The Morgan Report Blog

Silver is a Screaming Buy

Silver is a Screaming Buy
David morgan

Interview Highlights

the silver market is on fire at the retail level
the government mints are way behind
US Mint is on allocation
the Canadian Mint is shutdown for now
the Perth Mint is selling record volume now
the smaller scale retail investor is backing off now but larger orders are coming in
on a true money supply basis, silver is priced back at the $5 level from the early 2000s
$16 per oz. today is the same as an adjusted $5 per oz. in the early 2000s
now is a great time to switch out of equities into metals
there is an arbitrage opportunity in the spread between rounds and good delivery bars but you would have to be patient and ok with risk
current delays for pressing rounds are approximately 12 weeks
we are waiting for roughly 5 million oz. to flow through the system
I think the Fed will hike before the end of the year to save face
longer term the Fed is in a box it can’t get out of
going to 3% [federal funds rate] is probably fatal to them
the bond market really scares me
the equity market as a whole is overvalued
just because you think you can prevent something it doesn’t mean you can or will e.g. Long Term Capital Management
no matter how good an investment is don’t overdo it
don’t overload on metals, 10% is plenty for most investors
more pain lies ahead for industrial metals
we like zinc
the decline in platinum is probably overdone
central banks have been net buyers of gold recently
the Chinese will end up with the most gold because of their production
I don’t see how oil prices can stay low

 

David Morgan is a precious metals aficionado armed with degrees in finance and economics as well as engineering, he created the Silver-Investor.com website and originated The Morgan Report, a monthly that covers economic news, overall financial health of the global economy, currency problems, and the key reasons for investing in precious metals.

As publisher of The Morgan Report, he has appeared on CNBC, Fox Business, and BNN in Canada. He has been interviewed by The Wall Street Journal, Futures Magazine, The Gold Report and numerous other publications. If there is only one thing to teach you about this silver bull market it is this… 90% of the move comes in the last 10% of the time! Where will you be when this happens?

 

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Color Outside the Lines

 
Richard (Rick) Mills
Ahead of the Herd

As a general rule, the most successful man in life is the man who has the best information

Mining is an extremely capital intensive business for two reasons. Firstly mining has a large, up front layout of construction capital called Capex – the costs associated with the development and construction of open-pit and underground mines. There are often other company built infrastructure assets like roads, railways, bridges, power generating stations and seaports to facilitate extraction and shipping of ore and concentrate.

Capex costs are escalating because:

  • Declining ore grades means a much larger relative scale of required mining and milling operations
  • A growing proportion of mining projects are in remote areas of developing economies where there’s
   little to no existing infrastructure

There is also continuously rising Opex, or operational expenditures, to consider. These are the day to day costs of operation; rubber tires, wages, fuel, camp costs for employees etc.

The bottom line? It is becoming increasingly expensive to bring new mines on line and run them.

The reasons behind flat-lining gold production, and record cash and all-in costs, are numerous:

  • Production declines in mature mining areas
  • Slower than expected ramp-ups of output
  • Development time up
  • The entire resource extraction industry suffers from a lack of skilled people
  • Extreme weather
  • Labor strikes
  • Protests
  • Increasingly more remote and lacking in infrastructure projects
  • Higher capex costs
  • Increased resource nationalism
  • Increased environmental regulation
  • More complex metallurgy
  • Lower cutoff grades

In 1998 the world’s top two highest grade mines were SMM’s Hishikari Mine in Japan @ 50g/t and Barrick’s Meikle mine in the U.S. @ 32g/t. In 2011 the world’s top two highest grade mines were Newcrest’s Gosowong in Indonesia @ 25g/t and goldcorp’s Red Lake mine in Canada @ 24g/t.
In 2014 Klondex Mines Fire Creek Mine in the U.S. was the world’s highest grade mine @ 44g/t and coming in second place was Kirkland Lakes Macassa Mine in Canada @ 22g/t. Declining mined and mineable gold grade is a direct result of the industry’s inability to discover new high grade/high margin deposits.

Read rest of article here.

