All humans experience love and loss at some point in their lives. With love comes pain, we can’t avoid it, all we can do is experience it, embrace it, and keep breathing. 321gold co-founder Bob Moriarty recently lost the love of his life, Barbara Moriarty. Bob was at her side when she took her last breath and while it was not a complete shock, it is no less easy to deal with losing someone whom one loves so much.
In our latest conversation Bob and I talk about Barb, the Saudis and Iran, and the liquidity crisis which he believes has just begun to take hold of global financial markets. Without further ado here is Energy & Gold’s September 2019 conversation with Bob Moriarty…
Goldfinger: I know it’s a difficult time for you after having recently lost the love of your life Bob.
Bob Moriarty: Let’s spend two minutes talking about Barbara. You’ve done many interviews with me and Barbara would come in and make comments. You actually knew Barbara so you had some idea what an interesting person she was. We’ve been together for 30 years. We’ve been married 29 years. She had a major heart attack five weeks ago. And then on Monday a week ago she literally collapsed and died.
It’s heartbreaking. It’s very difficult to go through, but when you love, the other side of that is when you lose that love there is pain. So you don’t need to feel sorry for me. I’m quite capable of doing that myself. I miss the shit out of her, but she wanted to go, okay? She went quick. I was there. And if she had actually scheduled that it would’ve been exactly what happened.
Goldfinger: Yeah, I sympathize with that and I understand. My father passed away two years ago in a very similar way where he wanted to go, it was his time to go. He called me a couple days prior to it and said “It’d be nice to hold your hand.” And I said “Yeah, that would be nice dad.” And I was probably going to travel to see him a month later, but I think that was his way of saying bye, you know, because he was gone a couple days later, and I never saw him again. So yeah, sometimes people are just tired of fighting and tired of the pain, and they just want to be at peace. May she rest in peace Bob.
Bob Moriarty: Yeah. And to the extent that 25 years ago I told her when she died she was not going to die alone and I was going to be there, and I was going to hold her hand, and I did that and I’m really pleased that I did. So let’s move on to other things.
Goldfinger: That’s beautiful Bob. Thank you for saying that. I think that’s a good way to start the interview.
Turning to the markets and what is going on around the world, we obviously had a very big event Friday night. It was actually, it was Friday the 13th, which is a superstitious thing in itself and then it was also a full moon. And you tend to talk about the full moons and how they tend to have a market impact. Somebody sent missiles to Saudi Arabia, knocked out over half of their oil infrastructure. What are your thoughts on…
Bob Moriarty: They knocked out half their oil production. And according to Saudis it was a very, they’re going to be back in production in the next two weeks. And that’s an important issue. You’ve got to segregate the infrastructure from the production.
So it was over half of their output and they’re being optimistic and saying they’ll have it all online again in a couple of weeks, but we know that they tend to lie about a lot of things so who knows if that’s true.
Goldfinger: Is there going to be a response from the U.S. or Saudi Arabia? They’re pinning it on Iran. It seems to make sense that Iran might do something like that but also doesn’t’ make sense because why would they give an excuse for themselves to be attacked.
Bob Moriarty: Yeah, of course. Okay, let me explain something to you. Have you happened to read my book about being in the military?
Goldfinger: I have it and I’ve read chapters of it. I admit I haven’t read the whole thing.
Bob Moriarty: Okay, that’s fine, and very fair. I mean, I need to know the limits. Now if I went into any courtroom in the world would I qualify as an expert witness on aviation tactics, both as a fighter aircraft and an attack aircraft? Could I qualify as an expert with this?
Goldfinger: Yes, I would think so.
Bob Moriarty: Well no, okay? You can’t think so. Literally, I have 125 missions in combat in the F4. I had 700 missions in the Bird Dog. I’ve controlled 1,000 air strikes. I’ve controlled fifty 16 inch gun strikes from the battleship New Jersey. I’ve controlled cruisers. I’ve controlled destroyers firing 5 inch .38’s and eight inch .50s.. And I’ve controlled easily 500 to 1,000 artillery missions. Therefore, how many people in the world have got as much time in real combat as I do?
Goldfinger: Not too many.
Bob Moriarty: None, none. Okay, let’s go to the attack and let’s figure out who did it. And strange enough because the attack was on the weekend and we’re now on Wednesday. I can prove to you conclusively through the use of both facts and logic that it was not a military attack.
Goldfinger: Okay, go ahead.
