Silver- A Few Questions

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In most issues of The Morgan Report I answer questions from our subscribers, this week I looked back at some past issues and picked out a few that might be of interest to this readership as well.

Dear David,

Thank you very much for your hard work and excellent research. Your level approach to the metals has long been a beacon to follow. Thank you.

I am writing to inquire about your opinion of the coming need for companies to follow the FASB-157 accounting rules. There has been some speculation on Web forums (such as PrudentBear Chat) that there could be some fall out in the coming months as companies which have been calling derivatives and other “mark to model” assets cash and short-term cash on their balance sheets. What level of risk is there that the junior mining companies might be bitten by this bug-bear? I would imagine that any producing mines could simply point to their ounces in production as an offset to any suddenly weakened assets that come to light via FASB-157, but wonder what impact this might have on the junior sector as a whole.

Kind regards, Chris

Comment: Thank you for the kind words. A lot of what makes my work so enjoyable is hearing from subscribers such as you. Soon after the initial fallout of the derivatives mess last fall, which several prominent resource sector writers such as Jim Sinclair and Greg McCoach (and I) have been railing against for some time, a number of the mining companies we follow were quick to assure shareholders that they did not have exposure to these financial time bombs.

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Silver –Long Term

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Silver — Long Term
By David Morgan

May 29, 2009

Forgive the generic title, and boring at that, but hopefully the readership of this and other missives penned by this writer will bring this important topic to light. Although I could go on and on about the long-term price forecast for silver, that is not what this week’s article is about.

My purpose this week is to point out what many others have addressed and it might be referred to as peak silver. Now before we get too far into this subject, please note this topic previously has been addressed by me and several other writers in this space.

In fact some time ago, I invited Ted Butler to engage in an e-TV interview with me on this topic, as he had penned an article about what the United States Geological Survey (USGS) had to say about the amount of silver left in the earth’s surface.

The same subject also came up during the panel discussion at the Phoenix Silver Summit in February of this year. One of the panel’s participants was presenting the “bearish” case for silver, and I brought up the fact that he had a shortsighted view because according to the USGS we’ll run out of silver from Earth’s surface around 2020. In other words, if you look at the silver fundamentals with perfect 20/20 vision, the picture becomes clear.

Read full article

Mr. Morgan has followed the silver market for more than thirty years. He wrote the book, Get the Skinny on Silver Investing. Much of his Web site, Silver-Investor.com, is devoted to education about the precious metals, it is both a free site and does have a members only section. To receive full access to The Morgan Report click the hyperlink.

Think Before you Leap.. Selling Silver Coins

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Think Before You Leap: Selling Silver Coins
Source: David Morgan, Silver-Investor 05/22/2009

Recently I had two consulting clients ask me about starting a coin/bullion business and then Ellis Martin of The Opportunity Show called for an interview on the same topic– there must be a message here somewhere?

Ellis Martin: I’m Ellis Martin, host of the Opportunity Show. Today again we’re featuring the Silver Guru himself, David Morgan. Mr. Morgan is recognized around the globe as an expert on silver, gold, and other precious metals. His Web site is silver-investor.com. David, thanks for joining us again today.

Last time we spoke we talked about setting up a possible new business in this economy and that would be a coin business, as opposed to a precious metals scrap business. You thought that this might be a good time to do something like that. But I’d be afraid to get into a business that I didn’t know anything about. Let’s say I see this as a great business opportunity, do you just obtain a coin collection or make a deal with one of the mints? Do you acquire as much silver as you can and just hold onto it and sell it into the market as the prices rise? To do any business without any knowledge of what’s involved is risky, don’t you think?

David Morgan: Absolutely, and you’re spot on. It’s not as easy as it sounds. The first answer is that a coin dealer or bullion dealer are, in essence, the business. Some coin dealers don’t do a lot with rare coins although some coin dealers specialize in that area. Basically a coin/bullion business is a warehousing business

Making Money with Mining Shares

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Although I have advocated that all serious precious metals investors start with the real metal (and I will continue this theme)– the largest gains have come from the paper side of the market, for most investors this means mining shares.

Implications of a “Sullivan-style Massive Sulfide Beds” Project Model
By David Morgan

May 15, 2009

I almost always focus these weekly missives on the precious metals or economy but seldom write about mining companies. This week I decided to give our readers a little taste of one high potential situation we have been following closely. The name and symbol are left out intentionally because many Internet hosting sites do not want company names involved. This is intended to give the reader some insight into the type of potential a Massive Sulfide discovery may entail.

