At a time when there is no shortage of pressing macroeconomic issues and market volatility it’s always worthwhile to have a conversation with 321gold founder Bob Moriarty. In this month’s conversation with Bob we discuss a wide variety of topics including sentiment, the US dollar, inflation, Russia/Ukraine, and a couple of our favorite junior miners with projects in South America. Without further ado, Energy & Gold’s May 2022 conversation with Bob Moriarty…
Goldfinger: It’s good to speak with you today Bob, and there is certainly not a shortage of topics that we can discuss (laughs).
Bob Moriarty:
Let me tell you something. This is going to be a year to remember. Every time I turn around, I see something else happening that is total insanity, and I mean insanity!
Goldfinger:
Yeah, it’s really hard to sift through the daily news and all the information that’s getting thrown at us out of this fire hose of information. I think a good place to start today is sentiment, you’re very focused on sentiment. You really look at sentiment as a student of manias and herd psychology. What do you think about the market sentiment lately? Some of the sentiment survey data shows a lot of pessimism out there.
Bob Moriarty:
You’re correct and most of the time, I believe that markets move up and down in cycles, but randomly. However, since Ukraine started, somebody has been dumping the Japanese yen and bonds, and I think that’s China. So the sentiment in currencies, it’s more extreme than I’ve ever seen. The British pound is down to $1.25, the Euro is down to $1.05. These are extraordinary numbers, which means there’s going to be some big turns in currencies.
EUR/USD (Daily)
Goldfinger:
So that’s interesting, you talk about the yen. So one of the people that’s been selling the yen is the Bank of Japan. The Central Bank has been selling the yen. The dollar index, I think the daily sentiment index is up to 95 or 96.
Bob Moriarty:
It’s at 95 for three days running and that’s the highest I’ve ever seen it.
Goldfinger:
Yeah, that seems really extreme. Are we about to get a top in the dollar?
US Dollar Index (One Year)
Bob Moriarty:
Something is going to break. If you will remember when the Canadian dollar topped $1.05, and this goes back 10 or 15 years, Barrick was doing a deal with NovaGold and they were putting $400 million into this project in northern BC. And they canceled it because their costs were going up so much they just couldn’t afford it. There is so much debt in the world that is denominated in dollars, that something is going to break shortly. Now we did see the Bank of Japan come out a few days ago and say they would buy unlimited Japanese bonds and that’s hyperinflation.
Goldfinger:
So one of the things that you’ve gotten right recently is the big move up in inflation. For the last couple years you’ve been saying that we were going to have really, really high inflation. I wouldn’t call it hyperinflation yet, but really high inflation is what we’re seeing out there. Do you think this is here to last, or are we about to see a peak in inflation? From a sentiment standpoint we are seeing a complete freakout about inflation including a recent Barron’s cover article on inflation a few weeks ago.
You turn on the news, you talk to anybody, they’re talking about inflation, how much their groceries and their gas bills have gone up. From a contrarian standpoint, isn’t that kind of a sign that maybe we’re getting near peak inflation?
Bob Moriarty:
Not necessarily, but will you agree that the PPI precedes increases in core inflation? The PPI comes first.
Goldfinger:
That makes sense, yeah.
Bob Moriarty:
Yeah. The PPI in Norway is up 71% year over year.
Goldfinger:
70%?
Bob Moriarty:
70.9%
Goldfinger:
Well, that’s borderline hyperinflation.
Bob Moriarty:
And I don’t think it’s borderline. I mean, that’s like Brazil or Argentina inflation. What I’m going to say is, and I think I’m going to be right on this, what the United States has set into motion in Ukraine with Russia, and Russia responding to these sanctions, it’s going to be the biggest change in world power and economics in history. We’re going to see things that are just incredible.
Let me read something to you because this is so corrupt. I read it, I went, “God, you got to be kidding me.” The headline says “US asks Germany to hold off on Russian energy sanctions until midterm elections.”
Goldfinger:
I mean, is that a joke?