Bob Moriarty: Pretend your a second lieutenant and you’re talking to the CO of the squadron and you went out with 20 aircraft to attack that facility. And you tell the CO of the squadron “Skipper, here’s what we did. I rolled in, dropped all my bombs, fired all my rockets, and we took out half the capacity of production of Saudi Arabia.” What would the CO say?
Goldfinger: Ah, it’s a great job.
Bob Moriarty: Congratulations Major. I’m putting you in for a medal. But what did the other 19 aircraft do? And you would say “well they didn’t do anything.” Okay.
We had taken out half of their production, Skipper, you just told me I was a hero. No, no, no. Lieutenant, when we send you out to destroy a target how much of the target are you supposed to destroy?
Goldfinger: The whole thing.
Bob Moriarty: No shit. That was not a military mission, period. It wasn’t done by Iran. It wasn’t done by the Houthi Rebels. It was a political statement by somebody who wanted to encourage somebody to retaliate against either Yemen or Iran and you can try to figure out for yourself. But it was a political statement, it was not a military attack, period, okay?
If I came back from a mission and told the CO I had delivered half the target, or destroyed half the target, he would shit can me so fast my head would spin. You do not attack half a target.
Now, how old are you?
Goldfinger: 40.
Bob Moriarty: Okay. You’re going to learn the meaning of this soon. How valuable is half a hard-on?
Goldfinger: Not very valuable.
Bob Moriarty: Bingo. If you understand that you understand why no military in the world would’ve attacked and stopped attacking.
The amazing thing, and nobody’s understood this yet, and people have kind of been casually writing about it, do you understand the importance of asymmetric warfare?
Goldfinger: Of course.
Bob Moriarty: Okay. We have B-52’s in Vietnam. We had F4’s in Vietnam. We had 10,000 helicopters shot down and we were fighting guys with AK-47’s. That is asymmetric warfare. Now another great example of asymmetric warfare is 9-11. Now regardless of which story you believe, a bunch of illiterate, poor flying Arabs, 19 Arabs, took a bunch of air planes and crashed them into the Pentagon, into Pennsylvania, and into the Twin Towers. How much did that attack cost?
Goldfinger: Probably a million dollars.
Bob Moriarty: Okay, that’s a good figure and I’m glad you came up with it. Okay, but you’ve got to consider in warfare how much you spend and how much the enemy spends. And if you could force the enemy to bankrupt itself… Do you know what pyrrhic victory is?
There was this king in the ancient Middle East named Pyrrha who attacked his enemy and wiped out the enemies army and 90% of its own army. It’s called a pyrrhic victory.
Goldfinger: Oh, so he won but he really lost.
Bob Moriarty: Yes, exactly, exactly my point right there.
Now then, if Osama bin Laden, if he was the guy behind it and he spent a million dollars, which is basically chump change, how much has it cost the United States for the wars in Iraq and Afghanistan and Libya and Somalia?
Goldfinger: Over a trillion probably.
Bob Moriarty: How about five trillion?
Goldfinger: Wow!
Bob Moriarty: Okay. Up until Saturday that was the most lopsided battle in history. What would it take, what is the minimum weapon it would take to start an oil storage tank on fire?
Goldfinger: One bullet? A match?
Bob Moriarty: You don’t even need a match, okay? Why do they use non-sparking tools around petroleum?
Goldfinger: So they don’t start a fire.
Bob Moriarty: Because one spark can start fire.
Goldfinger: So you just need a couple rocks, yeah?
Bob Moriarty: Exactly! A couple of pieces of quartz, bang them together you would start a fire.
The real key here is that you could take… Have you ever flown a drone or seen a drone? Do you know what I’m talking about?
So you get one kid who got a $99 drone for his Christmas present, and you get another kid who’s a chemistry major and he says “Hey, I’ve got an idea. What we need to do is we get some ammonia and some iodine crystals, we mix them together, keep them in a liquid format, and we get a magnet. And all you have to do is fly the drone over to the oil tank. We drop the magnet with the stuff on the oil tank and when it dries it blows up, starts the oil tank afire and there’s no record whatsoever. You just destroyed a billion dollar world economy with a hundred bucks worth of tools, okay?
Goldfinger: Amazing.
Bob Moriarty: But here’s the really scary part. Yemen has the intent to attack Saudi Arabia but Yemen is a shithole and the Houthis don’t have the capability to launch this sort of attack. Iran has the capability but they don’t have the intent because it would be such a dumb idea for them to bring on the wrath of the US and Israel.
