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TOPIC: Episode 11 - Rick Rule and Art Berman

Episode 11 - Rick Rule and Art Berman 7 months 2 weeks ago #1

  • NathanEgger
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Long day...but I'm hoping to get some feedback from you guys about the change in format, having a longer intro and a second guest, and the change in the length of the show. I know there was a lot of good content there, but would we have been better off making this two shows in the interest of keeping the length around an hour?

I tend to prefer long podcasts, myself, but I know not everyone shares my preferences, so please let me know.

If you're reading this and you haven't already, register for free and we'll email you Art's supplementary powerpoint presentation. It's even better if you have it to reference during the interview with him.

Cheers!


--Nathan
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Episode 11 - Rick Rule and Art Berman 7 months 2 weeks ago #2

  • ErikTownsend
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I truly feel blessed to have such an amazing team working on MacroVoices!

A little back-story on this episode: The decision to add a second interview with Art Berman was literally made a few hours before we began production. Nathan and I both felt that this week's market action in oil was just too important not to give full coverage. We'd already made a commitment to finish our 2-Part Gold special, and Nathan was the one to step up and say that given market conditions, we have to do both.

We began taping Rick Rule's interview at 10:30am. Nathan and Chris Curran, our amazing audio engineer, literally worked from 10:30am until after 4am, non-stop, in order to get this episode published. You guys have no idea how much work goes into this behind the scenes. It was a herculean effort, and my hat is off to both of them. Had I known how much work this would turn into, I never would have done it this way. We could have waited a day and published a second show to meet the circumstances. Lesson learned.

I shall leave it to our listeners to judge the worthiness of this week's content, but I really think Nathan and Chris deserve everyone's thanks for their efforts. I don't know of any other podcast on the Internet whose producer wouldn't hesitate to drop everything in his personal life and work a 16-hour day simply because he's passionate about delivering the best quality product we possibly can, and things happened unexpectedly in the market that he thought warranted your attention.

If anyone noticed the extra effort we put forth this week, it is Nathan and Chris, not I, who deserve your thanks here in this thread. I went to bed at my usual time! ;)

Erik
Last Edit: 7 months 2 weeks ago by ErikTownsend.
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Episode 11 - Rick Rule and Art Berman 7 months 1 week ago #3

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Hey Erik,

Rick Rule is an incredible guest. One of my absolute favorites to learn and listen to. I've met him a number of times at the Hard Assets Conference in NYC a few years ago. Such a nice guy and a class act. Your analysis of the oil market seems to be incredibly sound and it is baffling as to why it has now embarked on an upward trajectory albeit possibly a temporary one. I'm just wondering, you stated that you could not understand why this market is going up when all fundamentals point downward. My question to you is.... Is is possible that the markets are sniffing a whiff of inflation? Additionally, although very much just a novice I find technical analysis combined with fundamentals and geopolitics in determining price action trends in markets incredibly interesting. Is there any way to learn from you how to do analysis work in a much broader sense? Would you ever consider teaching an online course or some other way to learn how to trade markets? I've been listening to your commentary since you were on Financial Sense Newshour and always listened carefully when you spoke because I enjoyed and appreciated your detailed analysis. Thank you.

Kind regards,

Anthony
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Episode 11 - Rick Rule and Art Berman 7 months 1 week ago #4

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Working in IB, I come from a slightly different perspective, one closer to Rick Rule who is selling PIPE offerings to investors rather than looking at getting involved in purchasing PIPE financing.

I have a decent handle on Private Placements, but less knowledge about PIPE. I was curious as to any insight you have into what situation a company would be in to find PIPE financing useful? My initial thoughts are that E&P companies could have used PIPE financing a few months ago when the market for energy offerings was much, much softer and liquidity was essentially non existent (it's starting to come around recently for companies with strong balance sheets, good assets, or those pursuing quality acquisitions).

Currently, I could see PIPE financing being of use to E&P companies who aren't on their death bed, but could be headed there in the future if prices stay low, as well as midstream companies with strong volume commitments, but reduced revenue due to contract renegotiations and large interest payments / debt coming due in the near future. The PIPE financing would essentially act as a bridge, allowing them to survive the downturn longer and the warrants would give funds additional upside in a price recovery, with the reduced price providing them a small cushion if prices decide to turn.

Also, what type of investor would be interested in PIPE financing? It is typically those that invest in public equity like asset managers, Public investment arms of firms like GS and Blackstone and HFs, or do PE funds get involved as well? I haven't heard of many PIPE financings recently, is there any reason for that?

