I questioned/interviewed David Morgan of
Silver-Investor.com and The Morgan Report
on May 15th 2012.
This is not your "normal" metals interview - it is about
the emotional value people put into the investments of metals and how the bankers
are working on the psychological part to stop people from investing in metals.
Metals have been an emotional investment to people over the last few years and the bankers are playing the game like the show Survivor, in how it is "Outlast, Outplay, Outwit" against investors of the metals.
Transcript:
Sherrie: This
is Sherrie Questioning All, and right now I am questioning what the heck is
happening with the metals in the way of them being smashed. And I have the pleasure and honor of having
David Morgan of Silver-Investor.com, and author of the Morgan Report with me to answer some of these questions. Hi David, you there?
I
want to tell you thank you so much for talking to me about what’s going on in
the metals and what you think is happening right now.
David Morgan: Well it’s my pleasure, and we’ll state the facts
first. One, a lot of my contemporaries
have been pretty bullish here the last few months, and I’ve been somewhat
bearish. I’ve been telling our members
and also the public domain, because I do a lot of interviews as you know, that
I felt that the metals had some more work to do probably sideways to down. And I was telling the members that I thought
the $28.00 level would be about it. I
also thought that the $1550 level for gold would probably be about it.
And that’s
basically where we are today. We’re
under the $28.00 level. I also cautioned
everybody that the worst case I could see so far would be this “$26 and change”
I call it “and change” because it’s not $26.00 on silver; it’s had spiked lows
down there twice, and in both cases it’s been very strong buying for a very
short period of time and the metal shot right back up.
Sherrie: Yeah
but today I saw silver did touch $26.68 briefly, and now it’s back up above
$27.00. It’s at $27.15 right now, so
what do you – you think we’re really at the bottom here?
David Morgan: I think we are within a month or so. I’ve been calling a June bottom. What normally happens in these major bull
markets is the shares lead the metal, and I know I’m going to get some flak for
making that statement. And I use the
word “usually,” but what takes place is the mining equities usually bottom
before the metals bottom. And then they
also usually peak before the metals peak.
That’s not always the case. We
are getting really creamed in the mining shares. I mean it’s the worst it’s been in 31 years,
so the shares are very underpriced relative to what their true value is, and
again the metals are getting hit.
So I think
the shares are really very close to a bottom here. Almost every indicator you want to use
indicates that they are at a bottom or very close to a bottom. So very safe to buy in this range. And the metals, of course, maybe have some
more work to do. But as you outlined
we’ve already been at $26.68 and it’s bounced back up. And what happens in those levels is that you
see strong buying at that low; it’s all computer paper buying for the most
part. And then the price shoots back
up. So I’ll stick my neck out and say I
think this is probably as close to the bottom as we’re going to get. It could go lower; we probably have another
month perhaps. But with all that’s going
on geo politically it’s really counterintuitive to see these kind of sell offs
in the metals.
Sherrie: Well
that’s what – okay you know what I really love about – I’m a subscriber to your
report. And I really love about it is
that I am not – I don’t have a degree in finance, and basically 99 percent of
the people are like me. And so I like
how you write the plain, simple where I can understand what’s going on. But here’s my questions to you right now, to
me it almost – when you were talking about counterintuitive, it just doesn’t
make sense. And the understanding of
what’s happening, especially with the fact that the first quarter even the
Japanese retirement fund, which has never bought gold before, has been buying
gold. Soros,
Pimco, a Texas
teacher retirement fund. I mean the list
goes on about the acquiring of gold in the first quarter.
Yet gold has
been going down, and it’s almost – and tell me if I’m right, and again it’s
that simple mind that I kind of equate it to the show Survivor, outwit, outlast and outplay. And that seems like the psychological thing
that’s going on that the banks are doing right now with metals. I mean is that kind of a good analogy?
David Morgan: I agree. I
might say it slightly different, but you’re right. The fundamental facts are that there’s
probably more interest in the gold now than there’s been in a very long time. And so it would appear that the price should
be going higher from all the fundamental facts and the tensions in the economic
environment. I mean with the Euro
basically blowing apart or very close to that.
