Interview: David Morgan. Why Invest In Silver?

Kirsty Hogg from GoldBullReport interviews David Morgan, the Silver Guru about what is going on with silver today as well as what we can expect in 2013. David also answers the question; "Why invest in silver?". 

Silver, China and Graphite – New York Hard Assets Conference Review

I attended New York Hard Assets, May 14th and 15th and found there was a notable decline in enthusiasm and attendance from the previous year. The exhibit hall crowd seemed thin on both days, and the main speaker hall attracted the most attention. It seems when the markets are down, people seek a guru for guidance and that explains why most people made a beeline for the keynote presentations and shied away from the exhibitors. In my opinion, this is a time when thorough due diligence before a show will pinpoint interesting and undervalued companies. Then we can visit selected booths and ask questions with the CEO’s full and undivided attention. Meeting face-to face is a valuable and underused component in a speculator’s due diligence strategy.  I managed to hear some speaker presentations, and here are three who caught my attention:

Eric Sprott, of Sprott Asset Management, gave a talk entitled: “Mania, Manipulation and Meltdown”. Eric talked about how the markets are manipulated and applauded GATA’s work in this arena. He explained that central banks and governments surreptitiously suppress the price of gold as they don’t want the price of gold to increase to an honest level. He pointed out that the price of gold in any fiat currency reflects their inflated weakness. Eric reminded us that at this time last year; silver was at a near-record 49.50 and gold reached $1900 in August. Despite the fact that both metals have been in a 12 month correction, he predicted that this is temporary and both metals will reach new heights this year and beyond. He stressed that there will be no recovery in the US Markets and encouraged people to look at what is happening in Europe as well as the amount of money printing going on. He asserted that both gold and silver will ultimately shine the brightest and encouraged everyone to “stay the course”. He still refers to silver as the "investment of the decade" and to gold as the "ultimate currency".


Gordon Chang, Forbes, gave insight on why China is not booming. He warned the Chinese economy is faltering and is much worse than official numbers portray. The biggest threat is inflation, in addition to a property bubble, a volatile stock market and capital flight issues. Gordon mentioned the heavy export component in the Chinese economy and predicted a decline with the world going into a “double dip downturn”. He suggested a country with a large industrial manufacturing and export portion to its economy has the most to lose during a depression; much like the United States in the 1930s. Because of this, he thinks that China will suffer the most in the coming depression.

Gordon said that with China’s fragile economic state coupled with increasing mass insurrections and protests (some very violent) against the communist regime, anything can happen. He believes there will be a failure in the Chinese regime in a very short period. Gordon also pointed out the “One Child Policy” has problematic ramifications when considering that a single child must support two aging parents plus grandparents in a society with no social safety net.


Mickey Fulp, The Mercenary Geologist gave a compelling presentation entitled, “Graphite: The Newest Next Big Thing”. He pointed out that when he started looking into graphite’s potential over a year ago, there were only two established companies listed on the Toronto Venture Exchange in graphite; now, there are over 50.

He stated that graphite prices have risen due to strong demand, lack of investment in new mines and export restrictions by China (China controls 75% of production. Graphite has major industrial uses including: Refractories 35%, Batteries/Storage 25%, Lubricant Crucibles 10%, Foundries 7%, Pencils 4% and Other 19%.

Mickey thinks that graphite “is an up-and-coming semi-metal that has very strong upside not only for the short-term but the long-term.”

Despite a huge increase in the number of companies with a graphite play, there are “few contenders and many pretenders”, Mickey said. These are the companies that he called the “cream of the crop” based on his key criteria of project (in particular, safe geopolitics, good infrastructure, high grade, favorable metallurgy, and low operating costs), share structure and people: Flinders Resources, Focus Graphite and Northern Graphite.

Even though markets are getting hammered right now and the general sentiment in the junior resource sector is quite glum, I came away from this show with new knowledge and plan to take a hard look at specific graphite companies. I will adjust my investment strategy to use these volatile times to choose entry points on some great opportunities. And yes, I remain long on both gold and silver as a hedge against inflation and fiat currencies. See you at the upcoming Vancouver Cambridge House Investors Conference June 3rd and 4th!

Kirsty Hogg

Goldwars Now Available in Spanish: Las Guerras del Oro, by Ferdinand Lips

I received an update recently from Barbara Lips, daughter of the late Ferdinand Lips to whom this blog is dedicated, that the book, “Gold Wars” has now been translated and published in Spanish under the title: “Las Guerras del Oro”.

Ferdinand Lips’s classic book was originally published in 2001 just at the time gold had begun its spectacular bull run from the spot price of around $270.00 to a whopping $1650.00 today. This book is perfect for anyone curious about monetary systems and how honest, free market money has always been a safe haven throughout the ages and the lack of honest money has been the cause of many past and current wars and atrocities; hence the book title.


