David gives credit to Ted Butler’s continual analysis of the Commitment of Traders report, which David highlight’s often in his newsletter. The COT report reveals the large paper short and long positions in silver. Currently it appears to be indicating a small downtrend in the silver market. He discusses how silver markets move and how they can be pushed to the downside once investors run low on cash, as banks will short the market at opportune moments.
Over the last year the trading has changed dramatically, due to the advent of the Shanghai Gold Exchange, the strength of the long’s appears to be improving, perhaps almost as good as the banking system’s shorts. The open interest continues to grow and the longs are not as scared, they are better capitalized and are much smarter than they used to be. He is looking at the physical market where most dealers have very little silver, at some point the price must move to reflect the true value.
David says institutions have left the market and additional buyers of the actual commodity are needed. Any investor who bought under twenty is in a good position as that is near the mining costs.
David feels silver is the most honest money, for the average person, historically it’s been money far more often and longer than gold. The leverage you get in good silver equities is phenomenal. First Majestic for example went from $4 to $26 last year. There are many good silver companies with conservative stocks on good exchanges.
Number one is take care of your personal self and your family, I mean, you want to be healthy, wealthy, and wise to coin Ben Franklin. So, really change what you can, make sure that you're eating right, make sure that you're exercising, make sure that your health is number one. When I sign off the Morgan Report, from day one, I always sign it off “wishing you health above wealth.” There is a reason for that. Wisdom beyond knowledge. Having the knowledge of something doesn't mean much unless you implement it. Being wise is meaning you know how the world works and working with it and that's working with the truth. So that's the bottom line, I think control what you can.
Moving up from there, what can you do. Well I'm more or less a pacifist, so I think for example, what Ted Butler did over all these years, to give a shout out to Ted, I mean he was instrumental and spearheaded this whole idea of what was going on in the CFTC and it's been pretty thankless for him for a long time, yet he has maintained his position and asked people to help him write to the CFTC and investigate the manipulation of the silver market, and for years nothing really happened. But this little guy that is being held up as someone spoofing the market and then building a case against him, is probably due to some of the efforts that Ted did, in fact most recently.
So, you can make your voice heard, you certainly don't want to give up. Congress does respond to the populous, it really, really does. So a phone call is much better than an email, and a written correspondence carries a lot more weight than an email and it doesn't have to be a lengthy manifesto, it can just be simply, “I support freedom and you aren't,” or something even better from my politically, perhaps questionable point of view, but it's spot-on legally, is “you took an oath to defend the constitution from all enemies, foreign and domestic and I'm starting to question whether or not you are upholding that oath, write me back.” Something along those lines will wake them up, whether or not you'll get a response I doubt it, there's probably a computer form letter that has anything with the word Constitution in it that will probably pop out a form letter and send it back to you.
But regardless of that, you certainly can make it. And I'm for peaceful protest, the problem we have now is this "anarchy" with what's going on from a certain political belief system, where burning things up and bashing windows, that doesn't solve anything and it's deconstructive, not constructive. Yet, there seems to be an element that actually relishes making that kind of a statement, which is very sad indeed, and it falls back on us as a society on what's really being taught to the population at large and what are the moral values and what does make us great. What makes us great is we have high integrity, we were telling the truth. That's what made America great, it wasn't the financial system. If the financial system was honest, that helps a great deal. But as I've said many times, but probably bear repeating one more time Mike, as I close out, is there is a direct correlation between the integrity of the money system and the moral integrity of the population at large. The more the monetary system deteriorates, the more the moral society deteriorates with the population. They go hand in hand and we are witnessing that as we speak.
Well, there's two theories on money. One is that money is whatever the government says it is, which is a legal fiction, and of course you could be the argument that it's salt, or it's cow hides or it's sheep or it's whatever. Well, certainly that's been tried throughout history, but the argument is either it is a legal fiction or it's specie: it's something of value that has value in and of itself and I would argue silver actually has more value than gold, because you can use silver for medicinal purposes, you can use it for electronics, you can use it as money or barter, and it fulfills actually more services to whoever owns it than gold does. But regardless of my thoughts on the two metals, gold and silver from time in memorial all of recorded history have been chosen by the free market as money of substance. And this is where you can't get around the argument, I mean, a lot of people have been brainwashed into believing that gold and silver have no purpose today, they really aren't money, and on and on it goes. So, the idea that you can create something out of nothing and it has value has been tested time and time again, and again they always fail.
On the cryptocurrencies, I'm not against them first of all, in fact I just gave a lecture about them. I talked about gold, silver and the blockchain, of course I mentioned Bitcoin primarily because it's the leader, bitcoin is unusual, I mean let me again back up slightly Mike.
