Read Rick Rule's legendary speech from ten years ago and attend the conference this year!

https://jayantbhandari.com/capitalism-morality/capitalism-morality-2022/ 

That isn't to say that the factors that surround us the external factors that surround us don't present risks. Sometimes fatal risks! But I would argue that those risks are uncontrollable. We control the things that determine whether we're gonna be successful or unsuccessful in investing more than other aspects of life, but I'm not qualified to comment on those other aspects of life. It is our own responses to the risks that come from the outside that matter for our success. In every realm of my life and certainly in speculation and investments, my worst wounds were all self-inflicted.

One of the interesting things that I observe among investors and speculators, which is the community that I know best and includes you libertarian or anarcho-capitalists that are investors or speculators, is that despite the fact that we know and mouth discussions of self-reliance and distrust in the state many of us misunderstand the nature of the risks. To not take responsibility ourselves for responding to these risks, our behaviors are suboptimal and our performance suboptimal. Let's talk about a few of them...

One of my favorites is political risk. For those of you who don't know, I'm in the natural resources business. I'm involved in speculating and occasionally investing, seldom these days. Mostly speculating in businesses like mining, oil and gas, forestry, agriculture. These are businesses that are particularly susceptible to political risk. Those of you who are smart enough to be in businesses that are less capital intensive and those of you who are involved in intellectual property businesses know more about the ability to move around the worldd. It's much more difficult for the collective to steal from you than it is for the collective to steal from me.

If you're fortunate enough to find a mine, they are very stable. Hence politicians love them! They're wonderful targets. There's no better target than a mine. You put two or three billion dollars into it, and then what? It's stuck. It's there and it's fixed. It's visible. They grab it and they tax it. What's interesting about our response to political risk is despite the fact that all of us, to some degree, believe that all governments are evil the most efficient governments of the most evil when it comes to assessing political risk forget this. Specifically, political risk is a risk that we seem to respond to emotionally rather than rationally. Political risk for us is still driven not by our understanding of the state but rather by what we see on television.

Political risk for us is still driven not by our understanding of the state but rather by what we see on television. In the mining business right now, the political risk that is evident in places like Malawi, Argentina, and places like this. Places where the experience of political risk has been most recent are judged by us to be the most extreme. We feel in fact when Mrs. Cristina Fernández de Kirchner nationalized or stole YPF, the response to that was that small cap companies invested in Argentina fell by seventy five percent. I would argue with you that those companies almost instantaneously became seventy five percent less risky. Political risk in one sense is a function of the price that you pay to experience it or avoid it. When people look at the political risks offered up by Argentina and they respond to their feelings pardon me as opposed to thinking through things, they exposed themselves to much more political risk.

When people look at the political risks offered up by Argentina and they respond to their feelings pardon me as opposed to thinking through things, they exposed themselves to much more political risk. Let me give you an example. I have a Argentine client and friend, who is a wealthy Argentine. I was inquiring of him after the nationalization of YPF what he felt the risks associated with mining projects in Argentina under development at the time? His response to me was very illustrative and it's something that all of us should listen to. He said Mrs. Kirchner stole YPF because she wanted to steal a billion dollars a month to fund politically expedient domestic spending programs the idea that she would steal a deposit that she had to spend three billion dollars on before she could steal the cash flow is nonsensical. The political risk associated with Mrs. Kirchner in the context of her understanding of her own self interest would lead you to think that the political risk in Argentina perhaps after the event was less than it was before. But that wasn't the price expectation!

The other thing that I think is interesting about political risk, especially when I hear the subjection from libertarians and anarcho-capitalist, is that political risk in third world nations political risk and frontier nations or non-white nations is less extreme than political risk here. It's as though our community believes that money that is stolen from you in English by Caucasians according to the rule of law is somehow less gone the money that's stolen from you. It's interesting and by the way I'm not entirely immune to this. Over my life, I immediately react negatively to situations I don't understand as well. But what I have learned in 30 years of practicing speculation and natural resource businesses around the world, and I'm not making a joke of this, is like this. The worst personal experience that I Rick Rule have had with political risk came in a jurisdiction that I knew very well occurred in the People's Republic of California. In that jurisdiction I was part of discovery of a deposit called the Castle Mountain discovery by a company called Viceroy Resources. We discovered this deposit fair and square according to all the rules. Some of it was in fact on state land. Despite the fact that we had an absolute legal right to build this mine, the political process kept us from being able to build this mine for 12 years. The free cash flow associated with that mine at the gold price that existed at the time that we made the discovery was worth about $700 million dollars. My math isn't good enough to tell you what the net present value of losing access to $700 million dollars at a 10% discount would be over 13 years, but I suspect that those of us who were shareholders and discovered that mine lost the sunny side of $500 million dollars. People suggest to me that the Congo is risky. Well...

