Mike Maharrey: Greetings. I’m Mike Maharrey, a reporter and analyst here at Money Metals, and I’m happy to be joined today by David Morgan. David is a highly respected analyst, the publisher of The Morgan Report, the author of the book, the Silver Manifesto, and an all-around nice guy. How you doing David?

David Morgan: Michael? I’m doing great.

Mike Maharrey: Well, we’re happy to have you on the show once again, and of course a lot has been going on in the precious metal markets over the last few weeks. We just had a pretty significant selloff in both gold and silver. So in your view, healthy correction or signs that the bull market is on its last legs?

David Morgan: Well, healthy correction, it’s the market speaks volumes if you know how to listen and one thing in a very strong bull market is that a significant pullback, which we could say happened. I mean we’ve been up what, 60% in silver and had 8% correction in one day, but the net gain on that’s a 52% gain, but I’ll get to my point. If it bounces off the 50 day moving average, that market says, Hey, I’m a strong market. The $50 day moving average in silver. Last time I checked it’s about a week ago, it was $45 and we got close to it, but we didn’t even hit that yet. Not that we can’t touch it and bounce off or go below it, it’s still possible, but the way this market’s acting, it’s a brief reprise until we’re making further length in the up leg. I think we could consolidate for a couple months. I don’t think it’d be longer than that. I really think that we are in the last move, which will be very significant of a major secular bull market in the precious metals.

Mike Maharrey: Yeah, yeah, it’s interesting to me it’s a little bit of perspective. We saw gold go up so fast and I think people, we get it in our head, oh, this is just how it’s going to be and then when it corrects, everybody freaks out. But I mean gold is pretty much held $4,000 even.

David Morgan: Yeah, it’s just below a little bit. You’re right. Sorry if I interrupted, but I’m excited. I try to be steady. I don’t get too low when things go low or too high when things go high, but nonetheless, when you have a very much confidence that you want to buy the dips now and you want to hold, you don’t want to. If you want to trade around the move, that’s fine with me, but I would never trade more than 25%. In other words, 75% is my core position until we are overvalued and that’s a whole other discussion. When is gold or silver overvalued?

Mike Maharrey: Yeah. Do you have any sense of that?

David Morgan: I do. I do. Mike Maloney is Todd and others. I’ve used it myself and I really don’t care what the paper price is per se. What I care about is how many barrels of oil does an ounce of gold buy? How much wheat does an ounce of gold buy me? How much house does an ounce of gold buy? When I know those metrics that could compare ’em to the historical mean, the average price of a house of gold, I’ll know if it’s overvalued or undervalued and that will be my metric because saying it’s going to be $10,000 means nothing if the money supply has gone up by 500% from here.

Mike Maharrey: Right. Yeah, absolutely. Makes sense. So basically you’re treating gold as real money.

David Morgan: Exactly.

Mike Maharrey: Yeah. How do you do that? That’s an interesting thing to me, just the psychology and I tend to be pretty levelheaded as well. I’m a long-term investor, so I’m not anxious to get in and out and try to time every move, but how do you suggest that people do that? I mean, how do you get the mental discipline not to freak out when you see these big moves and we’re seeing a lot, I mean we’re up like a hundred bucks today in gold, there’s a lot of volatility. How can folks kind of keep that level headed and make good strong decisions based on the fundamentals and not on an emotional reaction?

David Morgan: Well, one thing is to learn discipline. There’s a book called Discipline is Destiny, and you could use a lot of analogies, you could use working out. A lot of people use that analogy and you have days that you don’t want to go to the gym and you got days you could hardly wait to get to the gym and you got days in between. But as long as you are consistent, you are going to improve. And it’s the same thing with a long-term view on the precious metals. The precious metals are not there to make you money. The precious metals are so you can’t lose, and the only ways you can’t lose is to understand the fundamentals and stay disciplined. Because if you started, when I started The Morgan Report and silver was under five and gold was at $252, you look at today’s prices and say, I’m a very happy camper, but you could go to 2011 and bought at the top and said, man, my gold position’s cool, went to 1,900. Now it’s double that, but my silver position was 48, now it’s 49. Of course, I emphasize buying both metals as you know.

