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David Morgan: Silver in the next Decade [Transcript: 2012 Virtual Silver Conference]

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January 31, 2012 - 4:29pm

The following is the transcript of David Morgan‘s presentation at today’s Virtual Silver Investment Conference.To listen to the audio and view the slides associated with the presentation, please attend the conference here.

 

 

And I'm doing a presentation for SilverSeek on Silver in the Next Decade, brought to you by myself, and obviously I'm the founder of Silver-Investor.com, lots of good information for free.But silver price has been very interesting over the last several years.In the last decade we've had a nice move up in the silver market.This chart is not current as of the date of this presentation, but it clearly gives the idea that we have gone mostly north, been as high as $48.00 in the recent – last year or so, down in about $34.00 range as we're doing this at the end of January 2012.

 

Website, this is just a snapshot, so I changed the video over here.It's pretty static.We have a free mailing list you can get to.I suggest anyone that isn't on it try it.It's free.It's a double opt-in.We do send something out every weekend for you, the silver investor, or people that are interested in what I'm doing as far as speaking engagements, workshops, that type of thing.We also from time to time send out good deals on silver eagles or 100 ounce bars or silver rounds or that type of thing as they pop across our desk.

 

Silver demand is increasing, both industry and as an investment.That's a statement of fact.People can argue about what's happening in a recessionary environment.Certainly a recession does curtail some silver as industry pulls back, but right now where we're at in this recessionary environment, and maybe even moving toward a depression, the industrial demand is quite strong, believe it or not, and I'm going to go through that here in the following slides.

 

Medical uses keep increasing.Silver is a natural biocide.You've seen it in all kinds of applications.You can go to the Silver Institute's website, SilverInstitute.org, I think it's TheSilverInstitute.org, and you can study that site and see all kinds of applications, and there's more developed for silver all the time.It probably has more applications or new patents for different applications using silver than any other metal.The only other commodity that I know of that has far more than silver does would be the oil market.

 

You can see, again, anything electrical or electronic uses silver.The more advanced technology a society has, the more silver is used.So a society that has a lot of cell phones, iPods, iPads, that type of thing, is going to have a lot more silver per capita use than a society that doesn't have any of those things.And of course, China is coming into that now, and of course what that means is there's going to be a lot of demand for silver, even though you're not thinking, when it says investment demand, it's industrial demand, but it's used in personal electronics.

 

Solar power is a huge factor in what's going on in the industry going forward.These are mirrors to focus the sun's rays on a collector and then run a standard turbine.Very easy technology, but it's utilizing the sun's power, and of course, these mirrors are very heavily using silver, because it reflects light better than any other element.

 

Gold or silver, I often get the question, you know, what do I buy?Gold or silver?And the answer is really yes.And the answer I think is really you should buy both.In fact, the older you are, probably the better you'd be having gold in your portfolio, or more weighted to gold, because it is less volatile.But this chart from 1990 up through 2011, you can see they tracked each other very, very much.Silver is more volatile than gold, but the tracking is very, very close.At this time, it's about an 84 percent correlation.If you do, excuse me, a correlation study from, excuse me, 1990 till now, it's dropped off.It's probably like 79 percent.There's nothing that tracks gold 100 percent except gold.

 

The point I'm making is that regardless of all the rhetoric, all that – all that you hear about, you know, only gold is going to do good, or there's only – gold is the only asset class and that type of thing, well, that's an opinion.The fact is right in front of you.They basically track each other.Silver has actually outperformed gold from the start of the bull market, this bull market, meaning 2003, when silver bottomed, till now.It's actually gone up more percentage-wise then gold has.Not to say it should be silver only.It's much too volatile.If you're older, you should favor gold; younger, you can favor silver.In all cases, I believe you should own both.

 

Supply and demand.Here's a chart going through 2010.The green is supply, red is demand.The gap between here is called the deficit.Deficit's not a shortage.The deficit ate up, you can say, the above ground stockpile from – it was really 1990 when it started, through about 2007.And that used about 1.5 billion ounces of fine silver.From that time till now, we've actually had a surplus according to GFMS, and CPM confirms that as well.

 

What that means is mine production and scrap is greater than total demand from 2007 onward.And that probably is true, but there's still a huge demand for silver.If it worries you that silver has finally overcome the deficit situation and you don't think it's a good investment, you'd have to apply that same logic to the gold market.Silver is – has about 6 months' supply above ground currently, whereas gold has about a 40-year supply above ground.So you have to think in terms of silver being a monetary asset as well as an industrial asset, and if you think of it in those terms, then buying it for all the properties that gold has and the additional kicker that it is needed for industry, regardless of good times, bad times, I think you can see that silver actually, you know, can do quite well, and it certainly has proven to do so so far.

