Ten Rules of Silver Investing

The following is a recent interview l did with Ellis Martin on the first rule of silver investing. As you will read, we got off topic but did cover a great deal of current concerns of investors.

Ellis Martin: Many years ago you were asked to write the ten rules of silver investing. Let’s start with that today. Rule Number One, when all else fails, there is silver . . . ?

David Morgan: I was asked to write the ten rules of silver investing for a book titled, Investing Rules. Rule Number One states, “When all else fails, there’s silver.” No one likes to be a prophet of doom, but the simple truth is that silver is the world’s money of last resort. Should a severe economic collapse occur, leaving paper assets worthless, silver would be the primary currency for purchases of goods and services (gold will be a store of major wealth but would be priced too high for day-to-day use). Thus every investor should own some physical silver and store a portion of it where it’s accessible in an emergency.

I wrote that, and it’s as valid today as it was when I wrote it. I haven’t reviewed these in a very long time. If I had to assert one rule of silver investing it would be to buy physical silver. The truth of the matter is, in the absolute worst-case conditions you would want some silver. As I just said, the reason silver is important in a currency crisis is that you’re not going to buy gas with a one- or half-ounce gold coin—it’s going to have too much value.

Silver has been money more often, for longer periods of time, in more places in the world than gold has. And that is because it’s the merchant-class metal, because most of the time in your daily transactions, what are you buying? You’re not buying your car or your house; the car is perhaps a purchase you make every five years, the house sometimes once in a generation. But it’s the silver that passes hands on a daily basis.

Certainly I am a gold advocate. Indeed, as I say in this Number One rule, it’s a way to preserve large amounts of wealth in a very small space and that’s great and all investors should recognize that fact. But if you’re really thinking outside the envelope, silver is absolutely the place you should be for part of your money.

Mr. Martin: We’re not just talking about obtaining physical silver for investment purposes. You’re saying it is also the best metal currency to use in the case of complete economic collapse, in order to obtain either a loaf of bread or a gallon of gas?

Mr. Morgan: Right; it’s more liquid. It’s simple because, you know, $0.25 in today’s money is worth about 14 times. It’s worth $2.50, $3.00, maybe three and a half bucks. So a quarter in silver would probably buy you a couple of loaves of bread or a gallon of gas now in today’s economy. But I want to emphasize, too, that this is absolutely the worst-case scenario. Do I see the worst-case scenario taking place? I don’t think so.

But that doesn’t mean you shouldn’t buy silver. I mean there are lots of other reasons to buy silver. If you go the other extreme—the best-case scenario—the world gets turned around and we start having prosperity everywhere and it’s the best global economy that’s ever happened in the history of mankind. Okay, so let’s take that extreme. In that case, silver would still make an absolutely excellent investment. Most likely far superior to gold from the aspect that there would be such a boom in industry and such a boom in commerce that there would be so much more silver used by the average person because everyone would have an iPod or two, a flat-screen TV, a couple of computers, another car or a washing machine, more electronic devices. So there would be this huge boom to the silver market. Thus, silver is as much a good-time investment as it is during uncertain economic times.

Mr. Martin: You still have these massive economies like China and India gearing up outside of the U.S., although not quite as much as previously. We could take a look at the last 16 months or so and say that this is just a huge contraction before this massive mega-bubble hits.

Mr. Morgan: This idea of destruction (collapse) is a normal part of life. I wanted to comment on that. Oftentimes, things have to die for other things to grow. An example might be the history of the radio for example. We still have radios today, but the tube style radio had to give way to the transistor radio, and the eight-track tape gave way to the cassette tape, which gave way to the CD. Industries die out and it’s not like the end of the world. That is just part of the normal business cycle.

Now what we’re talking about is much grander-scale—the dying of an economic system that no longer is working properly because basically they’ve built it on a lie. The lie is that you can get something for nothing, that you can print wealth. It can’t be done. So that is where we are on a global scale, particularly from the United States’ dollar perspective. This is a shift that takes place every few centuries, and I believe very strongly that’s where we are right now.

In order to rebuild a system that’s built on truth and honesty and integrity that can get us going really in the direction that we need to go, we need to see the current system reach its ultimate conclusion. I think the global economy is basically tied together, but that doesn’t mean there aren’t going to be great inventions during a downturn. People find better ways of doing things, greater efficiencies, that kind of thing . . . so it’s not an all-or-nothing situation.

I just want to get the impression across that the cycle of life is one thing that might be going down while others are going up, so to speak. It is not all negativity. Sometimes something dying is a good thing, from the aspect that something better (bigger, smaller, better, stronger, etc.) comes along to replace it. In fact, that’s kind of the American enterprise system the way it used to be. Unfortunately, it’s been so corrupted that we are having these problems we are experiencing.

Mr. Martin: David, you know I’m a subscriber to your Web site, and I was on there this morning. I noticed that around 2,000 jobs were leaving the Midwest and heading down to Mexico. Refrigerators from that company aren’t NOT going to be built; they just won’t be built here in the U.S. anymore.

Mr. Morgan: I’ve given the analogy that Great Britain, using the pound sterling, was once the superpower of the world, and they overspent just like America has today. The power shifted from Great Britain to America in the last century. That was a big shift economically, and now we’re seeing it shift again—out of America into China and India for the most part. The problem is that since it’s all based on the U.S. dollar primarily, then the dollar is the problem. I believe the U.S. will try to print itself out of this mess, and that will affect everybody, as U.S. dollars become worth less and less and less until they become worthless. And that affects business activity everywhere. I believe that could happen, but in the meantime, things continue on, and it is just that a shift takes place. The major productive capacity that was the U.S. worldwide probably up till 1965 or so is moving east.

