through two brutal world wars, so I think they are pessimistic, as one would imagine them to be, about political and economic conditions in Europe. But I would add that they were fairly confident about the strength of their own businesses. So it was very interesting.
The mood was markedly different in London where I was speaking to institutional investors. In London the people there are creatures of markets, and the markets are in total disarray. When I lectured in London about the differences between liquidity and solvency, that is the market seems to be fairly quiescent as a consequence of all of the liquidity, but with the overhanging issue of solvency, the institutional investors absolutely got it.
I would describe them (institutional investors in London) as absolutely terrified. I was in the offices of a broker in London, a broker that did extraordinarily well last decade, and they have to be concerned because they have high quality people doing absolutely nothing right now. So I would describe the mood of the institutional investors as quietly terrified.
The third stop, Belarus (east of Poland), is a place where they don’t need any introduction as to the consequences of political intervention in the economy. Belarus is a place where they still have statues of Marxist leaders, and where the hammer and sickle is still prominently displayed on bulletin boards.
I was staying on a street called, ‘Lenin.’ The next street over was (named after Marxist leader) ‘Engels.’ So it was a very strange place. But I had the extraordinary good fortune of being amongst young, liberty-oriented students at a wedding. I have to describe them all as very optimistic about their own futures, albeit many of them thinking about relocating.
It was a pleasure being around these young people who, as a result of coming out of communism, understood their future was really up to them. So the trip to Europe was very instructive all the way around.”
Eric King: “What about the metals markets here?”
Rule: “We are really in the summer doldrums now. We’re in sort of a ‘channel’ market, but I feel much better owning the metals than not owning the metals. I think the metals are reacting fairly well given the lineup of circumstances against them.
The most important circumstance against them has been the government of India’s absolute war on gold. The Indian government would rather that their subjects own government bonds as opposed to gold. They believe the Indian populations’ imports of gold are largely responsible for the trade deficit that the country is running. I of course believe that Indian socialism is responsible for that, but they haven’t as of yet asked me for my opinion.”
Eric King: “How do you see us emerging from summer?”
Rule: “I suspect that this fall is going to be a little better. I believe we are going to have selling exhaustion. We’re not going to have much buying, but we are going to have selling exhaustion, particularly in the juniors.
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