The last time we caught up with 321gold founder Bob Moriarty on July 25th he said that silver was near a bottom but gold could have further to fall. As it turned out both gold and silver turned higher in the final days of July and rallied into early August. However, those gains have since evaporated and silver is plumbing new 52-week lows below $18/oz while gold is struggling to hold above the $1700 level. Naturally, mining stocks have also increasingly moved out of favor among investors and just when it seems like sentiment in the sector can’t get any worse, it does.
In this month’s conversation with Bob we broach a wide variety of topics including precious metals sentiment, Russia/Ukraine, the European/global energy crisis, China/Taiwan, and we conclude by discussing a little known junior exploration company that has just commenced an intriguing drill program at a gold/silver project in Nevada. Without further ado, Energy & Gold’s August 2022 conversation with Bob Moriarty…
Goldfinger:
Bob, It’s an eventful time to be a human being on Planet Earth and it’s a pleasure to speak with you again. Let’s begin with precious metals and the really negative sentiment we’re seeing. Normally towards the end of August gold, silver and mining stocks get a bit of a lift. That is definitely not the case this year. And actually for the last three years, it’s not been the case. The last three years since 2020, the end of August has not been good for precious metals. What are you seeing out there in terms of sentiment in gold and silver Bob?
Bob Moriarty:
Well, as you are well aware I track a variety of things that measure sentiment. But the one that I give the most credibility to, and your timing on this is perfect. We’re doing this conversation on Wednesday and as of Tuesday, the DSI for gold was 11, and it was 9 for silver. Silver’s down about 2% today. Gold’s down a few dollars. So certainly the DSI for silver will go lower and it could go lower for gold. Anything below 10 tends to, it will always mark a major bottom. Now, if it went down to say 6 or 7, that would just be a screaming opportunity. So I happen to believe we’re days or minutes away from a major low.
Goldfinger:
What time frame are you talking about? A couple weeks or a couple days?
Bob Moriarty:
It literally could be today or it could be within the next week. I don’t see it going much beyond that.
Goldfinger:
This is a really interesting situation because it is exceptionally rare to see the DSI for both gold and silver fall below 10 simultaneously. There are so many indicators lining up simultaneously that are pointing to an overbearish sentiment extreme. I want to mention a few things that add some weight to the idea a low in precious metals could be imminent. The futures commitment of traders data, the CoTs, as of last Tuesday, shows that commercial traders have covered almost their entire net short position in silver futures. And then looking at the open interest in precious metals futures, it has fallen significantly. The open interest has fallen substantially in the last several months.
So, that is typically indicative of getting near a low in price. The COT is certainly not an exact market timing tool, however, when commercials have covered all their shorts it is a very strong sign that a bottom is very close, let’s say within a few weeks. When you see these sorts of extremes in the futures data with the commercials covering almost their entire short position in silver, that’s a pretty good sign that the bottom is pretty close. And then add that to what you just said about the sentiment data, including a post by Tom McClellan pointing out the extreme discount in the Sprott Physical Gold Trust.
Things are lining up here and silver is floundering around just under $18 an ounce as we speak. There is a layer of major long term support/resistance here in the $17-$18 area in silver.
Silver (Monthly – 20 Year)
But obviously everybody is worried about the Fed, more rate hikes coming, and tough talk from Powell last Friday including his use of the word “pain”. If the Fed continues hiking to above 4% on Fed Funds it could literally blow everything up, including precious metals. I know you’re not a big fan of following the Fed, but does it matter at all that they’re saying they’re going to keep hiking rates?
Bob Moriarty:
Let’s go back to DSI for a minute. Do you remember when the last major bottom was? Now, ignore 2020, because that was an aberration because of COVID. But when was the last time there was a major bottom in gold and silver?
Goldfinger:
Well, there are two inflection points that stand out to me: September 2018 and January 2016.
