Ten questions on silver with David Morgan


From Precious Metals Monthly
Northwest Territorial Mint, Auburn, Washington


The well-traveled and prolific David Morgan has contributed to Northwest Territorial Mint Precious Metals Monthly in the past and has achieved recognition for his insights into the silver market and investing in general. As a follower of the silver market for more than 30 years, he is the author of "Get the Skinny on Silver Investing," and his Web site, www.silver-investor.com, is a leading source for serious investors. If you add yourself to his free e-mail list, the first thing you will receive -- for free -- is the "Ten Rules of Silver Investing," written several years ago for "The Global-Investor Book of Investing Rules: Invaluable Advice from 150 Master Investors," published in the United Kingdom. These rules are pithy, timeless, and will pay big dividends to new investors and seasoned professionals alike. We asked David to share his knowledge, as the precious metals markets have become as turbulent as Wall Street's.

1. Remind our readers of your background. How did you come to understand the silver market so?

As I explained in my book, "Get the Skinny on Silver Investing," when American coinage went from silver to slugs in 1965 I was an 11-year-old kid, but it had a profound impact upon me and I have pursued the truth about money ever since. The data are out there. I just took the time to understand commodity trading and price effects, silver leasing, and leveraged investments. I also ran down the facts about photography and silver, and aggressively pursued any information about new uses for silver. It's just doing that research, consistently and regularly, that has helped me truly understand silver.

2. Are investors smarter or just more afraid these days? Is that what's sending them to silver?

Silver and gold are the only "money" free from default. This is money outside the system -- no matter what falls in price or fails totally, gold and silver are left standing. So maybe they're a little of both: as long as fear leads to learning and not panic, investors will be successful, and silver and gold will help preserve their wealth.

3. GFMS statistics show that traditional uses for silver -- photographic film and silverware -- have fallen more than new industrial demand has risen, more than offsetting new investor demand. Do you see these trends growing?

Ultimately, photographic silver is a zero-sum game. What goes out comes back for re-use. As for silverware, these numbers are very difficult to verify and, in my opinion, are over-emphasized by GFMS. Industrial use is at 54% of all silver demand, according to GFMS. If industrial use increases by 1 percent in 54% of the market, that's a much bigger number than a 1 percent rise in 17% of the market, or whatever number they claim is used for silverware. So industrial demand is increasing but may slow during the current recession. The main trend of investment grade silver for wealth appreciation and preservation will continue.

4. Should silver remain at these current levels -- half of last spring's heights -- do you recommend that investors slow down or speed up their acquisition?

That is always an individual choice. If you don't have any, buy, even if you need to pay a premium. If you thought this through some time ago and have some real silver and gold that meets your needs, then relax. The worst case is probably not as bad as your imagination.

5. What signs should investors watch as they consider whether to buy more silver or sell what they already have (or should they ever sell what they have)?

To give a meaningful answer, this would have to be addressed on a case-by-case basis. When we get to the mania or panic phase, most should consider selling some or all, depending upon their personal situation.

6. What effect, if any, will the incoming Obama administration have on the financial markets, precious metals, and silver in particular?

Difficult to say at this point. If he is less favorable to mining than the present administration, that will put even more pressure on the physical market. But both gold and silver will regain strength again at some point, regardless of which party is in office. The financial markets may rally on the "hope" factor, but it will be short-lived. Governments always try to print their way out of these messes and most of us understand wealth cannot be printed -- it must be earned!

7. What should silver investors know about silver in relation to gold and the other precious metals?

Silver is the most useful of all the metals. It has been used as money for longer periods of time and in more places in the world than gold. Silver was in circulation in the United States through 1964, but gold left the scene in 1933. Silver has less quantity available for investment purposes than gold, but more than platinum or palladium. The word silver and the word money are synonymous in the Latin-based languages.

8. Is your precious metals investment portfolio exclusively in silver, and why?

No, I look at the entire resource sector and have always advocated a gold and silver position. Diversification remains a way of spreading risk. As some people are now learning the hard way, risk can lead to great loss as well as great reward. We have had good success with recommendations outside of the precious metals. For example, we have a drilling company that has done well for us and offers a great opportunity at these levels.

9. Are there any forms of silver that you like better than any other?

Not really, but a new investor should concentrate on coins first, then they can move to bars. By bars I mean larger bars, in 100-ounce or 1,000-ounce increments. Coins are best for making small transactions, if things ever got to that point.

10. You publish an e-mail newsletter, run a silver Web site, and consult individually with silver investors. Do you ever feel like you've overspecialized? What can an investor expect from your commentaries and consultations?

I don't think I am overspecialized. Look at my mission statement: "To teach and empower people to understand the benefits of an honest monetary system." As you can see, the words silver and gold do not even appear in it. However, they do play a very significant role. No, I am a macro-economist -- a big-picture, deep thinker with very good analytical skills. People who know me at more than a surface level understand this and that's why they’re willing to pay a fee for consultation, not just in precious metals, but in many areas of finance. People usually are overwhelmed by the depth of the consultations, but the consultations are driven by the client not by me. Most of what I teach or research cannot be answered in any satisfying way in a simple interview.

As far as my commentaries are concerned, people can get a huge amount of free-market thinking -- a real education in how the financial system really operates -- from the Web site. Unfortunately, it seems that almost everyone on the Internet has ADD. If someone really was interested in my work and read everything I have produced in the public domain over the past ten years, they too would be an expert.

Anyone who wants more information and is willing to do some serious reading should go to my site, www.Silver-Investor.com --especially now, because the entire members-only section is available to everyone from now until the end of the year, just for signing up.

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