Last Thursday morning, 321gold founder Bob Moriarty and I had the opportunity to have a discussion about markets post-US election and where things might be headed next year under a Biden/Harris administration. The conversation took place five days ago and much has transpired since then, however, the key themes remain the same. We also discussed Bitcoin, New Found Gold (TSX-V:NFG), GoldON Resources (TSX-V:GLD), and Eagle Plains Resources (TSX-V:EPL). Without further ado, Energy & Gold’s November 2020 conversation with Bob Moriarty…
Goldfinger: There’s so much to talk about, I don’t know where to start Bob. But let’s start with the market, do something different this time. We saw the S & P 500 up 2% this morning. Gold is $1,930, up almost 2% right now. What’s going on out there? What’s causing this big rally?
Bob Moriarty: I think it is because everybody’s been waiting to see how big a disaster the election could be. We could have had riots in every city and people just didn’t know, but for the S&P to be up that high and gold and silver to be up that high, that’s pretty remarkable.
Goldfinger: It seems to me that there’s a sense of a relief in the market that this election is coming to an end. It’s not over yet, but it’s coming to an end. And it seems that people are looking forward to a big stimulus package. Is that a fair assessment?
Bob Moriarty: I think that’s absolutely accurate and regardless of whether it was Biden and Harris or whether it is Trump, there will be a stimulus package, the dollar has tanked. But what you just said about a sense of relief, I think that’s absolutely true. I wasn’t convinced we would even have an election, it surprised me. But by and large, it went a lot smoother than I thought it would.
Goldfinger: Yeah. I guess everything is relative, right?
Bob Moriarty: Sure.
Goldfinger: Okay. So let’s talk about this backdrop and then we’ll get back to the market. It looks like Biden is likely to win, although it’s not over yet. And Trump has filed lawsuits in six states. Let’s just imagine for a second that Biden is going to win. What is the next couple of months going to look like? I mean, is this going to be just a complete shit show? Is Trump the worst loser in the history of the world? What can he do as-
Bob Moriarty: Why are you talking about Biden? Biden isn’t running for president, Harris is.
Goldfinger: (laughs) I think he could make it another four years.
Bob Moriarty: I think that when the election itself is settled, if the Democrats have won, the democratic national committee is going to look at Joe Biden and they’re going to say, “I hate to say this, but Joe is senile. He can’t be president. We need to let him step aside with the 25th Amendment of the constitution and Kamala Harris takes over.”
Goldfinger: I’m going to have to disagree with you here again. I think Biden can make it at least another four years, and he’s not as senile as the Republicans would have us believe. He is fairly fit and many people live well into their 80s and 90s. They just need to make sure he maintains social distance from young ladies so he doesn’t end up smelling more hair and being creepy.
What is a Harris presidency going to be like? Is that just like the worst case?
Bob Moriarty: Well, let me give you a hint. She goes to the same boutique that Hillary Clinton did for her broomstick.
Goldfinger: So we’re talking about a Harris presidency and what that might look like.
Bob Moriarty: Kamala Harris is the only candidate in the States that makes Hillary Clinton look sane.
Goldfinger: Well, what do you think the market implications of her presidency might be?
Bob Moriarty: We would have total government control. She would go after guns, she would eliminate the second amendment. She would give total power to the military and to the Deep State…
Goldfinger: Hold on a second, the President can’t eliminate the second amendment…
Bob Moriarty: Of course, she can. She can issue an executive order saying that you can’t have guns or the tax on bullets is $1,000 dollars a bullet. She has made statements to the effect that she is going to eliminate guns for Americans.
Goldfinger: But that would go to the Supreme Court and doesn’t the Senate have to vote on any constitutional amendment?
Bob Moriarty: Well yeah, but she wouldn’t do it with a constitutional amendment, she would do it executive order. Presidents have got a lot of power. But here’s what I want to get you to think about, because it’s the real answer to your question. How effective is anybody going to be trying to remove 395 million guns from the hands of Americans? And I’m going to tell you, that’s probably the worst idea I’ve ever seen. There are two things that could start a revolution overnight, one is trying to seize the guns and the other is a mandatory vaccine for a fake flu.