But the point is even in the worst-case scenario I just outlined, you still have made, you’ve still preserved your wealth as a minimum. Maybe in real terms you’ve actually gained in wealth terms.

So, I think it’s understanding that all markets go up and down and the metals are a special case because they are snubbed or opaque to Wall Street. There’s no one now. Now we’re getting to the last leg of the bull market. The reason I know that is many, but one of the main reasons I know is that the major institutions are saying, Hey, you ought to have 20% gold. Why weren’t you say 20% goal? When David Morgan started The Morgan Report, he was a lunatic, a kook, a conspiracy theorist, a no good, all these, he’d pick a name, pick a derogatory comment of your choice and check the box. But now after it’s gone up 24, yeah, the guy knows what he’s doing.

Mike Maharrey: Yeah, you’re suddenly brilliant. I was going to ask you about that. A lot of folks probably are aware that the chief investment officer over at Morgan Stanley was the first one to bring up this idea of a 60/20/20 portfolio as opposed to the traditional 60/40 with that 20% being allocated to gold. Do you think that that’s going to maybe catch on, and we’ll see other big institutional investors start actually looking at gold as an integral part of the portfolio? Or is that maybe just getting caught up in the moment by the Morgan Stanley, CIO? How do you view that?

David Morgan: Yeah, I don’t think it’s one-off. I think it’s a basic signal to the brokerage house community, maybe twenties too high, but I think the signal has been given. I think others will follow. I mean, if you look at silver, which is almost a subset of gold, especially from the monetary perspective, Saudi Arabia bought almost a million shares of the SLV. Why? I mean it’s not really considered a monetary metal. Why did India start silver ETFs?

Russia stocked physical silver for their strategic stockpile or whatever they name it. So, we are in a position where we’re not last leg of a currency crisis where people do not trust the world reserve currency called the US debt market, and they’re making adjustments that if the dollar loses value even further, they’re going to be protected in their purchasing power. So once that hits the mainstream that you just outlined and then we get more participation there, we’re going to see gold go higher priced. Many in the middle class will be priced out of the gold market, $4,000, $5,000 ounces. That’s a lot of fiat for one shiny disk. They might say, “You know what? I want a lot of shiny disks called silver.” So, that money will move toward the silver market more than the gold market at some point, and we will see the ongoing race to the finish line, which is not really that happy place. Well, David, you got a lot of silver and you should be very happy. But unfortunately at the end of a currency crisis, no one really wins. It’s who loses the least is what it amounts to.

Mike Maharrey: We kind of saw that dynamic with the pivot to silver in India as the price got really high this last festival season from the anecdotal reports that I’ve read, a lot of folks decided, Hey, let’s go silver because gold is just too expensive right now. So, we’ve seen that play out in real time in real life, and I think you’re right. We’ll see that happening in the western investment world too. I’m kind of curious. They talk about 60, 20, 20 and the emphasis is usually on gold. How would you fit silver into that mix? How do you kind of look at the ratio between gold and silver in your precious metals portfolio? How would folks maybe balance that?

David Morgan: Yeah, I do a PDF file when people buy the paid service, and it’s just a little outline how to use The Morgan Report, and it’s a guideline, not a set in stone. This is exactly what you must do. And the guideline says based on your age, you should be in 60/40, 60/30 or 70/30, 80/20. So, to outline that, the older you are, if you’re 60 years of age, you could have 70% gold, 30% silver if you’re 70, maybe 80 or 90% gold, 10% silver. The idea being the older you get, the more you should weight gold in your portfolio, not silver, but David, you think silver will outperform gold? Yes, I do. But as you get older, you want more stability and gold really is mainstream. I mean, as you said, here’s the CIO of Morgan Stanley for crying out loud saying 20%. I mean that sounds like I joked before I have to say the gig because I’m laughing my own joke, but that’s like idiot in Spokane that says that kind of stuff. I’m not the chief investment officer of Morgan Stanley, right? So I think we will see that shift. Already said that, but no, that’s how I look at it. I think you are making a mistake if you don’t include silver in an institutional or a private portfolio. However, I look at it as let’s say the S&P 500 versus the Nasdaq, if you’re conservative, you own the S&P, but you might have the Triple Qs in your portfolio just for added spice, let’s say.