Bob Moriarty:
The really big one was December 2015/January 2016. There was about a 600% advance in the gold indexes from January 2016 to August 2016. Now, I’m sitting looking at the DSI data going back there. And if you go back to December 10th of 2015, we had virtually the same DSI numbers that we’ve got today. And it came back and it retested those lows about five weeks later. But from mid January of 2016, until August of 2016 went 600% increase in the indexes. There were a lot of stocks that were up tenfold. That’s going to happen again. Now, we had what I called a tradable low, and I wrote about on July 7th. I think this is the retest of that low. And I think we’re going to have a major advance from here.
GDXJ (November 2015 – August 2016)
But now what I can predict, and I totally ignore the Fed, the Fed is so clueless. I can give you a good analogy. It’s like talking to a priest about sex. What do they know about it? And the Fed’s utterly clueless. I think there’s a really good chance they will increase interest rates at the end of September. And I am terrified for the next three or four months. We’re going to have the crash of a lifetime. We do want to discuss Europe. Europe’s totally screwed. And I mean, screwed like nobody’s ever dreamed of. There are going to be countries in revolution by December in Europe due to the cost of fuel and a lack of fuel.
Goldfinger:
It’s interesting. I just made a tweet. Let me read it to you: “It’s interesting for me to notice that many of the same guys who profess to be contrarians are also the same ones who are saying that Europe is heading into a depression and saying to short the Euro and European stocks.” However, the headlines, everywhere I look, whether it’s on Bloomberg, it’s on CNBC, it’s on ZeroHedge, It’s on 321gold, it’s everywhere. Everyone is talking about this European energy crisis and how Europe is screwed and the eurozone won’t make it through the winter. So how is being bearish on Europe a contrarian call here?
Bob Moriarty:
The interesting thing is understanding the difference between a subjective argument and an objective argument. The price of gold is subjective. Do you agree?
Goldfinger:
Subjective? There’s a market price. That’s it, there’s one price.
Bob Moriarty:
Yeah, but here’s the deal, that’s objective because you’re talking about the price today. But if you’re talking about the price of gold tomorrow, it’s your opinion, that’s subjective.
Goldfinger:
Well, that’s a forecast, yeah. Well yeah, that’s a forecast. So a forecast is an opinion. It’s a speculation.
Bob Moriarty:
Exactly, when you’re talking about something like Europe being short of gas and energy and coal, that’s actually objective. That’s not a subjective point of view. That’s absolutely objective. The Russians shut down Nord Stream today. And that means Germany that gets 55% of their energy from Russia in natural gas, and Europe that gets 40% of their natural gas from Russia, they’re screwed.
Now, here’s an important concept that very few people understand. I’m a pilot, so I tend to think in pilot terms. When you’re in a jet aircraft and you’re going to take off from a particular runway, you have a go/no-go point. And that go/no-go point is something that every pilot, every commercial pilot has to know. You get to a certain point and you are absolutely committed to take off because you can no longer stop the airplane. I believe the go/no-go point for Germany is September 1st. If they don’t have natural gas locked up and in storage by September 1st, they’re screwed. They are going to be shutting down factories. The price of electricity and natural gas in the UK and France and Germany is up a thousand percent in the last year.
Now, that’s not subjective. It’s not my opinion that it’s gone up. That is a fact. And you can look it up just like you look up today’s price of gold. How many countries can afford a thousand percent increase in the price of fuel? And I’m going to tell you none, nobody. So there ‘s going to be a crisis like we’ve never had before, very soon. I mean, Americans are complaining because the price of gasoline doubled. In the UK, the UK government, it’s already said the price of electricity goes up at 80%, October 1st. And I’m sorry, that it’s not subjective. It’s not my opinion. That’s objective and that’s enough to destroy their economy.
Goldfinger:
So, you’ve been around a while to say the least, and I’m starting to feel like an old gray beard myself lately.
Bob Moriarty:
You’re being very kind. I’m an old fart.
Goldfinger:
I’m starting to feel like an old gray beard as well. I feel like everything is happening at hyperspeed in the last few years and one year in today’s market is like a decade in the market of 30-40 years ago. We hear about crises every year now it seems, there’s some new potential crisis brewing. Usually they don’t turn out to be an actual crisis. I mean, you name it, there was an ebola crisis supposedly in 2014. There was a eurozone financial meltdown in 2011. We had a VIX armageddon in 2018. Every few years there’s a new crisis to worry about. Only one or two times in my market experience did it actually prove to be a real crisis. 2008 is the one that stands out. And that was a crisis that started slowly and gradually, we knew there was a housing problem for two years prior to Lehman. And it was a slowly evolving crisis then finally evolved into a violent full-blown meltdown.