Goldfinger: Yeah, so there’s a lot of things that could cause a revolution, but as far as markets go, it seems to me like precious metals and natural resources are big beneficiaries of pretty much everything that could be coming. Is that fair?
Bob Moriarty: That’s fair to say, but let me give you something to think about. How do you feel about living in a world with $50,000 gold?
Goldfinger: I don’t feel good about it.
Bob Moriarty: Exactly. So we’ve talked about gold going up and I’d love to see gold at $2,000 or $2,500 or $3,000, but there is a price at which I am terrified of paying. Joe Biden is absolutely senile. There is no way he’s going to be allowed to serve for four years. The guy is senile. He’s going to have a tough time making it through the oath of office. So, the real plan of the Democrats, and Harris has already given it away, she’s already talking about a Harris administration.
Goldfinger: Okay. Let’s forget about Harris right now and all that is many months or years away. So let’s just talk about the end of 2020. So, it’s morning of November 5th, right now, President Trump will be President through the end of the year at the very least. We have about 60 days left in the year. What are we looking at here in the final two months of 2020? Gold is up big today, silver is up big, mining shares are bouncing quite nicely, but we’re coming off of three months consolidation that’s been painful, especially in the juniors. Is this just the time to buy hand over fist?
Bob Moriarty: Yes.
Goldfinger: Okay. So buy now, and we’re going to get a year end rally?
Bob Moriarty: No, we’re going to get a year-long rally.
Goldfinger: Ah, okay.
Bob Moriarty: If you remember when Bitcoin and Tesla started going curvilinear, prices increase until they reach a certain point and then all of a sudden FOMO takes over. Gold and silver are going to be realized as the only safe refuge. Everyone’s talking about COVID-19 as if it is the danger. And it’s not the danger and it has never been the danger. The danger is the depression that governments have forced on us. And when people realize the banks are bankrupt and all currencies are headed for the toilet, we’re almost guaranteed hyperinflation. There is going to be a panic, and I mean a panic, into real assets.
Goldfinger: So, I did a webinar yesterday. I know you did one as well. And one of my key themes has been that the economies of Eurozone countries and the US, Canada are very weak. Growth is very low and money is not moving around very fast. It’s like there’s a stagnation, not a lot of lending, job market is very soft. And the FED and the ECB are trying to counteract these forces, the structural forces that are weighing on economic growth and inflation. And countries are adopting something called MMT, which is Modern Monetary Theory.
And basically, to sum up Modern Monetary Theory in two sentences, it’s that a country can always issue debt in its own currency, and always repay that debt in its own currency by just generating new currency, new money on a keyboard. And the constraints to MMT are basically inflation. The only thing that stops a country from issuing more of its currency, ad infinitum, is when inflation starts picking up too much and you get to very high inflation or hyperinflation. So since hyperinflation is not a factor at all today in the US or the EU, in fact, quite the opposite, are we staring at a year or two of just absolutely run away money printing?
Bob Moriarty: The United States today, the growth in the money supply, it’s higher than the growth in the money supply was in Germany in 1922. Hyperinflation is not a lot of inflation. Hyperinflation is when people no longer trust their currency. And with all the nonsense that we’ve passed for the last four years, we had a four year coup going on against Donald Trump on the part of the FBI, the CIA and the Democrats.
Now, whether you like Trump or not doesn’t make any difference. When the Praetorian Guard starts to decide who the emperor should be, their next move is to decide, “Well, we don’t like this emperor, we’ll just whack him and get another one.” The power of the deep state has been demonstrated in this election. The mainstream media and all the polling people had it 100% incorrect. If you look at the reaction of governments around the world to the virus, governor of California, Newsom, put out a tweet and said, “If you go out with your family to a restaurant, be sure to put your mask on in between bites.” That is so stupid. I mean, how on Earth did anybody select this guy for anything higher in office than a dog catcher? That’s absolutely insane.
Now, Fauci has gone from, “Well, you don’t need masks,” to, “Well, you do need masks.” Now it’s, “Well, you need masks but you also need a face shield.” We know teen suicides have doubled. We know that the excess death rate for people between 28 and 44, there’s 100,000 excess deaths this year. And those people are not at risk from the flu. We’ve just gone into absolutely never-never land and one by one, people are going to wake up and they’ll realize this is crazy. And frankly, it is crazy. It’s totally insane. Negative interest rates, are you kidding? Modern Monetary Theory, are you kidding? Go to Zimbabwe. They use some MMT there.
