Interview: David Morgan on Silver’s Recent Price Breakout

Read the full interview transcript below.

Jerry Robinson, Host: Well, recently, gold and silver prices have been breaking out of a malaise that they have been locked into for many years. In fact, there has been a multi year downtrend occurring in gold and in silver, and it just seems to be shaking it off. It seems to be beginning to perk up. It’s catching the attention of hedge funds. It’s catching the attention of retail investors, and, of course, one person who has been watching the price of silver, in particular, for many, many years, a top analyst in this field, David Morgan. He’s a friend of the show, the founder of The Morgan Report. He publishes that on a regular basis. You can find that online. The simple website to go to, the one that he’s very well known for is silver-investor.com. The creator of that website, David Morgan, is joining me on the line today. David, thank you so much for joining us on Follow The Money.

David Morgan: Well, Jerry, it’s great to be with you. I want to make one quick statement. We have rebranded to themorganreport.com. That’s where our portal is for all of our paid and unpaid members. We will keep the silver investor website up, of course, but it will be more of an educational site. A lot of sweat equity has gone into that website over the last almost two decades, and we won’t take any of that down. It provides an educational platform for everybody. But the actual, what we consider to be the serious investor who wants a free report, a consultation, to be a member of the site, that type of thing, should go to themorganreport.com. The reason for that is because of the association with silver, a lot of people have never subscribed because they think it’s a silver only website, but it’s not. We’ve probably had one of the biggest gains in the aluminum space as an example. We looked at lithium, uranium, copper, coal, oil, all through the resource sector. We try to find value throughout the sector, meaning top tier, mid tier, and speculative situations that make sense, and we outline exactly how an investor would go about participating in our research. One size doesn’t fit all. Somebody that’s nearing retirement would take a different approach than someone that’s young and aggressive, and has a high cash flow and no responsibilities. So, we outline that and how to use it. The Morgan Report, and, again, rebranding so people get a solid idea of what we actually do, because, again, unless you are a member, the idea that “Oh,I’ve got some silver, so I’m good to go. That’s all I would get out of The Morgan Report.” is far from what we do.

JR: So, themorganreport.com. Now, The Morgan Report you’ve been publishing for many years, and I would imagine some of your subscribers are beginning to get the itch as they see silver and gold and just a few of the other commodities, but mainly precious metals, beginning to really curl up here, beginning to really form, possibly, a new uptrend. You know, David, here at our website, we created a trend analysis software, and we’re able to track buy and sell signals on equities, ETFs, and, of course, commodities. At the very beginning of February, the bell started going off for silver and gold. Gold issued what we call a Position Uptrend, which is on the weekly chart. We saw a brand new uptrend forming in gold and in silver. We haven’t seen the bigger long term uptrends form yet. They’re still a little bit away. We need to get it higher on gold and silver. What does your analysis tell you about this present pop in gold and silver that we see in 2016? Do you think this is merely a blip because of what happened to the dollar? The dollar has pulled back amid concerns about the global economy. Do you think that this is something more fundamental? What’s your take on the recent pop in precious metals?

DM: Agreed, I think this is it, and the reason being is that if you look at the majors, something like Barrick Resources which we outlined in the January issue. When these companies like that, Global Corp, Newmont, some of these really top tier companies, have almost doubled in that short amount of time. And, the volume has been substantially greater than what it’s been over the last several years. That, to me, is a key that the indication is strong that we are in, basically, the beginning of an upcycle. Does that mean that’s it 100%?. No, nothing in this business, Jerry, as you well know, is guaranteed. But, I think the bottom was in November of last year, and just for everyone who listens to what I do on the internet, certainly, we have been struggling with getting the bottom correct, but this really looks like it. I’m more confident now due to the fact of what the majors have done pricewise and what the volumes have been.

