Welcome to this week’s Market Wrap Podcast, I’m Mike Gleason.
Coming up David Morgan of The Morgan Report joins me to breakdown the madness in the markets, tells us why he believes this is 2008 part 2 in the financial markets and also addresses the major frustration over silver and when he thinks it will start acting like a safe haven and start to play catch-up versus gold. So, don’t miss a tremendous interview with the market insider who has decades worth of market experience, the man they call the Silver Guru – David Morgan – coming up after this week’s market update.
As cancellations, emergency restrictions, and panic selling of assets spreads, the global economy is at risk of grinding to a halt. We are already in the throes of the worst market mayhem since 2008.
If the news on the coronavirus front gets any worse from here, we will be facing a once in a century financial crisis – and a possible Great Depression ahead.
That said, there are at least some reasons to be hopeful. The number of coronavirus cases in China and Korea appears to have plateaued. Warmer weather in the weeks ahead and more aggressive containment strategies may begin to inhibit the spread of the deadly infection in the U.S. and Europe.
But public officials so far are failing to inspire confidence. German Chancellor Angela Merkel shocked the markets when she said up to 70% of the German population could contract coronavirus if more isn’t done to stop its spread.
And the stock market tanked immediately after President Donald Trump spoke to the nation Wednesday evening.
Meanwhile, the response from central bankers and the Plunge Protection Team has so far been woefully ineffective. The Fed’s emergency rate cut last week and its $500 billion expansion of bond purchases announced Thursday have done little to stem trillions of dollars in market liquidations as circuit breakers on stock exchanges get blown out.
The tools central bankers have at their disposal aren’t suited to the problem at hand.
The Fed can address liquidity and solvency problems in the bond market and banking system. But it can’t get consumers, workers, and businesses in the real economy to return to their normal activities. Government officials wouldn’t allow a return to normalcy at this time, anyway.
President Trump is contemplating invoking temporary new emergency powers. And globalists are eyeing permanent new power grabs to restrict our personal travel and financial freedoms.
The World Health Organization is exploiting the coronavirus crisis as an opportunity to promote cashless technology. The WHO says paper cash may be spreading the virus and recommends people use digital payments instead.
One of the virtues of silver-based money, by the way, is silver’s antimicrobial properties. Viruses and bacteria that thrive on the surface of paper Federal Reserve notes are naturally repelled by silver coins.
But the threat of the Wuhan virus spreading through common currency is likely to accelerate the war on cash. That’s what trends forecaster and frequent Money Metals Podcast guest Gerald Celente warned about in a video presentation earlier this week.
Gerald Celente: No paper money. You’re going to spread them germs. We got digital dough for you. You think things are bad and the market’s going way down, economy’s crashing? Martial law, digital currency, and for me, I don’t give financial advice. My gold forecasts, match them, anybody, anywhere in the world. You said the gold bull run began in June of 2019, June 6th, and that gold bull is going to keep on running, as I see it. But you know. Think for yourself.
Although gold prices got pulled down on Thursday in the brutal wave of selling that hit Wall Street, the money metal this week is once again holding up much better than the stock market, commodities, and cryptocurrencies – believe it or not.
As the Dow Jones plunged 10% yesterday alone – its worst day since the 1987 crash – Bitcoin crashed 26%. Gold suffered only a 3% drop, although it dropping further here today.
For the week, gold prices are down 9% to trade at $1,525 per ounce. Meanwhile, silver is getting obliterating and shows a 15.5% weekly loss to come in at $14.75 an ounce as of this Friday afternoon recording.
Turning to the PGMs, platinum, is taking a similar pounding as silver, and is off by 15.8% this week to trade at $766. And finally, the once high-flying palladium market is crash landing – down 31% on the week – to bring spot prices to $1,790.
Another week like this in asset markets, and a true deflationary spiral could take hold, with a wave of corporate defaults and bankruptcies coming seemingly out of nowhere.
By this time next week, it’s even possible the stock market and banking system will be shut down – and some form of martial law imposed as you just heard Gerald Celente forecast.
The good news is that while deflation scares tend to be sudden and severe, they are ultimately short-lived. Deflation will never be allowed to persist for long while our inflationary fiat monetary system remains in place.
The old adage, “Don’t fight the Fed” is worth heeding.
