Bob Moriarty: The Financial System Is Bust And It’s Time To Return To Sound Money
Bob Moriarty: The Financial System Is Bust And It’s Time To Return To Sound Money from Energy and Gold
In less than three months 2020 has quickly become a year that many would like to forget. The gravity of the COVID-19 crisis has reached unprecedented levels as it has now become a global health crisis the likes of which the world hasn’t seen in a long time. Bob Moriarty of 321gold has been warning us about what was coming since January and his analysis couldn’t have been more correct up to this point. Normally Bob and I speak once every 4-6 weeks, however, given the unprecedented circumstances and rapidly evolving crisis I felt it was time to check in again. Even after yesterday’s big rally, the S&P 500 is down ~25% year-to-date and the Russell 2000 is down ~35%, meanwhile gold has held strong and has risen more than 7% since New Year’s Eve. In a conversation on the afternoon of March 24th, 2020 Bob and I discuss why this is the most dangerous market environment he’s ever seen and how investors should position for what is coming, a depression and a return to sound money.
Goldinger: Bob, we last spoke less than two weeks ago, but it feels like a year ago at this point. Since then the COVID-19 crisis has considerably worsened and the deaths are piling up. Much of the world is now either on a mandatory shelter in place order or being told to strictly follow self isolation and social distancing protocol. We are seeing markets have a pretty big rally across the board today after being beaten to death over the last few weeks. Is this a one day wonder that will quickly be given back or can we look for a multi-day rally?
Bob Moriarty: This is the most dangerous market i’ve ever seen. I wouldn’t advise anyone to chase rallies in stocks because I think you’ll find that the rallies won’t sustain much more than a few hours or a day. Anyone who wants to get cute is going to find that the danger is not of catching a falling knife but catching a falling safe. Remember our last conversation? How much did the Dow fall during the Great Depression?
Goldfinger: I believe it was 89%.
Bob Moriarty: Exactly right. This market is going to fall at least as much as it did during the Great Depression. We’re down 42% so far, so there is a long way to go before a bottom is in place.
Goldfinger: The US Congress is working on passing a multi-trillion dollar stimulus bill. Will this make a difference at all in the long run?
Bob Moriarty: They are going to try 15 different things, but in the end none of them are going to work. Where is this money actually coming from?
Goldfinger: The taxpayers and bond holders who hold US Treasury debt.
Bob Moriarty: The government is broke and this is just more of the same deficit spending with no end in sight. Doing more of the same isn’t going to deliver a different result. They should let everything crash and rebuild the economy based upon a real money system. We need to go back to sound money, not more of the same which got us here.
Goldfinger: Let’s talk about gold and silver. I’m not sure if you read my morning email but I was talking about how gold has rallied about 15% in less than 36 hours and I don’t think i’ve ever seen anything quite like this. It seems to me that investors are realizing that the world is heading for stagflation (an inflationary period accompanied by rising unemployment and lack of growth in consumer demand and business activity), very similar to what we experienced in the 1970s when gold went from $35 an ounce to nearly $1,000 an ounce. Do you agree that stagflation is coming?