Bob Moriarty:
No, no, no, it’s real. I’m going, “Are you kidding me?” I mean, how much more corrupt can they be? The Democrats stole the last election. There’s a movie out now showing that there were 1,000 couriers in Philadelphia alone running filled-out votes to drop boxes and they tracked these people using data from their cell phones. And they got hundreds of videos of these guys dropping off 10 or 20 votes at a time, all of which is illegal. In the 2020 election, we had more votes than we had voters, so I mean, the corruption is just unbelievable.
Goldfinger:
Well, let’s go back to the inflation topic, Bob, because I think that’s the one that’s really pertinent for markets today. If inflation stays this high or goes higher, it’s going to be a major negative for pretty much everything except for maybe the dollar index, because what the Fed is going to have to do is they’re going to have to tighten that much more. And obviously inflation, it chews into consumer confidence, it chews into corporate profit margins. It’s just a big negative overall.
So how is this going to play out? I mean, are we going to be at this double-digit inflation for the rest of 2022, or are we going to see it start to curb due to base effects and tightening financial conditions?
Bob Moriarty:
Well, I’m going to agree with you when you were talking about that magazine article talking about inflation. By the time people wake up to inflation, or when they wake up to anything, most of the time it’s about to turn and certainly the dollar appears to turn. However, the forces in motion are so enormous that no one can really predict with great accuracy anything other than the shit’s about to hit the fan. Now, do you have any idea of how much currency, foreign currency, what the total currency trade is per day?
Goldfinger:
$500 billion?
Bob Moriarty:
$4.2 trillion.
The forces that are in play are just absolutely terrifying. Is the Fed going to respond to the Dow going down 1,000 points by opening the spigots? Are they really going to tighten to stop from having 10% interest rates? And the answer is, I don’t know. I just know there’s chaos on the horizon.
Goldfinger:
Okay, we had a little chaos, but definitely when Russia invaded Ukraine in late February, there was quite a bit of chaos. We saw gold reach almost $2,100 an ounce, but now it’s back under $1,900. Now, is this a buying opportunity in gold, this $200 drop, or is this a sign of trouble that gold could not stay above $2,000, yet again?
We had a peak above $2,000 in August 2020. That proved to be a major top. We just had a move above $2,000. We’re already down $200 from there. Is this a double top in gold?
Gold (Monthly – 10 Years)
Bob Moriarty:
Here’s the problem with that. When you talk about the price of gold, you have to determine exactly what it is you’re talking about. Now, if you go back to the gold and silver market back in 2008, when the stock market was crashing, it took gold with it. And that’s perfectly rational because everybody was getting margin calls and they were selling off everything that they could possibly sell off and gold happened to be one of them.
I don’t look at that as a problem. I looked at that as an opportunity, so it doesn’t concern me. I mean, literally 10 minutes ago, I bought a 1,000-ounce silver bar for $23.50 an ounce. And I consider that a safe and a pretty good investment. But we’re going to see chaos in gold, not because of gold. We’re going to see chaos in gold because of the general stock market.
Goldfinger:
Silver is really interesting because it’s been so range-bound. And so many of the silver bulls out there seem to be so passionate about their theory that silver has to go a lot higher and that the price of silver is being suppressed. But meanwhile, the only price you can trade on the exchange or through your local dealer is the market price, the spot price. And just like you said, you bought a 1,000-ounce silver bar at $23.50 per ounce, that’s the price.
That’s the price today, and every time it’s gone up to $27 or $28 in the last couple of years, it’s quickly come back down. What’s your view on silver and do you think that the price is being held down by central banks or J.P. Morgan or what have you?
Silver (Weekly – 5 Year)
Bob Moriarty:
Well, that’s really interesting because every time I do an interview and I’d say that all markets are manipulated, people come back and say, “Well, you don’t believe silver is manipulated.” All markets are manipulated. They’re manipulated all of the time and it’s no big deal. We know interest rates are manipulated. The stock market is probably manipulated. Currencies are absolutely manipulated.
So who gives a shit if they’re manipulating silver? But at the end of the day, you can always use facts and logic to determine what’s happening. I’m going to ask you a question. It’s not a trick question. Silver got to $4.02 or $4.03 in November of 2001 and that’s a fact. It went to $49, I think $49.83, in April of 2011. So it went from four bucks to nearly fifty. Was it suppressed?
Goldfinger:
No.