All the stress that’s going on with the debt loads and everything else
we talk about constantly and yet here they are.
Well I, as you know Sherrie, was at the money show in Las Vegas; it’s actually going on today as
we’re doing this interview. I was there
for two days not the entire four, and Bill Murphy was speaking at that event as
well as myself.
And Bill
pointed out how often gold does the opposite of what you’d expect, and this is
a very big case in point. His idea, and
I tend to agree with it, is that were gold to reflect all that’s going on in
the economic environment, the political system and making new highs right now
as logic would dictate it would. It
would feed on itself. In other words,
the psychology is the most important thing that can be controlled by the paper
markets. And the psychology right now is
“Why isn’t gold going up?” So massive
amounts of paper gold and silver are being sold through the systems in the
futures markets to keep the psychology puzzled.
Because the
Johnny come lately on the street that may be following the gold market in a
very cursory way, a very small way, pays attention every once in a while is
looking at the Euro perhaps and what’s going on in the mainstream press and
saying to himself or herself “Why in the heck isn’t gold going up? It’s been going down like 11 days in a row or
10 out of the last 12.” And so that
fortifies their belief system that “Oh well gold can’t be a good
investment. Gold should be going up
right now and it’s not. Oh I’m not going
to buy gold.” And this is exactly the
manipulation, not only in the price structure but in the mindset. And this is something –
Sherrie: Right.
David Morgan: That I commend you on Sherrie, because really this is
an area that quite honestly I don’t remember ever being interviewed on. But that’s the idea. I’m going to drill on a little bit longer if
you allow me, but I was in this movie called “The Four Horsemen”. And they had 23 thinkers across the globe
that talked basically about all the economic/political problems that the world
faces and solutions to those problems.
And I forget the lady’s name, but she was in my view quite intelligent,
and she talked about the control mechanism and she called it the “cognitive
map.” In other words how we think, and
she said “That’s what it’s based on, the cognitive map.” It’s how the controllers, the media if you
will as a word that covers the whole basis.
“If the media controls your thinking they’ve got ya.” And again, this is what I think is going on.
Sherrie: Well
see that’s – from my talking to people, and that’s why I did want to do this
interview with you. There’s so many
people over the last three years that have believed in the metals. And what I find interesting is that even last
year I believe about mid-point, Citigroup even came out and said “Oh by the end
of 2011 gold will be at $2,000.00.” We
were hearing gold’s going to be at $2,000.00 at the end of 2011. And it’s almost as if a setup for people to
buy in it, buy in to it at $1,600.00 or $1,700.00 and then it just gets
smashed. And psychologically those that
have believed in gold and silver are now almost giving up on it. I mean are you finding that, that they’re
really getting in to the psyche of people and is that the purpose of it?
David Morgan: Well I think it is the purpose of it, and I also think
yes, they are certainly getting in to some people. I mean this money show I just returned from I
was with one of the pretty large size retail bullion dealer. And they’re selling quite a bit at these low
levels, but they’re also getting sell backs.
There’s a fair amount of people that are – you know they’ve had it. And some are selling at a loss and some are
selling at a profit. All markets go up
and down; the metals are no exception.
But the problem with the metals is this, what we’re talking about, this
psychological aspect because people think in terms of dollars regardless of
what they should be thinking in, and I’ll explain that.
By
definition if real money, gold and silver are true wealth, and they are and
they have been for thousands of years.
And you accumulate more coins in any given year, by definition you are
wealthier. But that’s not how people
think. The way they think is “I bought
it at $35.00 and now it’s at $28.00 and I’ve lost money.” Well I won’t lie and say you haven’t lost
“money” if you need to cash out and pay a bill or make a purchase of some
type.
But in
reality if you have more silver, more gold or more of both over any time frame
you are, again by definition wealthier.