Again, I'm not super familiar with PIPE financing, but wanted to see if I am on the right track / @ErikTownsend had any additional input.
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Episode 11 - Rick Rule and Art Berman 7 months 1 week ago #5

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Long and great interview, you folks have given so much, thank you very much.
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Episode 11 - Rick Rule and Art Berman 7 months 6 days ago #8

  • ErikTownsend
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@MichaelMedici re: PIPEs

Sorry for the long delay responding; I've been flat out with business travel for the last week.

My knowledge of PIPEs comes from having once invested in a fund that specialized in funding small public companies using the mechanism. I'm sure his has many other applications, but that's the one I'm personally acquainted with.

I think the PIPE value proposition for the company being funded comes down to this: It's basically an alternative to a secondary offering, where the tradeoff is you don't have anything close to the expense and complexity of a secondary offering. The PIPE can be signed and completed between principals in a half hour and the funding is in the bank same day. The price you pay for that service is (at minimum) you have to sell newly issued shares at a negotiated discount to market, whereas presumably a secondary offering would occur closer to the market price before the secondary was announced.

In all the PIPE deals I've ever heard of, what was negotiated was always more concession from the company being funded than just a discount to market price. If I remember right, the fund I invested in used to try to get a warrant per share, but often settled for a half-warrant. As I understand it, the rules allow the CEO to make whatever deal he wants, and if he's giving away stock at a steep discount to what the retail guy has to pay on the open market, tough luck for the retail guy.

My impression has been that these PIPE funds focus mainly on companies that can't find financing any other way, but I don't think that means the PIPE mechanism is inherently suitable only for "desperate circumstances". Rather, the desperate circumstances are most ripe for this kind of funding, but I'm sure there are plenty of other uses.

From the investor's perspective, I think it's almost entirely about being able to buy something at a discount to market. The simplest form is a % discount to the current price on the public market, but most of the deals I've heard of include warrants struck at or near the current market.

One creative use I've heard of for the mechanism is just to let a new investor into a large position without moving the needle. In other words, suppose I am really hot for some new small publicly traded stock - so much so that I really want to be part of it. If I manage a large fund, perhaps 1% of my AUM would buy 25% of the target company, and I don't mind the regulatory obligations that come with owning more than 5%. But it's a penny stock with hardly any liquidity. No way I'm going to buy 25% of the company on the open market. So I call the CEO and first try to negotiate a discount. He tells me to pound sand because he knows as well as I do that his company is hotter than hot. So I cave and say OK, I'll pay current market price. But let's do it in a PIPE so you get a big fat check you can actually spend growing your company rather than just feeling good about the price of your stock going up, and I get into my full exposure without moving the needle. Good deal for all parties.

Hope this helps. Again, I'm definitely NOT expert on this subject.

Best,
Erik
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Episode 11 - Rick Rule and Art Berman 7 months 1 week ago #6

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I got into investing when I started learning about Behavioral economics. I found it fascinating how expert investors could find tops and bottoms simply by being very observant of their surroundings.

My all time favorite story has always been the famous story of Joseph Kennedy and the shoe shine boy. However, the Rick Rule bathroom story might now be my #1 favorite story and a great example of irrational exuberance.
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Episode 11 - Rick Rule and Art Berman 7 months 1 week ago #7

  • NathanEgger
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Happy to know that you guys dug the show despite its length. Thank you endlessly for your support!

--Nathan
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Episode 11 - Rick Rule and Art Berman 6 months 3 weeks ago #9

  • Arthur Itarian
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I hope you'll invite Rick Rule several times per year. No one, in my experience, possesses a better combination of comprehensive knowledge and ability to communicate. He is the complete package.

Now, a question for anyone. How do you weight the importance of jurisdiction when choosing mining stocks? Bill Fleckenstein insists on places with (relatively) friendly governments and rule of law. Whereas Rick has made a lot of money investing in bad places with good people. I tend to side with Rick because I think investors fail to understand that all politicians everywhere are "unfriendly." Although of course you need to be sure the valuations compensate you for any additional risk.
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Episode 11 - Rick Rule and Art Berman 6 months 3 weeks ago #10

  • ErikTownsend
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@Arthur Itarian

I really enjoy Rick's knowledge and style as well! To help you guys understand what we're looking for and what motivates our guest selection efforts, let me give you a little backstory.

We love all the "big-name guys" as much as anyone. That's why we launched with Rogers and Faber - probably two of the biggest known names in the biz. But let's face it, those of us who follow markets closely have heard Rogers' and Faber's views in umpteen thousand prior interviews, and they don't change much. We still have immense respect for those guys. But at the end of the day, how much NEW content did you hear from Rogers or Faber that you never heard before, assuming you're in the demographic we're targetting, who have been following those guys for years?

