TEMR: David Morgan is an expert on silver, gold and precious metals investments.Â Â Heâ€™s a world renowned lecturer appearing on CNBC and the FOX Business Channel.Â Heâ€™s an author having penned, Get the Skinny on Silver Investing.Â Mr. Morgan is a regular contributor and friend of The Ellis Martin Report.Â David welcome back to the show and happy New Year to you.
David Morgan: Ellis thanks and happy New Year to you.
TEMR:Â Are you optimistic for 2012 with regards to silver or metals in general?
David Morgan: If we take the whole year into account I am, yes. But, I think it’s going to be the most volatile year we’ve probably seen to date.Â
TEMR: Â Are you encouraged by the start of this week at all or are you just ignoring it and looking towards the long-term?
David Morgan: You can’t ignore one of the biggest gains on a one day basis for silver going back years. I mean, we got off to a rocket launch and of course you have to pay attention to that. But, that just goes back to the word I used just a second ago, volatility. I think you’re going to see a lot of movement both directions but overall the trend will be higher. And, I’m expecting actually to see silver pretty much double over the course of 2012, meaning going roughly from $30.00 to roughly $60.00.
TEMR: Â So, you’re predicting $60.00 silver at some point during 2012. That’s a big number for silver.
David Morgan:Â It is. It breaches the $50.00 psychological barrier that sells silver down ever since the Hunt Brothers situation. And, it was smashed down at that $48 1/2 level actually or $40 1/2 some time ago. And, it’s going to take some work to get through that but I believe this is the year that it will happen. And, I believe once we get through that psychological barrier that will become a floor for quite some time. Â
TEMR: Â Now as a subscriber to The Morgan Report or silver-investor.com, I get updates from time to time or I read them from time to time from you as do all of your subscribers. And, I while back I believe you mentioned, I may be paraphrasing here, silver as a buying opportunity at any price under $30.00. So, I took your advice and I went out and stacked up on some rounds. Are you buying more silver right now?
David Morgan: Yes I am. And, that’s exactly correct I said for a long-term investor, and long-term these days is like in the 2 to 3-year time horizon, anything under $30.00 buy physical. And, so far that’s proven to be pretty good handle on things because if you look at the chart and see how many days it’s traded under $30.00 there aren’t very many. And, even on the days where it’s printed in the $26.00 level there’s not many prints there. In other words you have to look at these markets in a way that most people don’t understand because they don’t really know how markets work. But, it’s like, I’ll use the car analogy. I know sometimes a lot of car dealers will put a car on display and it will be, you know, the super deal. And, it’s one at this price only. So, they have a lot of other cars that are almost identical to it but there’s only one at that specific price. So, it’s kind of the same thing for silver. How much $26.00 silver is available? And, the answer is far less than is available at $36.00, if you get my point. I hope I made that clear. People get the idea that once it gets to $26.00 or $22.00 or whatever their fantasy number is, I’ll put my $2 million dollars in there or whatever. Markets don’t work that way. There might only be enough silver at that level to take $100,000.00 worth of metal off the market and then the price starts moving back up. So, that’s something to bear in mind. There’s a lot of people out there that just don’t understand exactly how these markets work.Â Â
TEMR: Â Well, what surprised me the particular morning I actually physically drove to a bullion dealer in Los Angeles, a substantial dealer, I was the only one there buying silver. In fact, I was the only one in the showroom. I expected it to be packed. What’s going with regard to perception in the retail area and silver?
David Morgan: Well, it’s typical psychology. If you really want to do well in the markets you have to understand psychology more than the numbers. Numbers are important. They’re a tool. But, if you really understand human psychology you’ll do even better. And, well, let’s see, the price has gone off. The price has been below $0.50 May 1st and it’s going lower or I want to wait and see. So, you know, a lot of people that get that wait and see kind of an attitude and they’ll wait. They’ll watch. They’ll see the bottom. They won’t know it’s the bottom and they won’t buy. In other words they just watch the whole time. And, there’s lots of people out there like that because the psychology is they want to get the exact price, low. And, that’s an amateurs game. A professional looks at a market and says this is still a bull market. The major trend is still up. Nothing’s gone on in the financial system that’s made anything close to a resolution of these massive problems on a global basis. The metals is really the only safe harbor. Therefore, I’m going to establish a position and I’m going to keep building it. To use your words, stacking. Keep stacking up your gold and silver. And, a lot of people do get that but a lot of people don’t. They’re waiting and they’ll continue to wait and they’ll miss the market.
TEMR: Well, they’re going to wait until the price goes up I guess or until it goes down and it may not go down as low as they want it. Is that essentially what you’re saying?