 

David Morgan is a precious metals aficionado armed with degrees in finance and economics as well as engineering, he created the Silver-Investor.com website and originated The Morgan Report, a monthly that covers economic news, overall financial health of the global economy, currency problems, and the key reasons for investing in precious metals.

As publisher of The Morgan Report, he has appeared on CNBC, Fox Business, and BNN in Canada. He has been interviewed by The Wall Street Journal, Futures Magazine, The Gold Report and numerous other publications. If there is only one thing to teach you about this silver bull market it is this… 90% of the move comes in the last 10% of the time! Where will you be when this happens?

 

Join The Morgan Report Free for 30 Days *
* 30 Day Trial applies to new user sign ups only!
Offer does not apply to Premium Memberships.
  

Financial Repression – Governments boost their coffers and hold down interest rates

Financial Repression – Governments boost their coffers and hold down interest rates

Treasury Secretary Jacob Lew said the government will run out of money to pay its bills sooner than previously thought around November 5, 2015. Lacking sufficient cash, it would be impossible for the United States of America to meet all of its obligations for the first time in our history.

Again, another year, to increase the USA debt limit by the government. Will monetary and fiscal policy ever return to “sanity”? Will the political leaders ever become brave enough to quit spending more of the taxpayer’s monies than they bring in without fear of losing elections? Will Americans ever elect someone who doesn’t just promise them more and more “stuff,” and who will just start acting responsibly with the nation’s treasury?

Political leaders continue to “kick the can down the road” over and over again. Now, like games that involve kicking something over and over again, it won’t get rid of the economic grim reaper. Their “Keynesian mantra” is that the solution to debt is simply to spend more money. They believe it will stimulate an economic recovery that never occurred in the first place over all these years.
Until a proper resolution is reached to these issues, debt will rule. When a nation loses control of its finances through debt, bad things happen in all other aspects of its existence. It loses its power and survival becomes a challenge and no longer a taken for granted right.

What is really required is the attention to what is really going wrong. There must be a willingness to repair, reform, correct and heal it. This awareness is now growing throughout the world. There is a feeling that something is out of balance financially in the world. The issue of tax reform and getting rid of government waste continues to be discussed and that surely has not helped.

The key of all this will be to get people back to work. The USA “unofficial” unemployment rate is approximately 21%. Let’s correct these policies and activities that aren’t working. Make them work again in new and different ways

Why Is The Federal Reserve Bank of New York So Important?

The Federal Reserve Bank of New York plays a special role in the Federal Reserve System for several reasons. First the reason for the New York Fed’s special role is its active involvement in the bond and foreign exchange markets. The New York Fed houses the open market desk, which conducts open market operations, the purchase and sale of bonds, which determine the amount of reserves in the banking system. This is the process of how the FED creates liquidity and controls the money supply.

The involvement in the Treasury securities market, as well as its walking-distance location near the New York and American Stock Exchanges, the officials at the Federal Reserve Bank of New York are in constant contact with the major domestic financial markets in the United States. In addition, the Federal Reserve Bank of New York also houses the foreign exchange desk, which conducts foreign exchange interventions on behalf of the Federal Reserve System and the U.S. Treasury. Its involvement in these financial markets, means that the New York Fed is an important source of information on what is happening in domestic and foreign financial markets, particularly during crisis periods, as well as a liaison between officials in the Federal Reserve System and private participants in the markets.

Second, its district contains many of the largest commercial banks in the United States, the safety and soundness of which are paramount to the health of the U.S. financial system. The Federal Reserve Bank of New York conducts examinations of bank holding companies and state-chartered banks in its district, making it the supervisor of some of the most important financial institutions in our financial system. Not surprisingly, given this responsibility, the Bank Supervision group is one of the largest units of the New York Fed.

The third reason for the Federal Reserve Bank of New York’s prominence is that it is the only Federal Reserve Bank to be a member of the Bank for International Settlements (BIS). Thus the president of the New York Fed, along with the chairman of the Board of Governors, represent the Federal Reserve System in its regular monthly meetings with other major central bankers and interaction with foreign exchange markets means that the New York Fed has a special role in international relations, both with other central bankers and with private market participants. Adding to its prominence in international circles is that the New York Fed is the repository for over $100 billion of the world’s gold, an amount greater than the gold at Ft. Knox.