The last deflation scare in 2008 led to Zero Interest Rate Policy, Quantitative Easing, and unprecedented Fed balance sheet expansion. The Fed is set to do all that and more this time around – possibly even buying up shares in U.S. companies and monetizing Americans’ tax bills.
The current turmoil in markets – and the central bank response – will create generational buying opportunities in beaten-down assets.
Those who hold gold and cash will be the real winners because their purchasing power is dramatically increasing versus virtually everything else now on the chopping block.
While Wall Street cheerleaders will scream about buying opportunities in U.S. stocks as they do on every down day, the greatest buying opportunities may be in overlooked markets such as silver.
On Thursday, the white metal fell to a historically low discount versus gold as the gold:silver ratio spiked to 100:1 – just as we suggested it might in last week’s podcast.
This extreme reading reflects just how stretched the deflation trade has now become. While gold is often thought of as an inflation hedge, it is actually better viewed as a crisis hedge. Once the crisis fades and markets reinflate, other hard assets can be expected to begin vastly outperforming gold.
At some point – and it could be any day now – the deflation/inflation dynamic will swing violently in the opposite direction. And when it does, silver is likely to be a prime beneficiary. Once a new bull market in silver and other inflation-correlated assets gets going, it can run for years.
So as painful as the past month has been for investors, it sets the stage for the next great inflationary mega trend that will last for many, many months to come.
Well now, without further delay, let’s get right to this week’s exclusive interview.
Mike Gleason: It is my privilege now to welcome back our good friend David Morgan of The Morgan Report. David, it’s always great to have you on and appreciate the time as always. How are you sir?
David Morgan: Well, Mike, I am doing well personally and the markets aren’t, but I’m hanging in there and thanks for having me on the show.
Mike Gleason: Yeah, definitely overdue, and great to have you back. Well David, we are seeing tremendous volatility in markets. The coronavirus is getting the blame for a huge sell off in stocks and in epic rally and bond prices. Commodities, oil in particular, are getting hammered. Maybe the only thing predictable about the recent market action is the Fed’s response. They did another emergency 50 basis point cuts and a lot of people expect them to cut another 50 basis points when the FOMC meets later this month. What is your take on the turmoil, David? Is this a short lived phenomenon and will markets recover as soon as the fear around the virus dissipates? Or we looking at the start of something more serious and maybe the bubble and equities is finally been popped?
David Morgan: Well, I think from a longer term perspective, it is 2008 part two. Really, the fact is after the financial crisis of 2008 where these bank stopped trusting each other and money actually stopped flowing, the Fed, right or wrong, came in and immediately exchanged this worthless or toxic subprime mortgages that the banks didn’t want anything to do with and stop trading with each other and replaced it with basically treasury bills, which is the sacrosanct debt that anyone would ever want, right. So it basically kept us from having, basically a total meltdown. Obviously it was a pretty big meltdown. Well, from that time until this, it’s basically been Quantitative Easing, one, two, three, four. It’s been Operation Twist. It’s been buying the long end of the yield curve. It’s been pumping money into the elite so they can buy Baptist stock and, and lower the floats so that the price goes up and the CEOs get big bonuses.
But the systemic problem in the underlying financial system really has not been addressed. So, now we have more debt than we had before. We have probably more bad paper if you factor in, not subprime, but you look at student loans, you look at pension fund problems, you look at interest rate swaps, you look at the derivatives market and you look at the over-leverage in the stock market. We’re probably set up for a bigger fall than we were in 2008 and that’s the truth. So, I look at the long-term is 2008 part two.
From a short-term perspective, if we do get some kind of resolution on this virus situation, yeah, there’ll be a relief rally. From a Fibonacci perspective, let’s say the market ends up down 10,000 from top to where this virus situation subsides, and then it takes back and moves up 5,000 or one half retracement. That could be a fairly likely scenario but it hasn’t fixed the systemic problem I just outlined, which means that you’re probably going to get a further sell off after that relief rally and continue down.
What most people don’t even realize is where we are in the United States stock market. Let me elaborate a little bit Mike. So, most markets go from undervalued to fair value to overvalued or from overvalued to fair value to undervalued. And it has that cycle over a long period of time. When we had the 2008 sell off in the stock market and I think the Dow got down to what, I forget the number 5,000 or something. What I do know is at that level stocks were fair valued. They weren’t undervalued. They were fair valued right there. So, if we take whatever the inflation rate was from there until now and put a fair market value on the S&P 500 or the Dow or both, we’ve got a long ways down before we’re fair valued again. We’re still over-valued. So, that’s my take on the stock market, Mike.
