Silver Crash, Shanghai Shock & Triple Digit Target

Craig Hemke (00:00)
Hello again from Sprott Money at SprottMoney.com. We've reached the midpoint of February, midpoint of the first quarter for that matter. And it's time for your Ask the Expert segment. I'm your host, Craig Hempke. Joining me today is my old friend, David Morgan of the Morgan Report. We're going to talk a little silver. David, nice to see you.

David Morgan (00:25)
Craig, good to be back, thanks.

Craig Hemke (00:28)
Again, before we get going, just to remind everybody, as we always do, ⁓ this is all brought to you by SprottMoney.com, the preeminent Canadian bullion dealer, but they don't just do business in Canada. You can access them in the U.S. as well. And if you're doing retirement planning this spring, before you meet your tax person, hey, get an RRSP or an IRA from Sprott Money and start that retirement savings in Sound Money. They can help you out.

Give them a call at 888-861-0775. All right. Well, David, having you in for this month's ask the expert was a no brainer layup when I was thinking about it, because we've had such a crazy couple of months, culminating with everything since the first of the year. ⁓ you've seen a few things, ⁓ over the course of your career, you've kind of been dedicated to silver your entire adult life. You've seen silver go up a few times. You've seen silver go down a few times.

As we sit here on Valentine's Day weekend, what do you think? Is this different this time or are going to go straight back down?

David Morgan (01:36)
Well, I think it's different this time, but to put it in a little bit of context, many in our community have talked about this is the worst sell-off in Silver's history and well, it's the second worst to my knowledge because the first worst was called Silver Thursday. I think it was March 27th, 1980. Silver went from $20.61 down to $10.27 in one day. That's a 50 % chop.

Craig Hemke (02:02)
Yeah.

David Morgan (02:04)
not a 30 or 33 % chop. Not that this 30 % plus chop wasn't hair raising. Still got some left, but it wasn't the worst. ⁓ I think to follow up real quick, we're not done yet. Everything I know about how metals trade, ⁓ the algorithms are not. We are still in a secondable market.

final phase of it to my strong studies. And I think we are going to triple digit silver again, but I don't think it's a week from tomorrow.

Craig Hemke (02:41)
It, um, after that type of event. Yeah. And we saw it even here as we record this on the 13th, we saw this back on the 12th where things were seemingly stable and everything was fine. Then all of a the silver fell what? Six or $7 in about six or seven minutes.

David Morgan (02:58)
Yeah, if I could put it again in a larger context, I mean, I'm pretty convinced that the the one thing that I think we've all been looking for meeting, meeting the precious metals people. You know, we were waiting for that day when the physical market took control of the price and we got there. I'm convinced we got there and it was based upon physical thousand ounce commercial bars, which is the silver market.

Craig Hemke (03:18)
Mm-hmm.

David Morgan (03:24)
It is a derivatives market, but under all the derivatives, there lies a thousand ounce bar or 10 of them or 20 of them or a thousand of them or 10,000. And that demand was moving the actual price for quite some time. But the paper paradigm kept moving along with it. got overextended. It went up, you know, 140 % in a year. And then we do 70 % a month. I was warning my group, my members and the public, you know, shows like yours that look.

Nothing goes up that fast without having some kind of a correction, some kind of a go back. We got it. It gasped a lot of people that haven't experienced the futures market before. And here we are consolidating back to the 10, you the big move yesterday, a bit of a surprise, honestly, you know, but it shows that the paper paradigm still has some power. So I think it's a struggle now between the reality of physical silver and the paper derivatives market still having a lot of

control it.

Craig Hemke (04:26)
Well, that would kind of be the key question, I guess, David, you know, the, the hunt brothers episode in 1980 was, was a Comex focused event. Uh, what was happening in April of 2011 was a Comex focused event. Um, this current rally does not seem to be a Comex focused event. seems as if almost like Shanghai was leading the whole, uh, expedition.

back in January. Do you sense that as well? And if so, does that continue going forward?