But most of the time, the crisis that everyone is talking about doesn’t actually turn out to be a crisis. It’s the one that nobody sees coming that you have to really worry about. COVID interestingly enough was a major crisis for a few months, but as it turned out some of the government ‘solutions’ turned out to be worse than the actual disease. In February/March 2020, everybody was scared to death. And as it turned out that was actually a great time to buy stocks, and precious metals.
So with the Eurozone energy crisis, what’s to say that they won’t find some way to fix this? They’ll find a way to harness other forms of energy such as coal, LNG, nuclear etc. Maybe they’ll buy natural gas from somewhere else. I just read an article on ZeroHedge saying that the Chinese are buying Russian gas, converting it to LNG and shipping it to Europe. So what’s to say that they won’t figure out a way around this?
Bob Moriarty:
Oh, that’s an excellent, excellent question. And let me explain something that your readers will understand right away. You essentially have two different narratives. You’ve got the narrative from the World Economic Forum, from NATO, from the United States, from the governments. And then you’ve got the narrative from the independent people on the web. Now, yes, in March of 2020, the narrative from the governments was 100% a lie. The 15 days to flatten the curve was a lie. The lockdowns were a lie. The masks were a lie. Fauci had five different definitions of mask. You don’t need a mask. You do need a mask. You need a mask and a face shield. No, you need two masks or three masks because more is better. Or no, you only need one mask. So basically, “follow the science” in government terms means everything the government tells you, everything the media tells you is an absolute lie.
Now, two years ago, I was saying there would never be an effective vaccine for a very simple reason. Viruses mutate. You cannot have a virus like the common cold, which is a COVID. There’s no vaccine against it because it changes. This year’s cold it’s not the same as last year’s cold. Now, ordinary people are writing about it and saying the masks don’t work. And now the CDC admits the masks don’t work. The PCR test didn’t work. And now the CDC says the PCR test didn’t work. And today, do you know what the NIH had to say about Ivermectin?
Goldfinger:
No, I didn’t see that.
Bob Moriarty:
It’s on their approved list.
Goldfinger:
That’s surprising, even though I saw a study that concluded ivermectin is effective in preventing severe disease in covid patients.
Bob Moriarty:
So the guys who were taking the counterparty to the government narrative and the counterparty to the mainstream media were absolutely correct. And the mainstream media and the governments were absolutely wrong. Now, let me read a title for you. “The US, EU and NATO Just Committed Suicide.” Do you have any idea of who wrote that and when that’s written?
Goldfinger:
You wrote it last year.
Bob Moriarty:
I wrote it March 1st of 2022. And I believe I was the first person in the world to write about Europe committing suicide. And the strange thing is lots of people now recognize Europe has committed suicide. Now, some of these things, what happens with natural gas is the peak usage is in wintertime. And by springtime, they’re at the lowest in storage facilities. And then they fill up from March or April until September. And they’re at their peak in November. And the natural gas isn’t there today. But here’s the key. I’m saying Germany is going to collapse. Now, can you recognize how obvious it is that there are two different ways you can collapse with natural gas?
One way that you can collapse is if natural gas is required for 55% of your usage and you do not have any natural gas.
The other way is when it costs a lot more. How about 10 times as much? Are you familiar with the term Hobson’s choice?
Goldfinger:
I’ve heard you mention it before, but why don’t you refresh our memory?
Bob Moriarty:
Okay. Hobson was an innkeeper in Cambridge in the early 17th century. And of course Cambridge was a university, and the kids going to university had money and wanted to visit mom in London. So they would rent horses from Hobson. And Hobson realized that a quarter of his horses were being overused and three-quarters of his horses, there wasn’t very much demand for. So he said, “Okay, screw this. When you show up and you want a horse, you get the horse nearest the door.” So Hobson’s choice is a choice between two bad alternatives. One is, you get a plow horse when you want to run a race. And the other is you don’t get a horse at all.