Goldfinger: Well, Modern Monetary Theory doesn’t work in Zimbabwe, the problem is nobody wants their currency.
Bob Moriarty: No, the problem is nobody trusts the government and that’s where we’re going to go.
Goldfinger: Right. So that’s a very good point. When people lose trust in the government and its fiscal responsibility, then the currency goes caput and hyperinflation takes hold. And so the US is getting closer and closer to that stage and China and the rise of China, the emergence of China as a superpower is helping to accelerate that. And I think that an argument can be made that the Trump presidency has also helped to accelerate the downfall of the dollar. No other president in the history of the United States has even come close to the amount of debt that the US has piled up during the Trump term, the four year term. I mean, the amount of debt creation is absolutely stunning since 2016.
Bob Moriarty: Yes. The one thing we absolutely know is it’s going to be worse in the next administration, no matter who the president is.
Goldfinger: That’s a very good point. And that brings us back to precious metals and junior mining. But before we talk about that, I want to ask you about Bitcoin. We’ve had some very colorful conversations about Bitcoin in the past, and you pretty much called the top to the day at the end of 2017. This morning, if you’ll notice, Bitcoin is moving up again, it’s almost back to the price where you called the top at. It’s at $15,000 here this morning. Is this going into another bubble?
Bob Moriarty: I think there’s an excellent chance that it is. Let me point out two things that are very important. When I called for a top in Bitcoin in December 2017, there were somewhere between 1,400 and 1,500 variations of cryptocurrencies. There are now over 4,000 variations of crypto currencies. Now, somebody believes that all of those 4,000 cryptocurrencies are going to have value and I seriously challenge that assumption. And second of all, it’s absolutely correct that the bank of Japan, I think the Swiss national bank, governments are now starting to talk about… Hang on. Governments are now starting to talk about cryptocurrencies. Does anyone seriously believe that the bank of Japan or the US Federal Reserve are going to allow 4,000 cryptocurrencies to compete with a US government cryptocurrency?
The problem with cryptocurrency is, first of all, nobody understands what they do. Nobody can actually define it to you. And second of all, it is a solution running around looking for a problem to solve. Now, I’m sorry, I do not see any value whatsoever in any of the cryptocurrencies, including the government cryptocurrencies. Governments believe they are all powerful. I spent two years in Vietnam. I know governments are not all powerful, no matter how much power they’ve got, economies are bigger. If you believe governments are all powerful, take a bucket, go down to the beach and start emptying the ocean. And when you can stop the tide let me know.
Goldfinger: Okay, so there’s a lot to unpack there. I’m sure you’ve heard of Raoul Pal. He’s in the Caymans, he’s the founder of Real Vision. He said Bitcoin is the cockroach that can’t be killed. And he likens it to gold, but an improved version of gold. He said governments have tried to ban gold throughout history over the last 5,000 plus years. Many different governments have tried to confiscate gold, make owning gold a crime, et cetera, et cetera. And yet here we are today. Gold is $1,935 an ounce as I speak these words and it is a store of value. Actually, wow. Gold is $1,948 now. It literally just jumped $13 in the last two minutes.
So gold is still here. It’s also a cockroach that can’t be killed. And so, forget about the other 4,000 cryptos. There’s only one Coca-Cola. It’s not hard to make a sugar filled, caffeinated soda. You and I could probably make one if we put our minds together, but we’re not Coca-Cola, we don’t have the brand name. We couldn’t sell millions of cans of soda if we tried. Coca Cola, there’s only one. Is Bitcoin the Coca Cola of cryptocurrencies?
Bob Moriarty: No, and I can prove it to you. There is not one Bitcoin. There are already three Bitcoins. And if you can have three Bitcoins, why can’t you have 3,000 Bitcoins or 3 million Bitcoins or 3 zillion Bitcoins. Cryptocurrencies are the ultimate cockroach. They’re going to still be breeding when the rest of the world is a smoking nuclear holocaust. However, all they do is irritate people.