So that’s something that most people can’t even grasp thinking wise. They might think about it intellectually and
say “Oh that makes sense.” But when it
comes to the reality of “What is the price on a given day?” and especially when
you have these long consolidations like we’re witnessing where it’s been
hitting highs. I mean it’s a year and a
couple of weeks. I mean you go back in
to last year, silver was hitting the $48.00 level at the very end of April; now
we’re in mid-May 2012. I’ll bet if you
did a survey from the time silver hit $35.00 and moved all the way up to $48.00
with ever silver bug you could find and ask them “Do you think you’ll see
silver under $30.00 in the next year or two?”
And I’ll bet you 98 percent of them would say “No, will never
happen.” Well –
Sherrie: Right.
David Morgan: Here we are.
Sherrie: Right,
right, yeah. I mean silver was last year
towards the end of last year, it was – of the futures reports, of the charts
that I would look at it was highest increase of any commodity of value. And now this year if you’re looking at the
chart, in one years’ time it’s minus 20 percent in the way of value from it was
a year ago. And it just seems like – yet
am I correct in saying the actual – I mean there’s enough information out there
about silver, and there’s a great article saying it’s the most important metal
in the world.
Silver is
used in almost every electronic product, in our light switches; it’s a very
important metal. And let’s see, in the
Patriot missiles it’s 16 pounds of it.
Silver’s not recycled like gold.
And I mean and from all that I’ve read, and correct me – we’ve used
almost all the above ground in U.S.
and Canada and yet we have China and India which are upcoming economies
that estimated to use twice as much. So
the supplies – am I correct in saying the supplies really aren’t out there? And this whole manipulation of prices even
may be causing the supplies to go faster?
David Morgan: Well a couple corrections. One is silver is recycled; there’s a lot of
applications where it cannot be recycled or it’s uneconomic to recycle it. But the round numbers, depending on which
study you look at, there’s probably 200,000,000 ounces of silver recycled in
any given year.
Sherrie: Okay.
David Morgan: I don’t know if I believe that totally or not, but
there is a great deal. I mean for
example the public is, in my view is dumbed down generally speaking. And there’s a lot of these “Cash for Gold”
places all over the place.
Sherrie: Right.
David Morgan: And so what people don’t really realize in this cash
for gold is a lot of people are turning in the gold they don’t want, the
mismatched earrings, or the necklace, or the bracelet or the ring or
whatever. But they’ve never stopped to
consider that 14 karat, 16 karat, 18 karat; 22 karat gold is always mixed with
silver. And so there’s a lot of silver
that comes through this gold buying apparatus.
That’s one thing.
Sherrie: Ah.
David Morgan: The other thing is there is still some –
Sherrie: And
they’re not getting paid on that silver; they’re only getting paid on the gold
part.
David Morgan: Right, but they do that – they do it to their
advantage.
Sherrie: Hmm.
David Morgan: I mean basically most of those places you’re lucky to
get 30 percent on a dollar.
Sherrie: Right.
David Morgan: I mean if you melted it down yourself and weighed it at
a coin dealer, you would be getting substantially more money. So you could say yeah, they’re not getting
paid for the silver. But they’re not
getting a fair price in any event.
Sherrie: Right.
David Morgan: The other thing was supply. Supply was in a deficit from 1990 through,
and including 2006. And around 2006 or
’07, depending again which study, either CPM Group or the Silver Institute’s
study, said and I tend to agree, that the overall mining supply of silver was
greater than total demand. And I think
that’s borne out by the facts. The facts
are that the above ground bullion supply at probably 2003, ’04, ’05 was around
500 million ounces, maybe even less. And
today we know we have a billion ounces.
So it’s
doubled over the last 5 years, and the reason being is mine production has
increased substantially over the last 10 years.
There’s been a huge increase in the commodities boom. It’s not just the metals, it’s the base
metals, it’s energy, it’s food, it’s lumber, you name it. China’s been on this huge build out
program for the last decade; they have demanded all kinds of raw materials,
which means commodities. And there’s
been this big push to increase production of all commodities. Well silver’s a byproduct of base metal
mining primarily; only about 25-30 percent of the silver is mined out of
primary silver mines.
So copper,
for example, provides 25 percent of the world’s silver supply. Lead and zinc combined allow for 35 percent
of the silver supply. So just those two
alone are 60 percent of the silver supply.
