Eric Sprott is making a bet that we’ve reached the capitulation point in precious metals and that the precious metals will pivot sharply higher in the next 12 to 18 months.  He rightly points out that by putting sort of $50 million into this bet…he might lose 50% of $50 million or $25 million…or if he is right about the timing of the move in precious metals and the quantum of the move of precious metals, he could easily turn that $50 million into $500 million. A bet where you have one chance of losing half your money and another chance of making 10 times your money to the extent that you can afford to make that bet—that’s how you build businesses like Sprott.
I’ve had the good fortune in my life to know 12, 15, 20 self-made billionaires and what segregates the billionaires, what segregates the people who get that last digit—is guts. 
You have to take risks…Every billionaire I know has been willing to take bets that were contrary to conventional wisdom at the time that were highly risky. You have to see a situation that you think has outsized possibility of reward and you have to really, really, really swing for the fence.”

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By Tekoa da Silva, Bull Market Thinking:

I had the opportunity recently to reconnect with legendary resource financier and investor, Rick Rule, Chairman of Sprott U.S. Holdings.

It was a fascinating conversation, as Rick indicated the resource market is exhibiting all the classic signs of a major bottom, to which investors face downside risks of about 50%—juxtaposed against upside potential of 10 times or more.  He further commented on the single trait which separates millionaires from billionaires, after having personally gotten to know over 20 during his lifetime.

Commenting on price performance across the junior resource sector, Rick noted that, “We’re starting to see the odd incidence of a melt-up in this market. We’ve seen meltdowns for three years where there was a preponderance of sellers over exhausted buyers. Now you’re starting to see melt-ups where the odd buyer comes in the market [but] there’s nobody left to sell.”

That growing disappearance of sellers according to Rick, “Is a classic sign. Capitulation with seller exhaustion…and I think it’s indicative of where we are in the market. The thing that would confirm it for me would be either or both a market capitulation which we’ve talked about before as sort of a two-week tumultuous sell-off which could occur right now in the context of tax-loss selling but hasn’t, or else it’s issuer capitulation where the issuers, rather than trying to do a private placement that will keep them alive for five months…finance for the two or three-year time frame. In other words, try and move their company forward irrespective of the dilution that they incur.”

“If either of those events or preferably both of those events took place, it would be easy to say, ‘Bang! We put in the bottom, clear sailing from here.’ But we haven’t seen that yet.”

When asked to comment on yesterday’s interview with billionaire Eric Sprott, and what he sees him doing in the market with his own funds, Rick noted that, “Eric is making a bet that we’ve reached the capitulation point in precious metals and that the precious metals will pivot sharply higher in the next 12 to 18 months…[he] rightly points out that by putting sort of $50 million into this bet…he might lose 50% of $50 million or $25 million…[or] if he is right about the timing of the move in precious metals and the quantum of the move of precious metals, he could easily turn that $50 million into $500 million. A bet where you have one chance of losing half your money and another chance of making 10 times your money to the extent that you can afford to make that bet—that’s how you build businesses like Sprott.”

Emphasizing the distinctive trait which separates millionaires from billionaires, Rick indicated that, “I’ve had the good fortune in my life to know 12, 15, 20 self-made billionaires and what segregates the billionaires, what segregates the people who get that last digit—is guts. You have to take risks…Every billionaire I know has been willing to take bets that were contrary to conventional wisdom at the time that were highly risky. You have to see a situation that you think has outsized possibility of reward and you have to really, really, really swing for the fence…George Soros said that he became a billionaire by finding ‘broadly held public precepts that were wrong and betting against them’ when he had the cash and the courage to stay the trade.”

As a final word of advice to investors, Rick said, “The good investor’s mind is constantly curious. The good investor is always starting conversations and is shutting up and listening to gather more information about other people. Looking not for information that supports his or her existing paradigm, but rather information that challenges the paradigm and alters the paradigm.”

This was another powerful interview, conducted with one of the world’s greatest performing natural resource financiers. It is required listening for serious investors and market students.

To listen to the interview, left click the following link and/or right click and “save target as” or “save link as” to to your desktop:

>>Interview with Rick Rule (MP3)

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