Welcome to this week’s Market Wrap Podcast, I’m Mike Gleason.
Coming up David Morgan of The Morgan Report joins me to talk about what the coming months are likely to have in store for the metals and the markets, tells us how the smart money has already exited stocks and shares his secret to finding value and success in any market. Don’t miss my interview with the Silver Guru, our good friend David Morgan, coming up after this week’s market.
Precious metals markets are trading mostly to the downside ahead of Labor Day weekend. Gold prices are off 0.2% this week to trade at $1,204 an ounce. Silver is taking it on the chin for a 1.5% drop since last Friday’s close with spot prices now at $14.62 per ounce.
Metals markets didn’t react particularly well to Wednesday’s Gross Domestic Product report. On the surface, it was a blockbuster with revised GDP growth coming in at an annual pace of 4.2% for the second quarter.
The GDP report was hailed by the White House as proof President Donald Trump’s pro-growth policies are working. When the President originally promised to deliver economic growth above 4%, few economists believed him. But deliver he did.
The only problem is that Trump and the big spenders in Congress have also delivered higher deficits. In effect, the GDP growth rate is being artificially inflated – much like a household’s standard of living can be artificially raised by running higher credit card balances.
Another indication that the GDP number isn’t totally representative of the real economy is that wages are barely growing at all. GDI stands for Gross Domestic Income. And the GDI number is arguably just as important as the GDP number, yet the financial media rarely report on GDI.
The latest Gross Domestic Income reading comes in at just 1.8%. Even though wages and salaries aren’t surging higher, spending is. Deficit spending at the household, business, and government levels are combining to drive a huge, unsustainable boom in the consumer economy and stock market.
Of course, just because a bull market is unsustainable doesn’t mean it’s going to go bust tomorrow. President Trump wants to roll out new tax cut stimulus this fall to give the bubble boom another leg higher.
He is also scheduled to sign an Executive Order this Friday to boost retirement accounts. Trump will direct the government to relax rules that require IRA and 401k retirement account holders to take required annual withdrawals after they turn 70 and ½. The idea is to stop punishing retirees for leaving their money invested in the stock market.
Another way Trump plans to support the stock market through Executive Order is by making it easier for small businesses to offer 401k plans to employees.
The President hopes this move is well received by workers looking for more opportunities to save tax-free. But you can bet virtually nothing Trump does for working Americans will be well received by the establishment media during their Labor Day coverage.
The holiday typically serves as an opportunity for Big Labor bosses to push their propaganda – and an agenda which isn’t necessarily aligned with the actual interests of the workers they claim to represent. For many workers, forced union dues are just another tax extracted from their paycheck that diminishes their take-home pay.
Working class people are also among the hardest hit by the less visible inflation tax. When prices for goods and services go up faster than wages, workers lose ground. At the same time, artificial asset inflation helps the rich to get richer.
There’s nothing wrong with getting rich by merit. But when the financial system is rigged and the fiat monetary system that underpins it is dishonest, it shouldn’t come as a surprise that lots of people who are amassing great paper wealth aren’t actually delivering much to the economy in the way of productive activity.
Under a sound, non-inflationary monetary system where the currency’s purchasing power remains constant, the financial sector doesn’t dominate the economy. Central bankers can’t manipulate markets. There’s less incentive for people to speculate or chase yields. Workers don’t have to worry about the inflation tax. They don’t need to fear losing ground by holding cash outside Wall Street and the banking system.
Of course, the only currency that has proven to retain its value over time is gold and silver, although that doesn’t mean it won’t fail to keep pace with the paper money every now and then. But at the end of the day, hard money is the enemy of unproductive financial parasites and the friend of honest capitalists and laborers. That’s the message we’d like to spread on this Labor Day.
Well now, without further delay, let’s get right to this week’s exclusive interview.
Mike Gleason: It is my privilege now to welcome in our good friend David Morgan of The Morgan Report. David, it's always a real pleasure to have you on and welcome back. How are you, sir?
David Morgan: Well, Mike, thanks for having me back and I'm doing well, thank you.
Mike Gleason: Well, David, the metals got off to a decent start early in the year. They spent a few months trading sort of sideways and in April when we spoke to you last, the setup for a move higher looked pretty good, but prices broke lower instead. We've had two and a half months of selling. We've seen that move attributed to a stronger dollar and the metals are trading more like commodities and can't find much of a bid as safe havens. Now that the lower prices have certainly been well-received by some bull investors who are glad to take advantage, and we're certainly seeing more buying activity here. However, there's plenty of frustration too. Lots of people have had just about enough of this bear cycle. So let's start out with getting your take on the recent price correction. What are the challenges these markets are needing to overcome in order to get something going to the upside here, David?
