Bob Moriarty: The US Is A Paper Tiger At The End Of Its Empire
A lot has happened since Bob Moriarty and I spoke two weeks ago. Markets have crashed and volatility is at the highest levels in more than a decade, meanwhile, President Trump has now declared a national emergency due to the COVID-19 virus. We are in completely uncharted waters at this point, however, 321gold founder Bob Moriarty predicted much of what we have seen transpire in the last month. I wanted to get Bob on the phone to see what he thought of markets after this big drop, and whether he would step in and buy gold mining shares after they crashed last week. Without further ado, Energy & Gold’s March 2020 conversation with Bob Moriarty…
Goldfinger: So we last spoke February 28th. That was exactly two weeks ago. At that time the crash had just really started to get underway, and it’s reached a fever pitch in the last week. You called this pretty much exactly right and you even said that the gold miners might even get sold. We’ve seen that exactly happen. Now the GDXJ is down 50% in three weeks. Are they throwing the baby out with the bath water? Is this a great buying opportunity in gold stocks? Or is there still more selling to come?
Bob Moriarty: We will have a better opportunity, but yes, it is throwing out the baby with the bath water. It’s the same thing anytime I ever say there is going to be a correction. A lot of people start screaming that I said, “Sell,” and I don’t believe that makes any sense. All markets go up and down. Somebody wrote me this morning about Irving, and Irving was down 23 cents, and he basically was in a panic, and I took a look at it and Irving was down 23 cents on 34,000 shares. Now that’s meaningless.
The intra-day movement of stocks, when you’re in a correction can be violent, but you can’t trade that. These are totally irrational markets. I would not dream of selling my core positions because there’s no way I can get back in and I’m happy with those stocks. Everybody worries about the price of their stocks on a day to day basis. Who cares? I mean, stocks go up and stocks go down, if you don’t have to sell or if you don’t want to sell, don’t pay any attention to it. I paid less attention to my shares over the last week than in years. I own great stocks and at times they are cheap. I don’t care what they’re quoted in, in nominal dollars.
Goldfinger: Okay, so I’m still not clear on that answer. Is this a good buying opportunity in gold shares or not?
Bob Moriarty: Well, yes, it’s a good, good opportunity. But you could have a better opportunity. You know me, I’m a contrarian. I want to see excess. We have excess optimism in gold and I would like to see excess pessimism. If you go back to 2001, or 2009, or late 2015, those were just wonderful opportunities. You could throw money at gold stocks and make money. Having some cash today I think is the smartest thing you can do. Yes, shares are a lot better priced today than they were two weeks ago, but there’s nothing that I see that says we’ve seen the bottom.
Goldfinger: Okay, so gold hit $1700, actually $1704 Sunday night. It’s currently about $1570, clearly it’s getting sold for liquidity purposes. Actually $1522 now. Wow. What are your thoughts on gold itself here? I mean if you have a choice between buying a gold bar at $1522 an ounce or just keeping it all in dollars, cash, what would you do here?
Bob Moriarty: I think that cash is king right now. In terms of silver, the ratio got up to 105 to one, that makes gold very expensive and silver very cheap. But you could see the action in palladium. You could see the action in rhodium, if gold follows palladium it could fall a lot farther. Everybody thinks that these metals are supposed to go straight up. Now I think at the end of the crash, and we are in probably the biggest stock market crash in history, there will be extraordinary opportunity. I think the metals will be a lot more valuable than they are today, but there’s nothing that tells me we’re at a bottom, gold is still expensive.
Gold (Daily – One Year)
Goldfinger: So turning to the economy and this virus, it seems to me that the US, is sort of where China was in early January right now. So we’re entering what looks to be the worst part of this virus for the next few weeks. But I will say while it’s obviously going to spread, it’s going to infect more people, it’s going to kill more people. I will say I think that based upon my understanding, China suppressed this news for two months. It probably started in November, in Wuhan, and we heard nothing about it until after January 1st.
Then even as January evolved, it didn’t start to become acute until around January 20th. So China suppressed this for basically two months, which means that we are ahead of them and that we are fully aware of what the hell is happening and what’s coming, but we’re still slow in terms of getting testing kits and getting ready to treat people. Do you think that the US is going to handle this better than China handled it or is it going to be even worse in the US?
Bob Moriarty: That’s a really difficult question to answer for a simple reason. Let me give you some numbers. I’ve been keeping track two or three times a day of the number of people who have the virus and what the total number of deaths is. Now according to Johns Hopkins, on the 12th at 9:33 AM in China, there were 80,932 cases. If you go 10 hours later, to 7:44 PM, there were no additional cases. If you go another 15 hours forward to 10:33 AM this morning, there were 8,945. Now my question is to any rational reader, is it possible that China only have 13 cases in 25 hours?
Goldfinger: It seems very unlikely.
Bob Moriarty: No, they’re lying through their teeth. Okay, so the problem is China has the most data and unfortunately they’re lying through their teeth. Now if I look at the chart. If you look at Italy, Iran, Korea, Spain, Germany, France, the US, the number of cases have absolutely skyrocketed and I believe that’s exactly what happened in China. I think the Chinese are lying through their teeth. We are coming up with better numbers today, but the best numbers we can come up with seem to indicate in the United States there would be somewhere between 200,000 deaths, which would not be a big thing, to a high of 1.7 million deaths and that would be a big thing.