So literally Germany has Hobson’s choice and their choice is, do they starve to death this year because of the cost of natural gas or they freeze to death because there isn’t any natural gas available? But it’s not my opinion that they have Hobson’s choice. There’s absolutely no bones about it. And even the example that you showed, I mean, it goes without saying if Russia ships natural gas to China, and China liquifies it, and sends it to Europe, the price is going to be a hell of a lot higher. And in fact, if you go to the forward contracts on natural gas in Europe, it is 10 times higher than what it was two years ago. And that is a catastrophe. There is no country in Europe that can handle that.
Goldfinger:
So I hear what you’re saying. But looking at the glass half full, it seems to me that this crisis is going to cause positive change for the long run. And I see a big shift of public opinion towards nuclear energy. And Germany still has three nuclear power plants that are operational. And if they simply got their heads out of their asses, they could ramp those up and not try to shut them down. That would solve part of the energy problem. And then ironically enough, they can just burn a ton of coal. As horrible as that is for the environment and as big of a step backwards that is, considering they’re talking about ESG. But when the choice is to either, go broke and sink the economy into depression, freeze to death, or burn coal and use nuclear energy. I have a feeling they’re going to choose the latter. I believe this energy crisis is hugely positive for nuclear energy and the uranium mining sector.
Global X Uranium ETF (Weekly)
Bob Moriarty:
No, they’re not. Where do you think they get their coal?
Goldfinger:
There’s plenty of coal in Europe.
Bob Moriarty:
There is, but it’s a low grade coal. In Poland, literally the coal only has half the BTUs that they’ve got in the coal from Russia. And literally they’re going to partial power. Germany’s doing the same thing. This already, we’re not even in fall yet. And these guys are already cutting back on electricity. You’re absolutely correct. Germany does have nuclear power. They should turn those plants back on. But you’re missing the pimple right on the end of your nose. Is there an energy crisis? Is there a shortage of energy?
Goldfinger:
There appears to be a shortage, but we have the technology and resources to solve this problem. There’s a shortage of political will. There is enough energy, for sure. However, there are terrible policy decisions that are creating a crisis when there doesn’t need to be one.
Bob Moriarty:
Yeah, exactly. I mean, here’s what’s crazy. Why isn’t Nord Stream working? Why isn’t Nord Stream 2 working? Because the United States put sanctions on Russia for doing something that was 100% reasonable. Russia said we want secure borders. We want the United States to honor the agreement they made in writing 30 years ago. And we want the Ukrainian government to honor the agreement that they made in Minsk II. Now you and I discussed the United States agreement. You argued that there was nothing in writing and I’d sent you a piece a few days ago and showed you there were half a dozen examples where clearly the United States had said they were not going to move NATO one inch to the east.
Now, the United States lied and you Ukraine lied and everybody’s making a bad guy of Russia. Russia is doing what the United States refuses to do. We’ve got millions of illegal immigrants crossing the border because Biden doesn’t give a shit about secure borders. Now, that is simply insane. Now, if you go back to April, Ukraine and Russia were about to sign an agreement that would restore the borders to what they were prior to the war. And that Russia would be given unequivocal legal guarantees that Ukraine would never join NATO. Do you have any idea why they didn’t do that?
Goldfinger:
No.
Bob Moriarty:
Boris Johnson went to Zelensky and said, “No, no, no, you don’t want to do that. You want to keep fighting? You’ve still got soldiers alive. And until you kill them all, you don’t want peace.” Can you name a single European leader or a worldwide leader who is actually suggesting that there be negotiations and we’d be aiming for peace? Everybody wants more war. They don’t want more peace.
Goldfinger:
Yes, at the end of the day, the first agreement where Ukraine gave up its nuclear weapons in the mid-90s, Bill Clinton signed an agreement that ensured Ukraine’s sovereignty and security. So in return for handing over the nuclear weapons and no longer being a nuclear power, which I believe in the mid-90s, Ukraine still had like 50 nukes. They were assured by the United States and Russia that they had sovereignty and security.