Actually about 13 percent of the silver supply comes as a result of gold
mining. So all these commodities that
have been sought after so strongly has increased the amount of silver.
So because
of that there has been a increase, not only in the amount of silver coming
above ground, but the amount that is actually needed or demanded by the
markets. So there’s been enough silver
to fill total demand, which means investment and industrial demands. But the stockpiles, if you want to call them
that, have actually increased over the last five years or so.
Sherrie: Okay
well then that I did not realize. I
thought the supply and demand that the demand was almost outstripping all the
supply over the last few years. Huh,
okay. Well what do you think –
David Morgan: Well let me interject there for a minute ‘cause first
of all everything I said, I hope I was very clear. Supply and demand always meet every year
regardless of what anyone tells you. Now
the reason that you get a higher price is because someone’s willing to pay more
for something that they have a higher demand for. Gold has got a great amount of supply above
ground, but the price keeps going up because – well it’s down now. But it was generally up over the last 11
years because there is higher and higher demand at a given price.
So all I’m
trying to state is that it’s not like there’s this big surplus of silver
sitting there; there’s silver supplies very tightly held. Roughly half and half; half investment and
half industrial applications. You got to
factor in jewelry and silverware and that stuff as well. But the supply above ground that’s excess, in
other words it’s no one wants for either investment or industrial purposes, is
very, very, very small, if any. I mean
basically for my work there isn’t any.
So the above ground supply isn’t something to focus on too much. I just want to be very factual about the
silver market.
Sherrie: Right.
David Morgan: But it’s the demand, and now the reason you’re able to
buy junk bags and bars and all the stuff is people are giving up. The psychology –
Sherrie: Right.
David Morgan: What this interview’s mainly about goes something
like… “Oh boy I wish I never bought silver.
I bought it at $35.00; it’s $28.00.
I don’t want to lose any more money.
I’m going to sell it.” Or another
very good example is someone that bought it early, that bought it at $15.00 and
watched it go to $48.00. “Oh my
goodness, I bought it at $15.00; I could have tripled my money. I could have sold it at $45.00 and then I
could have sold it at $30.00 and doubled my money. And now it’s under that. I’m sick of silver; I’m selling it now.” So you’ve got those basic two, there’s of
course a plethora of different case studies.
But those are the two main ones.
Sherrie: Right.
David Morgan: So you get supply into the market based on, as we’re
talking, psychology only.
Sherrie: Right
and what do you think – I mean especially with the political, with Greece
possibly – you know that whole back and forth of leaving the Euro, not leaving
Euro, the whole Euro dropping. The new
__________ in France who’s talking about joining the _________, being a partner
with them. The whole political scene
that’s happening around the world, besides the _______ currencies I would like
to know – I mean to me, and I know there’s strength actually in the
metals. It is the game, the outwit,
outlast, outplay right now in my opinion that they’re playing. Where do you think this year with everything
happening, even with them playing their games, where do you think silver is
going in value of price by the end of the year?
David Morgan: Great question.
Earlier in the year – to be consistent ‘cause there’s people that follow
almost every interview I do, and that’s their right to do so. Earlier in the year I thought we could
probably see $60.00 silver by the end of the year. I have since modified that based on more
current events. I still think $40.00 is
possible, and I want to give a caveat about $40.00. Once we get above $40.00 if it’s on big
volume, in other words the market’s extremely strong going through $40.00 and
it stays there for oh 3 days minimum, and a week or 2 is more what I like to
see.
It could
launch from $40.00 to $50.00 to $60.00 quite rapidly. And the reason for that is technical work but
it’s very simple to understand. It’s
just silver above the $40 level basically has no overhead resistance. In other words, there’s nothing more bullish
for any market than a new high. Now I
realize $40.00 isn’t a new high, but it’s close enough that there’ll be a lot
of strong hands by that time holding whatever silver’s available. And any new buying people get excited on
price moving up. They don’t get excited
when price is moving down. They do the
opposite, again with the psychology that you should; you should be looking at
today’s prices as an opportunity or a gift to either add to your position or
start a position.