Finally, the president of the Federal Reserve Bank of New York, is the only permanent member of the FOMC among the Federal Reserve Bank presidents, serving as the vice chairman of the committee. Each of the Federal Reserve banks is a “quasi-public”, part private and part government, institution owned by the private commercial banks in the district in which they serve. The member banks own stock in their Federal Reserve Bank. This is a requirement of membership. Originally, the FED was not responsible for the health of the economy. . Over time, it acquired the responsibility to promote a stable economy through its control of the money supply and its ability to influence interest rates. It is subject to the influence of Congress because of the legislation that structures it is written by Congress and subject to change at any time. It reports quarterly to the banking committees of the House and the Senate.

Our debt problem is now out of control. Between 2007 and 2014, the total global debt increased by over 40%. Governments, financials, corporations and households have all increased their absolute debt levels in the last few years. The chart shows that total global debt has reached $200 trillion USD. World global output measured by the gross world product was around 76 trillion USD in 2013. This means that on a global scale we have a debt ratio of approximately 270% of the total yearly world output.

DEBT

In short, the Treasury is part of the executive branch of the US government. They must follow the direction of the President. The Federal Reserve is independent of the executive branch, almost like the Supreme Court. The voting members of the controlling body of the Fed are nominated by the President. The goal is to limit the impact of short-term politics on decisions about the money supply. Specifically, there is a concern is that if the Federal Reserve was not independent, politicians would seek to obtain short-term economic growth through expanding the money supply, at the cost of long-term inflation. But the fact of the matter is, everyone is addicted to creasing the money supply and every week that goes buy with this artificial stimuli the worse uglier things will be in the future for those not prepared.

A Global Rest is required. Gold is the only asset I know that has no sort of counterparty risk and has been considered to be of value for thousands of years. I follow gold’s price daily. I am currently awaiting for my Proprietary Trend Systems Analytics’ Model to confirm that the bottom is in place so that I may load up on much more.

I believe it is possible that this gold/silver/miners play alone could potentially fund an individual’s retirement if invested in at the correct time. And I will be sharing this with members of my Gold newsletter at: www.TheGoldAndOilGuy.com

Chris Vermeulen

David Morgan: The Day The $h*t Hit The Fan

 
David Morgan: The Day The $h*t Hit The Fan
http://www.silver-investor.com

Just consider the following statistic. THE TOP TEN LARGEST ECONOMIES IN THE WORLD ARE ALL IN A BEAR MARKET, OR ENTERING ONE –

The DOW is off 2,000 points from its high.
China is at a 78-month low, off by 40%.
Japan is off 3,000 from its peak.
Germany is also off
UK is off 16%.
France is down 18%
Brazil is off 12,000 points since their peak.
Italy is down 50%.
Indian stocks are down 4,000 points.
Russia is off about 10%.

So, is the shit about ready to hit the fan? David certainly believes so. In one of the most comprehensive interviews we have ever done, David discusses precious metals, PM stocks, monetary policy, and Volkswagen’s effect on the PMs!

A precious metals aficionado armed with degrees in finance and economics as well as engineering, David Morgan created the Silver-Investor.com website and originated The Morgan Report, a monthly that covers economic news, overall financial health of the global economy, currency problems, and the key reasons for investing in precious metals. visit: www.silver-investor.com

Talking points from this week’s interview –

• Will a rate hike from the Fed crash the economy? Yes.
• Will a rate hike crash the gold price? Yes and No.
• Will a stock market crash benefit gold? Absolutely.
• Is a catastrophic catalyst event in the making? Probably.
• Will this be the most epic bull market ever in precious metals stocks? Yes.

 

David Morgan is a precious metals aficionado armed with degrees in finance and economics as well as engineering, he created the Silver-Investor.com website and originated The Morgan Report, a monthly that covers economic news, overall financial health of the global economy, currency problems, and the key reasons for investing in precious metals.