Bob Moriarty:
Thank you.
Goldfinger:
Another aspect of the market that you’ve been right about in the last year or so is the revenge of the miners and the return to natural resources. I remember we were talking, I think it was probably almost exactly a year ago. And you said that what we’re going to see is this transition from crypto and meme stocks and all this bullshit ponzi finance to hard assets and natural resources. And actually we’ve really seen that in 2022. Energy and natural resources have been the best performing sectors.
Obviously many of the stocks in these sectors were a lot higher a month ago, but the fact is that everything has had a rough year in 2022 so far, and natural resources like oil and agriculture and metals have done better than most. Do you see this correction we’ve had the past couple weeks as just a pullback, a little shake-out in the context of a secular bull market, or is this something to worry about with the natural resources trade?
Bob Moriarty:
Okay, that is again a really good question. If you go back to the crash of 1929, in a major market crash, and that certainly was. I think we’re going to have the same thing. I think we’re going through the same thing right now. Everything gets hurt, okay? I don’t care how you are invested. Nobody is smart enough to catch every turn. And what you’re really trying to do is get hurt as little as possible.
And people are always saying, “Well, what do you think gold’s going to do? What do think silver’s going to do?” And my answer is always the same. We’re making a transition from a debt-based system that backs our currency with Monopoly money to a resource-based system where resources have some value. I think that in 1980 something like 3.5% of total money invested in stocks was in resources and that’s very low.
And it’s .5% now. The US debt-based system where you fire up the printing press every time you want to earn some votes, it’s over. And people haven’t figured that out yet, but it’s over and we’re going to go to a resource-based economy thanks to the sanctions on Russia.
Goldfinger:
That’s a really interesting concept, a resource-based economy. So let’s talk about the US, for example. So the US has a wealth of natural resources. We have huge reserves of oil, natural gas. Obviously there’s a lot of farmland in the middle of the country. We don’t do too well in the mining aspect of things, though. The US has one mine that produces nickel, only one in the entire country, and that’s about to run out of ore in the next few years.
There’s some massive copper deposits in Alaska, but they face a lot of opposition from environmentalists. How is this going to play out? I mean, if we’re going to have a natural resource-based economy, but we don’t generate any natural resources, how’s that going to work?
Bob Moriarty:
If we maintain the steady course that Biden and the Democrats have put us on, the United States will become a Third World power. If you remember, Biden just killed the Keystone Pipeline. He restricted drilling for oil on federal land, even though he’s changed that and he’s kind of opened it up. But that’s not going to have any effect for two to three years.
The leadership, and I use that term in the loosest possible meaning, the leadership in the United States is corrupt, stupid and they’re absolutely on the wrong path. And they’re trying to turn the US into a Third World nation. Now, what I’m saying is we’re not going to have a resource-based economy. We’re going to have resource-based money. China and Russia have been collecting gold for years and I’m certain they’re in collusion.
And they looked at the United States and said, “The United States is trying to destroy both of us economically. We need to come up with something better.” And as soon as they insisted that energy be paid for in roubles and they would buy gold for roubles, we just went to a gold standard. And nobody has figured it out yet, but that’s what the end of the day will bring where the price of oil and the price of gold determine the value of the currency.
Goldfinger:
That’s really interesting and I think we’re seeing that now. I mean, the sanctions that have been put in place against Russia are incredibly far-reaching, the biggest sanctions that I’ve seen in my life. I mean, I guess maybe ever, to be totally honest. I mean, these are very, very far-reaching sanctions that affect how world trade is happening.
One thing that’s interesting is when the sanctions first started to be put in place in early March, we saw the rouble drop as low as 160 against the US dollar. Well, that turned out to be one of the greatest foreign currency trading opportunities ever, because now the rouble is 71 against the dollar. So anybody that took their dollars and swapped them for roubles at 160 has more than doubled their money since then. I mean, how do you explain the rouble strength that’s actually gone up since the war in Ukraine started in the face of all of these sanctions?
Bob Moriarty:
Well, the interesting thing is that I think you’re making a mistake because you’re assuming sanctions hurt the parties that the sanctions are put on. Actually the opposite is true. These sanctions are incredibly destructive to Europe and probably will destroy the EU. Russia literally stopped shipping natural gas to Poland and Bulgaria a couple of days ago because they wouldn’t pay in roubles.
