Rule - What investors Should Do With Their Money Right Now

In a recent interview, Rick Rule, partner with Eric Sprott and CEO of Sprott USA, stated that he believes this is a time when investors need to do a bit of soul searching and asks investors questions regarding the current state of the US economy. He believes investors make money by finding a popularly accepted trend and betting against it.

Eric King
May 2, 2013
King World News

Today one of the wealthiest people in the financial world spoke with King World News about what he is telling the affluent investors and professionals they should be doing with their money at this time. Rick Rule, who is business partners with billionaire Eric Sprott and the CEO of Sprott USA, also takes KWN readers through an interesting set of questions regarding where the future price of gold and silver is headed.

Rule: “This is the time when people need to do some soul searching. Normally when I give a speech people ask me a bunch of questions at the end. But the world is turned upside down, so my talks are turned upside down.

I have been doing a Q&A at the beginning of my speech, and I have been asking the audience the questions. So let me ask your readers some questions, Eric, and at the end the answers to those questions will determine for your readers what they should be doing with their money....

“Is the financial crisis in the Western world over? Has anything been fixed? Can your readers name any G20 country, just one, that has a balanced budget? The next question: Do your readers think that the global banks are solvent?

Do your readers think 6% or 7% equity is enough to run those big bank balance sheets? Do they think marking bank assets to ‘myth’ rather than marking bank assets to market makes the banks’ assets solvent?

Are interest rates around the world still negative? In view of recent Japanese actions, do you readers believe that competitive devaluation of Western world currencies, the yen, Canadian dollar, the US dollar among them, is ongoing, or do your readers think that has stopped?

Do your readers believe that the European periphery, places like Italy, Spain, Portugal, Greece, Malta, Slovenia, and maybe even France, are still challenged, or do your readers believe those problems are over?

Do your readers believe that liquidity is a substitute for solvency? In other words, is central bank printing and liquidity in the system a substitute for the fact that the debts are very large relative to those countries ability to service that debt?

Do your readers believe that the US federal government still has budget issues? Do they believe that states in the US have significant budget issues? And finally, with regards to the United States, do your readers believe that local municipalities have budget issues, particularly with regards to unfunded pension liabilities?

Do readers believe the problems with regards to derivatives on bank and insurance company balance sheets still pose structural problems, both to the economy, and to those institutions? Do they believe the momentum-driven institutional sellers of precious metals have enough money to overcome physical buyers of those precious metals?

And finally, one last question, do your readers believe that the ascendant Asian and South Asian cultures still have an affinity to owning physical precious metals? Eric, I think that the answers to those questions will help shape your readers views of the future?

As I consider the answers to those questions what I am struck with is that the set of circumstances, which really revolves around the answers to those questions, was the same in 2006, 2007, 2008, 2009, 2010, 2011, 2012, and 2013. In other words the facts are the same, but the paradigm has changed. In the near-term, remember what Ben Graham said, ‘The market is a voting machine, while in the long-term it is a weighing machine.’

People who get information from the market are individuals who generally agree with the way other people vote. I don’t happen to be one of those individuals. I believe you make money by finding a popularly accepted trend and betting against it. You then let the market prove which side is correct.

So, Eric, I think KWN readers need to pay attention to how they would answer the above questions. They need to form their own conclusion about the direction of gold and silver prices based on the answers to these questions. The answers to these questions will give them the key as to what direction the gold and silver markets should be headed on a going forward basis.”

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