321gold founder Bob Moriarty returns to The Gold Report for a lively exclusive interview about what he sees as the best investments for 2010. “Last year it was gold,” says Bob, “and this year I believe it will be gold shares.” Noting that Bernanke ‘destroyed the financial system of the world,’ Bob sees two possible outcomes—a deflationary collapse wherein the U.S. refuses to pay back its $10 trillion debt, or hyperinflation. “Those are the only two alternatives,” he says, “and either is pretty bad.”

The Gold Report: Bob, when they announced Ben Bernanke as the Time magazine’s Person of the Year, I was thrilled, because I knew I was going to be speaking with you. I just have to ask, how do you see Ben’s place in the 2009 economy?

Bob Moriarty: Actually, it really scared the hell out of me. What it means is that I can no longer go to college football games.

TGR: Why is that?

BM: You know the president was awarded the Nobel Peace Prize.

TGR: Yes.

BM: We have three-and-a-half wars going and he was awarded the Nobel Peace Prize and then Time magazine came out and made Ben Bernanke the Man of the Year. Now that’s the equivalent of being awarded the Nobel Prize for Economics. Stalin was Man of the Year.

It means that Bernanke had the most influence on the world last year, which is quite interesting because it means I cannot go to a college football game anymore.

TGR: Okay. I’m still missing the link.

BM: If I go to a college football game, at half time they give out awards and they do special things. If I go to a college football game, I’m bound to be awarded the Heisman Trophy.

TGR: I hate when they give those out.

BM: Ben Bernanke has done more to destroy the economy of the world. If there was one organization that is responsible for the financial chaos that exists today, it would have to be the Federal Reserve. Ben Bernanke has destroyed the financial system of the world and they’re thinking he saved it by creating all this money. Well, wait a minute. That money has to go somewhere.

If you actually look at the numbers, the most accurate number that I’ve been given is a $23.7 trillion increase in U.S. liabilities. It’s not necessarily the government that spent that. We’re just on the hook for that kind of money in one year and that has to have an effect. Dubai has defaulted; Greece is not very far away from defaulting; Ireland is very close to defaulting; the U.K. is very close to defaulting; Japan is very close to defaulting; the United States is very close to defaulting; Spain is very close to defaulting. And the one thing that we know is they’re going to. So we can either have a deflationary collapse where everybody says, okay, well, remember those $10 trillion that we owed the rest of the world? We’re just not going to pay them. Or we can go into hyperinflation. Those are the only two alternatives and either is pretty bad.

Bernanke has guaranteed a collapse of the financial system. We’re in the center of the storm, the eye of the storm right now. The hundred or so people in the world who actually understand what’s going on are all going, “oh, shit.” And Ben Bernanke’s sitting there with a grin on the cover of Time magazine. Well, I can guarantee next year he isn’t going to be sitting on the cover of Time magazine with a grin. He’ll be sitting on the cover of Time magazine with a noose around his neck.

TGR: Do you think these relatively smart people—granted, you stick them in Washington and weird things happen—realize they’re in the eye of the storm, and they’re just trying to keep the panic down now and try to maneuver things behind the scenes or do you think they’re totally oblivious to what they’ve created?

BM: There’s a lot of total oblivion. These guys have all studied Keynesian economics. Keynesian economics simply doesn’t work. Anybody who actually understands economics knows that, but that’s what they were taught and because everybody around them was talking Keynesian economics, they think you can somehow buy your way out of failure.

Obama came up with this really wonderful quote early in December saying we’re going to spend our way out of the recession. My question is—if we spent our way into this recession, how the hell are you going to spend your way out of this recession? Spending is what got us into trouble in the first place. There was another article released last week saying that the number of Federal employees with salaries in the six figures is higher than it’s ever been. This is insane. We have 22% unemployment and we have hundreds of thousands of Federal employees earning over $100,000 a year. The 22% unemployment, those people who have no jobs are starting to get really, really pissed. And when they do, we got problems.