The following is an excerpt from a special report I wrote just over a month ago. Upon returning from the Las Vegas Money Show just a few moments ago, and calling to receive the latest news on the company referred to below, I wanted to make the point that although I have always stressed real metal as the fundamental starting point for a precious metals portfolio, the art of speculation is also an area that can reap large rewards, especially now when the junior mining sector is an area that most people are ignoring.

Our latest speculative position has indications of being similar to the Sullivan discovery. This can be researched on the Internet by the reader for background information.

From the April Special Update:

We have received many questions relating to the geology model contained in this project, so this update will be essentially in Question and Answer format.

First, I stated three things in the April Morgan Report:

1. Mammoth-sized upside. We will make some basic assumptions, squiggle on the backs of a few envelopes, and divine what the upside potential might be given the geologic model and assays released thus far.

2. They have not yet hit the highest grade bed or layer in the latest drill hole. A miss may not be a project killer or even disprove the geologic model, but a hit suggests a long and relatively flat lying bed of super-high grade ore. As I have often stated a company is not made (or lost) on one drill hole. We should know the outcome within the next few weeks.

3. If this company hits super-massive sulfides similar to that found in the previous drill target, it is my guess they will get samples into the assay labs quickly. The stock would react like crazy if we were in 2004-2006 time frames, but today the market seems to ignore even the most exciting news. This can work to your advantage because the stock price is NOT running away!

A key initial question is what is the cost on a per-ton basis for resource development and mine construction? Another key question for us as investors is what is the potential cash flow?

The Sullivan Mine’s sulfide beds were shaped like an inverted saucer, thickest in the middle. The 100 meters thickness number was actually the thickest part, and each lens or bed was itself 3 to 25 meters thick (this makes our company’s 15 foot layer of super-high grade easier to understand –it was one of many layers).

The beds are essentially the stratification of metal containing sulfides that occurred in a hydrothermal system. Think of a slowly rising level or horizon of hot water that causes each metal to dissipate out of solution one at a time to form layers. The degree of stratification, as well as the order in which the metals dissipate out of hydrothermal solutions, can be affected by temperature, pressure and chemistry, and tends to work better when it occurs in appropriate host rocks. More stratification equals potentially higher grades due to less dilution.

One could imagine that even if stratification forces were acting on rocks across a vast regional distance, only in certain places would everything align just right so as to produce a fully-stratified series of “Sullivan-style massive sulfide beds.” They found one in Kimberly, British Columbia, a little over 100 years ago and it became a world-class mine. Before we get too carried away let’s be clear there is lot more verification and drilling that MUST be accomplished but from what we know so far we have a speculation of the variety that quite frankly I have not seen very often.

Let us go a step further and define our analysis down to mining just a 35 foot thick bed of super massive high-grade ore that happens to exist in a deposit shaped like a circle and 6,000 feet across (which are the lateral dimensions of the Sullivan). Its radius would be 3,000 feet. Our company reported 37 feet of 18% Zinc, 3.6% Lead, and 2.2 oz of Silver per tonne, so let’s use those numbers and simplify to a 35 foot thickness.

Massive sulfides are very heavy – anybody who has ever hefted a box of massive sulfide core can attest to this. Given some of the mineral types mentioned, I will use a specific gravity of 5.0 for this analysis. Specific gravity is a dimensionless number, the ratio of the weight of rock compared to an equal volume of water. A cubic foot of water weighs 62.4 lbs, so the weight of a cubic foot of sulfides with a specific gravity of 5.0 is 312 lbs. To be comparable to the Sullivan numbers, one metric tonne = 2,200 lbs. Thus, a tonne is about 7 cubic feet of rock.

To find the square footage of a circle with a radius of 3,000 feet, we multiply the radius by itself, and then multiply that number by PI (or 3.14). This comes out to 28,260,000 square feet. If the layer is 35 feet thick, this would come to 989,100,000 cubic feet. Divide by 7 for the tonnes = 141,300,000 tonnes of ore.

This is fairly close to the 130 million total tonnes of ore reportedly mined at the Sullivan, so it appears Cominco mined an average of a just under 35 feet of thickness across the entire deposit. The Sullivan had lower grades, and a cut-off grade would have applied, so it is easy to see how the mineable thickness on our company has the potential to be larger.

What is a tonne of this ore worth? We will use what we think we know so far, at the grades stated above, each tonne (or 7 cubic feet) of ore would contain 396 lbs of zinc (2,200 x .18), 79 lbs of lead, and 2.2 ounces of silver. At $.61 per lb of zinc, $.59 per lb of lead, and $12.55 for each ounce of silver, that tonne is so far worth about $315.78 in the ground. In an earlier analysis at slightly lower metals prices, we figured that the 15 foot zone of extra-high grade was worth almost $600 a tonne.