Some of the things they’ve done with sanctions are so illegal I am absolutely staggered. Now let’s pretend for a minute you’re wealthy, you make a lot of money and you buy a $400 million yacht. And you’ve got it sitting in Cyprus, and Bulgaria decides they want to seize your yacht, so they do. Now, what’s the legal basis for that and what is the difference between France seizing a yacht or the UK seizing a yacht or Singapore seizing a yacht or the US? I mean, this has never happened in history. We just took the international law books and put them through the shredder.
Once you go down that path, how do you go back? I believe the Ukraine war’s going to end shortly. How do you undo the sanctions? And the sanctions are hurting the US and sanctions are hurting Europe a hell of a lot more than they’re hurting Russia.
Goldfinger:
Yeah, it’s actually a really interesting topic because we don’t agree on this topic of Russia/Ukraine. I know that you’re generally sympathetic towards Russia and Putin, and I think this is an absolute war crime that’s taken place over there. I’m not pro-Russia at all. I think they’re the biggest threat in the world today, the worst threat the world’s faced since Nazi Germany. However, I do agree with you that the way that the West has responded in terms of seizure of assets, both for private individuals and the Russian government is absolutely unprecedented.
And it’s a very slippery slope that these Western governments, whether it’s France or Italy, Germany, the US, are unilaterally seizing assets with no due process, no guilt proven in a court of law. It just basically proves that governments can do whatever they want whenever they feel like it and there really is no freedom out there. It’s a very, very dangerous thing. And while I don’t agree with the Russian oligarchs, I don’t support these guys, but still they should have an opportunity to due process and go through a justice system.
Bob Moriarty:
I think it’s actually worse than that. When sporting events will not let Russians compete or musical venues will not play Russian music, it’s gotten to the point of absolute absurdity. And what I will point out is the amount of propaganda, that we are being deluged with propaganda saying, “So Putin bad, Ukraine good and people are believing things that are just simply insane.
Okay, if I was Germany, I would look at what Putin wants and say, “Gee, is it reasonable for Putin to want secure borders in exactly the same way that John F. Kennedy did in 1962?” And I would conclude, “Yeah, that’s probably reasonable, so why don’t we try to get along with them?” The United States and Germany and Poland, and the UK and France, have been sending troops and arms into Ukraine and those are all acts of war. Russia didn’t start this war, the US and NATO did and they are doing everything in their power to prolong it.
Let me point something out that to the best of my knowledge, nobody else has pointed out, and it’s the first thing people should think about. Regardless of whether you like Putin or not, or whether you like Zelensky or not, let’s pretend Ukraine defeats Russia in a military conflict. What is the last thing Russia does before they accept the fact they’ve been defeated?
Goldfinger:
I think it’s a complex conversation. I think that Russia is going to lose, just like the US lost in Afghanistan and just like the Soviets lost in Afghanistan. They’re going to lose because an invading, colonizing force always eventually loses on foreign soil. It’s just how war goes and there’s no winner. There’s no winner in a war just like Vietnam. Yeah, the US killed millions of Vietnamese, but they didn’t win the war. And even you could say, “Well, Vietnam made the US leave,” but the toll, the cost of the war, was absolutely enormous. So I don’t think there’s any winner or loser here. I mean, I think everybody loses.
Bob Moriarty:
But you’re making my point for me. When you attack your next door neighbor, who has a nuclear weapon, how do you defeat him? And the answer is, “You can’t, because the very last thing he’s going to do is push a little red button.” We are threatening World War 3 and to the extent that the United States created this war, the United States wants this war. The United States giving military aid to Ukraine. Remember the pride of the Black Sea fleet of Russia?
Either the US or France provided the targeting information to allow the Ukrainians to sink the ship. You think that didn’t piss the Russians off? You need to rethink. The United States getting targeting information to the Ukrainians that shoot down a Russian aircraft with hundreds of paratroopers on board, the United States is doing things that are so dangerous I can’t believe the stupidity.