Now here’s what’s very important for everybody to understand, the coronavirus did not, has not caused the stock market collapse. The stock market collapse was absolutely written into the cards. I predicted it on January 1st, actually I predicted a year ago and the two are related. The coronavirus is the ultimate black swan, but we were going to have a crash whether we had the coronavirus or not. So you’ve got to separate those two. But quite bluntly, I look at Europe’s reaction and I look at the American reaction, I think the US is way behind the power curve of testing, and like 70 people in a day is the most we can handle. Now if Australia can test people, or the UK can test people, or France can test people, and Canada can test people, why the hell can’t the US test people? I think that’s unfortunately, it’s going to expose Donald Trump as a plump fraud with orange hair and a strange suntan.
Goldfinger: Yeah. So now it’s interesting. It’s really amazing. Bob, how much has shifted in two weeks. So we spoke the last day of February. In that two weeks, so much has shifted in the world, including Joe Biden is a hundred percent chance of being the Democrat nominee. Now in my mind, Biden is a very weak candidate, extremely weak, maybe even weaker than Hillary. Now if this virus up ends things like it looks like it’s doing, and Trump’s economy becomes a dumpster fire. Can he lose to Biden?
Bob Moriarty: I don’t think so. I don’t think there’ll be an election. I think Biden has dementia, clearly he has dementia, just listen to some of the stupidity out of his mouth. It has nothing to do, whether you are Democrat or Republican. The guy is simply incoherent. But what we have done … You know, I was in Vietnam for two years and the Chinese and the Vietnamese, called the Americans a “Paper tiger.” The incompetence at all levels in government in the United States has exposed that we have the most corrupt political system in US history. We are indeed a paper tiger at end of empire.
The reaction to both the financial situation, stock market collapse, and to the coronavirus is just exposing how impotent our system is to attack any very real problem. I mean, we should have a convention right now of every nation in the world. We should be talking about, “Okay, what do we do about this and let’s cure it and how can we work together?” Instead, I mean, China, it’s blaming the United States for it, the US is blaming China for it. China is clearly lying through their teeth. The US is clearly lying through their teeth. This is the end of empire, I mean this is just as bad as it gets. Everyone’s life just changed, literally in the last two weeks and it’s going to be six months to a year before we realize how much it’s changed.
Goldfinger: So how in your best guess, I mean obviously I know we’re in uncharted waters, if countries like Spain and Italy, maybe the US, do quarantine and basically have widespread self isolation in place. Can we be coming out of this by, let’s say early May? It seems like China, it took them about two months to sort of work through it and see the number of new cases start to drop. Obviously they took drastic measures, but by mid January, Wuhan was a mess. There were so many new cases every day they couldn’t handle it.
So is there some sense for optimism that obviously things are going to get worse over the next few weeks? We might have a financial crisis, there might be, who knows, maybe, the high yield corporate bonds from the oil sector are going to go into a default, and that could cause some ripple effects throughout the banking system. But at the end of the day, the Fed can come in and do more quantitative easing, try to sort of paper things over. Then if the virus stopped spreading as fast, by let’s say early May, we could be coming out of this? Or do you think that this is a crisis that’s going to last six months or a year or maybe even longer? Is it just going to keep going?
Bob Moriarty: Well now there’s something called a knock-on effect and when one thing happens, what does the knock on effect do to other things? Can I imagine any time in the next five years where people would want to invest in cruise lines? I don’t think so. There’ve been a lot of numbers and I can’t pull any up right now. I apologize. But something like 60% of Americans couldn’t come up with $500 in the case of emergency. So what happens when, say 80% of Americans go without a paycheck for two or three months? This is, it’s absolutely catastrophic.
Goldfinger: But don’t you think the government is going to announce some extraordinary stimulus measures? Because if they don’t … I mean, first of all, Trump only cares about getting reelected.. If the economy goes into a depression, he is not going to get reelected. So don’t you think that the government is going to do $1 trillion stimulus, a tax holiday, maybe even give people checks in the mail? Here’s $1,000 check from the treasury department. Don’t you think we’re going to see all kinds of crazy things like that?
Bob Moriarty: Yes, we absolutely are. None of them are going to work. Everyone wants to believe governments are all powerful. I spent two years in Vietnam. I can guarantee you governments are not all powerful. They are totally, absolutely, catastrophically out of bullets and that will be obvious very soon. The airlines, the cruise industry, the automobile industry, maybe even mining could stop for six months. We got so many black swans landing right now, there is no simple solution. They can open the goddamn monetary spigots and hand everybody $23 trillion apiece in monopoly money and it’s not going to work.