Using 141,300,000 tonnes at the lowest figure of $315.78 such a deposit would be worth about $44,619,714,000 “in the ground.” Nearly $45 billion if it were gold, but we are talking base metals so far, so we might cut that figure it half or even a quarter, yet we are still looking at a significant potential. Please see disclaimer below.

It is an honor to be.

Sincerely,

David Morgan

Disclaimer: Information contained herein has been obtained from sources believed to be reliable, but there is no guarantee as to completeness or accuracy. Because individual investment objectives vary, this Summary should not be construed as advice to meet the particular needs of the reader. Any opinions expressed herein are statements of our judgment as of this date and are subject to change without notice. Any action taken as a result of reading this independent market research is solely the responsibility of the reader. Stone Investment Group is not and does not profess to be a professional investment advisor, and strongly encourages all readers to consult with their own personal financial advisors, attorneys, and accountants before making any investment decision. Stone Investment Group and/or independent consultants or members of their families may have a position in the securities mentioned. Investing and speculation are inherently risky and should not be undertaken without professional advice. By your act of reading this independent market research letter, you fully and explicitly agree that Stone Investment Group will not be held liable or responsible for any decisions you make regarding any information discussed herein.

Upside Down Gold

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Upside Down Gold
By David Morgan

May 8, 2009

John Exter was an internationally known banker and a gold bug in the true sense of the word. He graduated from Harvard and was present when Keynesian economics first came to the fore. He lived through World War I, witnessed the founding of the Federal Reserve, the Great Depression, and the establishment of the International Monetary Fund (IMF). He also presided over the New York Federal Reserve Bank. Mr. Exter’s work can be found on the Internet with a simple Google search.

One of his most famous quotes is, “The U.S. and world economies are on the threshold of a deflationary crash that will make the 1930s look like a boom. Gold will be the single best investment to own. Buy it now while it’s still cheap.”

Read entire article click here

Mr. Morgan has followed the silver market for more than thirty years. He wrote the book, Get the Skinny on Silver Investing. Much of his Web site, Silver-Investor.com, is devoted to education about the precious metals, it is both a free site and does have a members only section. To receive full access to The Morgan Report click the hyperlink.

Radio Show

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April 14, 2009

I was asked to do a radio interview– it was very focused on silver and my work in the industry. Here is the link from Blog talk radio

http://www.blogtalkradio.com/derekdreamer/2009/04/13/Interview-w-David-Morgan

Mr. Morgan has followed the silver market daily for more than thirty years. Much of his Web site, www.silver-investor.com, is devoted to education about the precious metals.

Opportunity Show interview

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This interview was posted on April 9, 2009

Ellis Martin, president and CEO of Sol Media International Ltd, created The Opportunity Show in 1999 as a successful terrestrial radio resource for small and mid-cap public companies seeking to vastly expand their shareholder base as they in turn grow their companies. The Opportunity Show airs throughout North America and is currently positioned for expansion into Europe, Australia, and Asia. Prior to that, Mr. Martin served as senior vice president for the Phoenix Media Group in Burbank, California, station manager for WHB-AM in Kansas City, Missouri, instructor/lecturer for the Academy of Radio Broadcasting in Huntington Beach, California, and a variety of broadcasting positions across the U.S. Mr. Martin has been an entrepreneur with interests in media, entertainment, and financial concerns since 1978.

Ellis Martin: I’m Ellis Martin, executive producer of The Opportunity Show. Today we’re joined again by the Silver Guru, David Morgan of the Morgan Report. He is one of the most preeminent world experts and the predominant recognized authority and speaker on all things silver as well as all metals, with frank commentary and weekly analyses on the sectors, and he is now a regular feature of The Opportunity Show. He is also an author, having penned the book Get the Skinny on Silver Investing. David Morgan is a teacher, lecturer, researcher, world traveler, and we’re pleased to have him on The Opportunity Show.

Okay, David, let’s begin… Can I trust investing in silver right now either as a commodity or finding public companies that are producing?

David Morgan: Can you trust investing in silver the physical metal? The answer is yes, always, and everywhere. The reason that’s the answer is because silver and gold both are sovereign wealth. They’re the only monetary or financial assets that are outside of today’s financial system. This means that by themselves alone they stand for purchasing power and wealth preservation. So if you own gold you can exchange it for something—goods or services—anywhere in the world.