The gap between government employees and employees in general is higher than it’s ever been. The unemployment in the United States is higher than it’s ever been. So not only is the government employment increasing, unemployment’s increasing for everyone else. Who do they expect to pay the taxes? And the answer to that is the 47% of people who pay no taxes at all are listening to Pelosi say, “Hey, I’ve got a great idea. We’ll make the rich people pay for the health care.” And then a week later she had another really great idea. “Hey, we’ll make the rich people pay for Afghanistan.” Unfortunately, nobody listened to her definition of rich people. Did you catch that? Did you hear what she said? “Rich people are those who still have a job.”

It’s the end of empire. Democracy works until the voters learn to give themselves benefits. We have gone into never-never land. For Barack Obama to be awarded the Nobel Peace Prize after being in office for two weeks goes beyond absurd. The fascination with the sex life of Tiger Woods is all over the news and my question is who cares? Are they kidding? We’ve gone crazy.

TGR: So how are we going to be protecting ourselves investment wise? I’m going to ask a little bit about gold because you’re a big gold bug. Gold ran up to above $1,200 and now had quite a decent pullback. You point out correctly that who wouldn’t have expected a pullback when it’s up for 13 days straight.

BM: We have not seen the top in gold, but corrections are perfectly normal and they’re a good thing. Now why should you own gold? You should own gold for two reasons. One is it’s an insurance policy. The things that Bernanke and the Federal Reserve and Tim Geithner have done are going to destroy the world’s financial system in the end. I know that sounds really catastrophic, but it’s going to be catastrophic. The United States is $100 trillion in debt. No sane person can come to me and say, “Bob, there’s a way out of that.” They can’t, there is no way out of that. We’re going to default. I don’t care if we default next week or next month or next year or 10 years from now. We’re going to default and it’s going to be catastrophic.

Gold is an insurance policy. It’s like an insurance policy on your car or your home or yourself. It’s not something that you want to collect on, but for 5,000 years it has worked to protect people’s assets. Secondly, as an investment, the general stock market would absolutely terrify me right now. It’s so over bought and the P/E ratio has hit historic highs. It’s just screaming to take everybody’s money away when people wake up to what’s really going on. So gold shares, silver shares, energy shares, food shares are a good, safe place to be. It used to be widows and orphans would buy GM and they would buy General Electric and they would buy Ford and Chrysler. Widows and orphans should actually be buying Canadian juniors right now because they might preserve their wealth. They own FAO and Ford and GM and General Electric; they own companies that are walking zombies just waiting to die and be buried.

TGR: If the stock market does take another correction and even a massive one, could it take down even the Canadian juniors, too?

BM: I don’t believe that’s true. The Canadian juniors have already crashed. It happened last year and everybody had it absolutely wrong except Bob Hoye. Including me. I believed the Canadian juniors were going to be a safe place. But if you look at the ratio of the XAU over gold, the ratio is lower than it’s ever been in history and it’s been lower for a year. So Canadian juniors are not going to crash; Canadian juniors already have crashed.

The market is going to do whatever it has to do to surprise the biggest number of people and people are expecting a crash in the juniors if the market crashes. I don’t think so. You have to have some place of safety. Last year it was gold and this year I believe it will be gold shares. I think that this year—this is a good time to bring it—I think that 2010 will be an extraordinary year for gold shares.

TGR: Does that mean it would be an extraordinary year for all gold shares and once the mania starts happening, will all gold companies rise in value?

BM: Well, that’s what’s really funny. The biggest piece of crap companies out there are going to go up fifty fold. I would be very hesitant to recommend that people buy into piece of crap gold companies. But when the wind is high enough, even the turkeys fly.

TGR: Do you think in a market place where most people don’t understand mining to begin with, they’re going to be able to differentiate the crap gold companies, as you call them, from the valuable ones? Why not just buy a market basket of gold companies?

BM: That’s a really good move. There are some great funds out there—USAA Gold is a good fund. Frank Holmes does a good job with the U.S. Global Investors Funds; Eric Sprott does a good job with the Sprott Funds. There are some great gold funds out there and that removes the risk of having to make decisions. The reason I spend eight months a year traveling all over the world is I’m trying to give my readers the house advantage and we think we do. I’ve been doing this for eight years and we pick some pretty good stocks. That doesn’t mean they don’t go down. Some go up and some go down, but that just proves I’m honest.