David Morgan: Well, great question. First of all, I want to state that you're right about the breakouts or potential breakouts in both gold and silver. Gold was at the $1,350 level. It looked like it was going to make it, but it failed. And then there was one for silver that was around the $17 level and I called that one, but using the Morgan rule, thank goodness. Experience pays. And you have to earn it, you have to put in the years, the days, the months. And it failed on the 4th day, so we didn't go along and get more aggressive. So, after that, it's just been down, down, and it's been heartbreaking for some, especially the long-time bulls. But some of the new people that see the advantage to the market are certainly taking advantage of it. I put out something for my free list that I haven't done in quite some time. I told everyone how I trade a spike low which is normally reserved for members only.
So, obviously the members only got that, and I did a kind of a shortened version of that for everybody that's on our free email list. And that was to take a very high beta of stock with a very good risk to reward profile and try to catch that falling knife. And so far if you got in at the low and I got in a little above the low and pretty much at the low. And if you looked at yesterday's closing price on that stock, you're already up 10%. And that's how much these stocks can move relative to the silver to gold prices, which certainly can move, I'm not saying they can't. What I'm trying to explain is that the leverage is there on that side of the market which is basically what we do for the most part at The Morgan Report.
Mike Gleason: Now let's talk for a minute about the dollar since the rally and the greenback is getting blamed for some of the recent decline in gold and silver prices. The dollar has generally been moving higher in the foreign exchange market since April, though we have seen significant weakness in the past few days. So, I want to get your thoughts on what lies directly ahead. On the one hand there is more talk about de-dollarization. The list of other nations who aren't happy with dollar hegemony is growing. It seems to us the process of transitioning away from a world where the U.S. dollar is utterly dominant may be years if not decades long. In the short-term what matters is the relative strength of the U.S. economy and monetary policy here and abroad. Right now, the Fed is fostering a stronger dollar and central bankers in places like China are working to devalue their currencies, something President Trump has begun complaining about.
So with that as a backdrop in the ongoing trade wars, what are you expecting for the dollar in the months ahead?
David Morgan: Down. Right now, what we have is a spike high in the dollar at about 96.80 and that was several trading sessions ago, but very recent as you said. And then it's been back down into what I call the indecision pattern or the congestion area which is under the 94.75 level, which breaches the 50-day moving average. And so I believe that we've probably seen the peak in the dollar. So we spiked high in the dollar at the same time we basically spike low in the gold and silver markets. And I don't see the dollar actually doing much better here. I think that, let's say the central bankers on a global basis are well-aware of the problem of the emerging markets are having paying back U.S. dollar because of the strength of the dollar. And no matter what they say, watch what they do.
The charts give an indication, they are a tool. Manipulated or not, the charts are still there. So they're still valid. So this is what I look at, I'm certainly not just a technical analyst. I've tried to actually downplay that and go more toward the fundamental side, but I don't think you're a big analyst unless you use both, and I always have. So that's what I see, Mike. I think regardless of the rhetoric. Now the thing to watch for is if it breaks out of that congestion area which is roughly I'm going to call it the 93 1/2 level. If you see the dollar below that level, then we're getting kind of close to the 200-day moving average on the dollar, and that would be of even greater concern. If that were to occur, and I believe it will over time, then you're going to see probably good strength in the gold markets. But I don't see the gold and silver markets getting real strength until two things.
One, what I just described, further weakness of the dollar that's significant enough to look technically or let me just say it a different way… on the algorithms, where the algorithms trade because it isn't really people anymore, it's these computer programs. And, or, mostly and, a significant enough drop in the overall U.S. equity markets, the S&P 500 to cause concern that maybe the peak actually has taken place.
Mike Gleason: Yeah. It's going to be interesting to see. Obviously, the Fed policy is going to have a lot to do with that. If we continue to get raid hikes maybe that does finally give us that pullback in the stock market that we've been waiting for for so long. Is that kind of how you're looking at it as well?
