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Interview: David Morgan on silver
David Morgan of the Morgan Report (www.silver-investor.com) is one of the preeminent experts on silver. Here, he's interviewed by Ellis Martin, president and CEO of Sol Media International Ltd. Martin created The Opportunity Show (www.theopportunityshow.com) 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. Ellis Martin: OK, 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 $100 Federal Reserve note. 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. 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 an ounce not too long ago? Morgan: Well, the lows are around $8.80 in November of last year, so it's not doubled but it has gone up 60% to 70% 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 5,000 years - precious metals. A lot of people who were never tuned onto 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. 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? 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% of the portfolio into cash and wait for better opportunity. We of course alert the Morgan Report subscribers. 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. Martin: You mentioned a spike in prices. I noticed recently, I think we had a spike of 12%, 13%, maybe 15%, 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? 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 $1,000 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 $1,000 level. Silver will go where silver is going to go. As we're doing this interview, silver is up over 5% and gold is only up about 2% 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% position at all times, regardless of what the short-term market conditions provide. No technical analyst in the world can anticipate a September 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. 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? 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. Second, 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. Martin: What's the best way to find out what companies you like? 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. |
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Leading silver guru talks about the state of the white metal and comments on the prospects for gold and metal-related equities.