David Morgan (04:59)
Absolutely, that's what did it. I mean, I think that could be proven pretty easily objectively, but does it continue? And I'll have to be honest, I don't know. I have said, and I'll say it again, if equilibrium is met in the Asian market or the Shanghai metals exchange, Shanghai futures exchange, and everyone that's demanding physical to either afford it or keep it for future industrial purposes or long-term investment.

If that demand is satisfied and we reach equilibrium, we could see a stabilization in the price. ⁓ That's just a fact. Now, does that mean it's going to happen? I don't know. ⁓ Could it happen? Probably could. I call it a low probability. I think that between gold's consistent march up and up and up because of currency debasement, silver will march to that tune alone.

without any increased industrial demand. But there is always the chance, or let's just say chance, there's always the ⁓ re-engagement that we've already seen that they're marching hand in hand, industry investment, industry investment. So I still think for both purposes, it's gonna move higher. But even if it's only investment demand, it's such a small market, that alone I think will keep us going.

Craig Hemke (06:09)
Mm-hmm.

It's funny you mentioned gold. I was the one being interviewed earlier today. And that was a point I mentioned. know, the gold has been on this steady climb for two years of 20 % rallies and then periods of consolidation, another 20 % rally, another period. And we just got through with another 20 % rally. If that trend continues, the next target would be $6,000. David, how important do you think that is for maintaining silver? Because at some point,

David Morgan (06:29)
Hmm.

Craig Hemke (06:49)
$6,000 gold doesn't really work with $40 silver

David Morgan (06:53)
No, it doesn't. you know, the, think one of the things that, you know, it was kind of poo poo, but I think very important. If you know what you're doing with the data, I mean, some people look at, well they don't know how to interpret it. The gold silver ratio thinks important. And it's kind of a slide from here, Craig. I hate to say it, but facts are facts. And you could get to like an 80 a game where you get, you know, silver, very undervalued relative gold. If that were to occur, I'd probably buy more silver. I probably have enough.

looking in the eye, you know, if it gets out undervalued relative to gold, why would I buy gold at that point with that kind of single separation? Not saying it will get there. I'm just looking at a chart, seeing what the resistance levels are and aren't. It's like a slide to that level. Does that mean it's going to get there? No, it does not. But what it does mean is it's an easy path to get

Craig Hemke (07:47)
So, all right, so as we watch this then going forward, because Shanghai was such a focus, know, there's, we're going to have, Shanghai is going to be closed next week for the Chinese New Year holiday. You you wonder how that's going to impact things with the trade for the next couple of days. But do you think that that shift is now permanent? Are we, is it the?

That kind of more physically based market now going to start wagging the dog instead of the futures markets in New York.

David Morgan (08:20)
Well, first things first. mean, once the Chinese New Year situation shut down the markets, that's when all this paper got sold and we got that whatever it was yesterday, eight or nine dollars down. that's point number two. The question you asked is it's a back and forth, Craig. I really believe that the market knows more than me and it keeps us all humble. I think the paper pushers are kind of in charge right now and there's ⁓ stall in the market where there's no market on Monday.

Craig Hemke (08:30)
Yeah.

David Morgan (08:49)
And people that run the printing presses more strength than people that are abstaining from the market due to the Chinese New Year. But when it comes back in the long term, a fact is a fact. And that is the physical market will take control. I'm not convinced. I just ran some numbers, create a like to kind of repeat them. Best I could do doesn't mean they're perfect, but the LBMA, know, ComEx has got about 93 million in the registered category.

We all know that Shanghai is about 10 or 11 million ounces. And LBMA is really a tough one to figure out because most of that London metal is in the ETFs. But of that 891 tons, I forget the number, Craig. You might know what I think it's like 300 million or 250. That's actually free float. It's not a lot. So, yeah. So the point is, though.

Craig Hemke (09:40)
Yeah, it's not in the ETFs. Yeah.

David Morgan (09:46)
the place that's taken the metal off the exchange more rapidly than anywhere else. It's coming off the Codex and London, but it's really, mean, whatever goes into Shanghai is coming right out and has been that way for several months now. So I do think we are going to see that again.