In addition to the fact that we didn't have access to the cash flow during that period of time, we had to pay $16 million dollars in bribes. These weren't the efficient kind of bribes that you might pay in the Congo where you got payment for services rendered. No, this was the People's Republic of California. My old friend Adolph Lundin once said his definition of an honest politician was one who "stayed bribed". A little harsh, perhaps, but accurate. These were very different types of bribes in the People's Republic of California. These were contributions of property in lieu of campaign contributions. Some truly farcical stuff. There was alleged to be a critter present called a desert tortoise. Everybody here's sort of familiar with desert tortoises. They are little reptiles, like Volkswagen Beetles. I don't think the environment was actually cared about by the Government here. I think these tortoises were a tool to use on us to get what they wanted. But that was the rule of law, so we had to send out these herpetologists -- nice guys by the way -- to look for tortoises. These were young, hard-working diligent herpetologists but despite the fact that they had all these attributes, they couldn't find any tortoises! Well, that wasn't good enough. The response came that tortoises were sometimes subterranean, so we couldn't look for these tortoises on the ground because they might be underground. Given that we were gonna mine underground, we could hurt them. Okay.

We got some other herpetologists who then tried to fabricate a motorized skateboard to go in these burrows with a camera. This was really truly bizarre things happening. They're fun to talk about now, but they were very expensive. Anyway. They couldn't find any tortoises there either, but that wasn't the end of it! The fact that they couldn't find any tortoises but that this was known tortoise territory meant that tortoises might be able later to walk in to the mine site and get hurt by these big trucks. No doubt they would get here if they got hit by a big truck. The political solution that we agreed on, and this is where I got my money's worth because I'm able to tell stories like this for the next 20 years, was like this. The political solution that was forced on us or got the powers that be on our side where we all had the good sense to accept was something that left me personally outraged. But at least it got done. The political solution that we agreed on is that we surrounded the whole mine site with a tortoise fence. Now, those of you who don't know about tortoises will just have to take it on faith that these things don't climb well. They don't fly, right? What they do reasonably well is burrow, as they had pointed out to us before because they want us to look in burrows. And there was no requirement that we bury any of this fence. What?

The second critter issue that we faced was something called -- I'm not making this up by the way on my honor as a stockbroker this is all true -- another critter called a Mexican mine bat. This Mexican mine bat -- well, they're not exactly endangered but there's just not very many of them. The reason that there aren't very many of them in California is because there's no good terrain for them. They like caves. And the Southern California desert don't have any caves, except old mine shafts. Prior mining activity on this property had left mine shafts. And these bats had colonized these mine shafts! Now, heaven forbid, that mining disturb critters. By the way, these are foreign critters or alien critters like weeds. These critters were encroaching on territories as a consequence of human intervention, believe it or not. Heaven forbid that these critters be disturbed, so we had to hire these other guys -- again, nice guys by the way, these people in these agencies are invariably nice people. Batologist -- I don't know what they call these people but they're people who do bats. The idea was that we had to get these bats out of harm's way. Bats are pretty shifty. They do better in the dark than we do. Moving these bats was a real challenge. It ended up that we put these mist nets out and people clap their hands. The bats got all freaked out flew into the mist nets, we gathered them all up, and we took them to other mine shafts 17 or 18 miles away and put them in those shafts. Then at night they do what you expect -- they came home. This cycle went on a couple times when the batologist said to us, "Listen, this is really disturbing the bats and we suspect that when mine construction commences, the bats will leave." I said could you put that in writing? Yes, I'm telling this story to amuse you but I'm also telling you this story to illustrate the fact that political risk is greatest from the government that touches you the most.