Mike Gleason: Well, it does seem like stocks were priced for absolute perfection for a number of years here and now we don’t have perfection. We have an economic situation that’s taken place because of the coronavirus and maybe that’s the straw that sort of broke the camel’s back. Obviously we got a lot of algorithms trading and these high frequency trading outfits and machines and so forth and it can kind of get bad as everybody runs for the exits at the same time. It sort of builds on itself, doesn’t it?
David Morgan: Yes it does. And there’s tangents that come off of it too. I mean you’ve got the overall market, then you’ve got to have the gold market intersect it. What does the oil mean to the overall financial system? And I mean on and on it goes Mike. So we are in my favorite expression, I said a hundred times, interesting times.
Mike Gleason: Yeah, we certainly are. Well switching the focus to metals. Gold in particular has done fine. Obviously silver has been sold along with stocks and commodities. Do you think we will see more futures market selling or will metals start to get a bid perhaps because speculators anticipate some safe haven demand and start buying futures or because the Fed is pulling out all the stops on stimulus… or both? The U.S. Dollar is not looking too good here. It’s been falling in currency markets despite the turmoil. Let’s get your thoughts here on metals and how they’re reacting to things.
David Morgan: Sure. Well gold is doing its job. Gold came off of bottom of December, 2015 and it’s up from that level and it’s worked through the $1,350 levels. Finally made a six-year high, hit the $1,550 level, which is resistance. Worked through that, we’re up at $1,700 gold in U.S. terms in the aftermarket, just a few trading sessions ago. So gold is responding, gold itself, not gold stocks. And sure it goes up and it was down, what, 60 bucks in one trading session a Friday, a week and a half ago or whatever. And then by the next Friday, it had taken back that $60 it had lost. So, these are very volatile markets in gold, especially gold equities are about the highest beta stocks, meaning beta ladies and gentlemen just means how volatile are given set of stocks. What do they do? And the gold stocks are notorious for big moves up and down.
So anyway, gold, I think doing quite well and it’s signaling us that there are more people coming in the gold markets seeking a safe haven and gold is the answer for right now. Silver on the other hand has gone to the hundred to one ratio, which it’s only done a couple of times previously and that has signaled the financial crisis in the past. So obviously I’m believing it’s signaling the financial crisis, which we’re probably in right now. So it’s done this job there. As gold becomes more and more of a safe haven and there’s more price pressure in gold and the gold stocks start to recover, I think you will see some people starting to move into the silver market. I mean this gentleman, Scott Minerd from Guggenheim, who’s their main investment advisor authority or the chief investment, I guess, officer, I don’t know if there’s such a term.
He was asked at Davos by some financial news reporters from Bloomberg, what was his go to trade for 2020 and he said silver. And a Bloomberg gentleman kind of rocked him on his heels a bit, said “Silver, why not gold?” And Mr. Minerd said, because gold is pretty near it’s a nominal high, but silver is about 65% off. And silver is an undervalued asset. That’s pretty close to what he said. And then the reporter went on to ask him, he said, do you think that, he didn’t say silver, but do you think the metals could perform like the non-precious metals have recently? What he meant by that was could gold and silver perform like palladium even though in my view he stated, it was well understood what meant. He was saying these other two metals, can they perform like palladium? And Scott said, I think there’s a high likelihood of that.
So, there’s a guy that’s managing a lot of money because I looked it up. In fact, I wrote about it in The Morgan Report two months ago. The amount of money that if they devoted to the silver market could certainly have a huge impact on the paper price if silver.
I’m going to digress a bit further Mike if you don’t mind. But when we look back in history, when (Warren) Buffet bought in 1999, he bought a hundred, almost 130 million ounces of physical silver and it took the market up from about five to by eight and a half, which didn’t double it, but moved it quite a bit. And when he reported that year, I got the Berkshire Hathaway annual statement because it’s part of my job to report on the silver market and the word silver never showed up. Are you kidding me David? David Morgan, silver didn’t show up and the Berkshire Hathaway and he bought 130 million ounces of silver, about 25% of the supply. Are you kidding?