In fact, having an aircraft background, which I don’t mention very often, I think it’s interesting that the survival kit in a fighter jet has a gold coin in it. They don’t give you a hundred-dollar Federal Reserve Note ($100.00), they give you a gold coin, and the reason for that is, again, it’s exchangeable anywhere around the world. So, yes it’s the right time to buy silver. As far as the other part of the question, silver equities, I would say if you’re willing to use some discipline and buy in throughout the next several months I think it’ll be a good approach. Even though we’re getting a strong rally as we’re doing this interview, I do expect to see gold and silver top out here rather briefly and then probably back and fill and actually come down again. So I think there are opportunities going forward, but that’s on the stock side. On the metal side itself, if you don’t own it you should try to get it, basically as soon as possible.

Mr. Martin: Interesting. So if one were to acquire the hard metal itself you’re not doing it to speculate necessarily, although you could because silver was down near $10.00 an ounce not too long ago?

Mr. Morgan: Well the lows are around $8.80 in November of last year, so it’s not doubled but it has gone up 60–70 percent or so over the last few months. It’s outperforming gold from the beginning of the year, but from the beginning of the precious metals bull market, gold is doing better presently. This is a good time to buy the physical metal, because we’re in a situation now where the premium is very high and the metal is very hard to get. Now this is counterintuitive, but it means that people in the know, sophisticated people who have something to protect, are willing to pay up to get the most valuable financial asset known to mankind for the past five thousand years—precious metals.

A lot of people who were never tuned into the gold and silver story are becoming very, very aware of it and that’s been the case probably since late summer. Many of them who were never gold bugs are discovering gold as a place that they need to have at least part of their assets in, and that’s taking place on a global basis. Because of that fact, the supply of gold and silver that is available for investment and purchases is diminishing rapidly. I think we’re going to reach a point over the next year or two where we see it’s almost impossible to find investment grade gold and silver in size.

Mr. Martin: Keeping that in mind, you wouldn’t necessarily trade the metal—you’d keep that for long-term investment purposes as a hedge against currency in general. But, you would trade certain stocks in the near term and short term . . . correct?

Mr. Morgan: Yes, that’s basically correct. Just one little quick caveat, as I personally and some of my readers do trade the gold/silver ratio and that’s swapping metal for metal. So we’re always in the metal physically but we’re not necessarily in the same amount of gold to silver. When I see that silver is really outperforming gold, maybe spiking, I might trade that silver for a gold position, and conversely, when silver gets hammered down much worse than gold, I might swap back the other direction. But again I’m always in the physical metal for that part of my portfolio.

On the equity side, somewhat the same thing. If I see a spike higher, overvalued situation generally speaking, I will shift out about 25 percent of the portfolio into cash and wait for better opportunity. We of course alert the Morgan Report subscribers (members-only portion of the Silver-Investor Web site). We’ve been fairly successful doing that. I did get in a little early on the last buy and I corrected it later as the market gave us more information, but we’ve been pretty accurate so far. Even with this slight “mis-timing,” my call on the bottom was really close—so close that if you look at that monthly chart two years from now it will make me look like I was a genius.

Mr. Martin: You mentioned a spike in prices. I noticed recently, I think we had a spike of 12 percent, 13 percent, maybe 15 percent, with regard to the price of silver itself. Do you see that as a short-term trend or is this something that portends what is really coming as the federal government is doing some serious monetizing at the moment?

Mr. Morgan: That is a really tough call to make. I mean I’m one who’s known to be one of the better silver analysts out there and I appreciate that confidence. Silver in my view is much more difficult to analyze than gold. We could get to a situation when silver is in such tight supply either because of industrial demand or investment demand or both. It will be both, in my view, but primarily investment demand is why silver prices will take off, and for no rhyme or reason the price keeps on going up. So I never rule that out.

Therefore it’s really difficult to put a long-term forecast on silver from this day going forward, because the supply is so small and the demand could increase overnight. I do believe that we’re going into a spike high here, with gold probably going to touch around the thousand-dollar level, give or take, and I think that the governmental bodies that are so worried about what the financial system is doing keep a pretty close eye on the gold market. So I think on a very, very short-term basis we’re probably going to see a spike up to about the thousand-dollar level. Silver will go where silver is going to go.

As we’re doing this interview, silver is up over 5 percent and gold is only up about 2 percent on the day. That’s typical of the pattern that I look for, to basically want to start thinking about taking some profits off the table. By the way, just to reiterate, I always maintain a 75 percent position at all times, regardless of what the short-term market conditions provide. No technical analyst in the world can anticipate a 9/11 event on a chart. We want to keep the bulk of our money invested at all times, but when you see the overbought or oversold situations and you have the stomach for it, you certainly can take advantage of them.

Mr. Martin: Taking a look at silver stocks at the moment, many of them seem to be in that position, as far as being oversold. Although in recent months they’ve come off their all-time lows, for those who want to risk right now, what would you look for when seeking a company that’s a possible investment opportunity for the investor such as yourself?