Yeah, here’s what we’re going to do, we’re going to bomb these fuckers. Nobody will know it was us. We will piss the U.S. off, and they’ve got nuclear weapons. We will piss Israel off, and they’ve got nuclear weapons. We will piss the Saudis off, and they’ve got more money than God. Is that a great idea?
Goldfinger: So, you’re getting at somebody who had the technology to launch these sort of missiles and who had the motive, is behind it. But it’s not the obvious culprit, which is Iran, who has the technology.
Bob Moriarty: Actually, it’s the obvious culprit. What is the most technologically developed country in the Middle East?
Goldfinger: Israel.
Bob Moriarty: Ok, and do they have the capability?
Goldfinger: Absolutely.
Bob Moriarty: Okay, let’s not look at intention, because that gets you focused on the wrong thing. Who’s the prime minister of Israel?
Goldfinger: Netanyahu.
Bob Moriarty: Who was up for reelection yesterday?
Goldfinger: Netanyahu.
Bob Moriarty: Who would like a boost in the polls just before elections?
Goldfinger: Netanyahu.
Bob Moriarty: Nobody in the Israeli military would bat an eyelash at conducting an attack on Saudi Arabia that they could fix in two weeks. I mean, for all I know the Saudis could’ve said “Shit, we’ve got some access capacity here. We’re trying to get the oil price up”.
Goldfinger: Honestly, this attack helps Saudi Arabia every which way.
Bob Moriarty: Bingo!
Goldfinger: It increases the price of oil.
Bob Moriarty: Yep.
Goldfinger: And it gets them to have Trump want to start a war with Iran.
Bob Moriarty: Well he wants to anyway and doesn’t have a good excuse.
And let’s ask some other questions. How do you wage conventional war against a country with 80 million people?
Goldfinger: It’s difficult.
Bob Moriarty: No, it’s not. It’s impossible.
Here’s what’s really scary, because you talk about asymmetric warfare and opening Pandora’s box. This attack, it doesn’t make any difference who did it, just proves that every kid with the $99 drone has the potential to attack a major world power.
Now I’ll go you one better. I can’t absolutely prove it’s true, however there have been several reports of it. Which direction did the drones/cruise missiles come from?
Goldfinger: The east.
Bob Moriarty: No, they came from the northwest.
Goldfinger: The northwest would be Israel.
Bob Moriarty: Or Jordan. Okay. The interesting thing is, and time will prove it, but the fact is that Israel had the capability, Israel had the intention, Benjamin Netanyahu. Let’s go one better, I’d all another card, another ace to may hand. What happens to Netanyahu if he loses the election?
Goldfinger: He’s probably going to prison.
Bob Moriarty: Ah, okay. So do you think maybe that Benjamin Netanyahu would love to get reelected?
Goldfinger: Yes.
Bob Moriarty: Would he cheat?
Goldfinger: Of course.
Bob Moriarty: Okay. Now, we’ve been talking about a black swan, which is very interesting and I’ve given you lots of stuff to work from. But you were only talking about the one black swan. We didn’t talk about the other, even bigger, black swan.
Goldfinger: Bigger black swan? I don’t know, Hong Kong?
Bob Moriarty: No, no. That’s chump change. Was was the overnight lending rate in New York on Tuesday?
Goldfinger: Oh yeah, yeah, it jumped up above 10%.
Bob Moriarty: Yeah, now…
Goldfinger: But can’t the Fed just rig it? They can just fix it, right?
Bob Moriarty: Yeah, right, give me a fucking break.
Goldfinger: Just print some hundred dollar bills, right?
Bob Moriarty: Yeah. I’m going to take credit for this. I wrote my book in January and I said this fall we were going to see the everything bubble blow up. And somebody wrote me an email and said “hey the Fed Funds Rate right now is 8%, what caused that, the overnight rate?” I said “nah, no way. It’s impossible. I mean, the whole system would blow up at 8%.”
Basically, what happened was…. Now I’ll ask you another question, has the Fed been loosening or has the Fed been tightening?
Goldfinger: Well, in a way they have been loosening by lowering the Fed Funds Rate but…
Bob Moriarty: What they have done is when T bills and bonds came up they’ve been retiring them, and that is exactly the same from a financial point of view as draining liquidity. If you don’t roll those instruments you were reducing liquidity in the system.
The Tuesday event is absolutely giant (Fed pumping $53 billion into the system through overnight repo operation which has now ballooned to permanent operations which will increase the Fed’s balance sheet by nearly US$400 billion over the next two years), okay? I don’t care what the Fed does and everybody talks about what the Fed going to do and you know the stock market is going to do this, gold and silver is going that. It’s all bullshit.