First of all, to be intellectually honest, would a cured fiat system work in theory, and the answer is probably yes, to be intellectually honest. If and only if you had a limited supply of dollars and they only grew as the economy grew, you would have in theory, a pretty good paper system.
However, that has never been the case, even when the gold-standard-basher's bash gold, they've said well, the gold standard has never worked. Well, yes and no. The gold standard would work because what gold's purpose is, is to keep that money supply growing basically at 2% a year, which is probably what a lot of the people on the left side would like, which is sustainable growth. And in a real, true economic system that is backed by physical reality rather than a make believe set of derivatives that is unimaginable at this time, you have an economic system where each dollar over time becomes more and more valuable. But that is not where we're at. So, we’re in a situation where there is a challenge to the system, and the main challenge really isn't coming from the precious metals, the main challenge is coming from the cryptocurrencies.
Bitcoin is obviously the leader, I look at it Mike, right now with 750 different cryptocurrencies out there, being similar to what happened in the tech wreck, where a lot of these domain names were getting huge valuations for a very short time and a lot of people were piling in. And yet today we still have Yahoo.com, Amazon is a big leader, there are certainly companies out there that were the real deal, stood the test of time, and a lot of these dogs and cats went away very rapidly. I think the same thing will take place in the cryptocurrencies. I do think that some of them are here to stay, I think Ethereum is really not a coin, I think it's a platform. I think few people really understand it's potential. I think it's one I'm favorable to. Bitcoin, it's hard to argue against, I mean, the markets certainly voting very strong for that one. Dash is an interesting one, I certainly don't know them all, I don't claim to be an expert.
But one place I really do have some concerns is security. And I gave that main concern at this lecture I did in Vancouver recently, and of course I got some blow back on it and people were telling me, you can take your account and write it down on a piece of paper and hide it under your desk and that type of thing, I get that, I understand that. But there's already been security issues with Bitcoin and a lot of people won't do that. I mean, just because you have the potential to make it more secure doesn't necessarily mean that most people will. So there is some vulnerabilities out there and this is not me speaking, these are someones at a recent tech conference, and these were high level people that were talking about the internet of things and how vulnerable all this internet of things model is with this, what's called big data, that is taking place before us right now, has security issues. And they do, so that's something to bear in mind.
Now, as far as, how much to put into Bitcoin or whatever, certainly I'm free market, you decide for yourself, but I think Bitcoin's got a long ways to go and I say that based on technical work. I mean, I looked at the chart before I did my presentation because I work pretty hard on these presentations as you know, and the volume was tremendously large in Bitcoin over the last couple months, which means it's got a lot higher to go, there's no question about it. And momentum feeds on momentum, especially when you're making new highs, there is nothing more bullish to the market than a new high because everyone that owns it wants to hold it, because they don't know how high is high, so there is very little that sells back. There will be some profit taking, but not much, because everyone is concerned with, “wow, I made this much percentage today, I wonder how much I'll make tomorrow.” So, there's not much selling pressure. And it will continue to go up. Very interesting market, from a couple places, the main one I would emphasize, which is a probably a differentview point from many, is it is a competing currency to the present system and obviously it's taking off rapidly.
First of all, the belief system is so strong, and yet the truth is sometimes actually opposite of a very, very strongly held belief. The belief globally for all of the establishment economic system, which means all nation states, big hedge funds, all banks, etcetera, believe that the safest place that you can be in is the United States bond market, be it a treasury bill, a T-note, a long bond, anything in between. If you own the full faith and credit of the United States debt, you are buying something extremely safe. And the truth is, it's the exact opposite. It is probably the once place that at some point in time, everybody is going to want to get out of it, perhaps at the same time or close to it.
How can I say that? Well, going back to what I stated, all fiat currencies eventually fail, so this is proven time and time again, yet the belief system has yet to shift in a dramatic way. However, the cryptocurrencies are a bit of a tip off that somebody understands what is going on, and I admit, the best place that you could have possibly been over the last 30 years, for a long term buy, hold and forget it trade, would have been the U.S. bond market, this is true. But nothing grows to the moon. I mean, all trees grow as high as they grow and then they stop. It's the same thing with the bond market.