Mike Maharrey: Yeah, that’s a good analogy. I like that. That makes sense to me. Well, let’s talk a little bit about the gold-silver ratio. After all of this turmoil and tumult, we’re still basically around 80 to one with that gold silver ratio. And I read somewhere the other day that we’ve been at historically widespread on that ratio now for well over three years, and this individual was speculating that maybe something is broken in that relationship between gold and silver and maybe we should start expecting a bit of a wider spread between the two metals. How do you see that? Are we still just kind of saying silver is very undervalued compared to gold and we kind expect that gap to close or do maybe we need to reevaluate that technical dynamic?

David Morgan: Yeah, I think both. I mean when I started The Morgan Report, the ratio was almost 80 to one precisely. And at that time, 25 years ago, I thought to myself, and I might’ve even written it, that that would be the highest gold to silver ratio I would ever see in the rest of my life. Wrong, wrong, I’ll say it three times because I was wrong. We saw 125 during the illness in March of 2020 and silver went to 12 and the ratio went to about 125, and I was lucky enough to be pretty cashed up at that point. Michael and I bought silver at that bottom or very close to it. But to answer the question more fully, yeah, I think we have to adjust silver that the narrative has been silver. It’s just an industrial metal. It’s not money. I argue otherwise I say it’s both money and an industrial metal.

But if we look at that narrative, we could say, okay, what has it done in the last 50 years? We’re not looking at rural history where the ratio has been under 20 for hundreds and hundreds and hundreds of years. We’re just say in the last 50 because data that’s near term is more valid than data in the past and many algorithms that are trading algorithms, and I have one use that it’s valid. You weight it to near term because it’s more meaningful. So anyway, that gives us ratio of about 50. So as you and I are talking, if it’s 85 just on the industrial use alone, it should be getting back toward that number. Now, if you go to where I think, and you asked me for my answer and I said I answered it both ways, is at the end of the great inflations, at the end of these currency crises, at the end of the game is up paper money doesn’t work.

Oh, we have to learn that lesson. Again, the monetary aspect, even though it’s only about 20% of the market takes the lead, I’m buying it because I am going to lose purchasing power unless I have something of value. I got enough tuna fish, I got enough peanut butter, I’m going to buy silver gold’s too expensive or I want to buy gold and silver. I’m buying it because gold is my s and p 500 and silver’s my Nasdaq. So that is the point we are starting to get to. And once we get below 70 by my work no magic number, it’s again guidelines. That to me is the level that tells me not me telling the market, the market telling me that silver has started to move into its monetary role again, until we get there, I’m happy to see these gains, but I want silver to stand up and say, okay, give me the ball. I’m the fastest half back there is. I’m running for the finish line and nothing could stop.

Mike Maharrey: For me, just thinking about my own psychology, and even before I really got into looking at precious metals, I always kind of intuitively looked at silver as a monetary metal. I mean I knew it was industrial as well, but even before I was more educated. That was just kind of an intuitive thing. Oh yeah, silver’s money. I think a lot of people are like that, even though the reality in the world has shifted and we primarily gold is money. I’ve always kind of felt like silver is money and imagine I’m not alone in that.

David Morgan: Yeah. If I could drone on a bit more, I mean Milton Friedman spoke at one of the best gold shows in the world in New Orleans, and he said that silver is the monetary medal of history, not gold. And he is right. Silver’s been used in more places for more transactions in the monetary realms than gold ever has. On top of that, the word silver and the word money is synonymous in the romance languages. Well, silver isn’t money. It’s just an industrial metal. Well, they’ve never been to Mexico. It’d be me telling you Michael, money isn’t money or silver isn’t money or silver isn’t silver. It wouldn’t make no sense to anyone. It’s like, what is it, plateau or whatever. Plata means silver or money in Spanish, but I forget how you say lead, but the cartels say silver or lead, you do what we want and get paid. You end up on the other side of the ground. I’m not trying to be funny here, but it is true. The other thing is silver in Chinese is silver in a structure, A bank in Chinese is silver underneath or in a structure I have on my desk is one of my paperweights. This that’s a piece of silver in Chinese, it’s a boat.