How many people here live in British Columbia? A lot of you. I was addressing an investment conference yesterday and the day before talking about political risk and when we're talking about various places that scared Canadians, in particular, there was Argentina. But how many people live in the province of British Columbia the last time the NDP got elected? A fair number of you. Do you remember that is a good time for mining? Anybody here remember that as a good time for mining? Let's go one province to the east -- the bastion of free enterprise, Alberta. Do you remember the last time natural gas prices rose five or six years ago? The response of the provincial governments, the Conservatives and free enterprise people was to just about double the gas royalty! Causing us to call it Alberta-Stan. Now, despite that I'm supposed to be concerned about political risk in places like Congo or Russia or Kazakhstan, one of the things that I'd like to leave you with is that it isn't so much political risk that you need to be worried about in your investments -- it's your own method of interpreting what political risk is and the price that you pay to either accept or insure yourself against political risk.

It's funny that it stands to reason, but people don't employ the test on themselves. I'm going to make some general discussions about our attitude towards money and things like that later, but I want to continue on this vein for a little while because I think it's important. There are other people here who are much better at describing for you the philosophical and ethical aspects of today's discussion. I want to go right straight to your greed and larceny so that I know I can keep your attention. Another interesting thing that happens more among non-libertarian communities than libertarian ones and appears in the securities business or investment business is that the government protects you. As if this whole apparatus of the state and the whole regulatory regime surrounding the investment business serves some useful purpose? What people do, I suspect, when they call up me and ask me to act as a broker or a money manager is that they're willing to exchange fees in order for me to take responsibility for something they should take responsibility for themselves, which is their own wealth. If they can get that for free and if they can cause the government to do it, as opposed to paying me to do it then so much the better. There is a conception out there on many people's parts, including many libertarians, that as a consequence of regulation that the investment business or the investment process is safer. I would argue to you that exactly the opposite is true.

The presence of the regulation and particularly the fact that people like you and others rely on the protection of the regulator makes you much less wary the best steward of you our wealth, including in an interaction with somebody like me who you at least should trust and respect. The best steward of your wealth is you and anything at all that distracts from you exercising your own intelligence and your own prejudice and your own work in defending your own capital is counterproductive. Now it's come to the point where those agencies are especially counterproductive as a consequence of their institutional response to their own failings. My friend Doug Casey may have stolen this phrase from some somewhere else, but 20 years ago in a speech he gave he referred to the big regulator in our country the Securities and Exchange Commission the SEC as the Swindlers Encouragement Committee. There was a point in time when I just thought this was one of Doug's clever turns of phrases.

What I've come to learn personally being regulated by the SEC is that people like myself who are in fact ethical and, when we understand the law, law-abiding are easy targets. The charlatan or the fraud who are always on the move and the people who are dodgy are very tough targets. What regulator would want a tough target? Why don't you go after somebody who is well capitalized and who is a fixed target? As a consequence, the efforts of the regulators are usually on what they perceive to be a fixed soft target. Not exactly the community that they were set up to go after. I had a visit I do every two years with them. Please let me say it correctly, the Securities and Exchange Commission the SEC. It's an interesting process where they come in. You get an entrance interview and you get an exit interview. The same thing happens by the way with a self regulatory authority, FINRA. In these interviews before the audit you are allowed to tell them things about your business that you think they ought to know that might help them with their audit. At the end of the audit, you can question them about their results and about their practices. They're very very very useful. It used to be 20 years ago that I avoided those entrance and exit interviews just because I was allergic to those people. But what I've learned is they are just people and it's very very very useful.

