The Morgan Report Blog

After the Welfare State, what?

One of the most important people on the planet regarding real economics and of course the silver market.
I had the pleasure of interviewing Hugo at the Silver Summit this year and for those serious metals heads
the DVD of that interview is available at our website.

In any event here is a clip of Hugo’s article…

After the Welfare State, what?
by Hugo Salinas Price

In the 40’s and 50’s of the last century, about 70% of reserves of central banks were in the form of gold at $35 US dollars an ounce.

At the present time, reserves of central banks, excluding gold, are about $8 Trillion dollars (not all of which, however, are dollars).

If these imaginary digital reserves (for such they are) were to once again amount to not more than 30% of total central bank reserves, the price of gold would have to increase substantially.

We can calculate the approximate price of gold that would be necessary in order to have the gold component of reserves resume the proportion it at one time took up of total central bank reserves, 70%.
Click to read full article

A Crucial Number for Silver Owners

I consider Chris Weber to be one of the best… His knowledge of silver is impressive, but
he also is quite accomplished in all areas of investing.  In this article he makes a point that
has been made by me on a few Internet radio shows.  What struck me is his methodology is
different — yet we both came up with about the same number. Personally, I have been saying
$25.00 was key based on a very long term chart and a huge scooping bottom formation.

Here is a clip from Chris–

 
By Chris Weber, editor, The Weber Global Opportunities Report
Saturday, January 23, 2010

Six years ago, on January 15, 2004, I officially recommended silver for readers of my Weber Global Opportunities Report.

We’d had silver stocks, and I’d owned silver personally, but I was waiting for silver to fall in order to get in at a better price for the newsletter readers.

We got in at $6.18 per ounce… It soon went to $8 and then fell back to $6, and then climbed back to $8, where it stayed a couple of years before mounting a new rise in 2006.

Click for full article

4 Reasons Why Silver is the Most Undervalued Commodity

4 Reasons Why Silver is the Most Undervalued Commodity
by Jeffery Lewis

Silver prices still have a long way to rise before reaching their top.  From industrial applications to its relative value, it’s easy to make the case that silver remains one of the most undervalued commodities.

Industrial Fundamentals

Industrial uses for silver are abundant.  Ranging from electrical uses to photographic development, silver may be one of the most useful metals known to man. 

However, silver prices have yet to reflect the growing applications and uses for the precious metal, despite so many fundamentals suggesting silver prices should rise.  Silver’s low price is mostly due to a poor economy, which has seen consumer spending go into a drought.  With consumers buying less big ticket items, such as washing machines, computers, and other consumer-grade electronics, which all contain silver, the amount demanded from the industrial sector is under its average. 

Luckily, economies do not stay in recessions or depressions forever, and consumer spending, as well as industrial silver demand, should skyrocket with any rebound.  Silver’s price should follow closely behind.

 

Relative Cost

2008 was a record year for virtually every commodity across the board.  Oil soared as high as $147, gold pushed towards $850 per ounce, and agricultural commodities rode the rally as well. 

However, silver remained behind the pack, moving only as high as $15 per ounce, which is roughly one-third of its all time high set in the 1980s.  In fact, silver was the only commodity that had not beaten its previous highs in the last three years. 

When compared to energy commodities, gold and even stocks, silver remains heavily undervalued, despite a belief among economists and financial analysts that it represents one of the best investments in 2010 and beyond.

Silver and Gold Relationship

Gold and silver typically trade within a range of 20-70 ounces of silver to the price of gold.  Today, the ratio is roughly 62.2 ounces of silver to one ounce of gold, which is the highest it has been in years.  This ratio is often used by traders as an oscillator to decide when it is best to move from gold to silver or from silver to gold.  When the ratio nears 70, investors buy silver and sell gold.  When it nears 20, investors are selling silver to buy gold.  This ratio, which has long been important to commodity traders and long-term investors alike, suggests silver is ready for a rally.