Please join me in spreading the word that this vital reading is now available to Spanish speaking students of Austrian Economics globally. You can read more about it at the Lips Institute website.
All my best,
Kirsty Hogg Founder of Why Buy Gold? (and Silver!).

Kirsty Hogg Answers the Question: Why Gold?

I was interviewed by Mark Cullivan of Resource Stock Digest at the Vancouver Investors Conference, January 22, 2012. Mark asked me how I got into spreading the word on sound money as well as why it is a good idea to buy physical gold and silver. I'll be contributing more about this topic at Resource Stock Digest in the near future.

Disclaimer: I am not a financial advisor in this jurisdiction or any other.  These are my personal opinions only and should not be interpreted as financial advice.

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Kerry Lutz Interviews Kirsty Hogg: Vancouver Resource Investment Conference 2012

I had the pleasure of having a meeting with Kerry Lutz of the Financial Survival Radio Network on Sunday Jan. 22^nd, 2012 at the 2012 Cambridge House Investors Conference. Kerry has been putting out a tonne of fabulous interviews with gold and silver experts from all around the world.  You can find all his shows at Kerrylutz.com.

Kerry and I chatted briefly about the great opportunities at the show for investing in the junior mining stock sector.  We reminded everyone to proceed with caution and do their own due diligence as this kind of investing is pure speculation and very risky.  Thankfully, there are some expert newsletter writers in the industry who can help the lay investor navigate their own way in this 1700 + company sector successfully.  An example of this kind of newsletter writer is Mickey Fulp, The Mercenary Geologist.  Mickey publishes a variety of musings targeted at the lay-investor (be sure to go back into his archives to access all of his previous articles and videos).  These musings specifially offer tips and tutorials that empower people to do their own effective research and potentially make some money along side the experts who have been doing this for 30 years.

If you want to learn more, I enourage you to go to Mercenarygeologist.com – Simply provide a name and email address to get full access.  Mickey was also listed as the top source of investment advice in mining by Mining.com on Jan. 2nd, 2012. Everything is totally free to his subscribers.

A Holiday Greeting from Kirsty

Dear Members of Why Buy Gold? (and Silver!):

No one knows what is in store for us in 2012, but we certainly have a very good idea after reading and viewing all of the amazing resources posted and provided by you in the past two years in Why Buy Gold? (and Silver!). Armed with this knowledge, we have the power to take action and prepare for an economic tsunami of which so many are not yet aware. The reason why this group is successful is because enlightened and knowledgeable members continue with the desire to spread the word on reasons people need to buy gold and silver and other “stuff” that will aide us in the future if the SHTF. I express my heartfelt thanks for your support and input to the group over the last year and wish you and yours a very Merry Christmas and a special holiday season.

My goal is to grow the membership of this group at least another 1000 people in 2012. Growing this group is always a challenge, so if anyone has an idea on how to help, please add your comments below.

We will continue to spread the word on the importance of physical reserves and how we protect our savings by storing a portion of our wealth in precious metals.

As we look ahead to the coming year, we should always remain optimistic in our outlook and not cave under the weight of dreary doom and gloom opinion day after day. To paraphrase Chris Martenson, we know there is a definite outcome to this 40 year fiat money experiment, and it will be the same as has occurred throughout human history. It is simply how we deal with this outcome that matters most.

All hail physical gold and silver!

Kirsty Hogg

Founder of Why Buy Gold? (and Silver!).

The CME Margins Advisory: Manic Monday or Business As Usual?

On November 4th, the CME put out short and obscure margin advisory stating it is raising rates to ensure adequate collateral coverage, apparently to back futures trades to ease the bulk transfer of accounts held by MF Global Holdings customers.


I wanted to discuss the panic that ensued after Zerohedge sounded the alarm Friday, Nov. 4th, about the imminent margin calls predicted for Monday morning and its overall effect on the silver market.  Here's an excerpt from the ZH article in reference to the implications of the fallout of the announcement: “Which means that by close of business Monday, millions of options and futures holders will be forced to deposit billions in additional capital to the CME just so they are not found to be margin deficient, and thus receive a margin call. Naturally, since it is very unlikely that this incremental amount of liquidity can be easily procured in one business day, we anticipate the issuance of hundreds of thousands of margin calls Monday, followed by forced liquidations of margin accounts across America… and the world.”

This message is spreading like wildfire on the social networking sites prompting youtubers to make videos appealing to people to dump their silver contracts first thing Monday morning. Check out this one I stumbled across on Youtube.  It is a very compelling message.... It makes me want to get out of paper...Oh yeah, I already did that early 2008!


Here's Kid Dynamite's take on the announcement.  He writes “... the initial margin is almost always larger than the maintenance margin (initial margin is how much collateral you have to post when you buy the contract. Maintenance margin is lower because otherwise you’d have to replenish your margin every time the contract falls in value – instead you only have to do it when you reach certain “maintenance” thresholds).