I'm particularly proud of the Rick Rule interview because we saw how to take it in a direction nobody else has ever interviewed Rick about on a podcast, so far as I know - the opportunities presented by private placements and PIIPEs in early stage mining companies. That perfectly fits our mission statement of bringing you content that appeals to pro finance, high net worth, and other sophisticated investors, and its information you just won't find anywhere else. That's what we went to focus on here - content that appeals to sophisticated investors but isn't available elsewhere.

So my point is this: If you want to request Rick Rule multiple times per year, please also suggest what you want me to talk to Rick about. The "garden variety" retail Rick Rule interview where he explains the difference between junior and senior mining companies, then goes on to explain why the Sprott organization would like us to believe that the physical gold owned by PHYS is somehow 'more physical' than the physical gold owned by GLD - that interview just ain't gonna happen on MacroVoices. Not that there's anything wrong with that content - it's obviously super popular. But it's been done before a zillion times. Now you want to suggest we get Rick back to share some war stories about private equity projects gone awry and the challenges of asserting your legal rights in what is almost always an International relationship between investor and miner? Now THAT's interesting content we're very interested in pursuing.

I hope that helps clarify what we try to bring you and why. Guest recommendations are always more powerful when they come with some insight on how we can be different. Perfect example... One of these days Martin Armstrong will return our e-mails. He's been the 2nd most requested guest after Kyle Bass. But what am I going to ask him about? The same exact stuff he just talked about a few weeks ago on another podcast, or something new? We obviously prefer something nobody else is talking to him about, and which appeals in particular to sophisticated investors.

Best,
Erik
Last Edit: 6 months 3 weeks ago by ErikTownsend.
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Episode 11 - Rick Rule and Art Berman 6 months 3 weeks ago #11

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ErikTownsend wrote:
That's what we want to focus on here - content that appeals to sophisticated investors but isn't available elsewhere.

An admirable objective. I'll try to dial down my Rick Rule obsession :)

I would enjoy expansion of your highly topical opening remarks, incorporating guest viewpoints, and including specific investment ideas, such as stock recommendations. Not exactly groundbreaking, but you would do it better than the others. Just keep the idea in mind for when you expand to a 9-hour format :cheer:
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Episode 11 - Rick Rule and Art Berman 6 months 3 weeks ago #12

  • ErikTownsend
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I think you may have misinterpreted part of my last comment. I'm delighted you have a Rick Rule obsession. I share it! But the thing is, to get Rick back on the show sooner rather than later (and I'm all FOR that), we need to be creative and figure out how to both make it different from last time and different from the "standard issue" interview you here everywhere else.

Thanks for the kind words on the opening segment. That's actually a big ? in my mind. We launched with a goal of keeping the opening market wrap DOWN to no more than 10 minutes, because we figured people came to hear the featured guest and don't want to listen to too much of me and Nathan. When we started to consistently "blow our deadline" after the crude oil story got so much more complicated, I thought we were screwing up big-time. But the listener feedback has mostly been positive - asking for even more of what Nathan and I internally refer to as "pre-game" (the part of the show before the featured guest interview).

So thanks for sharing. Your comments are definitely affecting our policies and strategies.

Best,
Erik
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Episode 11 - Rick Rule and Art Berman 6 months 3 weeks ago #13

  • Arthur Itarian
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I think it's fine to vary the "pre-game" length based on news flow. I would only suggest that the guest segment should probably be at least 50% of the show.

I think your best innovation may be the "post-game" reaction with Nathan. It really helps the show feel satisfying and complete.
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Episode 11 - Rick Rule and Art Berman 6 months 3 weeks ago #14

  • ErikTownsend
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Thanks @Arthur Itarian, that's very helpful feedback. FYI, we are never sure about how "postgame" is working because we only have statistics for how many "listens" we get. The % of those who listen to the whole thing vs. how many "tune out" as soon as the guest interview is over is a constant question on our minds. And admittedly, we've changed our concept of it. In the beginning the idea was going to be that we keep the guest interview on a professional level, then we use "post-game" to clarify any terminology as necessary not to leave our retail investor audience lost.

But as we started to get more positivew feedback on our own interaction being of interest to everyone including the pro audience, we changed it up and tried to make it more about Nathan and me reflecting on our own opinions about the guest interview. This fulfills a very important need for me, which is that on one hand, I definitely want to express my OWN views on the show. But I feel very strongly that the biggest problem in financial journalism is the host talking over the guest. I want our guest interviews to be about what the guest thinks, not what I think. So in recent weeks we've been focusing on that - using postgame to get our own opinions in, because I feel strongly that the guest interview should not be about debating or arguing with the guest.

We're going to change it up again this week, and I'd really appreciate your feedback on the new direction. Perhaps we should launch a thread just for discussion of the change we're planning this week. Stay tuned...

Best,
Erik
Last Edit: 6 months 3 weeks ago by ErikTownsend.
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