David Morgan: Yeah. What happens is people do the wrong things. I mean, right now you were the only one in the shop. That’s a good indicator you’re buying correctly. I mean, if there was a massive amount of people in there you might question yourself. It doesn’t mean you shouldn’t buy. You might say, hmm that’s interesting. So, people should buy when they’re fearful, which is now. And, they should be selling or lighten up when they’re greedy. But, that’s not what happens if you study the markets. And, it’s not just the gold and silver markets. It’s the tech. It’s the housing boom. It’s any market. People get very euphoric at the highs. So as you said a moment ago silver starts moving back to number 35/40 you’re going to see a lot more enthusiasm and a lot people coming in the market that didn’t want to touch it when it was under $30.00. You know, they might have heard this radio show even and said, you know, that sounds really, really good but it’s going lower. And, they don’t do it. And, then it starts to move higher. And, some of those people will say, I’m throwing in the towel. I’ve got to buy it. I’m going to buy it now. Well, they would’ve had a much better profit base if they would’ve bought it when it felt wrong to buy it.
TEMR: And, we had this almost exact conversation well over a year ago when it was under $20.00.
David Morgan: That’s correct. You’ve got a great memory and that’s precisely accurate. We had a very similar conversation. And, you know, the thinking at that time, generally speaking, I’m paraphrasing, was that, oh my gosh $20.00. It was at $5.00 at one time. It’s a quadruple. Double-digits. Now that’s too high. Well, is $22.00 high when you’ve got an infinite monetary supply and governments that are so irresponsible that they won’t own up to the responsibility? You’ve got governments all around the world that don’t know what to do and they’re actually in a panic mode behind closed doors. They’re throwing rocks at each other. And, they don’t understand how to correct the system because it’s beyond correction. I mean, there really isn’t a physical paper price that you should focus on. We should focus on is, do I have metal or don’t I? You should focus on do I have more at the end of 2012 than I had at the beginning of 2012? And, that’s the way you should appropriate your wealth because it is wealth. It’s stored value and it’s for the future or spending on the present day if you choose to do so. That’s the only way to articulate it. But, people cannot get that paradigm shift in their thinking. Now if we were on a hard money standard then they would say well if I had more silver coins tomorrow than I had today I’m wealthier. And, that’s so simple to grasp that concept. But, when you put in the paper paradigm and everybody thinks of their net worth in terms of paper they can’t get the concept. They’re blinded to it. But, yet the reality is take that red pill. Get out of the matrix and look at your net worth in terms of how many coins do I have today versus what I had a year ago. Do I have more or less? And, that is true value. But, I can’t emphasize it enough and I certainly can’t put those rose colored glasses on everybody so they can see past the illusion into the reality.
Ellis Martin:Â Well, let’s shift this conversation into another lateral realm more or less. When I think about silver rounds now having done business with a few silver producers based out of Canada and producing in Mexico and China and what have you, I can’t help but think about these companies producing silver right now and being a part of that. What are your thoughts concerning silver producers right now? Are you grabbing up more of that stock?
David Morgan: Absolutely. I mean, my belief hasn’t really changed. They’re the most undervalued best place to be in the market and of course this is the one that has the most fear surrounding it. But, if you are patient and you have conviction the best place to be is in the junior to mid-tier producers. Buy in over the next, I’d say, few to several months, meaning 3 to 6-months and hold to your hats because what’s going to happen in my very strong view is that to people that are extremely late to the party that we talked about a moment ago, that will have to pile into silver above $40.00, more above $50.00 and even more as it moves beyond that they’re going to feel they missed it. But, they’re also going to look at reality at some big way and say my IRA isn’t going to make it. My pension fund isn’t there. Maybe Social Security payments will come but they’re not going to buy anything. In other words, fear will drive the market. So, there’ll be a huge rush into gold and silver. However, most people will not go to coin dealers at that point in time. They’ll feel that the prices of have passed them by. But they will be looking for gold and silver mining companies like crazy. So, I predict that it’ll be similar to the tech or the housing boom only it will be as big as or greater than those in real terms. And, the reason I say that is there’s nothing like a fear driven market. When you think your money is going to lose value rapidly it’s huge motivator to move out of that currency whatever the currency. Be it the euro. Be it the U.S. dollar. Be it the Aussie dollar. Be it whatever. Into a gold or silver related asset. And, that will be the underlying equities because almost everybody in the U.S. and in fact globally has some type of a trading platform that’s computer based and they can click a mouse and buy a gold stock. And, once that phenomenon starts to grab hold, and I really think it’s going to take 1 1/2 to 2 years before you see this, but once it starts it is going to be, you know, the Albania all over again. You’re going to see some of these penny stocks go ten-baggers in a matter of weeks.
TEMR: So it’s ok to accumulate now but you must be patient. Look ahead for 2013 and 2014.