As publisher of The Morgan Report, he has appeared on CNBC, Fox Business, and BNN in Canada. He has been interviewed by The Wall Street Journal, Futures Magazine, The Gold Report and numerous other publications. If there is only one thing to teach you about this silver bull market it is this… 90% of the move comes in the last 10% of the time! Where will you be when this happens?

 

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Conspiracy Facts Show Metals Prices Have to Rise

The Gold Report: You and David Smith recently wrote a piece titled “Gold and Silver: Heading for a Blue Screen of Death Event.” You compared the gut-wrenching panic of suddenly facing a computer that stops working with a precious metals market that seems frozen, in the case of gold, in sub-$1,200/ounce ($1,200/oz) limbo. But then you suggested that, like a Windows operating system, the metal could be rebooted on its way to once again hitting $1,900/oz. What would it take for something like that to occur? How do you hit Control-Alt-Delete on a commodity?

David Morgan: The retail silver market is very tight and getting tighter. India has historically imported a great deal of silver. As the country became more prosperous and started building its middle class, more gold started going there as well. On the supply side, low prices are detrimental to the recycling of silver so there is less recycling in the market. It has been reported that it is virtually impossible to get gold in size off of the London Bullion Market, yet the prices don’t reflect that tightness.

TGR: What is keeping the prices down? What is causing the blue screen of death?

DM: That is tough to answer without treading on the conspiracy theory realm. I don’t like to deal with conspiracy theory. I like to deal in conspiracy fact. The fact is that the futures markets allow massive amounts of paper contracts that represent silver and gold and, for that matter, other commodities such as wheat or corn, to be manufactured at will for speculative purposes. That satisfies the demand without changing the real supply. Someone could buy what they think is a physical amount of metal through a major broker-dealer, but in reality only hold a claim on the underlying asset. This is fairly pervasive throughout the precious metals industry.

The Dutch bank ABN Amro had stored gold for clients for multiple years, and when the bank got into problems, the clients were informed that they would have to take a cash settlement for their gold. The Texas Teacher Retirement System has requested gold be delivered from the Federal Reserve to Texas. That’s “in work” and could put more pressure on the paper gold problem if it doesn’t materialize. This problem has come to the fore several times, and yet it has not yet disrupted the market. However, I think that day of reckoning is closer because there is more of this going on and the premiums are so high. That is a direct indication that prices are not reflective of the true supply/demand fundamentals. However, to be fair, the premiums can come back to “normal” once the market quiets down.

TGR: Short of banks not being able to deliver precious metals, are there other black swans that could shake gold and silver prices out of their current state? We had the Chinese stock market flash crash, and gold and silver went up a little bit, but dropped back down again in a few days. The market is still focused on a possible federal Reserve interest rate hike by the end of the year. What could it take to reboot?

DM: Those things have an effect. Physical gold is the most negatively correlated asset to the stock market. That means that we should see an increase in the gold prices in a declining stock market environment. This has taken place at very minor levels so far. We have seen in the past that small events people would have brushed off in years gone by can mysteriously rock the market if they develop momentum. Jim Rickards talks about the avalanche theory where it’s that one additional snowflake that sends everything crashing down the hill. Naming that snowflake in advance is difficult, but we are poised for some kind of disruption.

TGR: When it happens, how quickly could it happen?

DM: These things happen fast. The problem builds and builds and builds, and then just a little bit more pushes the shift faster than you might be able to adjust your portfolio.

TGR: How much higher does silver need to be before the primary silver producers are doing more than just trading dollars?

DM: It varies from mine to mine, but I’d say somewhere around the $22/oz level would be beneficial to most primary silver producers because energy costs are so low currently. If energy costs increase then than number goes up, of course!

TGR: Because silver is often a byproduct, it will probably continue to be produced regardless of the price or the demand. Are there some companies with accidental silver exposure that are worth considering for someone who wants to get leverage on future higher silver prices?

