In an interview with INN, Rick Rule shared his thoughts on the lessons of the last decade and how to harness them for the future.
The “absolutely epic, epic decline” on the TSXV over the past 10 years has all the hallmarks of a turnaround, according to Rick Rule of Sprott (TSX:SII,OTC Pink:SPOXF), who is optimistic about the decade to come thanks to the basic rules of booms and busts.
“Bull markets like the market that we enjoyed in the period 2000 to 2008 are always followed by bear markets, and similarly, bear markets are always followed by bull markets,” he said when he nominated the decline in resource equities over the past 10 years as the most significant story of the decade.
“I think the silver lining in that is that bear markets are the authors of bull markets, and the bear market that we’ve been through is certainly one for the record books.”
When asked about which markets globally were affected by the “epic” bear market, Rule said that it was “more aggressively a North American phenomenon.”
“The Australian resource market recovered much earlier because I think the sins that were exhibited in Australia were less severe than the sins exhibited in Canada,” he said.
“The Australians came out of their resource bull market four years before the Canadians did … but certainly the constraints associated with resource-based businesses — if you expand beyond mining into things like oil and gas — has been a global phenomenon.”
Rule said that by his estimation from looking at the gold market, the broader commodities markets are early in the start of a recovery from lows plumbed recently, though he added that readers should be wary of his take on the current lay of the land.
“I’m not a technical analyst, so my looking at the charts is something that (Investing News Network) subscribers should be leery about,” he said.
“Broader indexes, Canadian indexes that cover the whole sort of range of Canadian extractive juniors, need to take into account that those indexes are extraordinarily speculative … the more established parts of the industry, (which are) the least speculative parts of extraordinarily speculative indexes, have done very well this last year,” he said. “That would suggest to me that we are out of the bear market.”
He added, however, that investors and speculators hoping for the conditions of the last bull market to be repeated could be disappointed if they expect those conditions to be normal. “Some of the disappointment with the market that we’ve experienced has to do more with irrational expectation than it does with market performance.”
When asked about what lessons investors could have learned from the bear market of the last few years, Rule said he believes anything learned would be “temporary,” as to participate in speculative markets investors need to be very optimistic people.
“We haven’t seen any tempering of brokerage firms not to finance highly speculative ventures, (and) we haven’t seen constraints in general and administrative expenses,” he explained.
“The lessons that we’ve learned on a broad scale merely reflect the fact that we’re unable to afford currently the stupidity that we exhibited before.”
Don’t forget to follow us @INN_Resource for real-time news updates!
Securities Disclosure: I, Scott Tibballs, hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.