you need to use ruby before doing any work with it:
rvm use 1.9.3-p125
now you can just run any commands without prefixing them with rvm
:
gem install rails
rails new test1
when you did prefix command with rvm it was actually short for:
rvm all do gem install rails
which means install gem rails into all rubies @default gemset.
you could be also victim of old and broken RVM installation bundled with Ubuntu, have a look on this answer for details: https://stackoverflow.com/a/9056395/497756
Also you should get known with some details how to use RVM, you should find this short tutorial very resourceful: http://screencasts.org/episodes/how-to-use-rvm