Bob Moriarty:
I agree.
Goldfinger:
By invading Crimea in 2014 and infringing upon Ukraine’s territorial integrity and sovereignty, Russia voided the agreement.
Bob Moriarty:
You totally ignored what I sent you saying the United States agreed that NATO would not expand one inch to the east. They did. And yes, Bill Clinton absolutely guaranteed Ukrainian sovereignty. And then the United States spent $5 billion in an illegal coup d’état to overthrow the democratically elected government of Ukraine in 2014. So when Minsk II came about, actually from 2014 until February of this year, the Ukrainians were shelling Donbas. And Donbas did exactly what Ukraine did, they fought an illegal government put in place by the US. They said, “We’re going to change it.”
Goldfinger:
I believe it comes down to a country’s sovereignty. Sovereignty. And a right to choose their own destiny without meddling and influence by other more powerful countries.
And so you’re saying it’s okay for Russia. It’s okay for Russia to invade a sovereign country and kill people in the thousands.
Bob Moriarty:
But it was okay for Ukraine to do that.
Goldfinger:
Ukraine didn’t do anything. It’s their territory, Bob.
Bob Moriarty:
So when Ukraine kills 14,000 Ukrainians in Donbas, that’s okay?
Goldfinger:
Russia orchestrated the fracture of Ukrainian territory in 2014, and then moved in weapons, mercenaries, and even members of Russian armed forces that weren’t in regular uniforms. It is ridiculous that you’re arguing that Ukraine is in the wrong for defending its own country. It’d be like, if the US invaded some South American countries and said, “You’re a threat because you’re getting closer to China and Russia. So it’s okay if we invade you and kill your people,” right? It’d be the same thing.
Bob Moriarty:
Oh, we do that.
Goldfinger:
No, we’re not invading South America.
Bob Moriarty:
We did it in Iraq. I give it to Iran. We did it to Syria. We did it to Afghanistan.
Goldfinger:
So Iraq was an illegal invasion, and I agree with you on that. That was an illegal and criminal invasion that should have never been done. But two wrongs don’t make a right.
We’re not going to agree on Ukraine and that’s fine. But if you think about the country of Russia and the West, we can say all the negative things we want about our governments here in the West. How we don’t like Biden, or Trump, or Trudeau. But at the end of the day, in Russia, if you speak out against Putin, if you attempt to protest peacefully and express a different opinion, you are arrested. You might even be beaten and tortured. You might even be killed.
I recently had the opportunity to speak with several younger Russians, and they have fled Russia to the EU because of lack of freedoms and few employment opportunities. Things are not good in Russia and so they are living in Europe instead.
Bob Moriarty:
Can we agree that that’s wrong? Russia should not be imprisoning people for peaceful protest.
Goldfinger:
Yeah, but they are. And Russia has always had this policy while Putin has been in power.
Bob Moriarty:
When you start eliminating political parties, when you start locking people up, when you start making up evidence, when you start beating people, torturing and killing them, that’s wrong. It’s wrong for Russia. It’s certainly wrong for the United States, but you ignore Ukraine. Now, when Ukraine does exactly the same thing that you’re accusing Putin of, is that okay?
Goldfinger:
No, it’s not okay. But I also don’t know what it’s like to be at war with Russia and have my country invaded. And so desperate times call for desperate measures. Ukraine is fighting for its survival.
Bob Moriarty:
They were doing that before the invasion. There were outlying political parties. They were beating up the opposition. They were torturing people. They’ve been torturing people in Ukraine since 1945, actually prior to 1945.
Goldfinger:
Well, it seems that all countries torture people. The CIA, Russia, China. Everyone does it, right?
Bob Moriarty:
And I am dead set against it. And I don’t give a shit who it is. Whether it’s Russia, whether it’s Ukraine, whether it’s the CIA, FBI, the United States, it is wrong. And it is outlawed and it is illegal. And those laws should be enforced.
Goldfinger:
So my point is this. At the end of the day, at least here in the United States, I can speak freely. I can write my thoughts and my opinions. I can choose to do what I want during the day as long as it’s legal and I’m not hurting anybody else. I have some degree of freedom. I may be losing a lot of my privacy every single day, but that’s happening everywhere in the world.
