David Morgan: Expect Stagflation And Silver Outperformance In 2019

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. How are you?

David Morgan: Mike, I am well, and thank you for inviting me.

Mike Gleason: Well, David, I'm excited to do a bit of a market preview for 2019 with you today and we'll get your thoughts on a number of different markets. Now, we managed to finish 2018 relatively strong in gold and silver. Volatility in stocks and a more dovish posture from the Fed helped create a bid for metals in December. We're now two plus weeks into the New Year, stocks have rallied off the bottom put in on Christmas Eve. We know Treasury Secretary, Steven Mnuchin, had a conference call with other members of the Plunge Protection Team. He spoke personally with the CEOs at the nation's largest banks.

It looks to us like he got the response he was looking for. Somebody is buying stocks again and we aren't too sure natural forces are behind it. At least metals prices are holding up okay. What is your take? Does the rally we've seen in stocks have legs and what are you expecting for gold and silver and how they might respond here?

David Morgan: Great question. It's a very typical question and I certainly am going to answer it. I just want to preface it with this, Mike, that we all get a lot of criticism and I'm subject to it, as well. Rightfully so in a lot of cases. What most people don't understand, that aren't paid members, is that anything in life you've got to correct and continue. So, if I make a call today and it sounds great and people make a decision based on that, doesn't mean that three days from now I'm not going to correct and continue. In other words, something I say long-term may not hold but, believe me, as long as I've been in these markets, when I'm wrong I promptly admit it and make an adjustment.

Having said that, I really don't like the trading action in the last week or so. Gold just can't seem to get through that $1,300 ceiling. Silver is trading as, for the last month, roughly outperforms gold two to one. Roughly, gold's been up about five percent in the timeframe that you mentioned at the beginning and silver was up almost 10 percent in that same time frame. At this point in time, as we're doing the interview, they're both languishing here. They don't seem to have much momentum. So, I actually expect somewhat of a pullback. I was hoping for a strong January all the way through, could be wrong. If I am, I'll adjust. I think we're going to have to see a little bit of a downside.

It did accelerate pretty strongly, as you mentioned. Maybe they got a bit ahead of themselves. Having said that, I want to be emphatic about the next statement. Longer term this year, gold and silver will do better and they're likely to outperform the stock market this year.

Mike Gleason: Like many of us in the precious metals space, you have been paying attention to the developments of Bitcoin and cryptocurrencies. Our take is that crypto offers some real promise as honest money if developers can solve the problem of scale, if it can approve itself to be beyond the reach of governments and regulators and if one these coins can get widespread adoption, the world would have a medium of exchange that not can be inflated or controlled. That would be a wonderful innovation for the cause of liberty but, those remain pretty big ifs. In the meantime, people are finding out that Bitcoin was massively oversold as a store of value, perhaps. Prices have fallen about 80 percent from a year ago. That is our take, but we'd like to get yours. Where is crypto headed from here in your view, David?

David Morgan: Yeah, I'll preface it here with, I'm certainly not an expert but I study all markets. Market behavior is market behavior, whether it's soybeans, cryptocurrency, silver, or the financials. There's certain patterns and certain things that are basically natural law to markets. Having said that, Bitcoin's got a struggle ahead of it to get back to its former glory. I think there's a possibility that it will. I doubt it will be this year. There's massive overhead resistance at certain levels and those will have to be overcome. I do hold a very biased view that it's possible, not probable but possible, that the next leg up cryptocurrencies could be, not would be but could be, led by the gold and silver asset backed cryptocurrencies.

I think there really is a direct tie between honest money, free money, sovereign money, and blockchain. So, this combination has been married by several innovators that are taking that idea and moving it forward by having an asset backed or money backed with gold and silver backing. I think, again, it's possible that you might see that in the next leg up. And if they were constructed correctly, then what you could see is a lot of demand coming into those as a store value and money itself, meaning a means of exchange. I know that's a big statement and you prefaced it the same way, Mike, which I'm grateful you did. But, let's not hold out weakness. Let's come from a position of strength, which means that the possibility exists, which means that the market, itself, if it likes and adopts the idea, it could go a lot further than perhaps we are, at this point in time, thinking about.

Mike Gleason: You've got an interesting point. When it comes to the privacy of crypto versus precious metals, will someone planning a transaction find more privacy at a Bitcoin exchange or at a precious metals exchange?

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Mike Gleason is a Director with Money Metals Exchange, a national precious metals dealer with over 50,000 customers. Gleason is a hard money advocate ...

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Moon Kil Woong 3 months ago Contributor's comment

Long term rates are dropping and growth is slowing. We are quite far from an economic downturn measured in growth and going the opposite way in inflationary pressure right now. I agree that inflation will remain especially if Chinese tariff wars continue and oil rises. So there is some concern.

Long term, the fact that Republicans no longer keep a lid on US spending but have all but given up on fiscal conservatism makes a pertinent long term argument towards some diversification to hedge for inflation.