David Morgan is recognized as a leading silver expert and his opinions have been featured in Barron's, the Wall Street Journal, and elsewhere. At the Cambridge House Vancouver Resource Investment Conference, he gave a keynote speech about myths in the silver market.
David Morgan is recognized as a leading silver expert and his opinions have been featured in Barron's, the Wall Street Journal, and elsewhere. At the Cambridge House Vancouver Resource Investment Conference, he gave a keynote speech about myths in the silver market.
Following the conference, we caught up with Mr. Morgan to find out more about the opportunities in silver.
But first, our conversation opened with his opinion of the Resource Investment Conference and what it hints at for the future. "It was the biggest retail show I've ever been to. When it's too exuberant, it concerns me that the market is near the top. But it was a great show, with great attendance, and only a moderate level buzz… meaning that the metals market is probably going higher."
Mr. Morgan's speech was about myths in the silver market. "There are several myths," he said, "and I talked about a few of them. One myth that I talked about is 'silver is not money.' That's a myth that really gets to me because silver has been money for longer periods of time and in more places than gold ever has been used for money. [Another] myth is that everyone should own a little silver… but that's ridiculous because even if just 5% of the world's population owns a couple of ounces each, that will be the entire mining supply year over year over year". More information about that myth is available at this YouTube video: http://youtu.be/IHcusYVwNWc.
David Morgan then gave his outlook on the gold and silver markets.
"The metals market is in a consolidation period right now," said Mr. Morgan. "Gold certainly has done well. It's done as I expected. We're up in the mid-1700's right now. Before silver hit the low $26s, I predicted that was as low as it would go. It's up to $34 now. No one knows the future but I've been in this market a very long time and I believe that we've probably seen the lows for gold (at $1550) and silver (at $26)… We'll have to wait and see. There's so much going on."
So, what should investors do based on Mr. Morgan's forecast? How can investors navigate the uncertainty that lies ahead? Mr. Morgan advised a sensible approach: "Investors should educate themselves about why things are taking place and what it means in the future. Once you've got that education then get some conviction and decide what the best asset allocation is for you. And then take action."
Mr. Morgan admits that some people face resistance to buying precious metals at their current rate. He said: "A lot of people say, 'silver has gone from $5 up to $55 and down to the $34 range right now… some people say -- it's too late to buy.' So I ask, 'what asset class would you go to…? The real estate market? The stock market? There are several opportunities in many markets but it's pretty tough. The main trend in the metals is still up.'"
Then Mr. Morgan explained why the main trend is metals is still up: "If you study how markets move, what you determine is that there is a great percentage increase during the mania phase, which is when everyone panics into a certain market. It's like what happened in the housing sector from 2007 to the peak, what happened in the technology boom in the 1990's, what happened to the Japanese stock market, and what happened to the NASDAQ. All these markets get over-valued and then they get extremely overvalued. So now is the time you really want to accumulate [because markets aren’t yet overvalued]. Take a long-term plan, buy-in over time, and plan to be in before the mania hits. In the not-too-distant future, a lot of people will determine that they haven't saved enough for retirement and they will start moving into metals because that's the one asset class that will continue to do well. And it doesn't take much more buying to move the market significantly higher. So a little bit more buying can move the price significantly."
Next, we talked about asset allocation and the opportunities that exist outside of owning purely physical metals. "The mining sector is very undervalued," Mr. Morgan said. "If you have a core position in physical metals, you should be concentrating in the equity side. I think that's where the most money is going to be made."
So what stocks is Mr. Morgan paying attention to? He said: "I like to put serious money into serious companies." And then he listed two stocks that investors should consider doing further due diligence on to decide if those stocks are right for them.
"One stock I like and own is Franco Nevada (TSX: FVN). They have a ton of cash. There's hardly anything negative I can say about that company." Franco Nevada is a gold royalty and stream company with interests in other assets as well.
The other stock Mr. Morgan mentioned in our interview is a well-known silver stock. "Silver Wheaton (TSX: SLW) has a business model that is almost impossible to beat. They're spread out enough that they have great diversification throughout the silver sector." Silver Wheaton is the world's largest metal streaming company and has 14 purchase agreements in place to buy silver-producing mines at a low fixed price.
These stocks are considered larger, compared to many of the junior mining stocks that are common in the industry. Mr. Morgan advises that investors should look closely at juniors before investing: "On the juniors, everyone knows an uncle's sister's nephew that made a fortune by putting $100 on a mining company that went to $300 and they bought it for three cents. Those stories abound but very few people accomplish that. Everyone likes to speculate – I do it myself – but I do it carefully by betting a little to win a lot."
Investors who want to know more about silver can subscribe to Mr. Morgan's free email list (http://www.silver-investor.com/joinfreelist.html). Mr. Morgan adds: "For those who are serious, there's a members-only section suitable for beginners, intermediates, and advanced investors." That membership information is available here http://www.silver-investor.com/amember/signup.php and investors can learn more about the membership programs at the video tutorials here http://www.silver-investor.com/videotutorials.html.
As we wrapped up, Mr. Morgan gave us the following summary, which stretches beyond a silver focus to an inspiring and optimistic forecast: "I think we're facing the most unique time in history. There's so much going on. I think the advent of the internet is equivalent to the start of the Gutenberg printing press. The internet has opened up the free market idea to the globe so lots of changes are happening at an accelerated pace. Because the financial structures are built on unsound principles, it's only a matter of time before things are going to readjust. And I think people should take the long-term view that people have gone through this before and the most important asset people have lies between their ears – ingenuity, the ability to invent new things, and the ability to overcome things. The human spirit is priceless. Regardless of how interesting things get going forward, we need to have confidence in our abilities to think things through to come out the other side smarter, better, and more enlightened than ever."
Investors who want to prepare for the near-term future would do well to consider adding silver to their portfolio. But as for the long-term future, even Mr. Morgan admits that he doesn't know. But he's confident that the indomitable human spirit will prevail regardless of what we might face.
REFERENCES
David Morgan: http://www.silver-investor.com/blog
Franco Nevada: http://www.franco-nevada.com/
Silver Wheaton: http://www.silverwheaton.com/