And the answer is, I’m not kidding at all because by law, if you are a company like Berkshire Hathaway, well you’re an investment company basically. You only have to list out in detail anything that’s greater than 2% of your asset holdings. And since that amount of silver was less than 2% of what Berkshire held, they just said they made a miscellaneous purchase and that miscellaneous purchase happened to be 130 million ounces of silver. So, I think that gives some people an appreciation for how small the silver market is and there’s somebody as smart as Scott Minerd and he is. I could go on and on… let me just say this. When I hear his interview, I go, well that guy thinks just like me. So either we’re both smart or maybe we’re both missing something. I’ll say it that way, but very interesting.
So, I circled into gold. Gold is doing its job. Silver is lagging. Silver will come back. Silver is a precious metal. Silver is acting like it’s only an industrial metal or a base metal. It’s doing absolutely nothing, disappointing everyone. It’s been there before. It’s done that before. I’m just so old, I know that from my own experience. But it will come back as a safe haven asset again and as a precious metal. And it’s a spike. I mean these hundred to one ratios usually don’t last 10 years. They’re a momentary thing on a chart. It might be a month, might be two, I don’t know. It could more likely going to be about a month and a half or so. But we’ll see. But normally it’ll last long. So we’ll see silver start to outperform gold and go from a hundred to one and 90 to one, 80 to one, 70 to one and we’ll what happens. But it’s tough. It’s tough on silver holders. I know that, I’m one of them.
Mike Gleason: Yeah, 30 to one, we saw that or 32 to one, right in that ballpark less than a decade ago there in 2011. So those days are not too long ago and certainly could happen again if silver does outperform eventually you have to think it well. Well speaking of silver, David, man it has such amazing uses when it comes to antibacterial and antiviral applications. A pretty important metal at a time like this isn’t it?
David Morgan: Well, it is. If you don’t mind me saying it Mike, there is a way to take a look at that. If you go to TheMorganReport.com/silverwater. If you do that you will find an interview I did years ago in Salt Lake City with two doctors. You see the interview and you can make up your own mind what you want to think about silver’s properties, but it was a pretty interesting interview and I saved it basically for those that are interested in a structured silver water and what these doctors have to say about it.
Mike Gleason: My wife has been breaking out the colloidal silver here of late as we try to sanitize things and obviously just sort of practice good hygiene, especially at a time like this.
David Morgan: Let me interrupt you there, sorry. But there is pretty, I think it’s a legitimate report that the Chinese in some areas were taking one of these spray canned things and it was basically a company from the United States that produces this the silver water that is a biocide. Silver is a biocide. That’s a fact people. And they were using it as a spray down mechanism to basically sterilize the areas for this virus situation. So, maybe there’ll be more of that in the future. I don’t know. But I thought it was pretty interesting that even the mainstream news mentioned it, that it was being used. And I’ve said for years, if you really want to keep the public health at a better level, you would use nano silver. We’re not talking an ounce of silver and a doorknob.
We’re talking just pennies worth the silver, but you need to do every doorknob at every public facility, every airport, every school, every church, every corporate building, every government building and everything else, it would add up. And you can use copper, copper is pretty good. But silver obviously is the best. Is that going to happen? I doubt it. But the point I’m making is that it’s that important if you want to keep bacteria at bay. And the higher end Japanese cars put silver in their steering wheels. So, when you’re holding on to the steering wheel, you’re basically, no matter what’s on your hands, you’re not going to carry any germs.
Mike Gleason: Yeah, pretty interesting and amazing uses in silver for sure. Well, switching gears here a little bit, David, politically, you got to think the potential economic meltdown here could put Trump at risk, seems like things a couple months ago, looked like Trump was a certainty and was very safe for November. But maybe now he could be falling victim to an economy spiraling out of control, which seems like maybe the only thing that could derail his re-election bid. Any thoughts there?