David Morgan: Mike, you're right. I agree. I think that the few rate hikes that are left, and there may be a couple more, it's hard to say. I mean, certainly they've stated as such, but whether it's followed through or not remains to be determined. I agree. I think we are at the end, pretty close. It's hard to know. It's very hard to time these things, but the dollar's given us an indicator. And the other indicator in the stock market that's some but not all really reported to the general public, and that is that the insiders are out. I mean, the smart money's basically sold off their shares to the unwary pension funds, public, et cetera, money managers, that type of thing, so smart money's basically out of the stock market. In fact, they're probably building a short positions as we speak. But that doesn't mean it's imminent.
Mike Gleason: You follow lots of different natural resources and commodities there at The Morgan Report, and we talked about copper before and how it's a bit of a bellwether type of commodity. Doctor Copper as many call it. We've seen a real price smash in copper over the last three to six months or so. Is that an indicator of a recession coming in your view, or is this just a situation where it was overbought and due for a pullback? What are your thoughts there?
David Morgan: Well, kind of both, and I'm going to take this and give credit to Dr. Jim Willie, The Golden Jackass, excuse my French. That's what he calls himself. And I heard the interview, and I didn't catch all of his stuff, but he talked about copper once being the PhD of all the commodities. And I agree with what he said. At one time, that was true. I don't think it's nearly as true as it once was. He referred to oil as being a better indicator, and I agree with him. I think the oil market or energy per se, which is mostly oil still and natural gas, as being probably the prime indicator where the global economy is going and not copper so much. I think we could still look at copper and use it as an indicator, but I would take its PhD status away from it and maybe give it a B.S. status. So, I think it's indicative of a slowing economy somewhat.
Again, watch the oil markets for a better indicator, and it's at a level now, Mike, where we're back into what I just mentioned on the dollar which is a congestion area. And a congestion area is what I like to call the indecision pattern. It's neither bullish nor bearish. It's basically neutral. It's like well, what's the stock market going to do? And the answer is it hasn't decided yet. It hasn't decided if it's going higher or lower, and that's the way I would refer to it.
Mike Gleason: As a follow-up, what commodities are looking attractive to you, David? Or without maybe giving away some of your best stuff that your paid customers get, what commodities are you looking at?
David Morgan: Sure. Well, first of all, and I'm much more than just a silver guy as you know, Mike. But silver certainly looks great. I mean, as I said a moment ago, it looks like we might have caught a bottom. And even if we didn't catch a bottom, I think there'll be enough of a rally to make some pretty good money on that trade. And we do both trading and investing. As far as lithium, the lithium story is worn out. There's far more lithium available on the planet than anyone will tell you. We probably have four centuries worth of lithium available. Cobalt, that story's kind of burnt out as well. Again, there's maybe only one or two I'd ever be favorable to at this point in time. One that we like that no one else has talked too much about is vanadium. But there again, there's probably only one on the planet that I would invest my money in. And then on the speculative side which is really tough, I have one speculative silver expiration coming that's just killing it.
And I will not give that away, I do too much research for my paid people to give that away. And the last one is this technology stock that I've been pushing pretty hard, and it's kind of had its ups and downs. It's underneath the price now where the investment banks put in a significant amount of money, so you can basically do better than an investment banker on that right now. And this has to do with the recycling of precious metals using a reagent that is ecologically friendly. It's basically e-waste. Recycling electronic waste which is a huge up and coming field, and very few are aware of it. We've been talking about in The Morgan Report now for probably a couple of years. Our early adopters, the people that've been with us from day one, so to speak, or the last couple years got in on a spin out basically for free.
But if you did the math, they got in for about 40 cents. That stock's been as high as $2. It's now underneath the level of where this investment bank got in at $1.15 or right about that level. All prices go up and down, and we hear the interview and check the price. If you know what I'm talking about, it might be up or down from that, but basically it's at that level or lower. So we're still favorable. I don't like most of the commodities in the mineral space right now, Mike. But what I do look at is the ones I mentioned, and the agricultures, which I don't do a lot, but I do mention occasionally in The Morgan Report, but I think if we look out two or three years, there's a couple things we really want to be cognizant of.
And one is foodstuffs. I mean, looking at wheat, corn, rice, soy beans. You name it across the board. The meats, of course. And then one that no one talks about and was in The Big Short. Dr. Burry went through the pain and agony of being wrong at the same time as being right. Wait a second, David, what did you just say? What I said was Dr. Burry actually knew what to do. He was short the housing market, and even when things were going in his favor, his investment wasn't working out well for a while. But he knew he was right and he stuck to it, held his guns, got a lot of upset people.