In the entrance interview I have taken to saying to the auditors, "one of the things that you need to know about our firm is we're required to have this much net capital and we have this much net capital. That says two things for you Mr. Regulator. In the first instance it says to you that I'm not afraid of investor rescission suits. I'm not afraid of my own malfeasance otherwise I would have stripped the cash out of my firm. The second thing that says to you is if I do go upside down then there's enough cash that it won't harm the industry particularly." That's very useful for them because what they're really looking for is not to make a mistake which would negatively influence their career. That's what they're really looking for. A couple of years ago, I had more interesting things on my mind in the regulator area and this very very very nice young guy comes in and we're talking. I said, "listen I want to make sure I have this right. When you audit a securities firm, what you do is you look at my trade blotter. That's where you recognize every transaction that you did and you look for evidence of the transactions by taking trade tickets -- maybe you take 20 or 30 of them and call the counterparties to make sure the trades happened. On the other hand, you take the check registers to see the payment that you received for the sales that you made matches the checks that you wrote for the purchases that you made. That's the basis of the audit?" Yes, of course. Immediately the guy says, "oh well no we check this and this and this and this..." Right, right, right, right. I know you do a lot more, I said, but really what you do is to make sure that we did what we said we were gonna do. Right? Here's my question. You guys are supposed to check all of us once every two years, so you had to do eight audits on Bernie Madoff. Eight times you had to check his trade blotter, you had to polish trade tickets, and see if he had a check his check register. I'm not a securities regulator. I'm a credit analyst. How is it that he got through eight audits with you when he never made a trade? You pulled and called trade records and you pulled and called checks. How did that work? What kind of audit was that?

He said, "It's interesting Mr. Rule. The Los Angeles Bureau has been curious about that, too." True story! True story. This is the protection that you're offered up by the state in financial markets. The response of course to this failing by the SEC and by FINRA was the suggestion that they were overworked and needed a larger budget. Of course! The fact is that they somehow attended to eight audits or they didn't. Only one or the other can be true. Either they went there or they didn't go there. There's only two choices, neither of them good. Because his was a much bigger firm than mine and if they managed to come see me, then they should have managed to go see him. Madoff was certainly more important than Rule. In the aftermath, the suggestion that this agency offers up protection from fraud is in fact fraud itself.

Another thing I'd like to leave with you is Enron. Enron was a was a situation where for years they were registered for years and filed a plethora of reporting documents. Probably this high. I don't know how high they were but there was lots of them and they were filed according to the rules made for and provided by in statute. For years and years and years and years and years. It turns out that they arguably perpetrated fraud. As a consequence of this failing by the regulator or the protector to catch the fraud perpetrated by Enron, what did Congress do? They increased the SEC's budget and they passed something called Sarbanes-Oxley. Now we're going to get into the economics of protection. The judge in the Enron case estimated in sentencing that the Enron fraud cost American investors seventy billion dollars. That noted libertarian social conservative Warren Buffett has estimated that Sarbanes-Oxley costs American shareholders a hundred billion dollars a year. A regulatory failing, not a market failing -- a regulatory failing that cost taxpayers seventy billion dollars a year has been institutionalized into a set of absolutely useless regulations that will not by the way protect anybody from fraud will cost us a hundred billion dollars. Annually!

Yet when I come to gatherings like these, there are people who believe that they don't need to read the regulatory filings themselves as a consequence of the fact that there are lots of regulators in an over-regulated business that will protect them. In fact, you do need to read the filings and you need to read them knowing full well that there are a lot of people out there who will lie in the filings. You yourself need to assume that there will be another Madoff. There will be another Enron. I don't need to name the miscreants here in town, you're familiar with them. You know them they exist in a regulatory environment. The notion that the British Columbia Securities Commission or the Ontario Securities Commission or the Toronto Stock Exchange or the Securities and Exchange Commission or any of these other people are going to do anything that would cause you to discharge your own personal responsibility to understand first of all the person you invest with is complete nonsense yet we do it on a bigger scale when we see the immorality of suggesting to society at large that they are protected by the SEC or by Social Security or by any of this system that is broken. It's clear to anybody who didn't flunk third grade math that they're gonna go broke. It's crazy. I talked to so many investors who believe the promises that have been made in the context of the SEC and the contract in the context of Social Security.