DM: Big mining houses, like Rio Tinto Plc (RIO:NYSE; RIO:ASX; RIO:LSE; RTPPF:OTCPK) or BHP Billiton Ltd. (BHP:NYSE; BHPLF:OTCPK) mine a lot of silver, but they are not leveraged on silver prices. I’ve actually calculated the impact $100/oz silver would have on their annual statements and it is almost an insignificant difference. These are primary producers of lead, zinc, copper, tin and nickel. The silver component is so small, it doesn’t really have much effect.

Some of the zinc properties have pretty good silver exposure. Trevali Mining Corp. (TV:TSX; TV:BVL; TREVF:OTCQX) is one of those, and we’re very happy with that call. We were one of the first to call the upcoming zinc shortage because some massive mines are winding down at the end of their life. Trevali does have a pretty good silver exposure, so it is a win-win. That one has done pretty well for us.

TGR: What about companies that were mining other commodities and have shifted to silver?

DM: Prophecy Development Corp. (PCY:TSX) is an interesting situation. I’ve been involved with the company and owned stock in it. It’s primarily a bet on CEO and Chairman John Lee, a man I’ve known for years, and I value his ability to manage well, get things done, think outside the box and buy value. When Prophecy took over the coal project in Mongolia, which I visited, it was very impressive. It was a good buy at the time, but very few people, if any, foresaw the devastation throughout the commodity sector that has occurred. However, Lee continues to look for value. He found Apogee Silver Ltd.’s (APE:TSX.V) Pulacayo project and bought it last year. David Smith visited and it is one of the highest-grade silver projects on the planet. I compare it to Silvercorp Metals Inc. (SVM:TSX; SVM:NYSE). This was a very rich mine in the beginning and had grades that were phenomenal relative to what we see in today’s market. He bought that property for an extremely good price relative to silver’s potential. I think Prophecy Development is doing it the right way. When things turn around, it could be one of the more significant small companies in the silver space.

TGR: Are there some silver-focused stories that would be well positioned if people started to gain confidence and the price started to go up?

DM: We have followed MAG Silver Corp. (MAG:TSX; MVG:NYSE) for a very long time. In fact, before anyone even knew the name, I was given a preview to the company by Dr. Peter Megaw, MAG chief exploration officer, whom I consider a friend and mentor. MAG Silver has two projects in the Mexican Silver Belt, the Valdecanas and Juanicipio properties. The company did get into a problem with joint venture partner Fresnillo Plc (FRES:LSE) that has been straightened out. You don’t need to look much further than MAG Silver if you’re really a silver bull to put something in your portfolio that I think for the longer term will certainly do well.

Bear Creek Mining Corp. (BCM:TSX.V) was on the recommended list for quite some time, but with the devastation of the commodity sector, we listed it on a speculative basis. The Corani project in Peru just released an updated feasibility study and it’s exceeding our initial expectations. Everything has just gotten better except the share price. That’s what’s so frustrating in this business. Companies do so much work to bring value to the shareholders, yet the price is lower than ever. The good news for people who have patience and willingness to stand by their convictions is if a company is a good price at X and now it’s selling at 50% of X, it’s obviously a better buy. That is the case for Bear Creek.

TGR: At this stage in the market, is the streaming model both an opportunity for the streaming companies to get deals and for investors to invest in streaming companies?

DM: We have always favored streaming companies because there is less risk. We still like them. We have several in The Morgan Report from the top tier, midtier and even the speculative section.

Sandstorm Gold Ltd. (SSL:TSX; SAND:NYSE.MKT) has top-quality management. The stock has been beaten up. I think it’s underrated compared to its potential. We’re still holding on because we know that 1) the model works and 2) when a company has the ability to do financings at low prices that gives the investor extra leverage. We like the idea that you’re “safe” relative to other situations. The company isn’t depending on one mine development going smoothly. A streaming company is more likely to stay in business.

Silver Wheaton Corp. (SLW:TSX; SLW:NYSE) is also extremely undervalued by almost any metric. The Canadian authorities have brought up the tax situation. The company has always answered consistently. So I think its stock price movement is overdone, which makes it a great value investment. We still like the company a great deal.