But in the long-term, it came to fruition and he made a lot of money for a lot of people. And that's sort of where I feel I'm at right now with what we're holding in a portfolio. A lot of stuff is up, especially our long-term stuff where we have big money. The big top-tier stuff. But back on point, I think we're near a turning point and we're going to see better days ahead.
Mike Gleason: You've been doing this a long time, David, and for those that follow you like we have over the years will quickly recognize that your ability to be nimble and identify value in any market is what has made you successful, and quite honestly is why the information you're putting out there at The Morgan Report is so valuable. So, what have you learned over the years, because obviously experience in being able to adapt to what Mr. Market is throwing at you has served you well. Talk about that if you would so people can maybe glean some insights potentially for their own sake.
David Morgan: Well, I think a lot of it has to do with your own personality, and the market is very good at exploiting things that are basically I'll call character defects, if you will. I mean, if you're inpatient, you're going to sell that stock just before the big move. If you are too greedy, you're going to watch it peak out and not sell it on the way down because it's just going to go higher, cause that's kind of your mindset. You really have to adopt a method of investing and/or trading that suits your abilities, and that's why in my view it's important to get someone or ones to help you make decisions. I will not name names, but there's a couple out there in my industry that basically look at all stocks that are in the space of gold and silver, in precious metals… all stocks in precious metals are created equally, and that's absolute and total, complete BS. Some stocks are much better than others, that's why we have them in the top-tier. This is basically conservative money.
This is money that hedge funds could invest in or pension plans or management of money, that type of thing. Family offices or whatever. Some of these places can't really put significant money in these speculations. So, just having a common-sense approach to some of this, just when I say it over the air makes a lot of sense. But a lot of people that get into the gold and silver space and really don't have a good background in investing overall… and they think that it's very easy just to pick these 10-baggers, 20-baggers or whatever… they're not, and that's part of the industry that most people that are in the industry and write about it prey on these people that really are unsophisticated. The people that really know what's going on usually have, let's say, a wealth manager or whatever, but today you really want to be your own wealth manager because most wealth managers will not allocate the 20% which is what I write about in The Morgan Report to the right products to keep your wealth.
In other words to preserve your wealth. We want to build and preserve your wealth. And there will be a time I think, and history has proven, where it will be more important to preserve what you have than to look for capital gains. And that may not sound like the right thing to say while the stock market keeps going up and up and up and up, but remember, nothing grows to the moon. And we're probably at a point where it's not going to grow much further. I know there's others that argue with me and 50,000 DOW and all this stuff. I don't buy it, we'll find out. Again, saying my favorite statement: the market knows more than anyone and I've been humbled before by the market, but all the indicators that I look at say this thing is not much longer for us to watch until you see a change of tide. You see the metals start to reassert themselves. Commodity sector especially, the needs, the foodstuffs as I mentioned, and the stock market that's overvalued by any metric starts to gain some reality.
Mike Gleason: Well, how about the rest of the year. What are your thoughts as we head into the fall, and what is your current investment outlook for the balance of the year? For instance, does the seasonally strong period for a gold jewelry demand maybe provide a bump for the metals, or do the ongoing trade wars keep a lid on gold and silver and other commodities? And what about Fed policy, do they stay the course on rate hikes, and does that kill the rally in stocks and bring about an economic contraction? I guess a lot of things there, but what are your thoughts on the next four to six months in the investment world? What are they likely to hold as we begin to wrap up.
David Morgan: Well, as I see it today, subject to change. I think the metals have put in their bottom. I think they will strengthen over the rest of the year somewhat. Could get that big dip in December that we've seen for so many years in a row. I think you're also going to see a waning in the stock markets, meaning that maybe the peak is finally in, and there's just less enthusiasm for stocks generally speaking. I do look for some kind of “what if” moment in some of the financial markets, I just don't know which one. Is it going to be student loans, is it going to be in the mortgage industry or housing industry? Is it going to be a bank in the Euro market? What is it going to be? I don't know, but I really think within the next six months there'll be a “what if” something that's going to capture the marketplace, the financial industry at large and the money markets as a total and say, "Mmmm." And it'll probably be washed away or try to be washed away, but it'll be one more chip away at the foundation of this system that really isn't working.
So, I look at that, Mike. I really don't have much other to say than to add that certainly we are holding cash here. I think there's value to be had in certain sectors. I like to look at value first if at all available, and I see very little value outside of the commodity sector. And even within the commodity sector, a lot of this stuff has been let's say overemphasized.
