Saturday, June 14, 2014

Interview with top speculator Rick Rule

Rick Rule has been making money speculating in resource stocks for decades. Emulating top performing individuals is one way I make money. I learned a couple of speculating rules from reading about and listening to Rick. He is famous for saying you are either a "contrarian or a victim". The meaning is that if you are buying what everyone else is buying you are buying at the top. You must identify undervalued situations and then have the conviction to buy them even when no one else agrees with your view. The other rule is to "buy when not if events". A perfect current example is uranium. The cost to produce the stuff and get a fair return on capital is $70 per pound yet the spot price is $28.50 per pound. This will have to resolve it self with higher prices or the light s go out. This is just a matter of "when" and not an "if" situation. Link to interview:

“What I am trying to do is determine an important unanswered question, that could in of itself give me an 18 month double, but has the follow on potential if I get a yes answer on the first question to generate a second question that could give me a double or triple. What I am really looking for is the possibility of an 18 month double and further possibility of a 5 year 10 bagger. That’s what I’m about and I try where I can to exploit that opportunity by offering the company money in a private placement that comes with a full warrant because a ten bagger with a full warrant isn’t a 10 bagger it’s a 17 or 18 bagger.”


Sticking around for the long term, saving capital, and working harder than others are the keys to success, in Mr. Rule’s experience.

“A lot of my success is due to the fact that for years I worked harder than guys. The compounding of working through good markets and bad markets. And the most important thing is I truly wanted to be rich. For years I made money and didn’t spend it. That allowed me to have a tool, capital, that’s essential for a capitalist. I like to think I have the correct perception in terms of time. When I look at a theme now like uranium, I am perfectly comfortable with the fact that it might take 5 years to be right. I have come to learn that asking myself investment questions where the answer begins with when, not if, is a very good trade.”


“In the uranium business now, industry costs including cost of capital is about $70, so you produce for $70 and sell it for $30 and lose $40. You cannibalize existing capital in corporate vehicles and that goes on until they go broke, and then the price shoots just like it did last decade. That’s a question that begins with when. When does the dam break? It’s not if. Does the price of uranium go up or do the lights go out?”

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