Bob Moriarty: You Can't Eat Oil
Source: Karen Roche of
The Gold Report
Well, you can't eat gold either. But at least gold is easier
to carry around, says precious metals pundit Bob Moriarty. In
this exclusive interview with
The Gold Report,
Moriarty lays out his forecast for the U.S. government
(ousted), banks (collapsed) and why he still has significant
stakes in precious metal equities despite his doomsday
The Gold Report:
When we last spoke in
, our conversation focused on quantitative easing in the U.S.
Since then, there's been a lot of news focused on the Middle East
and North Africa. The people of Tunisia and Egypt have
successfully overturned their governments. Now there are
significant civil uprisings in Libya, Bahrain and Yemen.
The cause of all the turmoil in the Middle East-and what's going
on in Wisconsin for that matter-has nothing to do with religion.
It has nothing to do with democracy. It has everything to do with
the cost of food.
Either Ben Bernanke is the dumbest guy in the known universe
or the biggest liar-and perhaps both. He says that the Federal
Reserve's second round of quantitative easing, QE2, has nothing
to do with the cost of fuel and food. Of course it does. He has
been wrong about every single thing he's said since he took
When people are hungry, they start riots. The riots in Egypt
were directly related to the cost of food. The riots in Wisconsin
are being framed as union versus anti-union. But it is really
about people being afraid they won't be able to feed their
In the U.S., the problem is that the government can't afford
the outrageous sums that it's paying union members for
retirements. As many as 90% of members are retiring on permanent
disability in some unions. California couldn't balance its budget
even if it fired every state employee. We have too much
To what extent do you think Wisconsin is a harbinger of
government cutbacks to follow in other states?
Wisconsin is the canary in the coal mine. The funny thing is that
Wisconsin isn't the state that is in the worst shape. California,
Michigan or maybe New York, is in the worst shape.
Do you know how long it will take for the U.S. government to
fail? Nineteen days.
How do you arrive at 19 days?
Because that's how long it took in Egypt.
Do you think this unrest is going to overflow into the oil-rich
countries, like Saudi Arabia?
Absolutely. The media is highlighting the Middle East, but unrest
has occurred in Croatia, Albania, France, England and Greece as
well. The breadth of these uprisings is connected to the power of
the Internet. These crowds can communicate because of Twitter,
Facebook, Google, instant messaging and e-mail. People have the
ability, on an individual basis, to take command of the
situation. This has never before occurred, and it's a very
If the U.S. has riots and we overthrow the government, which I
absolutely believe is going to happen, we're no better off. The
debt still exists.
The entire world needs to go back to real-world
economics-supply and demand. The economy needs to start producing
things of value. This is literally a worldwide revolution.
So, if it's 19 days to overthrow a figurehead government, how
much time does it take until some regulatory body is able to
create food, jobs or a middle class?
If there isn't any real money, which is gold and silver, probably
What if you're Saudi Arabia and you have oil?
Have you ever tried to eat oil?
You can't eat gold or silver either.
You could trade it for food. There are no individual companies in
Saudi Arabia running the oil business; rather, it's the
government of Saudi Arabia. If the government fails, then oil
refining and oil shipping stops immediately. It's already
happened in Libya, but Libya's only 1.2% of world oil production,
and Saudi Arabia is about 14%.
After the Yom Kippur War in 1973, Saudi Arabia was very upset
with the U.S. for supporting Israel and declared an oil embargo.
But what really happened was that the Organization of the
Petroleum Exporting Countries (OPEC) started raising the price of
oil across the board. Oil went from about $0.15 in 1969 to
several dollars a barrel. There was another crisis in 1979, when
the Shah of Iran was overthrown. Oil shot up to $12 or $15 a
barrel, which was enormous.
Shouldn't we be getting out of equities, and getting into
precious metals, at this time?
I define investing in gold and silver primarily as being an
insurance policy. I believe that everybody should own some gold
and silver. I had a meeting with a billionaire yesterday and I
told him exactly the same thing. You could have hundreds of
billions of dollars and not have the ability to buy gasoline.