Mr. Morgan: I actually started it as a Web page and built the initial site myself. I don’t have the ability or don’t have the time to do that now. It was a research site I established for myself when I was doing some consulting and trading. After a couple of years I renamed it silver-investor.com. One thing led to the next—it started getting traffic and it grew into a commercial site.

There are really two newsletters if you want to call them that. One is a free newsletter you can receive by e-mail just by signing up for free on the Web site. This free newsletter provides updates on silver, where I’m speaking, and my answer to a question of the week. This is useful because many people ask me questions on the market, and part of my mission is to educate people. I try to pick one and answer that for everyone.

Then there’s The Morgan Report, which is for your serious, sophisticated investor. It really isn’t a newsletter for someone who is a beginning investor. I’m sure I’ve got a few beginners, but most members are extremely intelligent and very knowledgeable and experienced in the investment arena, and those are the type of people who pay for this type of work.

I’m always trying to bring more value to people, both for the free site and members portion. Charles Savoie has done great research for us. He’s in the archive section of the Web site. It’s a very in-depth site, as you know, and ranked well in the Google search engine.

Mr. Martin: So there’s the free Web site and there is the subscription part of the site. How do you access that?

Mr. Morgan: To access the members-only portion of the site, you put your user name and your password in the gold strip at the top of the site. You can access your membership from anywhere in the world. I write The Morgan Report every month and that’s a guarantee, but I also write special reports with my staff. Using a select few top-notch writers, I do audios, videos, white papers, and mining company reports. You also have access to the Silver Institute’s work. There is a large amount of information; in fact once they become members, most people are pretty blown away with the quantity, especially at the low cost.

I am going to be changing the site slightly, though. So, I want to be upfront about this. I’m going to provide less information in the basic report because that’s what it is, a basic report. Some of the advanced information will be moved to the premium service, but in a transition period I will allow everyone to have full access for three months. Current subscribers will have a generous amount of time to determine whether they want to upgrade. I will gradually move some of the features that are more expensive to maintain, such as the videos (which are costly and time consuming), to the premium service. Ellis, thank you for this opportunity to speak with you again today.

Mr. Martin: Thank you, David, for this interview on the theopportunityshow.com. I’m Ellis Martin, executive producer. David Morgan of The Morgan Report is one of the most preeminent experts in silver, gold, and precious metals. He hosts a subscription-based Web site, The Morgan Report. David is also an author, having penned the book Get the Skinny on Silver Investing, available on amazon.com. He’s a teacher, lecturer, world traveler, and once again we are pleased to have him here on The Opportunity Show. David, thanks for joining us today.

Mr. Morgan has followed the silver market for more than thirty years. He wrote the book, Get the Skinny on Silver Investing. Much of his Web site, Silver-Investor.com, is devoted to education about the precious metals, it is both a free site and does have a members only section. To receive full access to The Morgan Report click the hyperlink.

This is a good forum that discusses gold & silver.

http://goldismoney.info/forums/

This website is a good source of information about the economy, gold and especially silver.

http://www.silverbearcafe.com/private/home.html

I’ve been to goldismoney .... I have some junk silver dollars but no silver dimes or quarters. According to this guy I should get dimes and quarters for an emergency monetary crisis

Gold is down today http://www.usagold.com/live.html as the US dollar slid to (gasp) $1.456 per Euro

Silver is very volatile and you can make (and lose) big money investing in it.

Here are some reasons silver might explode in price in the future.

http://www.silverbearcafe.com/private/04.09/roota.html

Junk silver or 90% silver American dimes and quarters will still be valuable even if the American dollar totally collapese which is a possibility or inevitable given reckless continual and increasing deficit spending.

There are other ways to invest in silver but I highly recommend any silver you do buy be the physical in your hands type.

The Hunt Brothers got screwed because Wall Street changed the rules on them. If they had bought physical in your hands silver they would have been laughing.

The Hunt brothers exposed a weakness of silver as an investment, it lacked a diversity of investors and its market could be cornered and manipulated by a few, much like diamonds are by de Beers.

While silver is a good investment option, with good long-term gains, it is still vulnerable to hits and speculation run-ups. You need a strong stomach for the sometimes roller-coaster ride.

Many of the common hits include dumping such as when Russia needs cash, or a new copper mine starts up as silver is a by-product, or digital cameras end the demand for camera film. Prices take a dive until other industrial use eats up the overstock and the price spikes back up again.

That is one of the long term attractions of silver, it is consumed by industry and that demand should always keep silver a good investment.

While silver is a good investment option, with good long-term gains, it is still vulnerable to hits and speculation run-ups. You need a strong stomach for the sometimes roller-coaster ride.

Or just “average in.” Buy some each month or quarter, and keep doing it. If the price falls, you buy more, if it rises very high, you stop buying and look back on your buys with pleasure.

Smarter people than I have always kept a good amount of silver coins in a cache just for the silver content (not collector value).........

These older coins are called junk silver. Typically sold in $100 face value bags. Also $500 and $1000 dollar face value bags. Look up junk silver on eBay.

Also on Craigs list I see junk silver coin buyers and a few sellers

The Hunt brothers tried to corner the market, but failed to appreciate the effect of 50 dollar silver on the hoards of silver in every household in the land. When you can take Aunt Tillie's tea service down from the attic and sell it at the local Holiday Inn for several hundred dollars,(Back when several hundred dollars would actually buy something worthwhile) then you begin to realize where all those hundreds of millions of ounces of silver have gone over the intervening years--they went into hiding, waiting to be enticed out by high prices.

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