Goldfinger: Interesting. Okay, let’s move to junior miners. There are a lot of different companies we can talk about. I’ve noticed you have a particular interest in this company called New Found Gold (TSX-V:NFG). Now, NFG has had quite a year and its market capitalization is now about C$650 million. C$650 million for a junior miner that’s still at the discovery stage. Now that seems to me to be a pretty hefty valuation for a company that doesn’t even have a resource estimate and it’s still relatively early stage. Why is this not a sell here?
Bob Moriarty: One thing I’ll say about New Found Gold, and I followed it very closely and own a lot of shares, it’s like Novo resources. It’s an absolutely wonderful stock to trade. I mean, I’m not a fan of day trading, but you could make a lot of money day trading New Found Gold and Novo resources. I’ve seen the numbers on New Found Gold and I am intimate with Fosterville’s Swan Zone and New Found Gold appears, “appears” in quotation marks, appears to have a better deposit in Newfoundland at Keats that’s a lot nearer surface then the Swan Deposit at Fosterville.
Now, let me give you some numbers that are pretty staggering. Eric Sprott owned about 15% of Newmarket and he owned, I think, about 6.7% of Kirkland Lake. Kirkland Lake was worth, I think, a billion or a billion and a half dollars. Eric Sprott wanted the two companies to merge. Management of the company was not in favor, but Quinton Hennigh went down to take a look at it and he said, “Look, these guys are onto something big.” They drilled where Quinton said to drill and they hit big time.
When the two companies merged in late 2016 or 2017 perhaps, the total market value of the new company was $2.4 billion. That company, on strength of seven different mines, but the Swan Zone being the premiere, absolutely, is now $16.85 billion and they’ve got the lowest cost of gold production in the world. The Swan Zone, it’s a kilometer deep and the Keats Zone at New Found Gold is about 50 meters deep. So it’s one of those things, there’s a lot of opportunity to make money. The stock has moved 10% today.
Goldfinger: Do you have any concerns about some of the big shareholders in New Found Gold? Some people that got stock at very, very low prices, I’m sure they’re going to be looking to take profits, right?
Bob Moriarty: Actually I don’t think so. I mean, I know them pretty intimately. I said early on that New Found Gold would need 20 holes to prove their theory. And in fact, they have done six or eight or 10 holes so far. It absolutely appears they’re on track. It appears to be everything that I thought it would be and time will tell. Frankly, the shareholders don’t give a shit what I think about how cheap they bought the stock. They bought the stock cheap. Well that’s just tough shit.
Goldfinger: There are a bunch of other companies we could discuss. What do you think of Eagle Plains Resources (TSX-V:EPL). Now, this is a junior that’s been around for a long time, more than 20 years actually. This company has seen multiple cycles in the junior mining sector. There’s a graphic in their presentation that I was taking a look at last week, it basically shows that they’ve created pretty steady value for shareholders over time through spin outs of some of their assets. I’m sure you know the story fairly well.
It’s rare for a junior mining company to generate substantial value over multiple market cycles. We often see, during bear markets, the dilution will really hit hard as it did from 2013 to 2018 and really eat into investor’s capital. But Eagle Plains managed to basically use the bear market to acquire more projects at very good prices, cheap prices. And now they’re starting to sign option agreements to monetize some of those projects. Do you have any thoughts on Eagle Plains?
Bob Moriarty: I absolutely do. First of all, Tim Termuende, the CEO of Eagle Plains, is one of my favorite people. I just think Tim Termuende is wonderful and Barbara would have dumped me in a heartbeat to marry Tim if he had been available. What you say is correct, but to a certain extent, it’s fairly meaningless.
One of the problems of all of the project generator companies is that if you get X value for your primary project, then you get one half X value for the next project and you get a quarter X value for the next project. And by the time you have five or six different projects, you’re getting no value for them whatsoever. Project generator companies are very valuable to the companies they do deals with, but there are so many extraordinary stories out there. New Found Gold, NuLegacy, Timberline, Labrador Gold, Eloro Resources. There are just a hundred brilliant stories out there and more.