But
unfortunately a lot of people will say “Well I’ll wait till it goes
lower.” Well what if today is the
low? You waited too long, but then it’ll
start back up and they won’t get on board.
Again, that’s a psychological game that you just have to overcome. I mean most things in life that you do well
in require discipline, and the discipline of a good investor is that you don’t
really care about an exact price. What
you care about is “Am I buying relatively in the weakness and am I selling
relatively in the strength?” It’s that
short term, intermediate term or even long term. That’s the attitude you have to have. To have the “I’ll pick the low” or “I’ll sell
the highs,” an amateur’s attitude is not a professionals’.
Sherrie: Well
with selling – all right with buying the low, and one thing I have noticed
which is interesting, not that the silver bugs, the gold bugs per se that have
been watching it very closely for the last few years. But one thing that recently I’ve noticed is
those that have stayed outside of it, have not believed in it interesting
enough I’ve had some people recently that are close to me that are saying, you
know that are in that group saying “Hey, I want to get in to silver now; when
do you think the low is going to be?” It
seems to me that it’s almost like a new group might be those that have been
frustrated that are giving up, but then those that have never participated
before are now saying “Hmm it’s low and I wanna get in to it.” Are you finding that, that there’s a kind of
a new group coming up, coming in to it?
David Morgan: You’re spot on as they say in London.
You’re exactly right. Any market
that’s what happens is there are some that are stalwarts. In other words, they bought low like myself and
they’re gonna ride this thing out to the very – not to the very, very top but
for the – or hopefully for the duration of the entire bull move. I’m very convinced that we have a few more
years at least left, probably five or so if you want a number. But as you said Sherrie, very correctly, is
that the stale longs with people that are selling for whatever reason get out
of the market and new buyers come in.
And that takes place in all markets.
So there’ll
probably be more people buying silver above $40.00 than ever bought it below
$40.00 believe it or not. Because the
way markets move is price movement causes action, and the people that are
looking at it today and saying “Well it’s gonna go lower than $28.00 or $27.00
and change, I’m gonna wait” never really get around to buying it. Once it gets above $40.00 they’ll catch
silver fever, they’ll buy it and it’ll keep pushing the price up and up and up
and up.
And with
what’s going on in the world, and I didn’t really – I apologize, I didn’t
answer your last question very directly.
Is you’re right, metals are strength.
I mean this is money for 5,000 years; always been there, always done
that for multiple societies. And yet
we’re in this global economic fiat game where we’re supposed to think one
currency’s stronger than another when the whole thing’s a giant lie. And so the metals are strength and that’s why
we’re seeing what you started the interview with. China’s increased its gold take by
600 percent in the first quarter.
You’ve got
funds that have never bought gold before buying gold now; Japanese buying gold;
people that have never bought gold. Friends of yours that you’re acquainted with
that kind of gave the soft show to the idea of buying precious metals. They’re now interested in them. And this is what takes place. So the new buyers will be there and they’ll
be there in great numbers, and that will force the price much higher. And that’s where I think we’re gonna go. Now is it gonna happen this year? I think it could begin by the end of this
year, but I really think you’re gonna see the biggest movement in metals
probably between 2013 and 2016.
Sherrie: Okay
I have a question, and it’s a little bit of a trick question here. If we actually had a free market of metal
pricing compared to a manipulated market of metal pricing, what do you think
silver would be at?
David Morgan: I think we’d be probably anywhere between $70.00 and
$100.00 at a very minimum. I mean I
base that mostly on gold. I mean gold
should be making new highs here. I mean
gold is more well known, and certainly much more widely held by institutions,
hedge funds, rich people, countries, nation states, etc. So gold to clear all the junk paper and all
the bad debt and everything else that’s out there, being extremely conservative
would probably be between $3,000.00 and $5,000.00. So if we just take the $3,000.00 mark and
look at what silver’s ratio would be to gold –
Sherrie: And
right now the ratio is 76 points – I’m sorry, 56.73 –
David Morgan: Yes.
Sherrie: Which
is not the norm; should be actually around the 15th, from
historical?