Mr. Morgan: We look at a couple of things. First, we advocate big money into bigger companies, which is your mid-tier to top-tier companies that have quarterly income statements and a decent balance sheet. We filter those companies through a priority system I developed over years that works well. Not perfect but very, very well. Secondly, after that we do very selective, and I mean very selective, speculations. These are companies whose properties my associates or I have actually visited; we get to know the management, and still these types of situations are difficult to pick, but we’ve had good success.

Everything that’s on our speculative list for Morgan Report subscribers right now is under the price we recommended it, except for one company and they’re still a very good buy in my view. We do look at other companies. One’s a drilling company that I just love. We have another one that’s primarily copper and base metals with some silver and gold credits, but overall that’s the approach to find companies that have good merit that can really appreciate over time. I’m very disciplined as far as big money and big stocks and a smaller amount of money into speculations. In other words, “bet a little to win a lot,” which we do and have done and want to do again.

Mr. Martin: What’s the best way to find out what companies you like?

Mr. Morgan: The best way if you’re a serious investor is to buy good research or do it yourself. Even if you have a full service broker and can obtain analysts reports, you may want a second opinion. My Web site is basically a split: we offer our members-only section, with access to The Morgan Report. But I am a big believer in education and offer tons of free information on the site and the free silver update mailing list.

We generally send the free updates out every weekend. It tells you what’s going on as far as where I’m going to be speaking, the radio shows I’m going to be on, what I’ve been writing lately, and once in a while, questions that I pass along from our members.

At times we send out our best picks as far as coin dealers are concerned, which is another area we didn’t have time to get into today. But you need to be a little careful on the coin side. Even though I advocate buying physical metal, there are some dealers out there who are better than others and some people have had a very harsh experience buying metal for the first time. That is one reason I send the “Ten Rules of Silver Investing” to all who sign up for the free updates. There are some specific ways to keep from getting burned the first time you buy gold or silver.

Mr. Martin: Well, David, thanks very much for joining us today. I’ve enjoyed interviewing the Silver Guru, David Morgan. His Web site and newsletter can be found at silver-investor.com. Thanks for joining us. Our Web site of course is theopportunityshow.com. I’m Ellis Martin.

It is an honor to be,

David Morgan

Founder Silver-Investor.com

Mr. Morgan has followed the silver market daily for more than thirty years. Much of his Web site, www.silver-investor.com, is devoted to education about the precious metals. To receive full access to The Morgan Report click the hyperlink.

Silber Info Interview

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Silberinfo.de interviews David Morgan of Silver-Investor.com

April 3, 2009

Silberinfo: David, 2008 had a great beginning with silver over $21 but it ended poorly. From a fundamental point of view not much has changed. Why the high volatility?

D. Morgan: From my perspective the market was overbought in March 2008 and in fact I sent a sell signal to all Morgan Report subscribers telling them to take some money off the table. Many did. I did not put out a buy signal until September 2008 but was too early and watched the market go down further. The last buy signal was around the 10th of December 2008, after the metals market had made a clear bottom. We have already taken partial profits on that.

For those who wish to trade, using our signals, we recommend no more than 25% of the portfolio. The rest is held for long-term gains.

There are several reasons for the volatility in silver:

The over leverage used in all assets classes, including the precious metals
Banks short selling of silver in massive quantities and other factors.
Price movement gets exaggerated due to silver being such a small market.

silberinfo: Do you expect a similar volatility for 2009?

D. Morgan: Yes, at this point (subject to change) I do not expect to see silver take out the $21 level this year. I want to be cautious here—silver can at almost any time take off on its own, without rhyme or reason. I have studied this market for more than 30 years and yet silver can confound the best of us. Because so little physical silver remains for investment or industrial use, we are in a “setup” that could launch the silver price at any time.

Having said all of that, it is still my studied view that because all asset classes have been falling so hard for so long, the deflationary mentality will continue for many more months. This could abate silver’s next big move up for several months. Investors should take advantage of this by planning purchases of real silver and gold for the next several months. Also this applies to the mining equities as well, but right now I favor the physical market over equities, for many reasons.

silberinfo: The Gold-Silver Ratio currently lies around 1:70. What is your opinion regarding the future development?

D. Morgan: Over time I expect to see the ratio move in silver’s favor. At the top of the market it would not surprise me to see 16 to 1 or even 10 to 1. This would be on a buying panic and I do not expect that ratio to hold for very long.

silberinfo: You are an American and also a bit of a patriot. Do you agree with Ted Butler’s excellent work regarding the allegations of a silver price manipulation on the COMEX?