I run into a whole different class of investors who, as a consequence of government action since the 2008 psychotic break in credit markets, believe that the political response to that crisis in terms of the government participation the economy was in the first instance desirable and in the second instance sustainable. I want to talk about that response. I want to talk about that response in the context of what you do with your money. Now, does anybody in the room believe for yourself that any of the causes precedent to the 2008 market collapse -- does anybody here believe that they've been addressed in any way shape or form? By the way you can raise your hand if you want to argue with me. I'm just curious if anybody in the room believes that the set of circumstances that gave rise to the 2008 collapse has been addressed. Nobody, right? Now, what they did from their point of view was pretty intelligent. People were terrified and there was a credit contraction. The big banks each individually knew that they were broke and they knew as a consequence of the fact that they were broke that their counterparties were broke. There was no leader bank lending there was no short-term credit, there was no credit to hedge funds and no credit to companies. There was no credit in the commodities chain. And what the government did was in the context of how they live -- the right thing to do for them was to flood the market with liquidity. They told the banks yes you're broke but you won't be, right? Yes you have a solvency issue but we'll put liquidity out so you guys won't go broke. And that's where we are now. The continued response that we're seeing now that the crisis is from their point of view "over" is very interesting.

They are continuing to provide liquidity. They're doing this really for three reasons. The first reason is that they genuinely are confusing a solvency issue with a liquidity issue. The root problems of 2008 didn't have anything to do with liquidity. It was an event that was caused by a solvency issue what we figured out as a society is that lending people 125 percent of the value of a house that they couldn't afford was not a good investment. That was what it was all about! All these guys recognize that they do it, so none of them would loan money to each other. It wasn't about liquidity to begin with, but they are dealing with the problem on a continued basis with liquidity when the issue is in fact solvency. Does anybody in this room believe that in society like the United States where the on balance sheet debt for the federal government is 16 trillion dollars and the off-balance sheet liabilities of the government are, pick a number, 70 trillion dollars? Let's call it 85 trillion dollars in total liability. Does anybody believe that this gets better by adding three trillion dollars a year in debt? That's what the response has been. The second part of the response and the second part of the response may be more troubling. The second reason I think for adding all this liquidity to the system is securities fraud. These guys couldn't sell their bonds any other way and that's what's happening in Europe by the way.

Right now what's happening in Europe is actually pretty clever. Depositors are rational human beings who are taking their money out of the banks. The government's are substituting credit lines to the bank's unsecured credit lines from governments to banks and the banks are using these credit lines to buy sovereign bonds. It's really very clever. Besides which if a bank in Europe makes a loan to a living breathing person or an entity, they have to reserve against that loan for the probability of default. But if they make a loan to a sovereign irrespective of the creditworthiness of the sovereign or the term of the loan, they carry that loan on their books at full value. A German bank that owns a Greek bond where there's no possibility of repayment over 70 years let alone 30 years where the bond is trading at 60 percent of par can be carried on the German bank's books at par. The same thing happens in this country.

The US federal government takes between 50 and 60 percent in a year by way of taxes of what they spend. There's 40 percent left over they raise. About half of what's left over between 20 and 25 percent of the federal government of federal budget by convincing people who are often foreign, about half foreign, to buy US government bonds. But they can't sell all the bonds that they print, so they do something very clever. They have these "open market operations" under the guise of adding liquidity. In fact these guys are buying their own paper. There's a word for that. A very precise word for that in English, its counterfeiting. It isn't counterfeiting apparently when it's done by Caucasian people in English according to the rule of law. It's only counterfeiting if we do it.

It was such a good idea they oughta let us do it! But they won't let us do it. The third thing that I think they're doing and this is probably the most pernicious is that by adding this liquidity they are stalling a market clearing event. I have Doug Casey to thank for this too. Doug Casey said with regards to currency the root word of confidence is con and this is a true con. I mean, this is a true con. Think through this. Doug gave a conference a couple months ago where David Stockman was there. I'm not suggesting that David Stockman is a good libertarian but neither is he anymore a battered old Republican warhorse. What David Stockman taught us is that the total federal government debt is about 85 trillion dollars, growing as he said by three trillion dollars a year. He said that the debt service -- the surplus debt service capability of the American public is in the range of five hundred billion dollars. Now what I'd like you to do is write two numbers down right now 85 trillion. That's 85, if you don't know, followed by 12 zeroes. It's a bunch of zeroes. You have to have a big piece of paper to do this. And then what I want you to do is write down 500 billion dollars. That's 500 with nine zeroes. You don't have to be an economist. You can be like me, just a credit analyst, and scrape off the nine zeros. Look at it as if this was a household with eighty five thousand dollars in debt and five hundred dollars a year in income to service the debt. This is not a pretty outcome.