And here’s the problem. Russia asking for secure borders is absolutely reasonable. Russia insisting the United States honor the agreement they made 30 years ago to not expand NATO is reasonable. Russia insisted Ukraine adhere to Minsk II, which Ukraine signed, Russia signed, France signed, the US signed, and Ukraine refused to do it. You can dislike Putin all you want to, but he had absolutely legal justification for going to war. If John F. Kennedy had been told by the Soviet Union, “We’re not going to take the missiles out of Cuba,” he would’ve invaded Cuba.
Goldfinger:
Yeah, this is a very, very deep, far-reaching conversation. I don’t think that we’re going to get to all of it today. I want to move to junior mining before we wrap up.
Let’s go to South America for a moment. There’s two companies that I want to talk about, both of which we follow. I think you’re a shareholder of both. One is Eloro Resources (TSX-V:ELO, OTC:ELRRF) and the other one is Libero Copper (TSX-V:ELO, OTC:LBCMF). We got news from both companies in the last week. Both companies announced results from drilling.
With Eloro, they continued to prove out a very large resource. I know we’re going to get a maiden resource estimate from Eloro in the next couple of months. I think it’s going to be very large, but perhaps something that’s even more interesting is they’ve been drilling in the southern portion of the project, exploring for this potential tin porphyry. Do you have any comments on Eloro and the news that they put out recently?
Bob Moriarty:
Eloro keeps coming out with incredible world-class news and they have not got credit for it. Tin, and I think you’ve sent out a piece today talking about a tin project, tin is in exceptionally short supply, and it’s a commodity that China doesn’t control. So finding a tin porphyry, and I think they’ve already found a tin porphyry, is going to be incredibly valuable.
I am very close to the company and obviously I’m very close to Quinton Hennigh. I’ve got a big position in Eloro and I think they’re going to end up with two billion tons of $100 rock. And if you add that up, that’s $200 billion worth of minerals in the ground. The question mark has to be resource nationalization. Okay, how much danger is there in Bolivia? And strangely enough, because the project’s so big, I don’t think there’s any danger because that’s going to be a major contributor to taxes to Bolivia. So I think it’s going to be a home run.
Goldfinger:
Yeah, and I know that they’ve drilled five holes at the Porco target in the southern portion of the Iska Iska project. And those assays are pending, so I’m really looking forward to those results. And maybe if we get some, if they can pull out some multi 100-meter intercepts of 2% tin, then I think we’re looking at a double digit share price here for ELO.
So finally, let’s wrap up with Libero. This is a company that announced a pretty good intercept, 840 meters of .72% copper equivalent. And by the way, this is the first hole they’ve drilled at the Mocoa project since acquiring it a few years ago. Mocoa has an existing resource of 4.6 billion pounds of copper and more than 500 million pounds of molybdenum. Do you have any comments on Libero?
LBC.V (Daily)
Bob Moriarty:
Again, I think the only issue there is the sovereign risk issue. The results were absolutely incredible and to give them all the credit in the world, to do that on the first hole is nothing short of remarkable. It’s a good company, you wrote it up. Everybody had a chance to make some money and for some strange reason, there’s been a big selloff in its stock. But when you’ve got 1200 meters of economic copper, you’ve got a mine. It’s going to go a lot higher. They’ve got a market cap right now of about $40 million, and that’s just absurd.
Goldfinger:
Yeah, I totally agree with your comments, Bob. I think that obviously, if there was a clear path to permitting and there was no sovereign risk, both of these stocks would be trading a hell of a lot higher. And so we’ll just have to see how these companies are able to advance both projects. But in a world where we need more copper than ever, and there’s going to be supply shortfalls very soon, and where we need tin and we need other base metals, so-called battery metals, the economics of projects like Mocoa and Iska Iska could be really compelling.
And at the end of the day, I think that responsible mining companies and the strong economics of the projects will speak and people will choose to increase high-paying labor opportunities and the wealth of the regions where the projects are located.
Thanks for your time today Bob, and I’m sure we will speak again soon.
Bob Moriarty:
Okay, very good. I love both of those companies and I think they have both done a great job.
Disclosure: Author owns ELO.V and LBC.V shares at the time of publishing and may choose to buy or sell at any time without notice
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