D. Morgan: Basically yes, and if there is any difference it is this. My view is that the basic trend cannot be manipulated. In other words, silver and gold are in massive uptrends that will unfold for years—in my opinion, at least 10 and more likely 15 to 20. Within the major trend, the price movement can be controlled to a certain extent by selling pressure or buying pressure. I have been over this so many times . . . I urge your readers to go to www.Silver-Investor.com and look at my past work. You can read what I have said again and again about how all markets move and in particular the silver market.

silberinfo: The iShares Silver ETF states an inventory of around 250 million ounces. Do you have knowledge regarding the whereabouts of this enormous inventory, and above all, would you say that the entire 250 million ounces physically exists in their vaults?

D. Morgan: I think that the silver they “display” does exist but not necessarily in their vaults. I recently did a radio interview on this at www.financialsense.com, and I also wrote a public domain article titled, “Silver—Draw the Line” (both in English). These outline many of my thoughts on the Silver ETF.

silberinfo: In addition to the iShares Silver Trust, there are a few other ETFs/ETCs on silver. Do you expect more to come in the near future?

D. Morgan: I’m not sure we will see many more Silver ETFs but I do expect to see other types of silver investment vehicles. I am actually working on a few right now but am only comfortable giving that information to my members first. Once my Morgan Report subscribers have the opportunity, then I am more comfortable discussing it in detail.

silberinfo: The Dow Jones Industrial Index has been going south for months now. Do you think the worst is behind us, or is the financial crisis really just getting started?

D. Morgan: I believe we will see a pause in the market decline, but it is far from over. I am looking for a Dow below 4000.

silberinfo: Mining companies usually have a positive correlation to the stock markets. Do you see the possibility for a diminished correlation or even a decoupling, and if yes, why?

D. Morgan: In the advanced stages (once we get through 2009), the golds and silver do decouple from the general stock market. I think this time it will be the biggest bull market in mining equities ever experienced, because by the time the investment pool of silver dries up there will be no alternative. Especially if one of the Silver ETFs turns out to be less than advertised.

silberinfo: What is your view regarding explorers and producers right now? What do you think about juniors and the big mining companies? Which sector do you prefer in the short, mid, and long term?

D. Morgan: I have always taught big money in bigger companies. There are many reasons for this and it is explained to my members in a separate report called, “How to Use The Morgan Report,” which is the first thing a paying subscriber should study. Once you own real metal, top notch companies, then you can speculate. Why not? Some have done fantastic for us, however I cannot brag about this for the past several months. Right now investors/speculators must be very careful. I think it might be a good time to build cash and pick stocks a bit later.

silberinfo: Many explorers and juniors, some of them with great properties, have had problems raising money and could complete financings only under adverse conditions; i.e., many juniors had to dilute their capital tremendously. Do you think that they can break out of the vicious cycle (deep share prices equals more dilution equals even less share price potential for the future)? What is the best way for an investor to go right now?

D. Morgan: Again, build cash, but if you can figure out who is going to survive you might take a small position. The list we have for speculation is good for purchase right now, in my very studied opinion. But these are companies for the most part with production and decent cash flow. Some have diluted but not to the point of killing their shareholders.

We have only one or two shoot-for-the-moon type of speculations right now, one with off-the-charts grade and another that did a stock split, and it was so favorable at the time, that I could not pass up telling my subscribers. Unfortunately since that time this company has been hit hard, but it has so many ways to profit that we are sticking with it.

silberinfo: Last year in spring, right after the beginning of the big silver price correction, you expected the market to hit a bottom in summer and then to recover by the end of the year. You were able to underscore this with typical chart patterns. As we all know, the correction took longer and brought the price of silver and especially the share prices of big and small companies to much lower levels. To be fair, the reason for that lies clearly in the extent of the financial distortions that caused the current economical crisis. Long story short: How is your current outlook, and in what way is it influenced by the crisis?

D. Morgan: Not to sound defensive, I did get the top correct and was too early on the bottom. I thought in April of 2008 that the metals markets would see the old highs: 1000+ gold and 21+ silver, by the end of 2008. By the time we got to mid summer, the data and work that I use gave a much different story and of course I presented that to all Morgan Report subscribers. I did suggest that they complete purchases by the end of September 2008. I wish I could take that one back and say the end of November, then wow, I would look like a genius.

In my view if we might project into the future, say 2012 or so, and silver and gold are far higher in paper price, getting in by September 2008 might look very good. The point I am making is no one can call it perfect every time and as long as you do not over leverage and are willing to hold, this market will be coming back.