What happens as a confidence of this "con" where liquidity is added in the system, is that people think that the system is functioning! And it is functioning. The lights come on, the SEC has their budget, everything goes on as normal. But planning your life around the fact that it's going to continue to go on requires you to believe that you can add a big column of negative numbers and come up with a positive one. I would argue with you that the function of government in this circumstance is in fact to cause you to believe that you can add a column of negative numbers to get a positive number.

We might argue about the utility of a market clearing event. Everybody here knows what market clearing events are? I mean one of the beautiful things about the old Vancouver Stock Exchange is that about once every ten years, the exchange would fall by ninety five percent. You'd have these little BS mining companies that were selling for two bucks a share and at the end of the exercise, they were selling close to their intrinsic value -- let's say a dime. And that did a wonderful thing, it exposed these companies to their true value. And it also eliminated in a temporary but efficient fashion, the specter of moral hazard. And its moral hazard, if you will, its Enron that we encourage with this officially sanctioned money printing and with the protection that's offered up by the SEC. One of the reasons that the United States and Canada and other countries have for so many years done so well in economic development in things like this has been competition. I was asked the other day at the conference here in Vancouver why the export of shale gas technology and oil technology hadn't happened? Why the exploitation of energy shales in North America was so much more vibrant and so much more vital than it was in other parts of the world. The simple answer the technology can be exported but what can't be exported is the learning we get as a consequence of the residual freedoms that we still enjoy. Let's say there is a technical problem in the Barnett Shale that is tackled by 40 or 50 companies. Say 60 companies make horrific mistakes. They drill dry holes and have blowouts and make all kinds of mistakes. They try technologies that fail and cost their shareholders $20 million dollars. Occasionally they succeed and the service providers become the intellectual connective tissue in the oil and gas business over time who understand the best practices and the worst practices. They accumulate the best practices and get rid of the worst ones. Over time, this very messy process called a market figures out how to do something...

In other parts of the world, oil and gas exploration is carried on by national oil companies. In other words, by the post office. You have a monolith that tries to employ technology where there aren't 40 or 50 competing partners trying something and failing. They only consistently fail. There's no new ideas. The second part of our success in North America is a consequence of the fact that we have at least in the oil and gas business some form of the rule of law with regards to subsurface mineral rights. There's some sense that if you drill a well and make a well where oil and gas comes back and you sell it then you get to keep some of it. That doesn't happen so well in other jurisdictions. It's interesting to me that the lessons that we should have learned in the context of our success employing technology in the energy business fail us when we look at other aspects of human behavior. The idea that we would give the government a monopoly on the oversight of investments in the securities business, as an example, is absurd when these same monopolies have been shown to fail in other spheres of human endeavor. It makes no sense to me why wouldn't we as a society -- no, why wouldn't we as individuals feel better about a system in securities regulations that was voluntary insurance based? Why wouldn't we favor a situation where we subscribe to investment newsletters that had been successful at doing due diligence as opposed to trusting a multi-billion dollar bureaucracy that keeps yielding Madoffs and Enrons? It's a mystery to me. It's a total mystery to me.

Where do I want to go with this? I want to talk about two other things that are much less focused on speculation and these are actually topics that I don't need to dwell on in this room, but they are topics that I had to propose and defend pretty vigorously the last three days at the other conference across town. Again I'm in some debt to Doug Casey for teaching me these lessons. There is a tendency for some of us who have gotten rich to apologize for it. There is a tendency for people currently to avoid being described as a member of the 1%. Now, the fact that the 1% walks around with a target on their back makes some forms of self-identification fairly stupid. But the idea that people who have achieved success has something to apologize for seems to me to be very strange. In my experience, and there are certainly exceptions, the accumulation of wealth has been a function for most people of producing more benefit for others than they consume themselves. You sell something to someone in a win-win fashion that they value more than you do, otherwise a trade wouldn't take place. The act of acquiring income is a function of generating utility for others. And if you produce more utility than you consume then you get wealthy. Everybody with me so far?