Rounding it All Up

Even after rising nearly 350% from its 2000’s low, silver is still heavily undervalued when compared to a slew of other commodities, setting the stage for a continued explosion in price regardless of the changes in other commodity prices.  Moving forward, silver has not only the fundamentals driving growth in consumption, but also investment, as more and more investors realize the untapped potential that resides in a healthy stock of silver. 

There is little time to wait, as silver’s explosion could be just around the corner.  Should silver prices make a modest move from 1/62 of the price of gold to 1/40, investors will be rewarded with a healthy 50% in returns.  The time to invest is now, long before Wall Street realizes what a true bargain silver is.

Why Physical Silver Investors Love ETFs – But Not Owning Them

Why Physical Silver Investors Love ETFs – But Not Owning Them
by Jeffery Lewis

Despite the various reasons silver investors should not buy exchange-traded funds and instead opt for physical metals, there are also many reasons why investors should love them.

ETFs Increase Precious Awareness

Before silver and gold were spotlighted for their extreme gains, only a small percentage of investors even had proper allocations of physical metals in their portfolios.  In what was a huge oversight for the average investor, silver and gold began their run upwards in price as stocks fell. 

Several years after the rise in metals pricing jumpstarted, exchange-traded fund sponsors begin to release slews of funds that were designed to track the changes in the price of precious metals.  Today, ordinary investors can’t open the Wall Street Journal or turn on the news without hearing about precious metals investing and popular ETF choices.  If you’re looking into investing in silver today, you most likely first heard about them via the popular derivative products on Wall Street.

 

ETFs Drive up Prices

 

Few can deny the impact large exchange-traded funds have on the commodities markets, especially those that claim to be “physically backed” by holdings in bank vaults.  These funds have to invest every dime they receive into precious metals holdings and ultimately drive demand, as well as prices.  One otherwise unrelated ETF, the United Natural Gas Fund, at one time held as much as 60% of the front-month futures contracts for natural gas.  As you can see, these market behemoths have a dramatic impact on prices.  However, they aren’t driving prices down; they’re driving them up!

ETFs Open to a Trillion Dollar Market

Retirement accounts are one place you’re unlikely to see a commodity investment category, and you will certainly never see one for precious metals – until now.  A variety of exchange-traded fund sponsors are lining up to encourage corporations, as well as investment companies, to list their ETFs among 401k plans and other products.  Retirement planning is a trillion dollar business which controls immense amounts of investors’ monies.  Should ETFs break into the mainstream 401k account, it’s likely that precious metals will be even more in demand and rise equally in price.

One Reason to Hate ETFs

Of course, exchange-traded funds are not all bright and shiny.  One of the many reasons investors should buy physical metals rather than paper metals is due to high annual fees that most exchange-traded funds charge.  There is simply no reason to give away some of your well earned returns just for the convenience of getting a paper statement as to how well your holdings are performing. 

For example, the iShares Silver Trust ETF (SLV) charges a whopping .5% annual fee, negating the returns you make on your silver.  If you invested $10,000 into SLV, a 10% annual return is worth $61,416 in 20 years.  On the flipside, investors who buy $10,000 in physical metals will have $67,274 in 20 years, which is a difference of $5,850.  Why give away those extra thousands of dollars, not to mention endure the risk of “paper” metals?   

While we can love exchange-traded funds for bringing thousands of investors into the world of precious metals ownership, as investors, it makes little sense to own them ourselves, especially at a cost of $5,850 on a relatively small $10,000 investment.

Silver as Money? Give Me a Break!

Tom Jeffries Interviews David Morgan of Silver-Investor.com.

 

Tom Jeffries:  David Morgan is editor and publisher of The Morgan Report. Full disclosure: it is my favorite publication. David is one of the leading experts on silver in the world. The Web site is silver-investor.com.

Mr. Jeffries:  Everybody’s talking about gold’s place in the “new world order.” Woo! Let’s not get spooky, folks. How would you expect silver to act in the event of a world oligopoly, David? 

David Morgan:  I think that, as I wrote so many years ago in Silver Investing Rules, no one likes to be a prophet of doom, but silver is the money of last resort, and I still believe that. However, gold certainly has a higher monetary aspect to it as basically a store of wealth, a store of value, and a safe haven. Silver has those qualities because it’s an industrial metal as well.