TGR: I understand there’s a new story about a mobile mill that you’re including in The Morgan Report. Do you want to mention that?

DM: It’s something that we have been following closely. It’s really a technology company for a self-contained unit that recycles the water and goes almost anywhere. This mobile mill allows miners that have gravity feed material—gold that could be separated in a gravity process—to use this technology and produce gold. This mobile mill could be brought on a site, and within a few weeks the rock is milled and sold with part of the profit going to the technology company and the rest going to the company that utilizes this process. The beauty is that a mining company wouldn’t have the capital expenditure for a mill that dilutes shareholders. This is something that’s never been experienced in the junior sector before to my knowledge.

The problem is that the company is making some structural changes that are significant to shareholders, and we had to put the report on hold. But once we are allowed to, we will do a complete write up for subscribers. I want to stress up front that I own it and it’s a highly speculative situation. It also could be a spark that gets investors excited about the juniors again and perhaps even the entire sector.

TGR: You are going to be speaking at the New Orleans Investment Conference in October and the Silver Summit in San Francisco in November. What do attendees need to understand about investing in silver in 2015?

DM: We still like silver as a part of a balanced investing approach, and it is undervalued. If you take the true money supply versus the amount of silver aboveground, we’re at as low a price today as we were at the bottom of the market in the early 2000s. This means that the amount of paper money that has been printed is the same on a per-ounce equivalent. Based on the overspending that all the world’s governments have done, you’re actually buying in a very safe zone. We’re also very undervalued in the gold market. Both of these sectors have lost a lot of interest from the investment community. A lot of them have left the sector, but those who really analyze the markets have a little bit of an edge. They realize what the true picture is. So I would say the remainder of this year is a good time to be buying into these markets.

I’ve always advocated that precious metals should be a part of your overall strategy, not your only strategy. Because of that, my early recommendation was about 10% in the precious metals. Early on, I upped that to about 20% because the world had become more uncertain. If you average the two, that’s 15%, the amount recommended by Ibbotson Associates Inc. for the highest return for investors at large. That is still a good place to be.

TGR: Thank you for your time, David.

David Morgan (Silver-Investor.com) is a widely recognized analyst in the precious metals industry; he consults for hedge funds, high net-worth investors, mining companies, depositories and bullion dealers. He is the publisher of The Morgan Report on precious metals, the author of “Get the Skinny on Silver Investing” and a featured speaker at investment conferences in North America, Europe and Asia.

DISCLOSURE:
1) JT Long conducted this interview for Streetwise Reports LLC, publisher of The Gold Report, The Energy Report and The Life Sciences Report, and provides services to Streetwise Reports as an employee. She owns, or her family owns, shares of the following companies mentioned in this interview: None.

2) The following companies mentioned in the interview are sponsors of Streetwise Reports: MAG Silver Corp., Silver Wheaton Corp., Trevali Mining Corp. and Bear Creek Mining Corp. The companies mentioned in this interview were not involved in any aspect of the interview preparation or post-interview editing so the expert could speak independently about the sector. Streetwise Reports does not accept stock in exchange for its services.

3) David Morgan: I own, or my family owns, shares of the following companies mentioned in this interview: Trevali Mining Corp., Prophecy Development Corp., Sandstorm Gold Ltd., Silver Wheaton Corp. I personally am, or my family is, paid by the following companies mentioned in this interview: None. My company has a financial relationship with the following companies mentioned in this interview: None. I was not paid by Streetwise Reports for participating in this interview. Comments and opinions expressed are my own comments and opinions. I determined and had final say over which companies would be included in the interview based on my research, understanding of the sector and interview theme. I had the opportunity to review the interview for accuracy as of the date of the interview and am responsible for the content of the interview.

4) Interviews are edited for clarity. Streetwise Reports does not make editorial comments or change experts’ statements without their consent.

5) The interview does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports’ terms of use and full legal disclaimer.

6) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their families are prohibited from making purchases and/or sales of those securities in the open market or otherwise during the up-to-four-week interval from the time of the interview until after it publishes.