If this is true then isn't getting rich generous? Isn't getting rich in and of itself evidence of generosity? By the way, I'm not suggesting that all of the wealth that was accumulated in the world was accumulated in a generous fashion. Certainly Mr. Madoff couldn't be described as generous! Certainly Ken Lay and the fellows from Enron couldn't be described as being generous, although they were extremely charitable -- different word. I would argue that in most cases the act of becoming wealthy is evidence of generosity. It's evidence of a contribution in and of itself. There is a suggestion that the rich as a class have to give back. But my argument is it's a privilege to give back. If that's something that you want to do then do it. But the fact that you're rich demonstrates that you have already given. And if you are really rich then it's evidence that you've given a lot! I gotta say I'm part of a public company now, so I am part of a small government in one sense. But assuming that my board of directors gives me approval in my own office, I'm going to pass out t-shirts identifying some of the staff as members of the 1%. And I'm gonna pass out other t-shirts to some of the other younger members of the crew that, say, aspire. I hope I'm allowed to do that. Well maybe, I'll ask for forgiveness as opposed to permission.

I'd like to follow this on a little bit in terms of challenging perceptions of people outside this room with regards to philanthropy. I think the most philanthropic thing that an achieving person can do is build their business. This is not a criticism of Bill Gates, by the way. I think he's in many ways a spectacular person. But the idea that he is going to contribute more good to the world by giving away twenty billion dollars or thirty billion dollars as opposed to the good that he could do if he drove Microsoft even harder and turned out more software and more applications is farcical. Farcical! the amount of good that has been done by the Bill Gates's of the world is already tremendous -- my business couldn't exist without Microsoft! It literally could not exist without Microsoft. The securities business could not exist without Microsoft. And I'm not suggesting that he owes society an obligation to keep people like me in business, I am simply saying that the amount of good that he could do by focusing himself on growing Microsoft as opposed to passing out mosquito nets is a very very very dubious proposition. It's his money. If he wants to pass out mosquito nets, God bless. But from a mathematical or performance point of view, his choice is anything but philanthropic. I think that the most important thing that businesspeople can do in terms of philanthropy is building their business. I'm philanthropic. There's some stuff that I want to see done that I can't do, and I haven't been able to pay anybody to do it in a profit-making fashion. I would prefer to invest in a company that was gonna find some way to solve some social ills that I perceive. I'd prefer to pay him to succeed as opposed to subsidize him to try, but that hasn't been made available to me yet.

I give away some money but I don't feel personally any obligation to do so as a consequence of the fact that I've been successful in some other realm. I think the sense that he people who have been successful owe some obligation to society is silly. It's really silly. Finally, I want to tie this back a little bit to the earlier part of this talk in terms of your own money. I'm not an economist. I'm not a philosopher. I believe that the current set of situations that we are facing in the West with Canada and the United States will resolve themselves in one way or another. The way the liquidity that washes through the system makes us all feel like everything is under control is a very vain and dangerous illusion. Now those of you who know me well, and I have a lot of clients here, know that I have many failings as an investment analyst but my principal failing is that I personally am a very linear thinker. I believe if this is true and this is true and this is true and this is true and this is true then the logical outcome is this. I confuse two words: inevitable and imminent. I can't tell you when the fact that we're trying to service eighty five trillion dollars in debt on five hundred billion dollars a year in income has an unhappy ending, I can only tell you that with the limited amount of mathematics that I possess that it's going to happen. And I would ask you to look after yourself!

I would ask you to think about the fact that well this may not be imminent, but it is inevitable. Planning your life as though the SEC and the IRS and the Department of Defense and the Department of Energy are somehow a shield for you from this inevitable reckoning is a real mistake. I think that failure to recognize where we're heading and not organize your whole life around it, or at least recognize it as a contingency, means that you don't take into account the fact that I started the lecture with, which is the greatest investment risk that you face isn't your government -- it's your response to your government. It's to the left of your right ear and to the right of your left ear. I hope you all take account of the facts there in front of you.

Wow! What will we see at the 2022 conference?