TGR: If we look at 2010 and it’s going to be this extraordinary year as you’re predicting, will the markets be smart enough to recognize and reward better run companies?

BM: Strangely enough, the ones that’ll go up the most are the crap companies run by absolute crooks that are selling for a penny and a half right now. You’ve got to remember going from a penny and a half to three cents is 100% climb. Let me give you an example. I wrote about the International Tower Hill Mines Ltd. (NYSE/AMEX: THM; TSX-V:ITH) a year ago and International Tower Hill, I think, was US$1.04 and it’s like $7.32 now. There are hundreds of companies that have gone up more than that and Tower Hill has one of the best deposits in the United States and its run by one of the best guys in the industry. A stock going from $1.04 to $7.32 is no different than a stock going from two cents to 12 cents.

TGR: You’re traveling around finding the good deals for eight years, which bodes well in that market place where better projects will reward. But in the market place, everyone’s going to get rewarded because you happen to be in the right sector. What’s your strategy?

BM: I invest in the best people that I can find. I try to find the best companies and the best people because, while you’re waiting for the piece of crap company go from a penny and a half to 15 cents, it may go to a quarter of a cent. You don’t know. I buy companies that I like their story, I like their management, I like their location, etc.

TGR: What do you see for silver?

BM: Silver is a commodity right now. When the financial system collapses—and it’s going to collapse—and we go back to the gold standard, the metal that you need the most of is silver because of its value as money. In a gold system the money you need most will be silver. At that point it would go back to a historic ratio, somewhere between 15:1 and 25:1. Silver is an investment. It’s very dangerous because there are always cheerleaders. The cheerleaders are the guys waving the flags and the pom-poms and showing their butt to everybody saying silver is going to go to $100 an ounce if we get into a war because this is the most critical war metal. Well, we’re in three wars and silver has not gone to $100. The cheerleaders say we’re going to run out of silver. We’re not going to run out of silver. It’s a commodity. At some price, it extracts itself from the ground. At $16 to $18 an ounce, there’s plenty of silver and silver’s supply and demand is in equilibrium. But to move it up relative to everything else, you have to have increased demand and the increased demand is only going to come from using it for coins.

TGR: So the increases we’re seeing in gold now through 2010 probably will not reflect on silver?

BM: Actually, the ratio of silver to gold will go up as the economic situation gets worse because people recognize gold as being a safe haven and they don’t recognize silver being a safe haven to the same degree. We could go back to a ratio of 90:1 or 100:1, but the idea that silver is somehow a better investment than gold, these guys have been wrong for 10 years. I can’t understand why they keep arguing the same thing when all the facts show they’re wrong.

TGR: So someone who’s looking to the insurance policy or hedging or putting money on the sure bet that the economy and the financials are going to falter should really focus in on gold, not silver.

BM: Focus on gold, but you want to hedge your bets, too. One of the possibilities that always exists is that maybe I’m wrong.

TGR: How would you hedge your bets?

BM: I own physical gold and physical silver and I own silver mining companies and I own gold mining companies.

TGR: You mentioned that you like to invest in the best people and so I’ll assume you have certain companies that you feel have management that represents the best of the best. Can you share those with us?

BM: Sure. If you look at the website, we write about them all the time. Animas Resources (TSX.V:ANI) came out with drill results as we’re speaking and the drill results didn’t appear to be good. The stock got hammered. Somebody sent me the drill results and I looked at it and said, hey, somebody’s making a mistake because those are pretty good drill results. They’re in the district and they’ve got really substantial management. In general, I tend to like Mexico. I like Timmins Gold Corp. (TSX.V:TMM), I like Animas, I like Pediment Gold Corp. (TSX:PEZ) (OTCBB:PEZGF) (FSE:P5E). There are so many great stories there.