Mike Maharrey: That’s cool.

David Morgan: And that’s how they used to use silver for trading purposes. So you’re right, silver is really the money of history, but in the last 50 years of my life, the narrative has been no, it’s not. And the banks certainly have adapted to that and so have most of the investment houses and everyone else. But I’ll say one more thing and turn it back to you, but there was a pretty well funded hedge fund guy in Asia that caught the silver story quite early on and kind of the light bulb went off and he called me and we had a pretty long discussion about where he was going to move his hedge fund and why he was going to favor silver over gold. I don’t know if he ever did it or not, I presume he did, but it’s much more valuable as far as what we need.

If we lost all the gold in the world tomorrow, all the gold bugs would be pretty upset because their wealth went away or part of their wealth. But we wouldn’t stop anything. But if we stopped, we took out half the silver in the world where it would be with no computers, no cell phones, no flat screen TVs, no microwave ovens, no washing machines, basically no electricity. I mean we’d go back into this dark ages without silver. So which one of those metals is more valuable to you? Well, silver is, I’ll answer the question for you. It’s a rhetorical question, but which would be more valuable? Well, gold because the bankers say so. Well, it’s scarcer than silver. Yeah, it probably is. There’s arguments that it isn’t I side that it is more scarce than silver, that gold is more scarce than silver. But regardless, you go to true value. It’s true meaning in our lives, if you had to say, well, you get to vote tomorrow morning, you only get one of these medals, which one do you want? You voted gold, you made a bad choice.

Mike Maharrey: Yeah. I will tell you this. If somebody comes up to me and hands me a 1964 quarter, and I know that that thing is 90% silver, I’m pretty darn thrilled. So you can say it’s not money all you want to, but I personally have had people pay me in old junk silver knowing that I’m getting much higher value because of that melt value.

David Morgan: Well, I’ll make the argument one more time. Sorry. You hit a nerve there. And so this one, I’ll win the argument in a court of law that silver is money and you just said it because that quarter is still legal tender, and that is M-O-N-E-Y money, especially if you use Mike Maloney’s definition of currency versus money. It is money. And I could take that quarter into Walmart today and throw it down. I dunno what the heck you could buy for a slug quarter these days, but let’s say I had four of ’em and that was a dollar and 90% silver. I could buy a pack of gum at Walmart and there’s not a damn thing anyone could do about it because it’s money.

So at law, it’s money economically, it’s not money because it’s value is not in the marketplace at value that’s stamped on it. That makes sense. In other words, we know what the trading price per ounce, but I cannot get that price at Walmart. I’d have to pay 13 times more than the face value in order to buy that pack of gum. They’re not that stupid, but no one could prevent me from doing that, and no one could do anything about it. They couldn’t arrest me, they couldn’t put me in court. They might want to do a psychological head exam, and what the heck am I spending that much wealth or to buy a pack of gum? But it is at lots money economically. It’s not in the monetary system, whereas it’s gold isn’t either. I mean, if you look at a silver eagle, what’s it stamped? $50 platinum, which trades for less than gold is a hundred dollars, right? So hey, I’ll give you this a hundred dollars disc, give me two of those $50 discs. Isn’t that equal? So it’s stamped on there, right?

Mike Maharrey: Yeah, I’ll take any of those discs.

David Morgan: Right, me too.

Mike Maharrey: I’ll be happy to trade all of the green paper that I can for those shiny discs. While we’re on the subject of silver, I wanted to ask you to kind of get your thoughts on this recent silver squeeze that we saw where we had kind of a displacement of physical metal. London was running short, there was too much silver in New York because it had moved over there when people were worried about tariffs. And that seems to have kind of resolved from what I’ve read. But I’m curious in your mind, did that tell us something more fundamental underlying the silver market, or was it just a perfect storm of circumstances that caused a little bit of disruption in logistics? How do you look at that situation?