At least I have some degree of freedom here, I can peacefully protest if I don’t like something that is happening. I don’t have to wear a mask. Government officials aren’t locking me in a hotel room for 24 days until I have 5 negative COVID tests in a row. So we have it pretty damn good here, and I am grateful for that. I am proud to be American, even if the United States isn’t perfect. And Russians and Chinese don’t have it as good. I prefer to support countries that promote freedom of speech and freedom of individual rights, and to not support the governments of countries that suppress freedom. And Russia is one of the biggest violators of human rights in the world today.
Bob Moriarty:
So you’re against Australia locking up people. You’re against New Zealand locking up people. You’re against the United States not allowing free speech on social media.
Goldfinger:
I was appalled by what New Zealand and Australia did during covid.
Bob Moriarty:
We’ve gone so far overboard. We’ve got the FBI up now invading the home of a former president. And what’s most ironic about that is let’s presume everything the government says in their narrative was correct. And Trump was a bad guy and he took stuff that he shouldn’t have taken. In fact, the most important thing that’ll tell you who the bad people are was, the FBI used agents who were part of the Russiagate conspiracy against Donald Trump. They used them in the invasion. I just went, “This is unbelievable.” That’s something out of the Gestapo or the NKVD. So we’ve moved a lot closer to Russia or Ukraine than anybody ever imagined. But has the United States forced people into lockdowns? Yes. Have they eliminated freedom of speech in social media? Yes. Try riding a train or an airplane without a mask, you can’t do it. But we know now after two years that masks don’t work. The whole COVID thing, I mean, we’re starting to understand that the whole COVID fear porn has destroyed the world’s economy.
And my point about Russia/Ukraine is that there is no shortage of energy. All Europe would have to do is say, look, wanting to secure borders, wanting countries to honor their agreements is a reasonable thing to ask for. And I know you don’t agree with that. But Russia has a right to secure borders and that’s actually a legal right in international law. And there’s no question about it, the United States lied about bringing NATO one inch to the east. And in writing last March, I said, the United States, the EU and NATO are committing suicide. And we’re seeing it take place now.
Let’s get back to the stock market. The stock market is going to crash because we’ve got the biggest financial change in world’s history happening right now. We’re going to get away from a debt-based system and go to a commodity real-world system.
Goldfinger:
So is there any way to profit and/or hedge oneself from an energy perspective here? I mean, if you’re saying the stock market’s going to crash, if this is like a 2008 type of meltdown then everything’s going to fall, and there’s really no way to profit from it on the long side. But it seems to me that there must be some winner from this energy crisis. We’re seeing the uranium sector outperform big time in August. We’re seeing fertilizer stocks do well. Is there anywhere to hide here?
Bob Moriarty:
Well, and that’s an excellent way of putting it. And the answer is yes and no. Certainly, it’s a good time to be looking at things that are secure for the future. And that would be gold and silver and resource stocks. But yes, I mean, uranium, the whole Ukraine, Russia thing has proven what a bad idea green energy has been crammed down our throats. You are absolutely correct. If Germany turned on their three nuclear power stations, they would not have the energy crisis they have. That, they did to themselves. The French are in exactly the same position. The French get a lot of their electricity from nuclear power. And they’re trying to turn them off. The United States refused to allow the Canadian pipeline, they refused to allow drilling on federal land. Biden has said categorically, he is going to kill fossil fuel. And if you don’t have a replacement for fossil fuel, what it means is you’re going to destroy your economy.
Everything that’s happening in the world today is because of government stupidity. And basically, I mean, the greatest answer to your question is what can you do to protect yourself? The most important thing to do would be to educate yourself, stop listening to CNN, stop listening to Fox and start thinking for yourself. And if people would do that, they would be far better off. We could end this whole energy crisis in a weekend if somebody in Europe would wake up and say, “Well, maybe suicide is a bad alternative.” And quite bluntly, and I said it about six months ago, it’s a horrible alternative. Why would you do that?