Endeavour Silver Corp. (TSX:EDR) (NYSE.A:EXK) has got some good deposits down there. Great Panther Resources (TSX:GPR) has got some good deposits. Candente Resource Corp. (DNT:TSX and BVL) has formed a new company called Candente Gold Corp. (CDG.TO). With Mexico you could pretty much throw a dart; I don’t think you could lose there. There are some great companies and there’s some great management down there.

TGR: Outside of Mexico are there any plays that you’re looking at that are interesting?

BM: I wrote about one called EurOmax Resources Limited (TSX-V:EOX) in Eastern Europe, Serbia and Bulgaria and Macedonia. They’ve got a surplus of good projects and the stock’s real cheap now. There are hundreds of companies. I’m not an expert. I go to a gold show and I see half the companies there are companies I’ve never even heard of before, but there are some real good guys in the industry who cover these and some good subscription services. Greg McCoach has got a good service and Brent Cook has a good service. Lawrence Roulston has a good service. There are some guys who can give good tips.

TGR: Are there any small caps outside of Mexico that you have a few thoughts on?

BM: Oh, dozens and dozens and dozens of them. For example, I happened to be on a trip with some of the people who were investors in Richfield Ventures Corp. (TSX-V: RVC) before they announced their recent results. Richfield is up in B.C. and there’s another company right next to them called Silver Quest Resources Ltd. (TSX-V:SQI) and, they had absolutely extraordinary results. You’ve got to give them credit for that.

I’m always hesitant to list companies that I like because there are hundreds of companies out there who have done extraordinarily well. We got cheaper in relative terms last September, October and November of 2008 than gold stocks had ever been in history. You could have thrown money at companies and made money.

My very favorite company right now is an energy stock. It’s not one that anyone can buy. It’s still private but it’s going to be a very big deal. It will be the Google of investing. It’s a company called Titan Oil Recovery Inc. It’s run by one of the smartest and best managers I know, Ken Gerbino. Basically the company treats past their prime oil fields with a patented bacterial process that essentially lowers the surface tension of the oil, making it easier for it to flow. Their tests on dozens of oil fields show increased oil production by over 100%. That’s giant. In the oil business, most oil gets left in the ground. You can never recover all of the oil in a field. This process is going to be worth many billions of dollars. It’s not a total solution to peak oil but it’s sure better than anything else I’ve ever seen or heard of.

TGR: Well, you could have picked almost any of the resource stocks back then.

BM: Yeah, yeah—exactly. You could pick the worst company in the business a year ago and made money. There were companies that were two cents then that are 60 cents now. But in relative terms, here’s one thing I would like to point out. We started our website in the summer of 2001 and, like Frank Giustra of Endeavour Financial Corporation (TSX:EDV), we chose to get back into the industry right at the bottom and we said it was the bottom. We were very supportive of companies and we said this is a tremendous opportunity to invest. Of course, nobody believed us because gold was $252 an ounce. Well, people, we’re not in Kansas anymore and gold is not $252 an ounce. It’s $1,120 and change right now. It was $1,200 and change a month ago. The risk is out of it. Okay. There are some extraordinary stories out there and they’re extraordinarily cheap. You should invest, one, because it’s a safe place to invest—it’s the only safe place to invest that I know of—and, two, because it’s so cheap that you should have extraordinary returns.

TGR: Thank you very much for your time, Bob.

Wanting to give others a foundation for investing in resource stocks, Bob and Barb Moriarty brought 321gold.com to the Internet almost nine years ago, and later added a second resource site, 321energy.com, which covers 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, Bob was a Marine F-4B 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.

Want to read more exclusive Gold Report interviews like this? Sign up for our free e-newsletter, and you’ll learn when new articles have been published. To see a list of recent interviews with industry analysts and commentators, visit our Expert Insights page

The GOLD Report does not render general or specific investment advice and does not endorse or recommend the business, products, services or securities of any industry or company mentioned in this report.

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FX Trading – The yen will take back carry trade crown in 2010!

Any dollar bull story must consist of the Mr. Greenback relinquishing its role as carry trade currency i.e. primary major currency borrowed to fund risky asset and other high yielding investments.  The Japanese yen, the all-time carry trade champ, looks like it is about to be anointed once again.

