Resource World Magazine

A P R I L / M A Y 2 0 1 8 www.resourceworld.com 23 Blockchain, of course, is the component of the distributed ledger. And if you extend the discussion to the distributed ledger, that has the ability to absolutely revolutionize capital raising and securities trading, among other things, because trust is distributed among market participants themselves. You could evolve a trading system that didn't involve regulators at all, if you will, a SEC and OSC optional market which I personally would love to see. This also has the advantage to theoretically revolutionize both trading and settlement and clearing and make them much, much cheaper. This of course, presupposes the development of applications to utilize this technology and enough investor education, so that the technology which is available to us today is used. RW: The TSX is the second worst per- forming stock exchange in the world – number 105 out of 106 in the last year. It has gone up only 14% in the last 10 years; only Venezuela is worse. Much of this is due to the oil and gas sector. However, some analysts now say that some investors are looking to invest in American compa- nies rather than TSX-listed companies. Do you think that Canadian resource stocks are immune from investor capital fleeing Canada? RR: I think that's partly up to the issuer community in Canada and it's partly up to your regulators. Right now, Canada is a friendlier jurisdiction to be an issuer in because the financial services infrastruc- ture and the regulatory infrastructure, even if they're not necessarily friendly to mining and oil and gas, understand it – unlike in particular, the regulator super- structure in the United States. Ironically of course, I think that your premise is interesting. A market which is down by 50% is of way more interest to me than a market that's doubled. I like to buy goods when they're on sale, not when I'm competing with every investor on the planet. This summer when I expect Canadian oil and gas stocks to be really cheap with gas backed up in the pipelines, in other words, when every investor on the planet has thrown in the towel with regards to the Canadian gas and oil sector, I intend to be a very large buyer. I suspect I'll be rewarded handily over time. Ironically, of course, one of the other markets that inter- est me right now, although I don't have a way to get into it, is Venezuela, for the fact that I would be the only person that had the guts to go into the market and as the consequence of that – it might be very cheap. If you look at my own personal portfolio, not the Sprott portfolio, one of the things you'll find is that the country that's most prevalent in my portfolio rela- tive to other people's portfolio is Russia for the very same reasons. RW: Is gold a commodity or a form of currency or both? RR: The latter of course. It's unique. It is a medium of exchange which makes it a currency. It is a store of value which makes it a unique currency and it has value separate and apart from the fact that it's a medium exchange which makes it a commodity. RW: Is gold a hedge against inflation? RR: Gold has proven over time to be a wonderful hedge against inflation, and ironically on occasion, a hedge against deflation too, which makes it unique. What gold is, I think, among other things, is that it's a form of insurance against the lack of faith in financial, political or mone- tary institutions. The manifestation of that lack of faith takes many forms. If you look back at gold's history over 5,000 years, you will see that it has kept individual savers relatively safe compared to other instru- ments in a whole variety of calamities. RW: What is the relationship between gold and rising interest rates? RR: That depends. Rising interest rates might have the impact of strengthening the underlying currency because the yield in it was higher and rising interest rates would also raise the price of owning gold to some- one who borrowed money to do so. When people say that the gold price can't go up when interest rates rise, those are people who have ignored the lessons of his- tory. You and I came to financial adulthood in the decade of the 1970s when the interest rate expressed by the US 10 year treasury went up by 600% and the gold price went up from $35 to $850 an ounce. The issue, I think, is the cause of the interest rate rise. If the interest rate is rising because savers need to be compensated more because the purchasing power of the underlying cur- rency that they're saving in is going down, then gold prices will do well. RW: Is it better to own, say, an ETF that owns a basket of gold producers or select a number of gold stocks yourself? RR: That depends on the investor. How much are you willing to do the work? There is no better steward of your capital than you if you're willing to do the work. Sprott tells its clients, as an example, in the junior mining sector, to limit their port- folio to the number of stocks that they're willing to spend an hour a month on studying. RICK RULE INTERVIEW

• Cover