Owning gold and silver is something that prudent people should
do. I'm not saying that people need to go buy silver at $34/oz.
because it's going to $500/oz. I'm saying people need to own some
silver, and I don't give a damn what the price is today because
they may want to buy some food and gasoline down the road.
Let's assume our readers own physical gold and silver. Should
they be pulling out of equities?
You always need a spectrum of investments. Once they get past
physical gold and silver as an insurance policy and investment,
investors have got to put money into something. I keep most of my
liquid assets in equities, even though I believe that we're on
the verge of a major collapse in the stock market, and gold and
silver shares could absolutely get whacked.
Currently, gold is doing quite well and silver is doing even
better. Are there certain types of mining or junior equities that
investors should be looking at?
I avoid the popular areas in investment. Investors should want to
get into investments when nobody wants them. That's when they're
Do you believe that metal juniors are popular now, or that they
are yet to become popular? A lot of the mainstream investment
shows and media really aren't talking about gold yet.
I think we are in phase two of three. But I'm seeing a lot of
scary things-like "market experts" forecasting that silver could
go to $500/oz. I could see silver at $40/oz. in the short term,
but I could see it at $20/oz. in six months. Silver at $34/oz. is
A lot of people are speculating that silver will go higher. I
haven't heard $500/oz., but we're looking at that gold:silver
They're wrong about the gold:silver ratio. Historically in the
U.S., it was 17:1, but we were using silver for coins. Nobody in
the world uses silver for coins now, so most of the demand is as
a commodity. Unless we go back to silver coins, I don't see the
ratio going to 17:1.
No one really uses gold coins now either.
True, but almost all the gold ever produced is still above
ground. Gold gets recycled. Silver gets used. It's a commodity.
At today's prices, there is something like $8 trillion worth of
gold in the world. I doubt very seriously that there's $500
billion worth of silver.
You mentioned that you still have a large part of your liquid
assets in equities. Can you share a couple of companies that you
find particularly compelling?
I've seen some really great stories. I went out to Guyana, South
America last week and met with
Sandspring Resources Ltd. (TSX.V:SSP)
. It has a green stone belt shear zone deposit, which can be
giant systems. Across the border in Venezuela is the Las
Cristinas gold project, one of the largest deposits in Latin
Sandspring has 6 Moz. of one-gram gold at surface. It's going
to be a really successful operation. It has a $300 million market
cap and should probably have a $1 billion market cap. The company
has $50 million in the bank. That's going to set a floor
underneath its stock.
Evolving Gold Corp. (TSX.V:EVG; Fkft:EV7)
Gold Canyon Resources Inc. (TSX.V:GCU)
EurOmax Resources Limited (TSX.V:EOX)
keep coming up with home runs. Stock in
Timmins Gold Corp. (TSX.V:TMM)
went from $0.40 to $2.25 recently. Stock in
Rio Alto Mining Limited (TSX.V:RIO; BVL:RIO;
went from $0.50 to $2.35 recently. There are some wonderful
opportunities to invest in now.
What's new at EurOmax? In September, you were not saying too many
nice things about it.
Most junior companies out there are stock promotions. The company
is run strictly for the benefit of management. There was a
management change at EurOmax, which was a good thing.
EurOmax had a half dozen world-class projects that had no
direction. A major shareholder started a little revolution to get
the management changed. The management was voted out 3-to-1, but
they said they were not leaving. I believe that they spent $2.3
million trying to defend an indefensible position, but eventually
the company got new management.
Now the company is actually advancing its projects and
communicating its story. It's still a very cheap stock at
Are there other inexpensive juniors out there?
Gold Port Resources Ltd. (TSX.V:GPO)
in Guyana is in a spring stone thermal system, similar to those
in Ghana, Mali and Burkina Faso, Africa. It's all the same kind
of rock. These are multi-million-ounce deposits.