But from a practical perspective, silver is the one that you’d be actually using in times of crisis. Not that you wouldn’t use gold, but if something happened and you needed to get a loaf of bread, a gallon of gas, pay rent, or keep your landlord off your back, and you had some silver coins, that would be a lot more advantageous to you than a gold bar, which would be pretty hard to divide up and pay your landlord or whatever.

So silver really has been money in more places for longer periods of time than gold has, and whenever I make that statement it seems to get some people upset, but it’s a fact, it can’t be disputed. Through all of recorded history it (silver) has far more functionality as money than gold does.

Mr. Jeffries:  Okay. I’m playing devil’s advocate for a second here with you, David. I guess that begs the question, and maybe you can explain, what central banks and those wily governments out there are going to do to resist the allure of silver for the average investor? As a money alternative?

Mr. Morgan:  Well, that’s a great question, Tom, and it’s a tough one. To really get an in-depth answer to that question you should go to our Web site, silver-investor.com, and go in the archives section and read everything Charles Savoie has written for the last decade.

Mr. Jeffries:  Yes, okay; I have read his work he has provided a massive amount through the years.

Mr. Morgan:  Readers get an eye-opener on how important silver is as money, what the central banks really think of it through history, and why they basically demonized and demonetized silver as their main concern so many years ago, hundreds of years ago, really. You’re looking back to, say, the Crime of 1873, 120-130 years or so ago.

And once that was accomplished, you went to the gold-only path. And then you had a monetary metal that was much easier to control because the banks had most of the gold anyway. So if the banking community and financiers got rid of silver, you didn’t have a problem with the people (or the peons and underlings, as the bankers view us), and you just had gold, and they owned it, so they could make the rules.

And as you know Tom, and very few do, The Wizard of Oz was basically a metaphor for going to the gold-only standard. There’s a gentleman, whose name I can’t recall, who wrote an article that’s on the Gold-Eagle Web site about how the gold-only standard eventually leads to the fiat system, but when you have bi-metalism, which is where you have both gold and silver circulating freely, not necessarily a fixed ratio by government but what the market could decide, you have a much freer and safer system.

You have a lot more stability in the system than you have on a gold-only standard, but very few people know that, very few people believe it, very few people study it. And if this is the government of the United States, supposedly of the people, for the people, and by the people, you should look at what the people use as money and why they use it.

Of course I take that perspective and because of that, I’m very, very biased toward silver being not only a monetary metal but also probably the most high-tech industrial metal required for today’s world.

Mr. Jeffries:  I was shocked, and I don’t know why this was so obvious, standing right in front of my face, when I found out that Dorothy’s shoes were originally silver in The Wizard of Oz and then I realized what Oz is short for ounce . . . I don’t know where I was with that one! The Wizard of Oz, not time for that right now, but do some digging. Web of Debt, a book by Ellen Hodgson Brown, explains it very well.

David’s written about this, it’s just fascinating. Holy Williams Jennings Bryan, Batman! The old Latin phrase comes to mind, talking about these ETFs and banks and central banks and that stuff, Cui Bono. “Who benefits?” in Latin. So, is this Goldman Sachs or is this one of the big guys behind the curtain (as in The Wizard of Oz) playing these ETFs or what’s going on?

Mr. Morgan:  It’s the banks. From my perspective, if you look at the Barclay’s Silver Trust, it’s in London. When Buffett bought 129.7 million ounces of fine silver off the COMEX, once he received the silver it ended up in London.

Then Buffett sells his silver and then the silver ETF arises in London, so now Barclay’s bank has some control of a great quantity of silver. Just look at the two best studies on the silver market, depending on which one you choose. I’m going to choose the CPM Group (even though I’m very close to the Silver Institute). In any event, you’re looking at maybe 500-600 million ounces of fine silver in 1,000-ounce bar form. So, the iShares has almost 300 million, which means they have three-fifths, or 60 percent, of the world’s silver supply sitting in their bank more or less. Which is a pretty healthy amount, and then if you subtract the COMEX out of that, they’ve got most of it. In fact, they do have most of it, not counting COMEX, obviously, but the point is that the banks now—or a bank, Barclay’s—has silver in their bank again, which is something that they haven’t had up until the creation of the ETF.