 

David Morgan is a precious metals aficionado armed with degrees in finance and economics as well as engineering, he created the Silver-Investor.com website and originated The Morgan Report, a monthly that covers economic news, overall financial health of the global economy, currency problems, and the key reasons for investing in precious metals.

As publisher of The Morgan Report, he has appeared on CNBC, Fox Business, and BNN in Canada. He has been interviewed by The Wall Street Journal, Futures Magazine, The Gold Report and numerous other publications. If there is only one thing to teach you about this silver bull market it is this… 90% of the move comes in the last 10% of the time! Where will you be when this happens?

 

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Are You Preparing for the Long Game?

Are You Preparing for the Long Game?
David Morgan

What kind of endurance is required in order to effectively attain preparedness?

Renowned silver guru David Morgan, founder of the MorganReport.com and Silver-Investor.com, returns to ReluctantPreppers.com to give us a reality check on the divergence of paper vs. physical precious metals, and also weighs in on how the kind of steady mindset which is consistent with precious metals/real money understanding is also the mindset suited for the current “long game” or slow-motion train wreck we are enduring, with its many clear and progressing dangers.

Subscribe (it’s FREE!) to Reluctant Preppers for more ► http://bit.ly/Subscribe-Free

 

David Morgan is a precious metals aficionado armed with degrees in finance and economics as well as engineering, he created the Silver-Investor.com website and originated The Morgan Report, a monthly that covers economic news, overall financial health of the global economy, currency problems, and the key reasons for investing in precious metals.

As publisher of The Morgan Report, he has appeared on CNBC, Fox Business, and BNN in Canada. He has been interviewed by The Wall Street Journal, Futures Magazine, The Gold Report and numerous other publications. If there is only one thing to teach you about this silver bull market it is this… 90% of the move comes in the last 10% of the time! Where will you be when this happens?

 

Join The Morgan Report Free for 30 Days *
* 30 Day Trial applies to new user sign ups only!
Offer does not apply to Premium Memberships.
  

Mining Stock “Crocodiles”

 
Mining Stock “Crocodiles”

Since April 2011 (for Silver) and November of the same year (for Gold), the resource sector, notably precious metals and uranium, have endured a cyclical bear market which has taken them substantially oἀ their highs. Adding insult to injury, the long-running stair-step decline virtually eviscerated the TSX-V, plunging it by some estimates into record low territory.

by David H. Smith

Mining Survivors are like drought-stricken African Crocodiles

Hundreds of mining companies have gone out of business or become financial zombies lacking enough cash to file financial reports. Others pathetically try to raise private placements at a few cents/share in order to fund a drill hole (or pay management’s salary). But there are dozens, if not scores of producers, streamers, and yes, some exploration stories, who are resting quietly, like crocodiles in an African stream bed that’s been shrunken to a few deep pools by an extended drought.

These wily survivors are preserving energy and resources, with only their eyes above water – waiting for the fall rains and a change in investor sentiment. And like crocodiles, the mining stocks themselves can erupt without warning, leaping upwards at a stunning pace.

Contrarians who go against the investment herd and their own emotions can acquire meaningful positions in ready-to-rebound outfits. Companies on the brink are like wildebeests and zebras who’ve come to the financial well to drink. Investors failing to act will have to watch others make a profit from explosive (and hopefully enduring) moves, as the changing seasons carry mining stocks up and out of reach at anything approaching a reasonable price.

Image1

A strong case can be made that with a little research, the odds of choosing companies positioned to ride the gold, silver and uranium markets as the secular bull run reasserts itself are – believe it or not- much better than they have been at any time during the last generation. Think about it. If a miner has survived the 2008 melt-down, is active today and has shown it can produce at anything close to breakeven with current prices, you are probably looking at a “contender.” Further, has a producer or explorer under review grown proven/probable reserves, or even its measured/indicated resource?

If it has controlled its fully deleted shares (FD) and carries low debt, your “selector button” may light up. And if a quick technical take on the daily/weekly charts shows an upturn from last fall or this spring lows, which isn’t breaking on the downside, your inclination could become a profitable one.