 

Mining – silver mining increase to 2020.This is a study that I've done.First I started with what the global silver production looks like, and you can see it was flat for many, many years, up to about 1980 timeframe.And from then till now it's increased.There was a dip in here, as you can see.There was a big sell-off in – excuse me.There was a big decrease in mind activity due to the fact that silver sold down to $5.00 for so long and there wasn't really much going on.Then the commodity boom started roughly in the year 2000.It's been up, up, and away ever since.

 

So in this ten-year study, what I wanted to do was project out, you know, is silver going to be a good investment over the next decade, or is it not?So the first thing I had to do is I had to look at mining supply, and so I did.I assumed that curve that I just showed you where I did the math on it, and it's basically increasing about 2 to 3 percent per year, which is roughly 30 million ounces.It's compounding, so further years out it'd be more than 30 million.It'd be 32 and then 35, and you get the picture.

 

But overall, you would need 30 million ounces a year to keep up.And by 2020, that would be a total increase of about 150 million ounces using the lower number.So you'd need 800 million ounces, during the 650 currently, and I did this actually last year, where one of the studies says we're mining about 600 – excuse me, 750 million ounces, so you can bump that up.You can bump this number as well.

 

The point is that industrial demand is exceeding what that two percent to three percent compounding is able to produce.If we're able to continue on that very steep curve, so let me move back there for a moment, that's a pretty steep curve.And we're just assuming that we can continue, continue, continue for the next ten years.I doubt that's really the case, but I made that assumption.

 

Even making that assumption, the industrial demand alone is going to exceed that kind of growth rate in mining.The reason being is that you have several demands that are coming in strongly: food hygiene, and water purification.Food hygiene is cutting, packaging, that type of thing, with food, and uses nano-silver particles in the plastics for preservation and biocide protection, germ protection.Also, all the meat cutters and that type of thing are using silver-tipped blades.Nothing magic about that.Also being used as water purification.

 

But the big thing is the solar panels, this orange – the orange part of these – of the chart here is the solar industry going from 2010 all the way through 2020.And I'll get into that a little bit more in a different slide.It'll be a little easier to see.This is just the solar applications.The RFID tags are in red.I'm going to ignore that.

 

But you can see from 2010 rapid increase, rapid increase, rapid increase, up to about 2014.It still increases, but not nearly as rapidly.But forecasts by Jessica Cross, the VM Group in Great Britain, says that by 2020, so back here, or even these, 130 million ounces per year for silver.And that may be true and it may not be true.But even in 2013, '14, we're looking at 100 million ounces a year.

 

So far, this forecast by her is quite accurate.The amount of solar panels that have gone on in China have doubled every year for the last couple of years.So the trend is in place.I think it is established.I think it's going to continue.And I do think this is probably going to turn out to be a factual look.

 

So I looked at the industrial demand going out to 2020.What I really said was that, okay, there's going to be more iPods and iPhones and electronics and flat screen TVs, and probably some more electronic goodies we don't even know about now that are going to be becoming available to the consumer over the next decade, but I'm going to discount that.I'm going to assume no increase in consumer electronics.I'm going to assume no increase in electrical power distribution, which really the most efficient way to do it is with – using silver.And no maglev trains, no increase in textile use or any of the things that we're using it – and those – all these are increasing, but I'm not even going to count them.

 

All I'm going to count is the things that you would need in a very bad recessionary environment, which would be food, water, and energy.So I kept the water and food part of it.I didn't even use the RFID tags.And I said we'd require 100 million more by 2020, but the solar applications alone, as I showed you, was 130, so something's got to give.In other words, if you're going to need 130 million ounces just for solar, and 100 million, excuse me, for the food and water, that's 230 total, and if your mining increase and recycling isn't going to meet that demand, then something's going to give, and what gives of course is the price.

 

Investment demand, something that isn't talked about in most of these studies.Jessica didn't talk about it at all, and that's fine.I will.This is the ETFs and holding companies.I've grouped them all as transparent silver holdings.This is done by Nick Laird, Sharelynx down in Australia.Nick's been a great friend for many, many years, does great work.You might check out his site and take out a subscription.There's a lot of charts in that site that you can use or look at.

 

So I'm not going to read these all to you.The point is that we had the COMEX and Central Fund of Canada, basically, up until the advent of the SLV.Once the SLV came into being, we got this big jump up in investment demand for silver or the amount of silver held for investment, I should say.That was 130 million ounces at the time when it started, and it's just been ever-increasing ever since.