JR: Yes, the volume has been encouraging. Also, the attraction we’re seeing from some of the big institutional investors beginning to say, “Hmm, what’s going on here with gold and silver?” We know what happened last time, the last time gold and silver really took off, and David, you’re the perfect person to talk to this. Back in 2007 and 2008, we were right here with you pounding the pulpit saying, “You’ve got to get into hard assets.” and, back during that time, David, the average individual didn’t even know how to buy gold and silver. It wasn’t even something on his radar. He was just thinking of stocks and 401Ks and IRAs. So, we saw this huge marketing push, especially as we got into 2011, Goldline was on every single network, and Glenn Beck and all of these people were pushing gold on Fox News and whatever. So it really became a popular idea. “I can invest in gold and silver.” Well, now that we have seen this epic pullback, it seems as if the investor participation rate this time around is likely to be a lot larger than it was the first time around. When I say the first time, I mean the last time in 2007 and 2008. So, we expect to see more people fearing the loss of missing out on another major uptrend, and we expect to see even more retail investors piling into gold and silver whenever it is perceived that another long term uptrend is beginning. Do you expect to see the same from your end? Do you expect to see more retail investors piling in this time?

DM: Absolutely, for several reasons. One that I am very fond of saying is that 90% of the move comes in the last 10% of the time. If you look back at what happened in the 1970 to 1980 bull market, you can say from 1965 when silver was taken out of the coinage to the ensuing 15 years, we see that the acceleration phase, or the third leg of the major secular bull market, which I truly believe we are still in, is the longest, not in duration, but the greatest in appreciation. So, I think that we’re going to see a move in the metals and the underlying mining equities and resource stocks in general, that will probably go into the historical record as being the greatest bull market ever. The reason I say that is because it’s the counterbalance to the biggest bubble of the debt system on a global basis ever. So, that’s the context. The real reason that you go to the commodity which becomes money, gold and silver at a certain point, and this is very rare through monetary history, is because the uncertainty factor is so great under a small amount of the population that understands what’s going on, that there is an exit from the distrust of government’s ability to manage the economy, which they really have no business doing anyway, but I digress. So, there is this safety or uncertainty hedge in precious metals. Basically, they do an accounting of all the misallocation of capital that has taken place for decades. Now, that actually took place, Jerry, as you probably know, during the 1980 peak. I wrote an article called “Engineering the Price of Gold”, and if you look at that article that’s still available on the internet by typing in “Engineering the Price of Gold David Morgan” and google you will probably find it, you will find that if you accounted for M1, that’s your cash money not looking at any credit but looking at money only, you would find that the theoretical price of gold, to make every dollar backed by gold, is $400 an ounce. Yet, we went to $850 on a given day. I know it’s a one day trade, but we were above $400 for a fair amount of time. So, we could have actually gone back to 100% gold coin standard for a brief time had the government come in and said we’re actually reinstituting gold, and it’s going to be at this price, etc. I’m not saying that would ever happen. What I’m suggesting is that the accounting took place, and I think the accounting will take place again. If you were to use the same metrics that were used at that time, in other words, what is the global monetary supply, not credit but just money, what I call “money”, let’s call it, as Mike Maloney correctly says, currency, and you took the amount of gold on a global basis, you would find that you would be in the thousands of dollars per ounce. So, as an example, if you go back to 1979, and let’s say that you were a real silver bug, and you bought it when it was demonetized, so instead of $1.29 per ounce which was the price in 1964, you bought it, for let’s say, $2. And, you rode it all the way up for 14 plus years, and it made it all the way to $6. In real terms, you had made a capital gain and actually profited in real terms. But if you were a rank speculator, and you bought it in January of 1979 at $6, and you were smart enough to get out, let’s say on the way up to $50 in January 1980, that one year timeframe, you would have gone, perhaps, an 800% gain. That person that sold at that $6 level where you bought, the speculator bought and the investor sold, would have missed out on the biggest part of the move. So, that’s why I want to emphasize this, Jerry. I’m not saying that it’s absolutely going to happen. No one knows the future, and, certainly, yours truly has been beat up by the markets more than once, and these days the market could still humble me. Having said that, I really do believe what I said earlier, that the biggest move is ahead of us. You said, and I’m emphasizing this, that many people will jump on board this time that were either once in this market and will come back to it, but much more than that, it will be new buyers. New buyers will be waking up to it, and it won’t be a popularity contest this time, although that will somewhat be the effect of social media platforms that we all know about. It will be primarily due to a greed and fear trade that will be going on on a global basis. This won’t be a US phenomenon like it was in 1980. This will be a global phenomenon. I really think, again, that unless you understand why people covet the precious metals and why these types of runs to gold take place very rarely, then you’re not going to understand why when gold starts going up $20, $30, $40, or $50 an ounce on a daily basis, probably a couple of years from now, people need to have the proper context to understand why that could take place.