Here’s what happens. When an economy gets totally out of balance, it has to heal itself. Everything that the Fed has done since 2008 is the opposite of what they should have done. Now let’s say, “Okay, we’re not going to collect taxes.” Who’s going to pay for all this health care? We have the most expensive healthcare system in the world. We cannot possibly cope with the number of patients that we’re going to have already. We have 10 or 15 real issues that have to be solved by rational solutions, and we don’t have any adults in charge. There is no simple solution to this. We are literally, we’re off the edge of the map, we’re in area of the world that we have never been in before and we’re led by a bunch of narcissist idiots. The Democrats wanted us to believe Trump was elected because of $100,000 in social media spending by the Russians but Bloomberg couldn’t buy a single primary and he spent $500 million. Are we stupid?
Goldfinger: Yeah, this is really uncharted waters and that is a pretty bleak outlook. I know you’re not a market forecaster you don’t like to call yourself one, but how far do you think the S&P or the Dow can fall during this bear market? Can it drop 50%? Can it drop 60%? how bad is this going to get you think?
Bob Moriarty: Okay, that’s a really good question. I’ve got a simple answer for you. One it’s going to be worse than 1929. Between October of 1929, at the top … Well actually the top which was September of 1929. But from the top in September of 1929 to the bottom in July of 1932 we had an 89 percent decline. So it could go down 89%, but it’s probably going to be worse.
Goldfinger: Hold on, let me just get that right. Did you just say it can go down 89%?
Bob Moriarty: Yeah.
Goldfinger: Wow. I mean that’s going to be the most devastating bear market in the history of the world then?
Bob Moriarty: Well, we are in the worst depression the world has ever faced and it’s not a localized depression, it’s worldwide, let me give you another number. From January 21st of 1980 when silver peaked at $50.25, until 1993 silver dropped to $3.53. That was a 92% decline. So saying something can decline by 90 percent is no big prediction, markets do that all the time.
Goldfinger: So a couple more questions. As far as the junior mining sector, I mean this is where we play, this is our sector that we write about, we invest in trade in. Is it worth it to even try to buy a junior miner right now? I mean there’s some companies out there that are still doing good work and putting out news. Doesn’t it matter at all anymore?
Bob Moriarty: Yeah, of course it does. I have six bids in on three companies and their prices, if the stock dropped to that price, I would be absolutely thrilled to own it, even if I really believed it was going to go lower. But let me give you the good news, if you have a total and absolute financial collapse and you have a financial reset and you go into a worldwide depression, at the end of the day, the only way out of that is to go to honest money, and that’s going to be resources. Resources have absolute value. That’s not a bad thing, that’s a good thing.
Goldfinger: So do you see a possibility that 12 to 24 months from now, governments are going to do all this stimulus, they’re probably going to build infrastructure to try and give people jobs, stimulate the economy. Could we see a V-bottom in things like copper and zinc and other resources?
Bob Moriarty: Yes, but it won’t be because of government stimulus. The sooner the government realizes that they are impotent the better. The only way economies ever cure is for there to be real supply and real demand. Everything the government does is totally artificial and it distorts the financial system. It doesn’t heal it, it wounds it. There was a depression in 1921 and it lasted 18 months because the government didn’t do anything. The government isn’t the solution, the government’s the problem.
I mean, strange enough, it’s going to be real obvious to everybody, literally in the next week or two that the United States government is absolutely impotent at every level to solve any problems whatsoever. They’re going to be overwhelmed with the multitude of problems that they’re incapable of solving. The American people are going to wake up and they’re going to say, “Hey, we need real change.” Now, if you ask me what do I think about Biden versus Trump, I wouldn’t elect either of those idiots as a dog catcher.
Goldfinger: Okay. So final question, Bob, you said that you’ve been, for two weeks, prior to our last conversation, so I guess since mid February you said that you were ready for this. You’re all set up. Can I ask you what you’re doing now and have you touched another person or seen anybody in the last few weeks?
Bob Moriarty: Yeah, I mean, the strange thing is, I’m ready for it, but I haven’t hunkered down yet. I have a small farm in France, and I’m here most of the time and I’ve got a little tiny mill house over a stream that’s a little bit closer to Spanish border. I have food, I have fuel, I have water, I have books, I have my computer. So when I find France will be locked down, literally in the next two or three days and when it’s locked down, that’s when I go to the mill. I’ve pretty much stayed away from people. I’m in a very high risk category, I can’t afford to get it. So whether the death rate is 2% or whether it’s 3.4%, it’s meaningless in my category, and I have hypertension and over 70, it would be a death sentence. So I can’t afford to catch it.
Goldfinger: Okay. Yeah. There are a lot of people in that situation. I live in South Florida, there’s a lot of people over 70 and yeah, it’s quite concerning. So final question. So what would you tell people right now? So let’s say they took your advice a few weeks ago and they got cash, they’re stocked up. What would you tell them to do now?
Bob Moriarty: Wait it out. Okay. If you could stay away from people, if you could work from home, stay off the grid, you’ll be fine. Okay. But this is truly where people should have learned. They need to rely on themselves, not on the government, and the people who rely on government, a lot of them are going to die.
Goldfinger: Well, that’s a sad reality. Thanks for your time, Bob. I really appreciate it. When we speak a month from now I pray that we will be emerging from this crisis and there will be some light at the end of the tunnel.
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