And let’s pretend for a minute that I’m an expert. And we’ve got to pretend that because I am not an expert. In the 1970s, there was one stock that went from 25 cents to $400. Okay, that’s going to happen again. Kirkland Lake has gone from $1 to I think $73 a share in the last five years. Now, all you have to do is have one of those in your lifetime and you have made your fortune. There are a hundred companies with Kirkland Lake potential and certainly Eagle Plains is one of them. I love Tim Termuende. I’m just not a big fan of project generators because the market doesn’t really get it.
Goldfinger: And what about GoldON (TSX-V:GLD)? Now, GoldON is also a gold project generator focused mainly in the Red Lake area of Ontario where there’s been some incredible gold mines. There’s been some incredible gold mines throughout history and there’s probably going to be more, including Pure Gold’s Madsen Mine which is set for its first gold pour by the end of 2020. GoldON is about to commence a phase 2 drill program at the company’s West Madsen project, which is adjacent to the Madsen gold mine, which will be the next gold mine in Canada. Do you have any thoughts on GoldON?
Bob Moriarty: GoldON is one of those sleepers that I was just talking about. The structure from West Madsen runs right on to their projects, all I have to do is drill the damn thing. I don’t see any way that they couldn’t hit. I think that they will hit. I talked to them and I bought a bunch of shares. I absolutely believe in that story. There are so many stories now that are just great stories. They’re under the radar, they’re cheap and nobody knows anything about them. Those guys have a $12 million market cap, but they could be $120 million. They’re in the easy 10 bagger or 20 bagger category.
Goldfinger: I want to maybe wrap up talking about market cycles. And I know you really are a big fan of sentiment and cycles and buying low and sentiment is extremely pessimistic and selling high when people are a lot more optimistic. There’s a quote from Howard Marks that might help inform us as to what might be coming in precious metals and that is, “The tendency of people to go to excess will never end. And thus, since those excesses eventually have to end, neither will the occurrence of cycles. And that means investors with the ability to understand cycles will find opportunities for profit.”
So if we assume that during the upswing in the cycle, it will go to an excessive point, does that mean that we’re on the cusp, in the precious metals and mining sectors, on the cusp of that move to euphoria and excessive optimism?
Bob Moriarty: Absolutely. But one of the things, and a lot of people have pointed this out to me, one of the most valuable comments in my book was to learn when to sell. All markets go up and all markets go down and people don’t understand that. And there is a time to buy and that’s when things are cheap. And there is a time sell and that’s when they get expensive. As favorable as I am to gold, it’s going to come a time where people have gone so far overboard that you have to sell or you’re going to lose everything you’ve invested. People are going to turn gold, silver and resource stocks into a giant bubble. You have to learn how to sell.
Goldfinger: And I think that’s a great place to wrap up. Obviously there are a lot of opportunities out there today, especially as we enter tax loss season, which probably goes on for the next four to five weeks. But overall, I think we both agree most of the higher quality junior miners that aren’t down big year to date, aren’t really going to see a whole lot of that tax loss selling. It’s mainly going to be the stocks that have had poor years. And where there’s a lot of overhang, there’s a lot of paper overhang, those stocks could see some tax loss silly season selling. And that might generate some nice buying opportunities for those who put in some stink bids on companies that are perhaps being sold off for uneconomic reasons that don’t have to do with the value of the company itself.
Bob Moriarty: I think tax law selling is always a great opportunity and I have very mixed emotions this year. I was one of the first people to call for correction. And if you recall, you mentioned that I was early, which of course I think is wonderful. You always want to be early calling for a correction. And in the same way that you wrote today and said you think the correction is over, I put out a piece a couple of days ago and I said I was really hoping the correction was going to go on longer and typically those on it till middle of December. But I don’t think it’s going to happen this year. If anybody thinks they’re going to be picking up extraordinary deals in December, I don’t think it’s going to happen. I think right now is when you should be picking up deals.
Goldfinger: Perfect. Great place to wrap up. Thank you for your time. I hope you have a good Thanksgiving and we’ll revisit this next month when hopefully we will have full clarity as to the Presidency.
Bob Moriarty: Well, take my word, Harris can be president a hell of a lot sooner than anybody realizes.
Disclosure: Author owns shares of Eagle Plains Resources and GoldON Resources at the time of publishing and may choose to buy or sell at any time without notice.
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