But no matter how good the story, don’t even think about “backing up the truck” with everything but your lunch money. Instead, force yourself to buy several tranches (portions). If you fear the stock could get away, use a limit price just above the market to purchase one quarter to one third of what you want. Then place an order(s) lower at “(price) or Better, Good ‘til Cancelled (GTC)”.

Backing and filling action into late summer/early fall is highly probable –a tendency exacerbated on the downside by a broad correction or a full-blown market collapse. This would improve the odds you’ll get a second or third portion at a satisfactory price. Save the remaining earmarked money in case a “dumber than dirt” price comes your way. Something close to this has already taken place for me. For example, I’ve added to positions in Alexco Resource (AXR.TO/AXU) at $0.27; Prophecy Development (PCY.TO/PRPCF) and U308 Corp (UWE.TSE/UWEFF) at $0.03 each; and Osisko Gold Royalties Ltd. (OR.TO/OKSKF) on a retreat to its issue price at around US$12.

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The Biggest Risk to Gold and Silver Core Position Holders

It is fully understandable how demoralized even the most ardent gold and silver bugs have become, as they’ve endured perhaps the most painful draw downs to be seen in mining sector stocks for the last 30 – 40 years. Even if you have sold and bought back quality companies at successively lower levels to raise capital and lower your average position price – as I have done – the natural inclination will be to get out whenever “breakeven” levels on your holdings come into view.

But before selling whole hog into a strong rise, or layering out too aggressively on the upside, stop and ask yourself, “What am I trying to accomplish next? Do I want to be out at $26 dollar silver and $1,500 (or $1,350) gold? Do I still believe new all-time nominal highs are in store?” If your opinion is the latter, then selling too much beforehand means having only a small position leἀ to capture that big payday that took years to develop.

An old market saw says that “the bigger the base, the greater the upside case.” This grinding lower-into-bottoming action in the resource sector has taken longer and moved lower than just about any of us imagined. If we want to avoid what David Morgan at The Morgan Report refers to as “being worn out or scared out” we need to approach things with a rational plan. “Prepping” before the inevitable fireworks get started may be boring. But it could help you latch onto a prize company before another investment “crocodile” beats you to it. Consider mega-basketball star and business personality Michael Jordon’s comment.

davidsmithDisclaimer: David H. Smith is Senior Analyst for http://www.Silver-Investor.com and a regular contributor to moneymetals.com For the last 15 years, he’s investigated precious metals mines and exploration sites in Argentina, Chile, Bolivia, Mexico, China, Canada, and the U.S. He shares his findings and investment perspective with readers, media listeners, and audiences at North American investment conferences. This writer owns shares in the companies mentioned in this report.

 

David Morgan is a precious metals aficionado armed with degrees in finance and economics as well as engineering, he created the Silver-Investor.com website and originated The Morgan Report, a monthly that covers economic news, overall financial health of the global economy, currency problems, and the key reasons for investing in precious metals.

As publisher of The Morgan Report, he has appeared on CNBC, Fox Business, and BNN in Canada. He has been interviewed by The Wall Street Journal, Futures Magazine, The Gold Report and numerous other publications. If there is only one thing to teach you about this silver bull market it is this… 90% of the move comes in the last 10% of the time! Where will you be when this happens?

 

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10 Largest Global Markets are all Crashing

10 Largest Global Markets are all Crashing – Money & Metals with David Morgan

 

David Morgan is a precious metals aficionado armed with degrees in finance and economics as well as engineering, he created the Silver-Investor.com website and originated The Morgan Report, a monthly that covers economic news, overall financial health of the global economy, currency problems, and the key reasons for investing in precious metals.

As publisher of The Morgan Report, he has appeared on CNBC, Fox Business, and BNN in Canada. He has been interviewed by The Wall Street Journal, Futures Magazine, The Gold Report and numerous other publications. If there is only one thing to teach you about this silver bull market it is this… 90% of the move comes in the last 10% of the time! Where will you be when this happens?

 

Join The Morgan Report Free for 30 Days *
* 30 Day Trial applies to new user sign ups only!
Offer does not apply to Premium Memberships.
  

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