Craig Hemke (10:07)
I, there's been reports this week, David, find this is the type of thing that just, I'm sure this gets you as well. How Shanghai is, ⁓ instituting rules that you can't short what you don't have. Did you see that story? ⁓

David Morgan (10:21)
I've seen it and I'm

not saying I agree with a lot of this stuff cannot be verified. Some of it can. It's really tough. If it was a no shorting at all, in my mind, not saying I'm right. It's well, why not have a cash market only? mean, what would be the purpose of the futures exchange? What would make any sense?

Craig Hemke (10:29)
Yeah.

Right.

Right. But the rules are that you've got to prove you actually have the metal so that then you can claim you're hedging it.

David Morgan (10:48)
Yeah. Well, I'll take that back. Yeah, just my brain just kicked

back into gear. Sorry, I didn't want a cup of coffee so far. Yeah, that would be legit if you're a hentra. So, I know. As little as you have, what a concept, I know.

Craig Hemke (10:57)
What a novel idea, David. You can only short what you have.

Jeez, ⁓ here we are. ⁓ The communist Chinese marketplace seems more fair and whatever. right, well anyway. ⁓

David Morgan (11:13)
I have to tag on that. know we have limited time, but honestly, the

first I've only been to Beijing once. I've been to Hong Kong numerous times, but mainland China one time. when I was there, it was probably about 2008. But honestly, I said to everybody that I knew after I left that there's there's places in China that are much more free market than we are. And that was the truth. Now, not that it isn't communist party running all that. I'm not trying to diss that off.

But you get out in the country, they have a saying that can't speak Mandarin, but the saying is the emperor is very far away. In other words, our communities do what we want and it works for us and this is what we're doing. Come and get us,

Craig Hemke (11:54)
Yep. David at the Morgan report, you've often, ⁓ you follow silver mining stocks as well. ⁓ I'm sure you've seen, I think you, Tavi Costa maybe had a chart of the relative valuation of silver versus the silver miners, you know, being pretty much at all time lows because there's so little participation. We're sitting on the, on the edge of a big week for fourth quarter earnings out of a lot of silver miners.

What are your thoughts on that whole sector ⁓ of the mining department, if you will, and going forward?

David Morgan (12:33)
It's the best place to go with new money. If you're new to the sector, I mean, I always stress physical first, you spot money, whoever you're comfortable with. But once you've got, you know, two or three months worth of physical metal as a last resort, you know, monetary unit, then why not move into something where you got some leverage and it's undervalued? That's the mining chair. There's no doubt about it. And, you know, someone with the clout of a Rick Ruhl sold silver or most of it or three quarters of it.

and been in pretty much of the mining shares. And there's one I won't name the name, but there are problems mining anywhere. And Mexico unfortunately has a lot of cartel problemos. And one that we just put on the list got hit pretty hard and it's upsetting, but it's a real world. It's actually an opportunity not to make a big bet because you don't want to bet big on those types of situations, but it's one of the best in the West.

Craig Hemke (13:12)
Yeah.

David Morgan (13:31)
And it's half price. It's on sale. So you could speculate with, you know, thousand or two or 10, whatever your, you know, percentages are for your portfolio size, probably doubling your money pretty quickly and sell it and ride that, that second half for free. I'm not going to give investment advice. I'm just telling you what Jim Dines started, you know, 40 years ago called a free trade.

When you double in a junior, sell half and keep the rest for free, that way you can't.

Craig Hemke (14:05)
There are so few ⁓ primary silver miners. Eric Sprott complains about this all the time, how hard it is to find ⁓ silver mining stocks. Where do you start in your evaluation of them? Do you look for the actual producers? Do like more exploration companies?

David Morgan (14:05)
Yeah.

No.

Thank

Well, I've had metrics since I started a Morgan report because it got burned as a young man and a junior so badly. I didn't want any of my readers to make the same mistakes I did. So I've started off waiting in the portfolio, like 70 % in the blue chips, 20 % in the mid tiers that are producers. A fairly good bet on junior producers, which is kind of that sweet spot when the market's hot because they're already producing.