The system is coming unglued. And it was obvious to some people as far back as January that it was coming unglued and I have said repeatedly I don’t know which black swan is going to be the one that bursts the bubble. I just know that a black is swan is coming. So the $50 billion is absolutely immense.
Goldfinger: Okay. That was a really good start, a lot of color there, and what’s going on in the world and why we shouldn’t just fall for media news headlines and actually we should think for ourselves because the world is not always what it appears to be on the surface.
Let’s turn to the gold sector and the junior mining sector. I was in Beaver Creek last week and it was the biggest conference they’ve ever had at Beaver Creek. A lot of companies, like 100 companies. A lot of big investors were there. And the mood was, I want to say relatively optimistic even though the gold miners were down on the week. Clearly the three month rally has stoked some optimism in the sector and companies are now starting to talk like $1500 gold is here to stay.
And even some companies, I won’t name them but a couple companies put in their pitch deck what their projects would look like at $1700 gold, which really raised my eyebrows because we know from our experience as investors in the sector that it’s better to be cautious and use metal prices that are a little bit less than the current spot price, not above the current spot price. And that’s why I say that If I’m looking at a company and I’m taking a look at a project I’m going to use $1250 or $1300 gold. I don’t care if gold is $1500 or $1550 right now, I want to give myself a margin for error.
We’ve seen sentiment improve recently. What have you noticed about people that you talk to and what you’re seeing out there, and is $1500 gold actually here to stay?
Bob Moriarty: No. Strange enough no, and the answer is no in both directions.
We have gone to record high levels of bullishness in the cots and in the DSI and any time you do that you’re always going to have a correction, and I called for a correction on the 5th and I called for a correction on the 13th. And even with the attack on Saudi Arabia, which is a true black swan, gold and silver are down.
I hate it when everybody is optimistic. I love it when everybody is whining and crying and “mommy my gold went down!” That’s when I want to buy.
Goldfinger: I was reading the Howard Marks book on market cycles. I don’t know if you know about him but he’s a big fund manager in California and he wrote a book on market cycles. And I highly, highly recommend it because he simplifies it so well.
Bob Moriarty: And what did he say?
Goldfinger: He has a checklist which is really quite clever for what to look for when things are starting to get euphoric to give confirmation that you are indeed in a bubble. And then he has a checklist on what to look for when sentiment is extremely poor and everybody is bearish to what to look for to bottom. And it really helps to clearly understand how you have to act opposite of your emotions in the financial markets. That literally you have to train yourself to buy fear, to buy extreme fear, buy when nobody is optimistic, and sell when everybody thinks it’s crystal clear and prices can only go higher and things can only get better.
But obviously those are two extremes. Those are very, very big extremes that don’t come around all that often. We spend most of our time in the middle somewhere where things are popping around from mildly optimistic to mildly pessimistic and it’s a lot harder to identify turning points in the middle there.
So you think we’re actually at one of those extremes….
Bob Moriarty: No, no, I don’t think, I know.
Okay, I mean it’s not an issue of thinking. I was saying two months ago that the bullish consensus on gold was a near record level. It was up to 97 (Daily Sentiment Index), which is absolutely nosebleed territory and… let me pull up my chart here, be patient.
Okay on the… let’s see which date that is. On the 3rd and 4th of September silver hit 95 and 95. And I hate to say it but at every important top, you’re always going to have near-record bullish consensus. Now on the 7th of August the bullish consensus on gold was 97. When you’ve got that kind of bullish consensus you’re going to have a top, period. And everybody argues with me but I’m sorry it’s there.
Goldfinger: I don’t argue with you on that. I think that it can definitely be a short-term top but the question is does that mean that it’s a top that lasts for a year or more? And I would assert that in a bull market you will get to extreme optimism at various points, and you’ll pull back, you’ll have shakeouts, you’ll wash out the hot money and then it will gather force again and the bull market will make a new high.
Bob Moriarty: Why did gold and silver both go down in 2008?
Goldfinger: Because everyone was selling everything.
Bob Moriarty: Exactly! Bingo! It had nothing to do with gold and silver, it had everything to do with a liquidity crisis. In a liquidity crisis everyone sells everything they can get a bid for. It is my opinion that we’re going to have a liquidity crisis starting shortly and this $53 billion in repos is an indicator that we’re going into a liquidity crisis.
Gold and silver will go down along with everything else in a liquidity crisis. However, it is immaterial in the long run because at the end of the liquidity crisis gold and silver will be the last men standing. This is an everything bubble and it’s all going to blow up.