David Morgan: No, I agree. I don’t really have much to add, Mike. I think you hit the nail on the head. I mean every election is pretty economically dependent. The old Clinton (line) who I’m not a big fan of, but he was president for two terms. It’s the economy stupid. I mean it carries a lot of weight with a lot of people and you said it. I mean it’s possible that things, if the economy gets “destroyed”, I don’t want to be too panicky here, talk in hyperbole. But it is a concern and it could be enough of a concern and people say, next, let’s vote in who knows? I wouldn’t even say it because I am equally distrustful the whole political class. But regardless, someone’s going to fill that vacancy or Trump will get reelected. We’ll just have to wait and see. But you make a great point.
Mike Gleason: Yeah, it’s going to be very interesting to see how that develops throughout the rest of the year and what kind of blame, I guess he takes. He has taken ownership of the stock market in the past and that could end up being to his detriment. Maybe we’ll find out. Well as we begin to wrap up here, David, any parting words for folks here today as we are looking at some serious tumult in the markets and in society as a whole? Any comments to share with us as we close?
David Morgan: Yeah, one I think is stay calm, don’t panic. The human species is quite adaptable and we’ve survived almost everything. But I want to move on to a different topic and that is this, I’ve been getting more and more correspondence communications with people that are worried about the next bale in and you cannot basically go to your friendly local banker and say, hey, “I’ve got 100,000 in my bank account and I’d like to cash it out.” They’ll tell you to stand in line, sign a form, take a thumbprint, get three photos, and you could get $5,000 and you got to wait a week for that to happen. So if you really want to move some of your savings out of the bank and into your own hands, the best way to do it is to invest in precious metals.
And I obviously favor silver and have for some time, but of a hundred to one ratio, I wouldn’t say go all in on silver. I think you should own both. And I said that basically from the beginning. However, it’s a good way to cash out pretty quickly. Just find a trusted dealer like you have there, Mike. I’ve known you and your brother for quite some time and I’ve never heard of one complaint. I’m sure there’s always a disgruntled somebody somewhere for something. But regardless, it’s one of the best and I don’t recommend very many as you know. So I would say if you’re out there listening and you’re worried about having too much cash reserves in your bank and you think this next bail out, which is now against the law will be a bail in which is in the law, and you have a lot of cash at risk in a bank, you might consider moving some of that through Mike and Stefan and whoever works there to get this precious metal into your own hands. And if you don’t want to hold it, they have a storage facility right there in Idaho that I visited as it was being built. And I’m not big on storage really, but there are cases where it makes a lot of sense. And that’s one, again, I would vouch for. So Mike, there you go.
Mike Gleason: Well thanks. I didn’t put you up to that, but certainly appreciate the kind words and it means a lot to us coming from you and certainly appreciate it. Well good stuff. It’s always a pleasure. Always love getting your insights and before we let you go of course we got to have you share with the folks about The Morgan Report and how they can get on board with your great service and the information that you put out there and how they can follow you more closely.
David Morgan: Sure. So the easiest things could in our free newsletter list, which is TheMorganReport.com. And then we have a paid service. You can go to the subscribe tab, pull down, watch the video and read. And I’ll just repeat, if you’re interested in a silver biocide properties, just type in TheMorganReport.com/silverwater. And you will see a pretty big set of videos that I did years ago interviewing two doctors that are extremely familiar with what silver solutions can do in the field of biocidal properties that can do everything from like decontaminate your floor, the air or whatever to help situations. So if you’re interested, go for it. If not, then don’t. It’s that simple.
Mike Gleason: Well, thanks again David. All the best to you. Strap on for what is likely going to be a wild ride and we’ll look forward to having you back on here in the not too distant future. And in the meantime we’ll be following the great stuff you’re always putting out there at The Morgan Report. Thanks again for the time and have a great weekend my friend.
David Morgan: You bet you. Take care. Thank you.
Mike Gleason: Well that will do it for this week. Thanks again to David Morgan, publisher of The Morgan Report. To follow David just visit TheMorganReport.com, you can also follow him on Twitter, it’s @silverguru22 and if you haven’t already, grab a copy of his book titled Second Chance: How to Make and Keep Big Money During the Coming Gold and Silver Shock Wave, which is available at MoneyMetals.com and other places where books are sold. Be sure to grab a copy of that today and then check out TheMorganReport.com and start getting his wonderful commentaries that David and his team put out there on an ongoing basis.
And don’t forget to check back here next Friday for our next Weekly Market Wrap Podcast. Until then, this have been Mike Gleason with Money Metals Exchange, thanks for listening and have a great weekend everybody.
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