….read more HERE.

9) Major Food Shortages.

‘Inventories of agricultural products are the lowest they have been in decades yet the prices of many agricultural commodities are down 70% to 80% from their all time highs adjusted for real inflation. Catastrophic food shortages are possible in 2010, not just in the U.S. but all around the world.’

1) We will learn the 2009 holiday shopping season was a bust.

The Commerce Department reported seasonally adjusted November retail sales up 1.3% from October. However, if you apply the average seasonal adjustments that were used during the years 2006 and 2007, which account for a normal spike in November sales due to the holiday shopping season, retail sales were actually down 1.3% in November.

NIA believes any year-over-year increase in 2009 holiday season retail sales will be bottom bouncing from 2008 and not an indication of an economic recovery. Most likely, adjusted for inflation, retail sales will be flat over a year ago. We expect to see a sharp sell off in many retail stocks, as a full economic recovery appears to be already priced into their share prices.

2) We will see a major decline in the Dow/Gold ratio.

The Dow/Gold ratio is currently 9.3, having bounced from the low of 7 it saw in early 2009. We are likely to see a decline in the Dow/Gold ratio to below 7 in 2010.

Many people who have bought U.S. stocks on the bet of an economic recovery, will soon realize the economy is not recovering and stocks have been rallying only due to inflation. Although some people selling stocks may once again mistakenly move to the U.S. dollar as a safe haven, we believe an increasing amount of people will avoid the U.S. dollar and buy gold as a safe haven.

3) We will see a sharp decline in the Gold/Silver ratio.

The Gold/Silver ratio is currently 64, above the average of the past 100 years of 50. Between the years 1,000 and 1,873 when silver was used as real money, the Gold/Silver ratio traded between 10 and 16. In recent history, the Gold/Silver ratio dipped below 20 on two occasions, once in 1968 and once again in 1980.

NIA believes silver prices will continue to outperform gold in 2010, as the world once again begins looking at silver as money, instead of just an industrial metal. The Gold/Silver ratio could decline to below 50 in 2010.

4) The U.S. Dollar Index will see short-term bounce, then huge crash.

We are at a point where there are more people who are bearish on the U.S. dollar than ever before, which means from a technical standpoint it is overdue for a short-term bounce. However, we would not consider going long the dollar even as a trade. A huge crash in the U.S. dollar could occur at any time.

The world has become flooded with U.S. dollars. Foreigners currently hold over $10 trillion in dollar-denominated assets that can be dumped at any time. With the Federal Reserve continuing to expand its monetary base to record highs, as soon as banks begin lending their excess reserves we could see a spike in consumer prices and a rush to get out of U.S. dollars.

5) Oil will rise back above $100 per barrel.

We expect oil’s next rise above $100 per barrel to be fueled almost entirely by inflation. This time around, it won’t matter if there’s another substantial decline in oil demand from the U.S. We expect oil prices to rise regardless of if Americans can afford it or not.

NIA believes any decrease in demand from the U.S. will be more than made up for by increasing demand from China and India. There hasn’t been any major new oil discoveries made in decades and the Federal Reserve’s printing of money will surely outpace the discovery of new oil fields.

6) There will be a move towards a Libertarian third-party.

Americans are waking up to the charade that has been taking place in Washington. Power has been going back and forth between two political parties who do nothing but multiply each other’s mistakes. Both the Democrats and Republicans are equally responsible for the economic mess our country is in today.

In the last Presidential election, Americans had a choice between two candidates who both supported the government’s destructive stimulus plans and bailouts. In the next Presidential election, we believe a third-party candidate will have a serious chance of being elected for the first time in history. We anticipate seeing a new leader emerge and a Libertarian movement begin in 2010.

7) Peter Schiff and Rand Paul will both win Republican primaries and be elected to U.S. Senate.

We are huge supporters of Peter Schiff and Rand Paul who are seeking the Republican nominations for U.S. Senate in the states of Connecticut and Kentucky respectively. They are both Libertarians at heart but realize their best chance to be elected is to run under the title of a Republican.