Goldfinger: So we’re about to have a big crash in the next month?
Bob Moriarty: Like 1929 I think we’re going to have a high for the overall stock market in September, and we’re there right now. Then we’re going to have a major crash starting in October.
I want to be clear that i’m not advocating sell gold/silver or mining shares, but i’m pointing out the potential for these things to crash along with everything else in a liquidity crisis.
Goldfinger: If this is like October 2008 all over again I sure as heck don’t want to own mining shares.
Bob Moriarty: There’s a bit of knowledge about 2008 that’s important to have. You know who Eric Sprott is right?
Goldfinger: Yes.
Bob Moriarty: Eric Sprott’s fund went down 93% in 2008. So why did mining stocks crash?
Goldfinger: Because they were a source of liquidity.
Bob Moriarty: Thank you! There were half a dozen big precious metals mining funds at the time and they all got hit by huge redemptions at the same time. They got absolutely destroyed because they were all in the same stocks because they were the biggest and most liquid. The difference this time is that we don’t have half a dozen big funds and most of the junior mining stocks are in the hands of smaller investors. Could they panic? Yes, and my recommendation for the last few months has been to raise some liquidity so that you can take advantage of market dislocations should they arise.
Goldfinger: Tell us about some of your favorite junior gold miners right now.
Bob Moriarty: Irving Resources (CSE:IRV) is one we’ve discussed several times and they have proven themselves to be a high-grade epithermal gold explorer in Japan. Irving has been crippled by the amount of time it takes to get assays back. I’m not concerned because I know they’ve got the goods.
I will also give a little bit of credit to Japan Gold (TSX-V:JG). Japan Gold’s theory is similar to that of Irving, but I think their administrative burn rate is significantly higher than Irving. I’m always really unhappy with companies that spend too much money paying management as opposed to putting shareholder money into the ground with exploration. You generate shareholder value through exploration, not through paying management.
Novo Resources (TSX-V:NVO) is another company that i’ve discussed with you many times. I’ve been a shareholder since C$.25 per share and Quinton Hennigh has used cutting edge technology to figure out exactly where the gold is. At Egina he’s using ground penetrating radar to find where the sweet spots are, he’s also found a sorting machine which works magic. You simply feed the ore into this machine and it flings the gold nuggets right out the end. This is an absolute game changer and it is absolutely a second Witwatersrand, it was formed at the same time and same place as the Wits and it’s got just as much gold it’s just that in the Pilbara it’s in nugget form.
Goldfinger: What else is of interest to you right now Bob?
Bob Moriarty: I will say that there is a lot of low hanging fruit and there are a lot of stocks that are going to go from $.05 to $1.00 once this liquidity event is over. If this really does take place we are going to have the best buying opportunity of our lifetimes in the next few months.
Goldfinger: Gold has jumped quite a bit since the end of May but many of the junior gold miners haven’t even budged. There are still a lot of really cheap stocks out there which begs the question what’s it going to take to get money to rush back into the sector?
Bob Moriarty: The way you stated that was perfect. The answer is the kleptocurrencies and cannabis has sucked a lot of free cash into those markets, those bubbles have popped and investors in those sectors have some monster sized losses. Once they finally capitulate and see people making money in junior mining then the juniors will experience a bubble rally.
I also want to mention Aurania Resources (TSX-V:ARU), Keith Barron has had the idea of finding these lost cities for over a decade. Back in May Aurania found a 22 kilometer extension which is reminiscent of the 4th largest copper mine in the world, which is in Poland (Lubin Mine) and has produced copper for 900 years. This copper mineralization is formed at the bottom of inland seas where there was a lot of chlorine and a lot of sodium and no oxygen, it just sucks the metal from everything around. Aurania is going to be a success.
Goldfinger: It’s interesting because Aurania and Irving are great examples of the tremendous benefits of having a very tight share structure, well known and well respected management, and the majority of shares are held in a relatively small number of hands. Most juniors would get killed if they were waiting months and months for assays, but in the example of Irving shareholders have such a high degree of confidence in management and the quality of targets that they are willing to wait.
IRV.CA (Daily)
Bob Moriarty: That’s very well put and accurate.
Goldfinger: Is there anything else you’d like to add today Bob?
Bob Moriarty: This is the most dangerous time financially that i’ve ever experienced or even heard or read about. We don’t have a bubble in just one place, we have bubbles across the world and in everything. There is $250 trillion worth of debt that is never going to be repaid and the world is going to have to come to grips with it.
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