So, there is a huge debt bomb that we talked about in The Silver Manifesto, that's waiting to go off and when that happens, and it doesn't necessarily mean one day, boom it goes, and everybody understands it. It's more likely to take place slowly, slowly, slowly and then all of a sudden. Which means that a lot of savvy people will be exiting the dollar, which we have seen for years now. We've seen a lot of nation states that have basically abandoned the dollar slowly, sometimes fairly quickly: China, Russia settling their payments between each other in their own currencies. A lot to move from the AIIB (Asian Infrastructure Investment Bank). I mean there is a lot of periphery situations that savvy people are aware of that have been a wayfor, not only individuals through the cryptocurrency situation, but nation states to exit exposure or much exposure, or to mitigate their exposure to the U.S. dollar. And this is a harbinger for what will take place at some time in the future. So, these things always end, the longer you add, to coin (a phrase) and give credit to Jim Sinclair, "pretend and extend," you pretend that everything is okay and these guys pretend they can manipulate it forever and extend the problem, the worse it becomes, and this is the state that we're in right now.
Well, that's a tough one. I would say first is eternal vigilance, I mean freedom depends on it, so my idea or ideal from the beginning has been that all fiat currency will eventually fail. And I also believe that it would happen within my lifetime and I'm certainly older than I was when I held that belief, yet I still hold it. So, really there’s a mandate to hold some portion of your wealth in a savings, in other words, the way capitalism is supposed to work you build from a savings base and that savings is put into a capital formation, which means you construct something be it software, hardware, a building, automobile, whatever, and that becomes a benefit to society at large and they vote in the marketplace with their dollars to further the projects so to speak. Make a profit, which returns to the initial investors and on it goes. So that's the ideal.
My statement was that in times like these rather than be a true capitalist – which is what I just outlined – it requires further savings because there's too many uncertainties out there with one certainty: every fiat currency on planet Earth in all of recorded history has always failed. So, to say that the dollar won't is a misstatement, at least based on past history. Is it going to, for this time, be different? Eh, I guess it's possible. But if we look at it objectively and we state, well, let’s really see what's gone on with the U.S. dollar, if you look at the Federal Reserve Board’s own website, they will freely admit that the 1913 dollar is worth about three cents today. So you have a 97% loss when their mandate was to basically keep the currency stable. They have failed miserably.
Most people that follow what you do, what I do, what the hard money camp, the gold/silver guys talk about, they understand this, but they are very tired out, worn out. I mean I coined the phrase a long time ago that “the silver market would either scare you out or wear you out.” We are definitely at the wear you out phase. And this is where complacency sits, in where they've manipulated the market, we even have proof Deutsche Bank admits it, there is a new CFTC ruling that's gone on, that they've singled out an individual that's going to turn over evidence and probably bring others into the mix on spoofing the market in the silver market, and yet we don't really see any real significant price change.
So, the complacency (mindset) is, look, I know what's going on but it doesn't matter because these guys have got control and they are always going to have control. You know, it brings to mind, the adage, the dark comes before the dawn, the big struggle for seed to germinate, that last little oomph that is required and I think we are very close to the tipping point and I'll add onto that.
First of all, I want to back up a second Mike. As you know, and you're on my service, I put an alert early in the morning about the second week of May and I said I think this is it. Meaning, the fundamental significant shift between paper assets and hard assets, I think, we don't know yet, that gold and silver had turned to the up-side and stocks to the down-side. Now, since I made that statement, stocks have made a new high, so let me get that on the record. However, it looks to me as if we are getting a confirmation on that with gold right now. Because gold is right at the breakout point from a six year down trend and it's mostly safe haven buying, but it's not the people that I just referred to, it's basically the smart money, which means big investors, large hedge funds, and China primarily.
China's gold demand is set to surge about 50% to about 1,000 metric tons this year. Their demand for gold bars are on track to make a 50% move in 2017. The geopolitical risk internationally is probably at an all-time high and this is leading to safe haven demand again, for smart money, nation states, people in the know, people that have basically sold off their stocks quite some time ago near the highs, that have capital sitting on the side lines and that is starting to filter into the gold market. And then you've got of course, a lot to do with the U.K. election, terrorism, the risking tensions in the middle east, and all of this is supportive of the gold, especially after the attacks in London that took place recently.
And the other fact, is that gold is 12% higher for the year and it's actually out performing stocks. Yet, if you stopped the average investor on the street and asked them what's doing better this year, I'd say about 90%, probably higher than that, probably 98% would say, well stocks are doing better than gold.
David Morgan, publisher of The Morgan Report, sat down with Silvercorp Metals (TSX:SVM, NYSEMKT:SVM) VP of Corporate Development Gordon Neal about the company, as well as addressed the “China discount.” In the interview, Morgan says that The Morgan Report thinks Silvercorp is “one of the best narrow vein miners out there.”