David Morgan: I really believe that’s the case. And, that’s the reason why if you really can think through these things and try to get your emotions out of the way you’re going to buy right now when the market’s quiet, which is exactly what you said. You walked in the coin shop you were the only one. That’s a quiet market. Never sell a quiet market, one of my favorite market adages. And, number two, you really want to be buying when everybody else is thinking about it. So, now is the time. It doesn’t mean this day. As I said, in the next 3 to 6-months I think. You’ve probably got that window of opportunity and then you’re going to start seeing a new base built and start moving up. And, It’ll move up I think well. But, not into the panic buying mode that I described a minute ago. That’s a couple of years off I think.
TEMR: Does politics per se have any immediate decision across the board with regard to influencing you over your investment decisions?
David Morgan: Somewhat but not much. I mean, the political spectrum is so corrupt that it is a situation that the analogy I use is it’s like changing captains on the Titanic. It doesn’t matter which party is in. It doesn’t matter who’s at the control. It doesn’t matter what blather lather speech they’re making. No real changes can be made. The hull has been pierced and the ship’s going down.
TEMR: So, you’re pretty much ignoring the news except for maybe a mild interest in what’s happening politically.
David Morgan: Yeah. Some people use it to trade. I let it influence me slightly. But, I mean, I look at the fundamental picture when it comes to politics. And, the fundamental picture in my strong view is that it’s corrupt and it cannot be corrected at this point in time. There’s some hopes out there. I mean, I’ll voice that I was honored of being able to have dinner with Ron Paul. It wasn’t a one on one. It was at the Austrians Group at San Francisco one time. And, I think he’s awesome. And, I even think if he’s elected he’d not be able to turn the ship around. I think it’s too late. That’s my opinion. But, I really don’t put much clout into the political system any more. I think it’s just really, really similar to the Roman Empire. Weâ€™re in the final days. And, at most the Congress critters and most of the senators are looking to fatten their own wallets on a personal basis and could give a hoot about the citizenry.
TEMR: Following up on an earlier point that you made just a while back in this conversation. You mentioned the real estate bubble. You mentioned the tech bubble of the late nineties and the early 2000s. Mining stocks, gold, silver, is that a bubble? Or will it act like one without ever popping?
David Morgan: That is a fabulous question. And, I wish I had an answer. My take at this point in time subject to change is that I think the equities could get into a bubble mode. I mean, It’s pretty easy to figure out what a company is worth based whatever the current dollar price is. And, when you’re in that kind of a blow off rally you got to kind of keep your head about you and realize that you’ve only got a derivative. So, what do you do with that derivative? And, the answer is quite frankly I don’t know. It’s a case by case individual basis but I’ve thought about it a great deal. So, my take would be to change that asset to another one. So, an example would be you’ve got very overvalued mining shares and maybe you could exchange that for the currency (inaudible) and move that quickly into a very undervalued asset such as a land position, raw land perhaps. Maybe real estate. Maybe income producing real estate. I don’t know. That’s the idea. I think you still want to be in a hard asset. And, so, you could either go into a land position or something along those lines. As far as the metal itself I’m reserving comment. My take today and it has been for the last couple of years is to go ahead and hold the metal itself. And, the reason being is that you don’t want to trade any physical metal for any piece of paper unless the whole system has been rectified to some large degree and you have confidence back in the system. And, if there is a currency that’s gold backed or that everyone trusts and confidence restored to the system and then certainly you can take a look at that and sell the physical. But, unless that confidence and trust is restored I don’t think it makes any sense to sell the physical. So, hopefully I was clear on that. You want to sell the derivatives and put it into some type of undervalued asset at the time and you want to hold the metals until you’re sure or as sure as you can be that there’s some confidence remaining in the system or it’s been rebuilt. In other words it’s fallen down as far as it can go. It’s bottomed and now confidence is being rebuilt and things are on the upswing again.
TEMR: If you don’t mind David tell our new listeners about your website, silver-investor.com or also themorganreport.com.
David Morgan: Â Certainly. I think what I’d suggest to most people that are not familiar with my work is get on my free list. It is absolutely free. You’ll get The 10 Rules of Silver Investing. And, you can go through those. I think they come out about every 3 or 4 days. And, then I send out a weekly update to everyone for free on the economic conditions. And, it’s also a way to kind of track where I’m speaking or what I’m doing over the course of the following months or so. And, then if you like the way I write we offer usually a sample edition to report that you can read and view if you want to actually get my best thinking which is reserved for my members only.
TEMR: Well, David it’s a pleasure to speak with you. Again, I’ve been speaking with David Morgan, the silver-guru, expert on mining, money and metals. The website again is silver-investor.com and themorganreport.com. David thanks a lot for joining me today.
David Morgan: My pleasure Ellis. Thank you.
TEMR: Â Listen to this segment again on the homepage of our website, Ellis Martin Report.com. Â
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