JR: You’re listening to the voice of David Morgan. He is a highly regarded resource analyst. You can learn more about him at themorganreport.com. David, you have recently revealed that you’re getting into business, into the royalty business, the streaming business, which is very exciting. I want to talk about that in a minute. Before we do, let’s just talk about the end game. I’ve noticed that as people wake up, and it’s been a process now for many years, it seems that the 2008 crisis really woke a lot of people up, they started researching and realized that cash money is not really money as you pointed out. It’s currency, and gold and silver are money. They started going through this kind of process where they became aware, and they began to understand what was happening. Now, it seems as if some people are trying to determine the end game. How does this end? The end game really varies. It all depends upon who you ask. Some people envision a Mad Max scenario. I don’t agree with that, but some people see that. Others see simply a return to the gold standard and a lot of pain in the process. What do you see? You just mentioned that you don’t have a crystal ball, but what is the end game from all of this reliance upon fiat currency? Just give us a realistic expectation of what you think could happen whenever the stuff finally hits the fan, so to speak. What do you envision?

DM: Good question. In fact, I’m writing an article exclusive, and I’ll give you the last paragraph. In fact, I’m working on it as we speak. It starts off talking about whether silver is a better investment than gold. Is silver more important than gold? So, in this paragraph, it says, “Looking at silver from a Mad Max perspective, one could argue that silver can purify water, help wounds to heal, kill many pathogens, act as a signaling mirror, and even recharge your cell phone. But, it’s highly unlikely to be used in an efficient monetary reset. The reset could go a number of directions at this point, from an all electronic system with some tracking methodology to a full international gold standard. At this point, many in our community think that some tie to gold in inevitable. This remains to be determined as my earlier statement about banks seldom losing, but almost always trying to gain more of a control over the populations still exist.” So, Jerry, I believe it’ll be something in the middle. I mean, this goes back to Aristotle’s golden mean. It’s not that I want to play politics. I’m not a big compromiser. I really stand on integrity and value, but I’m also fairly experienced in terms of years on the planet. Because of that, I think there will be some mix of perhaps a commodity based standard or perhaps a tie to gold. I don’t think it’ll be anything close to a true gold standard, but I also think there will be as much control in the system as the bankers can get away with, which means they’ll have an electronic form of payment. I want to go one step beyond that because this is something that I’m doing, I’m starting to look at it as seriously as I probably have the honest money movement or precious metals, and that is FINTECH which is slang for financial technology. Free markets are really hard to stamp out. I mean, whenever the authorities try to stamp out a free market they call a black market, well, that’s just their term for free thinkers that have solutions to problems that are caused, usually, by those in power. So, if we look at that, the financial technologies that are taking place now are disruptive to the current banking system. So, I’m fairly optimistic, Jerry, that we’re going to see more and more of these peer to peer payment systems like you have in Africa where people don’t have a bank account, yet they’re making daily trades for goods and services. And, again, this is a disruptive situation. So, I’m just starting to look into it, when I go after something, I go pretty deep, and that’s something I’ll probably be writing about in the next issue of The Morgan Report. So, that gives me hope. Now, how that develops is like anything “new”, which means that there will be stuff out there that is pure fluff, people out there trying to rip someone else off by making a company that has no real merit. There are those kinds of scoundrels in existence, unfortunately. There will be others that really put in blood, sweat, and tears that maybe make an error that’s very difficult to recover from, but they will, and they will build something that’s really of merit, even though they stub their toe, so to speak. And, then there will be some that will be leaders, perhaps from the beginning all the way up. I don’t know. What I do know is the process, and the process is that there will be competition, which is a great thing. So, there could be one, two, or three as an example, of these financial technologies that are totally disruptive to the current banking empires that will actually be coveted by the people, trusted by the people, utilized by the people, and will grow exponentially. So, that’s what I’m looking for. That gives me hope. You know, Jerry, you’re younger than me and that’s great. I was mentored by, in my view, some of the greatest minds on the free market, some of the greatest in the financial sphere that you can talk about. Murray Rothbard, what an intellect, and then look at practical guys like Jerome Smith that very few people talk about, Harry Brown is one of the greats. I actually worked for Jerome at one point in time. The Aden sisters came through the Jerome Smith school, meaning that he trained them in technical analysis. So, excuse the ego, I don’t mean it, but from looking at all kinds of the writers back in the day meaning back when I was young just getting into the field, the silver guys seemed to have some of the best thinking, in my opinion, over most of the guys. They did much more than silver just like The Morgan Report does much more than silver. The idea is that I still have hope. I have really strong beliefs, but I don’t want to voice too much on the air, but you know them. If you just put it in humanistic terms, I believe in the human spirit, obviously, but I believe that there is a God, and we’re not it. I think that’s very important to voice because where it all comes from is not just the human experience. There is a lot more to it than that. Back on track, I still believe that there are God given talents to make use of what we have, not only from the imagination perspective, but more from the practical perspective, how we can find solutions that are spawned, let’s say, from us rather than from some authority that’s going to tell us what to do. It really boils down to, in my view, and I’m going to get a little political here which I seldom do, there are really two types of people. There’s those people that really want to be free and make it on their own, and there’s those people that want to be provided for, even though they have reached adulthood. And, that’s unfortunate because, if you look at the metaphor, let’s say, of something that I think most can relate to. If you look at a lion, the king of beasts in a zoo, everything is provided for him. He has a habitat, he’s given food, he’s probably got a partner, and all of that. And, if you look at the eyes in that lion that’s in captivity, there’s nothing there. There’s no real spirit there. But, if you look at a lion out in the free, out in the Savanna, you see one of the most majestic creatures on the planet, in my view, and that’s a metaphor for what’s really going on. If you need to be provided for once you reach adulthood, I question whether you’ve really become an adult.