David Morgan: Yeah, the historic mean price is around the 15 to 1
mark, or I call it the “monetary ratio” or the “classic ratio”. But even if you used 100 to 1, if you had
$3,000.00 ounce gold you would have $30.00 silver. So you’d have $60.00 silver to 50 to 1
price. So I think that’s
conservative. When gold really moves,
silver goes faster. So again, I think
$70.00 to $100.00 as a minimum. But I
want to give the idea not the the price – I don’t want people to focus on the
price too much, ‘because it’s more important to get the concepts.
Because
people get fixated, again, on the price rather than thinking about “How much
metal do I have?” Or if they have more
metal now than a year ago. They think about the price rather than thinking
about silver will outpace gold, and that it’s got a lot longer to go to clear
the market. They think, again, about
price. So I don’t want to make price the
main issue, but it’d be far, far higher, I’d say probably double what it is now
as a minimum to be where – if we were in a true free market.
Sherrie: Gotcha,
well I very much appreciate your time and I would like to thank you and also
we’ve talked a lot and we’ve talked about the price. But basically I know what you’re saying and
it’s boiling down to is that even though the psychological what’s been
happening of the depressed pricing, yet we’re hearing about all the political
and the countries and the currencies going down and all these funds are
buying. And yet the price is going down,
and I know it’s affecting people emotionally.
Because even though it is an investment, and we’re supposed to be
non-emotional about investments, the metals – the people that have really
believed in metals have been very emotionally involved in them over the past
few years. And so the emotional portion
of it – of what you were saying, people are selling it, even losing money at
this time. It’s almost like trying to
stress that they need to hold on, right?
David Morgan: Yeah, I mean this is maybe a corny analogy but you
know me, I love to use them. And it’s
like a life preserver. If you had
abandoned ship and I threw you a life preserver that was only 60 percent full,
it had air in it, it’s probably – it will still save your life. And that’s where the gold market is right
now. But if that life preserver was
blown up fully and it was at a new high, $1,960.00 gold, you’d feel like “Oh
gold’s doing its job. It’s at this price
and it’s saving me, saving my financial future.” Well even if a lot of the air’s been let out
a life preserver is still doing its job.
I think
that’s the best analogy I can give you off the top of my head. Because yeah, it may not be the pristine,
wonderful life preserver that you wanted but you know what, it’s still going to
do its job. Same thing with silver, and
all I can do is encourage people to try to, I don’t want to say fight their
emotions, just acknowledge their emotions but use some logic to balance it
out. Nothing has changed fundamentally
that makes it the right thing to sell your metals here; in fact the opposite is
true. The fundamental facts that are
taking place in the global economic system and the political – I don’t even
know what to call it, that’s such a joke as far as what’s going on. There are no real leaders anymore; there’s no
one telling the truth anymore. The
political system on a global basis is so corrupt. That there’s more reasons than ever to buy
the metal.
So if you –
unless you really have to, I mean I can’t see in everybody’s particular
situation and there are probably some cases that they’re using that life
preserver. That was their savings;
something important has come up in their lives, that’s all they have. And if you really think about it, at least
they had that. You know what I mean?
Sherrie: Right.
David Morgan: But if you don’t need to sell, then certainly rethink
it before you do.
Sherrie: Well
especially when people, in the way of thinking back to like Ron Paul said, and
I believe what it was when he held up the silver circle coin to Ben
Bernanke. I believe it was 2008, he said
that it bought 4 gallons of gasoline; and now today at that time, which was a
little over $30.00, it would buy 11 gallons of gasoline. And so I guess it’s almost where people need
to look at that portion and the way of the purchasing power of what it was to
what it is. And that can help their
emotional part of it. But it is, and
it’s actually – which is why I really appreciate you talking to me about this,
is it – really is an emotional investment to many people who have gotten in to
and have watched it closely; and are very disheartened right now with it going
down. But we know the strength and as
you said, the strength is there and it’s just outlasting.
David Morgan: Yes,
that’s right. Just keep your
conviction. Well Sherrie thank you so
much offering me the opportunity to do this interview with you.