The financial crisis that I have forecasted for so long has come true. However, I did not expect the mining stocks to be hit so badly. I misjudged the amount of hedge fund participation and some of the methods used by the banking establishment to put pressure on metals prices. Gold (the metal!) has pretty much functioned as I expected. Silver actually has done about what I expected but did get below what I thought was the initial low. Having touched the major uptrend line—technically we are still in a bull market in silver and having gone from $8.80 to the current (mid March 2009) $13.25—we have a gain of about 50% in a little under three months. This may not make the people who bought silver above $14.00 very happy but all investment classes are constantly changing hands.

Specifically, more and more people are gravitating to gold and this will spill over into silver at some point. It is so interesting that gold is still available anywhere in the world, but try buying silver . . . as you know, it is much more difficult.

silberinfo: If we remember right, it is one of your long-held views, that the current bull market in silver will end somewhere between 2011 and 2013, after a huge exaggeration in the price of silver. Does the current crisis influence this? In other words, can we expect the bull market to go even further and the silver price to hit an even higher level, now that all central banks have started printing money at unprecedented levels?

D. Morgan: Somewhat. Like anyone in my industry I would love to look back and say, “Hey look, I got that right and that also.” But the bottom line is, much more than being an accurate forecaster, it is better to teach the underlying principals. The main principal is all fiat monetary (debt-based) systems end. And in all known cases, they end rather badly. So, you must have the right kind of investments to prosper for yourself, your family, your business, and your neighbors. This is quite simple, yet very few do it. You must become educated, you must study, ask questions, learn.

Yes, due to the current deflationary forces overtaking the monetary printing that is going on worldwide, I do see the top coming perhaps as late as 2016. But let’s take it one step at a time, much like the master Richard Russell. I try not to tell the market anything, I want to watch the market carefully, and when it is kind enough to tip its hand, I let my members know what I am seeing.

silberinfo: If you are going to invest your money, do you solely buy physical silver or do you also invest in silver mining or silver exploration companies?

D. Morgan: I spread it out exactly how I teach. First, physical metal; then, the top-tier companies using our priority system; and then, bet a little money to win a lot—speculate, which is the fun part of the market but not where you put your big money.

silberinfo: For a very long time now we experienced, year after year, an increase in the quantity of mined silver. Do you think that we have reached the peak or do you think it could be further ahead?

D. Morgan: I think we may be near a peak right now, since 70 percent or so of all silver comes to the surface as a result of base metal mining. The slowdown in lead, zinc, copper, and other base metals means there will be less silver coming to the surface and this could last a few years.

silberinfo: We recently attended a presentation of Frank Veneroso, who talked about the splendid outlook of gold, at least from his perspective. When asked about silver however, he offered little enthusiasm and seemed to be a true silver bear. His reasons were an increasing worldwide mine output, especially in China, as well as lower industrial consumption, big silver stocks, and so on. He generally put silver in one category with base metals. As you are a silver expert and “silver bull,” how would you reply to him?

D. Morgan: First, China has stated publicly in a major financial publication that they will NOT produce enough silver internally and MUST import more silver to meet their current demand. This was within the past few months. Secondly, most people who have a banking background know how the banks run the “hedge books” on the silver market and are confident that they (the bankers) can pretty much do with silver whatever they wish. Why not hold this view? Every time silver really runs to the upside it seems to get smashed back down! My view of course is that there are enough intelligent people on the planet to see the merits of owning real silver that the managers lose control and a true free market emerges in silver.

silberinfo: Where do you see the price of silver in, let’s say, two years?

D. Morgan: In two years, above $20, possibly in the $35 to $40 range, but this is so hard to forecast because all long-term resistance goes away after the $25 level or so and at that point anyone who owns silver (with very few exceptions) is holding at a profit. When this takes place, markets tend to really move rapidly to the upside, because all current investors are holding tightly because no one knows “how high is high”? In other words, how high will the market get?

silberinfo: Please take some time to talk about any subject that is heartfelt for you.

D. Morgan: Thank you! I must mention education. It is my opinion that Americans have lost the insight of just how valuable an education is. This is not necessarily a formal education either. In days gone by, there were many “self taught” people—once a person could read, the opportunity to better himself was only as far away as a walk to the public library. In my opinion, the hunger for knowledge just does not seem to exist as it once did. But if you look to Asia, that is a whole different story—learning is highly respected and valued. In a way I think the downturn we are all experiencing will be beneficial from the aspect that most systems do better under pressure. This means that some, certainly not all, Americans may begin to question what is valuable.

silberinfo: Do you ever get tired of discussing the silver market?

D. Morgan: Yes, there are days I get a bit burned out on the topic. And I do have other interests and enjoy many things outside of the investment business. Having run triathlons for several years was a great diversion and a healthy one as well. I do not have the time to train properly for them now, so my last triathlon was probably completed in the 2007 season. I do have a family and love to spend time with them. However I am passionate about the markets and have been all of my life.