JR: Interesting. Very, very interesting. You’re listening to the voice of David Morgan. He is the publisher of The Morgan Report. You can find out more about that by going to themorganreport.com. David has been an analyst for a very long time, watching commodities, particularly silver. David, now you’re stepping into, I just learned, a brand new role. You’re stepping into what looks like a royalty company. Why don’t you briefly describe for our audience in these final moments what your new project is all about. It sounds very exciting.

DM: Thank you, Jerry. The best thing to do for anyone interested is to go to lemuriaroyalties.com. On there you can find out about the management. Certainly, it’s not just me. We’ve put together a team of people who are very experienced in this area of royalty in a streaming company, especially the legal team which is important because these will be individual contracts on a case by case basis. We’re there to build shareholder value. It is a private company. Of course, that’s additional risk in some cases, but we want to build something that is a win win situation. The current model, generally speaking, is one where there is a set price on a given commodity, and that extends, let’s say, through the life of the mine. In our vision, we look at it more like how we can partner with a company and provide them some upside. So, for a quick example, not an actual contract, I want to be clear that this is just an idea. But, rather than give a fixed price to, let’s say, a silver stream as an example, at $5 an ounce, we would give a percentage, let’s say 30% of the spot price. So, if you’re looking at $15 silver, 30% would be $5 an ounce. However, if silver went from, let’s say, $15 to $45, the company would be receiving a much larger share than they would in the fixed price methodology. So, we want to provide something that we think the market would gravitate to. I’ve always been a big believer in the free market, and that there are win win situations. Not that you can’t be a great or strong negotiator, but if you leave winning the negotiation, and leave the other side feeling like they’ve been taken or have not been treated fairly, you’ve not built a relationship.