 

And this chart goes through January 19th, 2011, so that as of almost exactly one year ago.So let's fast forward over the last year.Different scale, same chart, but on a different scale.So don't let that throw you off.Basically here's the COMEX and Central Fund of Canada.Here's the SLV going straight up.But as that last chart showed at 750, actually had some commercial borrowers come out of the market and utilize – or you can make up your own mind where it went.It might have gone to industry, might have gone into private hands, might have gone into the coining program.We really don't know.

 

Anyway, it came off, and now it's back up to 750.I think this is important to, you know, be transparent to everybody.You can see it.So really it's been flat for about a year.I mean, it peaked here.It came down.It came up.So if you do – you know, where it is, it's flat across here, and of course, obviously it sold off in this range.So we aren't making a new high after a year.

 

Does that concern me?Not particularly, but it is something I wanted to point out.I really didn't know this until I went and digged into the data and started looking at it, and thought, aha, that's a bit interesting.This is just a breakdown of all, and you can read it as well as I can.

 

But consider the fact that – oh, let's just go through a few of these.You think Sprott's done buying silver?I doubt it.They just bought 9 million ounces more about a week ago.Do you think Zurich Continental Bank is done buying silver?I doubt it.You think Bullion Management Group out of Canada is done?You think Central Fund is done?How about the BullionVault?Think they're done buying silver?What about Gold Money?

 

I think all of these here at the bottom, Julius Baer probably not, the SLV I discount.People who have read my work, especially my private work, know my thoughts on the SLV.It certainly has the lion's share purportedly, 300 million ounces of fine silver.Yes, probably has access to that much silver.It may be hypothecated once or twice, thrice, or ten times.We really don't know.

 

The prospectus certainly doesn't tell you that it's one-off, that it's standing independently for one use only, only standing as an investment for SLV.In fact, they don't even use the word silver bullion.They have the word silver.So if you read the prospectus, you might get a better understanding of what an investment, quote/unquote, in the SLV really entails.Regardless, it's there, it's the biggest one, it's very liquid.

 

Investment demand, from the beginning of 2006 April to 2010, there was a 14 percent compounded growth rate.Now I just showed you a moment ago that the commercial bar inventory for investment has basically been flat for a year, so I don't want to make a bad assumption here.But what I – and I did forecast way back when I did this basic slide presentation well over a year ago, I did it in March of 2010 and we're almost to – we're not quite to March 2012, I forecast way back then that it would be slower growth, but adding.And, you know, we're not through all of 2012 yet, and I think we are adding.

 

Anyway, what I assumed was 100 million ounces of investment demand per year over the next decade.I thought that was conservative.My increase, as I said earlier in a previous slide, I suggested that we could possibly get to 30 to 40 million ounces per year.I doubt it, but I made that assumption, but even if we did that, something's still got to give, because there is going to be a lot more demand than available silver.So what that means is the price will be forced higher.

 

The amount of silver coming into the market to influence the price, primary silver producers, of course, are very much geared to the price of silver, so they move up and down the silver price.Of course, they're hedging, and that's going to cut into their ability.There's crossover companies like Hecla, which is a gold or silver company, depending on the price of gold and silver.

 

The conclusion of all this is that something has to give, and that is that investment demand, especially on the coin side, and I haven't addressed that, but the last few years for the silver eagle program alone have put out extremely large numbers of increasing investment demand.In fact, even in January of 2012, as we're doing this video, we have a lot of demand for silver.That happens pretty much every year, because there's a lot of collectors out there that like to have Mint boxes straight from the Mint, right, coming off the first run, and they put them away.

 

But regardless of that, the overall demand throughout the year has been very, very strong.So that side of the equation continues to be robust.And the commercial bar inventory for investment demand, as I showed you, looks like it's flattened out, but I have a little doubt, not chart so much, but as I said, Sprott just bought 9 million more ounces.We're not sure what's really going on with the SLV.We really can't do more than look at their website to see what their inventory status is.You are allowed to sell short on there.So there's a lot of stuff in there that's kind of got a question mark behind it.

 

Mining increase, 200 million increase with – by 2020.Of course, we're looking out eight years from now.That would provide the deficit, again, of 130 million ounces, based on all of these assumptions, that food, water, and energy are going to continue to increase on the projects that Jessica Croft's made.Remember, I feel they're conservative.I threw out increasing consumer electronics, electrical demand increase, using it – superconductivity, maglev trains, any more nanotechnology that comes along, or anything like that.I actually believe that all those are going to take place.So I think it's going to be better than that, but I'm trying to be conservative here.

 

So will we go back into a silver deficit before 2020?And the answer is I believe strongly that we will.I believe it'll probably happen around 2014 to 2015.We do still have some very strong increases in mining supply over the next couple of years, 2012, 2013.I don't deny that.I try to work with the facts as much as possible.