Mr. Jeffries:  Tell me something about the Silver Summit in Spokane.

Mr. Morgan:  I did a Webinar with Hugo Salinas Price in Mexico and he actually asked that I would be the interviewer, which I consider to be an honor. I met him in person many years ago.

Most people don’t know that Hugo Salinas Price has started a foundation (I don’t know if it’s technically a foundation, but a group) that is looking into using silver side-by-side with the Mexican peso, and this story has been out there for a very long time. It recently got shot down by, guess who, the central banks in Mexico. But the idea to put money into circulation just in one nation-state alone has huge significance, and as Hugo himself said (I’m paraphrasing), even if it doesn’t happen the idea of it happening has a lot of power, because people will realize honest money works!

In the United States, some people are two paychecks or three paychecks away from bankruptcy, thus gold is the last thing on their mind as far as what they can afford. But they certainly could afford some silver, so I think you’re going to see silver really, really take off once we get near the end of this great credit debacle that we’re now experiencing. Again, though, I want to caution everybody: I don’t see that happening in 2009. I’m looking for the final wrap-up in this thing to happen somewhere around the 2012 timeframe.

Mr. Jeffries:  Just an amazing time we live in. By the way, I know David’s a very busy guy but he’s kind enough to say he will answer questions. If you’ve got a reasonable question send it along to info@howestreet.com, select David Morgan, and we’ll send it along to David.

If he has the time he’ll respond to it on his weekly podcast on HoweStreet.com. And if you’re wondering about the Silver Summit in Idaho, just Google it; you’ll see David is joined by a lot of top people, including the eminent Hugo Salinas Price.

Comments made on goldradio.fm are an expression of opinion only and should not be construed in any matter whatsoever as recommendations to buy or sell any financial instrument at any time. Available online at www.goldradio.fm, goldradio.fm is a production of Howe Street Media, Inc.

 

Mr. Morgan has followed the silver market for more than 30 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

Silver and Gold down—

Gold Futures were off the most in a month yesterday, and silver had the largest one
day decline in more than a year. The U.S. dollar is up, and the U.S. stock market looks
as if a top has been reached.

Here is an article from Coin News

Read the entire article as China does factor into the overall outlook…

CFTC: the Common Fraud Training Committee

This is a post from SilverStockReport.com

The bolded text is by yours truly,  to emphasize an idea that we printed in The Morgan
Report some time ago. Another point that this article brings out and I have also mentioned
numerous times is the fact that the Over the Counter market is far larger than the CME
market and therefore it is possible for the players to move to the OTC market and keep
shorting the silver market.
Jason Hommel’s article starts below…

If you ever write to someone, like me, to say that you disagree with them, you should at
least be able to say why.  I do, and I will.  Here’s an example:  I think futures contracts
are a form of fraud because there are more paper contracts than real silver, and I think
“regulating” fraud is simply fraud on top of fraud.

So far, nobody has demonstrated any capacity to explain how new position limits on
metals, even applied to short sellers, would end the endless short selling.  

Nobody has explained how the Commodity Futures Trading Commission
(CFTC) would be able to detect, and/or catch, and/or prevent an entity like
JP Morgan from setting up many dummy shell corporations to short all the
silver contracts that they wanted to avoid and get around any new regulation
.

Link for article below

http://silverstockreport.com/2010/CFTC.html

Howard Ruff-Silver And Uranium Are Where It’s At

Howard was one of the best known writers in the precious metals space during the last bull
market. He is back and quite favorable to silver…

Read Full Story

CFTC says to review gold, silver position limits

This has been one of the hottest topics in the precious metals markets for a very long time
and it seems that eveyone has a strong opinion one way or the other.

Read in Full

Silver and Gold on the Wall Street Shuffle

This is my most recent interview on TheWallStreetShuffle.com

We went over some ideas that have been presented many times but also hit several new
ideas as well.

Click to Listen

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