JR: Yes, I would imagine. I’m thinking about companies like Silver Wheaton, Royal Gold. I’m thinking of Sandstorm. We’ve had the CEO from Sandstorm on, and these companies operate with that royalty mechanism where they pay. And I would imagine in this environment right now, they really have a lot of power, so you’re talking about giving some more power back or restoring some more power back to the silver miner. Is that what I’m hearing? It sounds like there is going to be a demand for that because that currently doesn’t exist in the marketplace.

DM: Correct. I will humbly say that sometimes building the mousetrap isn’t the way to do great in business. Sometimes building a better mousetrap is, and I will use that analogy because, certainly, there is nothing new about a royalty or streaming company. Silver Wheaton started with Chap Mercantile. In fact, we were on that very early for our members, but I thought, “Wow! I should have done that myself.” That’s the way to do it, especially with these base metal miners that could give a hoot about silver. Right? But, nonetheless, this came basically through partnerships that I’ve formed, people that I’ve known. I’ve known so many of these miners, so it’s an opportunity for them, in my view, to make a deal that, perhaps, serves them better.

JR: This was a logical step for you. Was this a dream of yours? Is this something that’s coming true that you’ve always wanted to do, or is this just out of the blue and just kind of happened?

DM: Great question, and I’m going to answer truthfully, not that I wouldn’t. Actually, it’s a dream of one of the guys that’s been working with me for some time, and one of my big joys in life is to help someone fulfill their dream. I have pretty much fulfilled mine. I basically wanted to be in the business I’m in and providing truth to people that are willing to hear it. The idea of running a fund, if you want to call it that, it’s really not a fund, but a company that dealt with the miners directly and gave appreciation to those that were participating with us. That’s more someone that’s in the team. We knocked around the idea for a while, and, of course, he had the idea. I’ll give him credit for that, as far as the outline I just provided, as far as the win win situation. But, I had the contacts, and I also knew the management types that we would need and how they tied into the legal structures that were required. So, it had to do with having some gray hair and a lot of contacts. The young guy had a great idea, and you could call me the connecter that put it all together, if you will. And, I’m the one taking the company forward in the CEO slot, which I’m fairly comfortable with, really. But, it’s a team effort. I’ve put together, I think, a really, really good team that will be able to do what we say we’re going to do. Does that guarantee we’re not going to make any mistakes? No, unfortunately, no. I don’t think I would like to live life without error. The greatest lessons I’ve learned have actually been from making mistakes and learning from them. To continue to make a mistake and repeat it, that’s insanity. That’s used way too often, Jerry, but I have to come back and say that the idea that we can print more money or create more debt to get out of this debt problem is insanity. That’s what’s going on in the top tier at this time with the global banking system.

JR: Those of you who want to find out more information about what we have been talking about today, you will find links on the show notes. Also, I’ll repeat the domains. Would you repeat the name of the company again? I don’t know if I know how to say the first name. Is it Lemuria?

DM: Yes, Lemuria Royalties.

JR: Lemuria, ok, so it’s . We’ll place a link to that on the show notes. Also, themorganreport.com. You can go there and subscribe to David’s newsletter. It provides a lot of great information, and you talk about different royalty companies. In fact, I do like those companies. They certainly carry less relative risk because of their business model than a typical miner. So, I do like the royalty companies. If you want to learn more about those types of companies, I know David profiles those in The Morgan Report, and he is now officially launching his own. So, you can learn all about that on the links we provided today. David, in our final moment, would you just leave our audience with a piece of advice from somebody who has been around precious metals for so long? Just some advice for 2016. What would you say to our audience in closing?

DM: I would say be prepared for change. We are in a system now that is rapidly changing in all fronts, financially, the food system, the political system. I mean, everything you can touch about our world is changing at a rapid pace. So, for those younger people, think about a career as being maybe three or four careers. In other words, the job that you have now may be very, very good, but may be superseded by something different in the future. So, I think the ability to be able to be a life long learner will probably serve everyone the best.

JR: Great advice. David Morgan, my guest today. Learn more online at themorganreport.com. David, as always, it’s wonderful to have you on. Thank you so much for sharing your wisdom.

DM: My pleasure, Jerry. Thanks for having me.

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