We need Peter Schiff and Rand Paul to join Ron Paul in Washington so that we at least have three elected representatives that understand the truth about our economy and the need to reverse the hyperinflationary course our country is currently on. Although they may be underdogs because they don’t have the support of special interest groups, Peter Schiff and Rand Paul will have huge grassroots support from educated Americans who will travel from all states to volunteer for their campaigns.

8) Large ‘End the Fed’ Protests.

In 2009, hundreds of people gathered for several ‘End the Fed’ protests in front of Federal Reserve buildings nationwide. However, the turnout for these events paled in comparison to the millions of Americans who participated in health care protests and town hall meetings.

In 2010, more Americans will realize that it is the Federal Reserve that is the cause of most of our nation’s economic problems. While the health care debate divided our nation 50/50, we believe 100% of all Americans will want to end the Federal Reserve as prices of food and other goods needed to live start rising through the roof.

9) Major Food Shortages.

For the past several decades, most Americans went to college to get a non-productive job on Wall Street and nobody went to school to become a farmer. There is currently a major lack of farmers in the U.S. and to make matters worse, the Real Estate bubble destroyed immeasurable amounts of farmland to build houses we didn’t need and couldn’t afford.

Inventories of agricultural products are the lowest they have been in decades yet the prices of many agricultural commodities are down 70% to 80% from their all time highs adjusted for real inflation. Catastrophic food shortages are possible in 2010, not just in the U.S. but all around the world.

10) Paul Volcker Resigns.

This may be a long shot but Paul Volcker, Chairman of President Obama’s Economic Recovery Advisory Board, could become frustrated with the Obama administration and resign in 2010. Paul Volcker, as former Chairman of the Federal Reserve, was responsible for getting our economy out of the inflationary crisis of the 1970s by raising the federal funds rate up to a peak of 20%.

With interest rates currently being held by the Federal Reserve at an artificially low level of 0%, we believe Paul Volcker must know that a currency crisis is coming that will make the inflation of the 1970s look miniscule. If Paul Volcker wants to preserve his reputation and legacy, he must leave the Obama administration, which is unlikely to seriously consider any of his advice.

“If gas stays in the$5–$6 range, that’s what I would call purgatory,” says Oil & Gas Investments Bulletin writer Keith Schaefer, adding “and anything less than that would just be hell.” Learn about new technologies that are greatly increasing the amount of recoverable oil in the world and find out why Keith warns investors to be very, very selective, particularly in Canadian natural gas stocks in this exclusive interview with The Energy Report.

The Energy Report: Let’s start with your big-picture take on natural gas because that’s one that seems to be retaining a low-price profile. People are talking about the high level storage, the improvements in production, the decrease in the cost of taking the gas out. What’s your view of what’s happening in those markets?

Keith Schaefer: I think that in 2010, natural gas is going to have what I call a ‘purgatory pricing environment,’ where it’s going to be low enough that most companies will not make money, but a few of the really low-cost producers will. If gas stays in the $5 to $6 range, that’s what I would call purgatory and anything less than that would just be hell. You’re looking at a situation where the all-in costs for natural gas production in North America is still around $6 to $6.50 per MCF. When the price is below that, few producers are making money.

So investors have to be very, very selective, particularly in Canadian stocks because these companies, for the most part, have high debt levels, higher pipeline costs and a higher Canadian dollar. So it’s going to be very difficult in particular for the Canadian juniors to give any real profits to investors, I think, over the next year.

Having said that, there are a couple of very powerful forces that are bullish for natural gas. The decline rates on these new shale gas plays that are so prolific, are quite high. These gas wells start off with great production, but then they die off very quickly.

We’re already seeing a slight increase in demand for gas. And there are a lot of people calling for gas to be quite a bit higher in the second half of 2010 because the decline rates are so high and demand is coming back. It was reported that for the first time in a year, gas demand was actually up in October and November of ’09. A lot of utilities started using natural gas to generate electricity, so it’s happening.

TER: So is the increase in demand mostly from switching from other sources of electrical inputs or is it from consumers?

….continue reading more HERE.