 

However, there are a lot of other factors to consider that I'm not putting into this presentation that could affect the silver price dramatically, and primarily that has to do with the – with oil and energy and open pit mining and grade.But that's outside the scope of this lecture.

 

I'm going to press on.Silver certainly has more favorable dynamics than gold in my view, and this is understood by Warren Buffet, George Soros, Bill Gates.Buffet of course has sold his silver sources away from Apex Mining quite some time ago, and Bill Gates sold his very large position in Pan American some time ago as well.

 

So where are we now?On a consumer price-adjusted basis, we've still got a long ways to go in the silver market.If we go back to 1998 constant dollars and look at a history of silver prices, it peaked around the 1500s, about $1,500.00 an ounce.I'm forecasting $100.00 at least, which is 1/15th of the inflation-adjusted high, so certainly that would be conservative relative to what it did in the 13th and 15th centuries.Even here in this whole hundreds of years' period here, we're looking at probably a little under $200.00.Even here we're looking at $80.00 silver.So I certainly think we have a long ways to go, at least from a historical perspective.

 

And then the bubble charts.This is one that I put together when I first gave this lecture, which was some time ago, when gold had broken through the $1,000.00 level, and all you could hear on the mainstream media was, "It's in a bubble.It's in a bubble.It's in a bubble." And I got pretty fed up with it, and so did Nick Laird, again, of Sharelynx.com.He put this together for everyone.I grabbed it because I loved it.Gold was only up from the bottom about 500 percent, about fivefold.And yet you look at the tulip bulb mania, was up about 6,000 percent.So gold would have to go up tenfold from here, actually more like 12-fold, from $1,000.00.So it'd have to get to like $12,000.00 to get in the tulip bubble mania type of range.

 

Cisco Systems up 7,200 percent.How about something real stable, like Fannie Mae, about 12,000 percent.Amazon, 7,000 percent.I think you're getting the point.I mean, these are thousands of percent, and gold was up 500 percent, silver was up about 900 at that time.And yet this is where they stack up relative to something – a real good one here.How about Lehman Brothers, huh, 1,300 percent.So silver would – gold would have to go about triple from there, $1,000.00, so $3,000.00, just to make it to what Lehman did, and we all know what happened to them.

 

So I think you made – I made the point here.It's pretty simple, that these assets, these best monies in the world, gold and silver, aren't anything close to a real bubble.

 

Some of the books I'm in, this is the book I wrote on Get the Skinny on Silver investing.You get it on Amazon.You can get it off the web.You can actually get an e-version if you want.This is the German version of that book, and this is the Investing Rulebook that I didn't write.I'm just in that book, writing "The Ten Rules of Silver Investing," which you can get for free off of the website.All you need to do is join our free email list, and our autoresponder will send you one of the ten rules – one rule every three or four days.We've got it set up something like that, and you can digest those.

 

Even if you're a seasoned investor, it doesn't hurt to look over those again.There's some pretty simple, basic, commonsense things that'll help you from making a mistake.In fact, I'm going to digress for a moment.I had an oriental gentleman call me several years ago, he said he just wished he had read that first because he was talked into buying some coins that were more valuable than bullion coins, and they weren't.And this happens in the industry.

 

So he found out later he'd been ripped off.Actually, it was his parents.He invested money for his parents in silver.It was very early on the market.The market was about $7.00 an ounce at the time.And there's nothing you can really do, other than the bull market will save you in those kind of cases, and it did.He certainly could have made more money if he didn't get ripped off buying these semi-numismatic coins that really weren't.But I told him to sell them back to the dealer after he could break even and get into bullion or just bullion coins.

 

Anyway, moving on, that's a look at the report.That's how we make our bread and butter here.It's a membership only site.I have three levels, a beginner, intermediate, and advanced.The intermediate level, I show you the trades I'm putting on.I don't trade a lot.If you're looking for a day trading service, forget it.You're not going to get that from me.That's not what I'm about.If you're looking for position trading, yes, I do some, and I'll show you what I'm doing.

 

Also, all the videos come to those members, plus at that level I think you can email me a question directly.So there's a little bit of benefit by paying more money.You get the videos when we do some of the shows that we film, and get updates on the companies and other interesting things, some of the mine visits and that type of thing.

 

And then there's the very advanced service for like fund manager types.These are very, very serious people.That's $1,000.00 a year.I don't recommend it unless you're extremely serious about this – about this sector, and investing in this sector.