So the initial/maintenance ratios were previously greater than 1.0. They are being LOWERED to 1.0. There are two ways for this to happen, obviously: 1) Raise maintenance margin requirements or 2) lower initial margin requirements. If the CME was hiking maintenance margins across the board, it seems that they could have more accurately used the term: “maintenance/initial” ratio to describe the change.”


In response to the on-line reaction, Saturday, Nov 5th, there was a press release from CME to apologize and clarify the previous advisory. "Nov. 5, 2011 -- /PRNewswire/ -- CME Group today is clarifying its notice to clearing firms regarding margins. In light of the issues customers transferring out of MF Global are facing, while still maintaining appropriate risk management protections for the market, CME Clearing is setting the "initial" margin upcharge to zero. This upcharge is normally applied to customer accounts when they are receiving a margin call. The intention and effect of these changes are to decrease the size of any margin calls resulting from the bulk transfer of MF Global customers to new clearing members not to increase them.

This is a short term accommodation to maintain market integrity and provide temporary relief to customers whose accounts have been disrupted by this event. We apologize for any confusion our initial advisory may have created."


The lack of clarity and professionalism in the initial announcement has the CME’s reputation in question.  And in this instance, many people are accusing the CME Group of changing the rules to service their own position.


This is what whistle blower Andrew McGuire had to say about this subject to King World News today “Now it’s obvious that a self regulated organization like the CME has its own clients’ interests at heart and not the interests of the public. So I’m absolutely incensed that any dispersions have been put upon Gensler for any failure to discover the MF Global problem when they (the CME) were actively blocking his request for extra staff. The CFTC has been facing an incredible headwind from the CME and their members to stop any form of progress on the Dodd Frank Act. This is yet another example of the power of the banking cartel and their constant abuse of power.”


Here is another less benign view from an editorial by Bix Weir (Bix is rather radical but I tend to agree with his overall message): "You know what that will most likely mean for silver…ANOTHER MASSIVE SILVER SLAM! The ONLY institutions that can make these kinds of margin deposits without selling off assets are the big banks. VOILA…massive long silver liquidations. On a brighter note, it is likely the LAST silver slam we will have to ride out…EVER! This is the END GAME of 40 years of computer price manipulation. Expect it to get a little crazy”.

I got out of paper early 2008, thanks to the warnings by the likes of Philip Judge, Franklin Sanders, and Peter Schiff et al. I sleep much better now that my involvement in market is to preserve my wealth in inflation proof assets and serendipitously capitalizing on the initial and massive break out they will both make in the coming months/years.  For the people who remain long in physical gold and silver, these are very interesting and exciting times and I smell another potential buying opportunity beginning next week.


I am extremely curious to find out what happens in the market on Monday (Nov. 7th, 2011). Will there be massive liquidation? Or will the market only have small sells offs and basically remain unchanged? I guess I will put an addendum to this entry as it unfolds.


Best to you.
As you know I am not a financial advisor in this jurisdiction or any other. As well, I am not a speculative investor and remain a proponent of physical bullion ownership only; no paper.

EDIT (Nov. 8, 2011):

What an anti-climax! It looks like CME back-pedaled after the amount of complaints received from their initial advisory last Thursday and therefore it was business as usual on Monday.
A couple of things of interest from today:
1) Now that the dust has settled, some may be overjoyed to find out that “CME Is Legally Liable For MF Global Customer Losses”, says Avery Goodman at Seeking Alpha.
 2) A Market Nugget from Debbie Carlson of Kitco.
Market Nuggets: CME Group: Verifying All MF Global Account Transfers Are Accurate, Complete; Collateral In Trustee's Control
08 November 2011, 1:50 p.m.
By Kitco News
(Kitco News) - The CME Group says in a letter to members dated Tuesday that it is working to verify that all account transfers are accurate and complete regarding MF Global’s customer accounts. "When the verification process is completed and we confirm that all monies and positions have been transferred correctly, customers will be given access to cash in their accounts," says the exchange, which had frozen the access to that cash. However, the exchange says all property is subject to the control of the trustee, which is SIPC. "In the ordinary course, he will reduce all assets, including securities, letters of credit, warehouse receipts and other delivery certificates to cash, and make a pro-rata distribution among the commodity customers based on their relative account balances," the exchange says. Customers of MF Global have complained that regulators are treating them as similar to unsecured creditors, rather than clients whose funds were to be segregated from the firm’s money. Their concern is that they will receive just a portion of the cash they had in their accounts.
Debbie Carlson of Kitco News; dcarlson@kitco.com

By Kirsty Hogg

http://www.fundsingold.com/
Goldvestments Copyright © 2011