Gold Port probably has a couple of million ounces identified
already and it's got a $15 million market cap. The company hired
some people to do an NI 43-101. When I heard that, I went out
literally this morning and bought shares at $0.15 each. It will
be making a lot of progress.
How close is Gold Port to the Sandspring project?
Very close, maybe 30 miles.
Are they part of the same system near Las Cristinas?
Yes, it's called the Guiana Shield.
Comstock Mining Inc. (
in the past. What's going on with it now?
Its plan was to be in production at 20,000 to 25,000 oz. per year
in May. They have backed off that time prediction but still say
they will be in production this year. That would be a giant
accomplishment. It would be making money hand over fist. I would
like to see more action, and more communication, from the
company. But it has a big district-if it actually gets into
production as it planned, it will be self-funded.
Is the stock price currently reflecting production this year?
I don't think it is. Everybody's gotten bored. When I wrote about
the stock, it went up from $2.80 to about $4.40. It's at about
$2.90 now. It's a good story. However, the management needs to do
more and communicate more.
What is the probability that it will go into production this
I don't think there's any issue. It has a mill. It has a
production facility. It was just going to bring in some
equipment. It's fully permitted. The company was previously in
production. It was just going to upgrade the equipment.
Another stock that you follow and commented on in the past is
Animas Resources Ltd. (TSX.V:ANI)
Animas was down in Mexico, but it never got traction there. The
company has made a shift of focus to Nevada. Animas actually
picked up a project that I looked at 10 years ago. I'm sure the
company will be drilling. It's got really qualified people. I
think that it will be successful one of these days.
Kiska Metals Corp. (TSX.V:KSK)
was on your list for quite a while. It had a nice run-up in its
Kiska is in Alaska-big potential. With gold at $1,400/oz., Kiska
could be making money hand over fist. It is still an exploration
company, but it is moving forward. There haven't been any home
runs, but it is well financed. If you can't make money at these
prices, you should be raising moose.
There's a road that goes right past Kiska to the
NovaGold Resources Inc. (TSX:NG; NYSE.A:NG)
Donlin Creek deposit. If NovaGold chooses that road, it would be
very beneficial for Kiska because it has to bring everything in
by air now.
Any other thoughts you'd like to leave with our readers?
Investors should be looking at graphite companies. Graphite is a
metal that's been ignored. There's big potential there. There are
just a few juniors that have started mining graphite.
I believe there is going to be a correction in gold and
silver. It's not something that panics me, but people are making
too much money and are getting too bullish.
Do you think the correction will be more than 10%?
Absolutely. Silver can correct 10% in one day.
What about in gold?
I'm a contrarian. I would rather see gold go down to $900. That
wouldn't hurt my feelings at all.
It's a privilege, Bob. Thanks for being so forthright.
Convinced that gold and silver were at a bottom, and
wanting to give others a foundation for investing in resource
stocks, Bob and Barb Moriarty brought
to the Internet almost 10 years ago, and later added
to cover oil, natural gas, gasoline, coal, solar, wind and
nuclear energy. Both sites feature articles, editorial
opinions, pricing figures and updates on the current events
affecting both sectors. Before his Internet career, Moriarty
was a Marine F-4B and O-1 pilot with more than 820 missions in
Vietnam. A captain at age 22, he was one of the most highly
decorated pilots in the war and the youngest naval aviator in
Vietnam. He holds 14 international aviation records, and once
flew an airplane through the Eiffel Tower's pillars "just for
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1) Karen Roche of
The Gold Report
conducted this interview. She personally and/or her family own
shares of the following companies mentioned in this interview:
2) The following companies mentioned in the interview are
The Gold Report:
Sandspring, Evolving Gold, Gold Canyon, EurOmax, Timmins, Rio
Alto, Comstock Mining, Animas, Kiska and NovaGold.
3) Bob Moriarty: I personally and/or my family own shares of the
following companies mentioned in this interview: Sandspring, Gold
Canyon, EurOmax and Gold Port. I personally and/or my family am
paid by the following companies mentioned in this interview:
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