 

This is something that I'm affiliated with.It's called the Silver Saver.You can find out about it at Silver123.net.That's Silver123.net.This is a good way for people that want a dollar cost average.I really like the program.It takes about ten minutes to get set up.Basically, you get it through your checking account and you just do a debit every month for like $100.00 or $200.00, or if you want, $500.00 or $1,000.00.I mean, it's the individual's choice, but I think the minimum is $100.00 a month.

 

And you just tell them, "I want to buy silver on the first of the month, or the third of the month," or pick a number, the fifteenth of the month, and they'll get you on the closest business day to the date you choose.They'll debit your checking account $100.00 and you'll buy silver or gold or both.You can set it up however you want.Silver comes right to your door on a monthly basis, or if you wish, you can store it there at – on depository.I've been through it, its safe, one of the ones I would recommend.Or both.I actually let it accumulate for a while and then I bring it home.So again, Silver123.net.

 

The nice thing about it is if you get involved in this program, you yourself could become an affiliate, and if you have any kind of a friendship base or you're on one of these social networks or you know how to market on the internet, you can actually start making an extra couple hundred bucks a month pretty easily.So you could actually be in a situation where with a little of effort you could actually cover your cost.For example, let's say you decided to debit your checking account $100.00 a month, and after a little bit of effort you were getting $100.00 a month just from your affiliation with Silver Saver and getting other people in the program.That would basically cover all your costs by doing it.

 

It is not, repeat, is not, multi-level marketing.It's based solely on your efforts.There's no bottom line.There's no people under you or any of that stuff that's in the multi-level marketing sphere.This is simply one affiliate, you, and what your efforts do, and that's how it's set up.

 

It doesn't pay much, but it pays something, and again, if you're internet-based and so inclined – that's not something I'm really trying to sell you.I'm just making you aware of it.I would get some small portion of what you bought in silver if you bought silver or gold, either one.But the amount of markup on their product is basically in line with everybody else, so it's not like they've got a huge fee to do that.Some of these MLM programs do.

 

This one basically is right in line with everybody else.Lots of convenience.It's a one-time setup and then you're on your way to dollar cost average in the market.Enough said about that.,

 

Hey, have any questions, just visit the website.We have a contact us button.You can write us at Support@Silver-Investor.com. Hopefully this is clear.

 

We have, as far as I'm concerned, several more years left in a very bullish environment for the metals, particularly silver market.We have global uncertainty increasing almost daily, but there are periods in history where this has happened again and again and again.It's nothing really new.And people are very, very creative and adapt well, and they know how to survive the worst of circumstances.So I'm certainly not look for all gloom and doom.I'm looking to help you to better your lives by having the precious metals as part of your portfolio, and everyone get out there and start thinking real hard on how we can make this – the whole planet a better place and get on with life.

 

So thank you for your attendance.Again, if you have any questions, you can go to the website.You can email us at Support@Silver-Investor.com.Thank you.

 

[End of Audio]

 

To listen to the audio and view the slides associated with the presentation, please attend the conference here.

 

David Morgan and The Morgan Report

Seduced by silver at the tender age of 11, David Morgan started investing in the stock market while still a teenager. 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 ahead and reasons for investing in precious metals.

David considers himself a big-picture macroeconomist whose main job as education—educating people about honest money and the benefits of a sound financial system—and his second job as teaching people to be patient and have conviction in their investment holdings. A dynamic, much-in-demand speaker all over the globe, David’s educational mission also makes him a prolific author having penned "Get the Skinny on Silver Investing" available as an e-book or through Amazon.com. 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.

Additionally, he provides the public a tremendous amount of information by radio and writes often in the public domain. You are encouraged to sign up for his free publication which starts you off with the Ten Rules of Silver Investing where he was published almost a decade ago after being recognized as one of the top authorities in the arena of Silver Investing.

The Morgan Report is devoted to everyone interested in Money, Metals, and Mining. You have come to the right website for the most comprehensive collection of information on the silver market.

The report looks at the silver and gold markets each month and also explores the commodity markets, the general stock market and is devoted to help you make money by investing in this exciting sector

Many of Mr. Morgan's early readers have gone on to start their own publications about silver.

They can view videos on his youtube channel: http://www.youtube.com/user/silverguru

 

Get updated on the latest silver market news and connect with expert opinions on silver. Visit and interact with top performing publicly traded silver production and exploration companies at their virtual booths in a rich virtual environment, from the comfort of your home or office.

Attendance to this online conference is FREE via online registration.


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About David Morgan / Commentary Author

Seduced by silver at the tender age of 11, David Morgan started investing in the stock market while still a teenager. A precious metals aficionado armed with degrees in finance and economics as well as engineering, he created Silver-Investor.com

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