Goldfinger:
So one more thing and then I want to talk about a junior mining stock. We had several U.S. politicians travel to Taiwan in the last several weeks. And China is definitely not happy about that. The Taiwan thing has always been a bit opaque because it was never fully recognized as a sovereign country. Yet they act as though they are. I mean, if you know the history of Taiwan it was previously part of China and there was a revolution in the 40s and the losers of the revolution fled to the island of Taiwan, made their own little country. But China’s always thought of it as theirs.
This is a very touchy subject. It reminds me of Cuba in the 60s and the U.S. very forcefully said to Russia, “You’re not putting any missiles in Cuba. We’ll have World War III, if you do.” And Taiwan’s very similar, because it’s so close to China, just like the island of Cuba is so close to the coast of Florida. It seems like we’re playing with fire here. And I would rather not see U.S. politicians fly to Taiwan. And I would rather the U.S. just back away from the whole thing. It’s not our fight. Well, how is this going to play out?
Bob Moriarty:
Oh, that’s an excellent way of putting it. And I think you would concede to me that I’ve got a lot of knowledge about war from a practical point of view because I’ve been in one. I will tell you categorically, the United States does not have the military capacity to defend Taiwan. So some of the things like Nancy Pelosi and the other Democrat congressional leaders going to Taiwan are waving a red cape in front of the Chinese. And I think that’s especially stupid. From a legal point of view, the United States has always agreed to the one-China policy. So on one hand, they’re saying we want to treat Taiwan as if it’s a hundred percent independent. On the other hand, they’ve signed an agreement saying, well, Taiwan’s really part of China.
The most important thing here, there’s two issues. One is we lack the ability to defend Taiwan. And the other is it will make a lot more sense to not have a conflict with China than to have a conflict with China. Europe is waking up to the fact that they cannot survive and I will be unequivocal about this, and I am not wrong. Europe cannot survive without resources from Russia. Period. Europe needs Russia, but Russia doesn’t need Europe.
Now, as far as China’s concerned, imagine what would happen if we put the same sanctions on China that we put on Russia. You would no longer be able to buy a washing machine. You’d no longer be able to buy a television. You couldn’t buy computer chips. Our economy would crater and we would become a third-world power if we did the same thing to China that we did to Russia. Now, I would hate to see a conflict because it’s not only playing with fire, it’s playing with fire and pouring gasoline on it to see what can happen. Any war with China would almost certainly have to go nuclear. And that would be the end of civilization.
Goldfinger:
Yeah. I don’t think that anybody wants to see a war with China. And I don’t think there’s the political will. There’s not the popular support for the U.S. to fight China over Taiwan. I just don’t see it happening. China will slowly suffocate Taiwan the way they did Hong Kong. And I don’t think the West can do anything about it. Shipping 100 missiles to Taiwan is not going to change the equation. China has overwhelming force. And unfortunately, Taiwan can’t do much about that.
Bob Moriarty:
Let’s go to the big picture because we haven’t discussed that yet. China’s banking system is a total disaster. 70% of their economy and their wealth is in real estate and it’s crashing. It’s going to be interesting to me to see what happens because while China does have a lot of gold, they’ve also got a totally dysfunctional banking system that’s collapsing right now. They are literally bulldozing trillions of dollars worth in real estate because the banking system won’t support it. And I don’t know what’s going to happen, but between Europe and the disaster that I see coming this fall in China, that’s a slow-motion train wreck. Bad things are happening to the economy. And certainly you could see it in the United States. When the richest country in the world cannot keep baby formula on the shelves, you got something seriously wrong.
Goldfinger:
So let’s wrap up with where we started off. So we started off talking about extreme readings in sentiment in futures data on gold and silver. You’re calling for a rally to begin within days in precious metals. The junior explorers, the junior gold and silver explorers are really out of favor right now. And there’s one company in particular that we both follow. I’m pretty sure you’re a shareholder of, Bitterroot Resources (TSX-V:BTT, OTC:BITTF). Bitterroot announced that they’ve started diamond drilling at the Coyote Sinter Project, not far from some of the biggest gold mines in the world in northern Nevada. Coyote Sinter is a low-sulphidation epithermal system that is highly prospective for gold and silver.