David Morgan: Well, as objective as I can be, I look at it as probably one of the primary metrics that I’ve talked about from day one, and that is there will be a day where the silver market is based on the physical presence of silver rather than the paper paradigm. And that’s what we’re seeing now. First of all, just a discrepancy in price. If you’ve got a different price than the Shanghai Gold Exchange that you have in the LBMA that you have in New York and you’ve got three different prices for silver, then what is the price of silver? Secondly, if you’ve got to move physical blocks of silver, a thousand ounce commercial bars from one location to another to clear the market, that means the physical market is taking control, not the pay paradigm. And I said there would be a day I’m repeating myself that that would happen.

It’s happening before our eyes. What’s interesting to go a bit further, Mike, is that I did my weekly perspective on that I think two or three weeks ago, and I said, I don’t know where this market clears. There’s been people that have indicated it’s going to take 150 million ounces of silver into the LBMA to clear the market. I argued it may not take that much. I’m not sure I believe that number, but I don’t know. And I said, if it took 30 million, will the market would let us know pretty quick or 50 to 70 million or even the 150 million right now we ship according to official sources, 29 million ounces of silver over to the LBMA and the market shed a lot of paper price, derivative price from 54 down to 48ish or maybe it got under that. And that to me looked like it cleared the market, but now the market’s bounced right back up.

And the metrics that we were using to identify this paper problem has resurfaced already. So the market looked like it cleared because the lease rates went back to normal. The market sold off heavily in paper terms and things had calmed down, but that calmness only lasted a short time, and now we’re seeing the lease rates go back up and we’re seeing the squeeze indicators coming back. So I must say in all good faith that I don’t think it’s a one day thing. I think it has not been resolved, and maybe it’s going to take another 30 million ounces, maybe it’ll take 150 million if we go to that number, and it only came from the COMEX, that would take the registered category from roughly 170 million ounces down to a hundred and see, we’ve already shipped 30, so we need 120. So we take it down to like 50 million ounces, which we’ve been below that many times.

David Morgan: We’ve been down to 30, 35 million ounces in the registered category in the COMEX, and I felt strongly that would be a problem. And so far it never has. It’s been very tight, but as long as you still got that one 16th of a gallon of gas in your car and there’s a gas station up ahead, you’re okay. You might be sweating it a little bit, but you’re going to make it, and that’s a good analogy for being under 50 million ounces in the Comex. So, we could see that much metal move to the LBMA, the LBMA clears because it needed that much physical and the COMEX would still be in relatively good shape.

Mike Maharrey: I’ll tell you something, wild money metals actually shipped 1,000-ounce bars over to India. The need over there was so bad. So, it’s not just moving into London.

David Morgan: Oh, I know! That’s the other part. Yeah, so I interrupted. But yeah, I mean the silver doesn’t come just from the Comex. I mean the LBMA is getting silver from other places, so even if they need 150 million doesn’t mean it all has to come from the Comex as I just outlined. Maybe half of it could come from other refiners around the world, but lots going on. I just did an interview with one of the CEOs of a major silver producer that’s becoming stronger and stronger month to month, and I had ’em verify once again, already knew the answer, but I don’t mind putting it out again. I said, is it true that the Chinese have gone in and paid for doré, which is roughly put together bars of metal, precious metal, very rough form. It has to be re-refined and paid basically above spot to get it.

And it goes, absolutely, it’s true. They went into Peru and some of the major silver miners there poured their own doré. You can look it up, you don’t know what that is, but these rough poured blocks of precious metals, it’s got gold, it’s got silver, it’s got some lead. It just depends on what’s in the ground and what they smelt, and then it really fines. But they want that bad that they came in and they’re paying basically above spots. So, it goes back to what said earlier, there’s dislocations of price A, B, and C in three different locations that tells you the distortions of the market are screaming that something isn’t right, something is wrong. And then again, to repeat, but we have to move metal around to make people happy. What happens if there isn’t enough metal to move around?