My mission statement is, “To teach and empower people to understand the benefits of an Honest Monetary System.”

As you can see, silver and gold are not even mentioned in my mission statement but they do play a very significant role, because there are no trust issues with real money. All of recorded history proves both silver and gold have been a means of payment and a store of value—exactly what an Honest Monetary System needs.

silberinfo: Thank you, David, for your knowledgeable answers to our questions. We wish you and your family all the best for 2009!

It is an honor to be.

Sincerely,

David Morgan

Founder Silver-Investor.com

Mr. Morgan has followed the silver market daily for more than thirty years. Much of his Web site, www.silver-investor.com, is devoted to education about the precious metals. To receive full access to The Morgan Report click the hyperlink. To preview the book Get the Skinny on Silver Investing click here.

Silver- Gold’s Poodle?

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Silver — Gold’s Poodle?
By David Morgan

March 27, 2009

Last week I updated our readers about a video shot at the Orlando Money Show. This week I have two videos where we discuss the ups and downs of the silver market and how silver differs from gold as an investment.

Gold gets most of the press and silver always seems to be in second place, and it will probably stay that way until we get to the blow-off phase of this precious metals bull market. During the panic buying phase or mania that accompany the blow-off phase, gold will be outside the price range of many people. Anyone seeking any protection from the destruction of the U.S. dollar will buy whatever they can, and that is silver.

Silver is far more volatile than gold but, in my studied view, has far more potential than gold. As I see it, both metals should be owned, although silver can give you one heck of a ride, as most silver investors are well aware.

We also discuss new applications for silver in laptop computers and in the health industry.

Click here for the Silver Video

Later we discuss the gold market and how gold is holding up better than other asset classes and actually was making new highs in some currencies, although it did fall back, in U.S. dollar terms. This was just a few months ago, when a huge demand for U.S. dollars surfaced as a result of the credit crisis.

As the host points out, eventually the chickens will come home to roost, and with all the money flooding the system it is only a question of time before this “new” money hits the system and manifests into more inflation.

My view is a bit reserved and those who follow my work carefully know I am actually looking beyond the inflation/deflation question to the question of a currency destruction.

However, that is getting a bit ahead of the story. For the time being, you can watch this video and learn why it might take a bit longer to see all this bailout money boost the gold price to the next level.

Click here for the Gold Video

I want to be cautious here, because both of these metals can take off to the upside at any point, and making a short-term call is difficult at best. Longer term, most of the gold community are not in agreement with the policies set forth by the major nation states of the world and see the metals are going far higher.

It is an honor to be,

David Morgan

Founder Silver-Investor.com

Mr. Morgan has followed the silver market daily for more than thirty years. Much of his Web site, www.silver-investor.com, is devoted to education about the precious metals. To receive full access to The Morgan Report click the hyperlink.

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Why is there a coin shortage — video

Story Link
Why Is There a Coin Shortage?
By David Morgan

March 20, 2009

While recently attending the Orlando Money Show and as one of the few who were advocating real money, if you know what I mean, the topic of the silver and gold shortage was discussed, as you’ll see in the attached video link. Before viewing it, keep in mind a few points:

There are some advantages to buying Silver Eagles that I did not go into during this interview.

Secondly, the premiums in the coin market still exist to this day, yet all of the dealers that I network with have verified to me that supply of both silver and gold coins is tight but much more plentiful than just a few months ago.

Nevertheless, the U.S. Mint is still having “problems” and has cut back on many of the coins that were once offered. Gold Eagles seem to be the hardest to obtain at this point.

Click Here to Watch Video discussing the Coin Shortage

Now that you’ve viewed the video, here are some other thoughts to keep in mind:

Silver bags (junk silver) still have a large premium, which is unusual; most of the time junk bags sell at a discount to the spot silver price.

Foreign gold coins also have a higher than normal premium.

Not many sellers are in the market—in fact it is almost exclusively buyers!!
As mentioned in the video, it is normally best to get as much gold or silver per “dollar” spent, and this is outlined in the Ten Rules of Silver Investing, which you can obtain for free by visiting our Web site and signing up for the free updates. In addition to the ten rules, we do feature some of the coin dealers we know and trust.

It is an honor to be,

David Morgan

Founder Silver-Investor.com

Mr. Morgan has followed the silver market daily for more than thirty years. Much of his Web site, www.silver-investor.com, is devoted to education about the precious metals. To receive full access to The Morgan Report click the hyperlink.

Subscribe To The Silver Investor Today