Mike Gleason: Well, outstanding insights as usual, David. We always appreciate having you on and getting your thoughts. We look forward to the fall and what is to come as things may be finally coming to a head, but we will see. Now before we say goodbye for today, please let people know how they can learn more about The Morgan Report, and then maybe talk about what makes your publication and your service unique, because there are a lot of options out there when it comes to financial newsletters and so forth, but The Morgan Report is a bit different. You've commented on that somewhat, but talk a little bit more about that as we begin to close.
David Morgan: Well, sure. Well, the first thing is for everyone to get on the free list, because interviews like this you don't want to miss. If you get on our free letter, just go to TheMorganReport.com, put in a name and an email, and then it's double opt-in which means you have to be not a robot. You click the link and say yeah, I really want the free Morgan Report. So you'll get the free Morgan Report, and every weekend we'll summarize not only my weekly perspective, which is my podcast, but all interviews that I do like this or any articles I've written will be there conveniently for you every Saturday or Sunday. So that's number one. Number two as far as what makes us different, a lot of things. I'll just mention one right now. We're the only one in the industry that I'm aware of that we have a service that's called the Alert System.
This is for our paid members, these are for serious investors in the resource sector. And it pops up on your home screen and alerts you that I've got a buy, I've got a sell. Something big happened in the market like we had the other day where I said, "Look, it's hard to catch a falling knife, but I think I can. This is what I'm doing. Look over my shoulder, this is the stock. This is why, this is where, this is when, and this is how." And so I gave that out to the members first, and then as I told you a moment ago, I also sent it out to our free list which obviously I just mentioned, the free Morgan Report to kind of help people out and give them a taste of what you get. So, the Alert System is unique, and I wanted to add onto that, Mike, it works for PCs only and not Macs. And it looks like we finally found a solution to that, meaning that we can not only send it to PCs and Macs, we can also put it on people's phones if they so elect to do it. And whether or not I'm going to charge more or not, I probably won't.
I mean, there's a lot of competition in this industry. What we do for $500, most people charge $2,500 for, but it's hard to prove that unless you have subscribed to XYZ's newsletter or ABC’s newsletter or many of them that are out there that charge that amount. And once you are familiar with their work and you come onto our work, then it's readily apparent what the value structure is. On the other hand, Mike, if you never subscribed to a newsletter at all, you have no comparison value whatsoever at all, so it doesn't make much sense one way or the other cause you will have nothing to compare it to. I guess I'll leave it at that. But thanks for asking because it isn't just, a passion. My passion creates wealth. I'm still passionate about it even after all these years, so I like to let my passion create your wealth because really, seriously what we do. I mean, I do have a sense of humor, but nonetheless, when it comes to stock picking, stock investing, timing, when you should get in and out.
More importantly sometimes what investments you should stay away from. There's a lot of stuff out there in this space that I wouldn't touch because it's not worth it. You want to make your money work hard for you, you want to buy the best of the best, and when you go shopping for an automobile, you buy the best one you can afford. When you go shopping for food, you probably buy the best you can afford. And this is the same thing with investing. A lot of people like cheap stocks, but most stocks are cheap for a reason. So I'll leave it at that.
Mike Gleason: Yeah, well, keep up the great work. We'll catch up with you before long. Hope you have a great Labor Day weekend, take care for now. Thanks, David.
David Morgan: Thank you, Mike.
Mike Gleason: Well, that will do it for this week. Thanks again to David Morgan, publisher of The Morgan Report. To follow David, just go to TheMorganReport.com. We urge everyone to, at the very least, go ahead and sign up for the free email list if you haven’t done so already.
And be sure to check out either of David’s recent books: The Silver Manifesto or Second Chance: How to Make and Keep Big Money During the Coming Gold and Silver Shock Wave, both of which are available at MoneyMetals.com and other places where books are sold. Be sure to check those out.
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.
About the Author:
Mike Gleason is a Director with Money Metals Exchange, a precious metals dealer recently named "Best in the USA" by an independent global ratings group. Gleason is a hard money advocate and a strong proponent of personal liberty, limited government and the Austrian School of Economics. A graduate of the University of Florida, Gleason has extensive experience in management, sales and logistics as well as precious metals investing. He also puts his longtime broadcasting background to good use, hosting a weekly precious metals podcast since 2011, a program listened to by tens of thousands each week.