Mike Maharrey: Yeah, I mean that’s kind of what in my simpleton brain, when you start having shortages of metal and you’re having to move it from one place or another, that tells me that there might just not be enough metal. Or I guess you could look at it the other way and say there’s too much paper depending on how you want to look at it. But I like the way you kind of put this earlier. The markets are telling us something, we need to listen to the markets and to dig a little bit deeper than whatever the headline might be. Because I think you’re right that the markets are speaking to us and they’re telling us some very fundamental underlying things. Speaking of fundamental underlying things, I’m going to get you out on this one. The Federal Reserve cut interest rates another 25 basis points yesterday and also announced that they’re going to end quantitative tightening. So, balance sheet reduction is done so much for Ben Bernanke saying that we’re not monetizing the debt because we monetized a whole bunch of it since the great Recession. But I’m curious to your take, why do you think the Fed is cutting into what I would argue is still a relatively warm inflationary environment?

David Morgan: Well, one is political pressure. We both know that. And the other one is I don’t think there’s a way out. I mean, the only way out to really what I consider to be the more morally correct impetus to make it resolve the problem is to let the market clear, which means the free market determines the price of money and something that isn’t very valuable, like the dollar has to be priced at a higher interest rate to make it clear the market meaning that the value of that dollar is not as strong as it appears now. And because of that, interest rates go to let’s say 10%, which means the bond market gets cut severely because the face value of the bond is always valid once it’s cash at that time that it’s stamped on the bond. In other words, 30 years from now, you’ll get your thousand bucks back.

What do you think a thousand dollars would be worth 30 years from now? Don’t make me laugh. So if you need the money and you got a 30 year bond and it says a thousand and the interest rates go to 10%, it might be worth 500 bucks, but you paid a thousand for it, but you’re glad to take 500 because next month it’s going to be with 400. So that is very deflationary, but I don’t think we’re going to see that. So the other side of the coin is you just pretend everything is okay. You lower interest rates, you flood the globe with more liquidity, more pieces of paper that say 1, 5, 10, 20, 50, and a hundred on ’em, and that just keeps running its course until people don’t want to use it anymore.

Mike Maharrey: Yeah, I put it this way, the Fed had kind of a choice. They can either try to keep the air in the economic bubble and keep supplying easy money or they can fight inflation. They can’t do both. They’re opposite things. And I think they picked inflation.

David Morgan: Well, all of history shows that they do. There’s never been an instance where a unbacked currency hasn’t gone the inflationary route. Now, if you go to the thirties, that was a debt liquidating depression because it was a gold back currency. And so what did they do? They tried to reflate by calling in as much gold as they could get, and then, oh, by the way, now we’re revaluing it by 75%, but that was a gold back system. Now we’re in a Zimbabwe kind. Well, we’re not in a Zimbabwe because we are the debt slash credit of the world. And what I outlined about the bonds is extremely important. So, you could see what, I won’t say it again, but you could see a situation where we let the market clear, which means the dollar gets devalued to whatever the market says it’s really worth, which would be far lower than it is now. People that held bonds are very unhappy because they get a reality check that dollar’s not worth what you paid for it, and now the market can readjust the price of gold, readjust the price of houses, readjust, everything, readjust. But again, they’re not picking that route. They’re picking, we’ll just keep inflating until we don’t trust the currency anymore. And that’s a very sad event because once you’ve lost faith in the money itself or currency, it’s very difficult to get it back,

David Morgan: Get back to confidence, get back to trust, get back to system.

Mike Maharrey: Absolutely. Well, I don’t trust it now.

David Morgan: Yeah, right.

Mike Maharrey: Well, let folks know where they can follow you work, where they can avail themselves to The Morgan Report point people in your direction.

David Morgan: Best place is the MorganReport.com. And then I like to shout out, I finished the documentary Silver Sunrise and it’s at SilverSunrise.tv, which is a documentary on the fierce stress and control money has over our lives and how we might reflect upon value versus price and maybe take a different look at the whole political geopolitical energy and monetary sphere.

Mike Maharrey: Very, very cool. Well, everybody should go check that out and always appreciate getting your insights and appreciate the fact that you were able to kind of jump in at the last minute and bail us out. And so very appreciative, but always glad to talk to you. I love your perspective and I learn something every time we chat, so it’s a good time. Hopefully listeners do as well. So appreciate it.

David Morgan: Well, thank you, Michael. It’s been a pleasure on my end too, and high host Silver Away. Let’s see how soon it takes before we get above 50 again.

Mike Maharrey: There we go. Thanks.