This project is intriguing to me because it was drilled by Chevron back in the late 80s/early 90s when Chevron was still doing hard rock minerals exploration. Chevron was poking around the Southwest of the U.S. trying to find some metals. I know they gave up on that at some point in the 90s and are no longer involved in hard-rock mining. But the historic drilling by Chevron was very shallow, using a reverse circulation drill. However, what’s interesting is that the shallow drilling at depths of 35 meters to 75 meters intersected highly anomalous levels of gold, mercury, arsenic and antimony. Those metals are all consistent with the top of a fertile low sulphidation epithermal system. So Bitterroot is currently drilling Coyote Sinter with a diamond core rig to 500 meters depth targeting the boiling zone of what’s interpreted to be a low-sulphidation epithermal system.
Bob Moriarty:
I will admit I’m talking my own book here because I have participated in a placement in the company, albeit at higher prices. The share price today is $.07, and they’ve got 88 million shares outstanding. So you’ve got a total market cap of just about C$6 million. I advocate buying stocks when they’re cheap, and I’m absolutely convinced I’m correct on this. And when you’ve got a turning point that I see coming right now, you want to buy the lowest priced stocks that you can. Now, let’s deviate for just a minute, because you just did an interview recently with the guy from Holland, Willem Middelkoop.
I listened to that. And do you remember what he said about the company that he invests in?
Goldfinger:
He likes to wait for them to make a new discovery.
Bob Moriarty:
Yes. And for it to be significant. And what I got from that, I thought it was an excellent interview, he’s quite willing to give up a hundred percent, the first hundred percent, because he wants it locked in before he invests millions of dollars in a company. But how does that create an opportunity for small investors? And it does create an opportunity for small investors. It’s very important for them to understand. How does that create an opportunity for small investors?
Goldfinger:
Well, small investors can buy in smaller sizes than a hedge fund or a larger investor can without moving the price as much. And you can get in at a lower valuation.
Bob Moriarty:
That’s absolutely correct. And that’s absolutely key. Yesterday, Bitterroot traded 81,000 shares. It was up to $.075. It traded 400,000 shares the day before at $.06. The key is when stocks get absurdly cheap, small investors can come in. But a larger investor can’t put in a million dollars or half million. Heck, he can’t even put $50,000 into it without moving the price significantly.
But you could put in $500 or even $5,000 and you wouldn’t destroy the market. So the key is, if you can identify major turning points at either tops or bottoms, and I did both in 2016, you can make a lot of money.
What I like the most about Bitterroot is the price. They’re doing something that’s either going to make that project or it’s going to kill that project. And either way it doesn’t bother me. You could take a small position in that stock and that stock could easily go up tenfold. And it’s exactly the kind of stock that went up tenfold in 2016.
BTT.V (Weekly)
Goldfinger:
And I will say, I’m talking my book too. I own a nice chunk of shares in the company. I’ll also mention that while BTT is drilling at Coyote Sinter, exploring for gold and silver, they also have projects in Michigan where they’re exploring for nickel and copper, battery metals. And I expect that once this program is done at Coyote Sinter, all depending upon the results of course, they’ll also conduct another phase of drilling in Michigan. The Upper Peninsula of Michigan is beginning to receive more attention because it is home to the only primary nickel mine in the United States, and I expect that there will be more nickel discoveries there in the next decade as more exploration is carried out.
Bob Moriarty:
I completely agree. And I’d like to add that I believe Bitterroot can be a ten-bagger but nobody should buy any junior mining stocks on margin. In fact, nobody should be using margin at all in this market. If you use leverage you’re going to get carried out by the heels.
Goldfinger:
Well said Bob. This is a dangerous market environment and literally anything could happen. It’s better to be able to sleep at night and have some dry powder in case the opportunities get even more tantalizing, similar to December 2008 or December 2015. Thanks for your time and insights, this is an important time in history and your wisdom is appreciated.
Disclosure: Author owns shares of Bitterroot Resources at the time of publishing and may choose to buy or sell at any time without notice. Author has been compensated for marketing services by Bitterroot Resources Ltd.
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