It might be producing just at the margin. They're all sustaining costs is 30 and so is at 32. I know it's at 80 to 70 something today, but you get my point. And then the rank speculations and that's gambling. So if you'd structured the way I do, you've done well. Not, you know, have I made some misses? You bet I have. Where have I missed the most? In the ranked juniors. I used to have a hot hand there, but that's, you know, bragging 20 years ago. Nonetheless, once this market really gets hot,

They'll be moose pasture selling as if it's a top tier because people will be late to the party. They want to catch up. They'll play catch up. They'll look for cheap stocks. They'll buy something with gold and silver name, not doing any due diligence whatsoever at all. Let their emotions run and buy penny stock.

Craig Hemke (15:37)
You expect we're going to have some pretty friendly numbers for most of these companies next week?

David Morgan (15:42)
I think the algorithms in Wall Street are going to see the value stocks are the miners. It's almost irrefutable. And I think we'll start getting more institutional money into them. Again, kind of how I structured it. mean, big funds aren't going to put money in a lot of juniors that they will put it in the top tier. So I think that's the safest bet at this point in time, Craig. But we all like to expect. mean, most people like to speculate. But do it do it with, ⁓ you know, mindfulness. Don't just.

go in there because of emotion. mean, emotions get in the way of the best.

Craig Hemke (16:18)
Here's one final question for you. Somebody asked me this this week, so I'm going to ask you. Would it almost be beneficial for silver to go sideways for a while? Would that allow, because there's so much, I'm not getting into miners because silver is just going to go straight back down. I'm going lose my shirt. Do you think if silver could just go sideways for three, four, five months, that that would benefit a lot of the mining shares?

David Morgan (16:38)
It could.

First of all, yes, is the answer. I think it'd be very healthy for everyone if it just cooled off and went to the trading range. So that's the answer. How long? Well, you know, it's who's how old are you? You know, I've been in the market as long as me. Six months would kill me. it's like, don't want it this long. I think it's probably going to be about six weeks, Craig, but I don't. I would be surprised if it went more than a couple of months due to the strength in the market and how little physicals on the Shanghai.

Craig Hemke (16:53)
Hahaha

David Morgan (17:10)
But we'll see. But no, I think it's great. The thing about a consolidation that's going horizontal is the easiest market to trade. It's so simple. You draw an upper boundary and a lower boundary. When it breaks a boundary, the upside to go long. If it breaks the boundary, the downside to go short. And it works like 90 % of the time. It's like almost with the overused word no-brainer, but it is.

Craig Hemke (17:27)
Yeah.

What, and you can actually see that on the chart now. mean, 70 seems to be the lower bound since all this collapse of a couple of weeks ago and 85 maybe is the top side. Do you think, uh, by the time we do this again, David, are you, are you inclined to think that we'll be above 85 or below 70 by the next time we talk?

David Morgan (17:52)
I hope

it's above 85. I mean, I don't have a car payment anymore, but my insurance bill has gone up, so I'd like to see it above 85.

Craig Hemke (17:56)
Hahaha

All right, my friend, look, you've been at this, like I said, you've dedicated your entire adult life to silver. And I think your expertise and your accumulated wisdom is invaluable. There's a lot of folks out there that became experts last week. ⁓ So I think people that are on the block once or twice, ⁓ add value. ⁓ How do people contact you? And the website is themorganreport.com.

David Morgan (18:27)
That's correct. Themoneymanreport.com and take a look at the documentary. It's called Silver Sunrise and it's at silversunrise.tv. Comments are open. It talks about more of spiritual side of money, what the money masters have, fear, control and stress in our lives due to the control over money. ⁓ But really there's more to the human experience than money. Yes, it's important, but we are, our community, our heart to hearts, our reality with each other really is more important than the social media.

I mean, I use it all the time. I don't want to be a hypocrite, but there's nothing like a live conference, Craig. You know, I know you, I've seen you, and I feel good with you. But you know, we broke bread together. That's different than just doing a webinar over the computer. It just is.

Craig Hemke (19:08)
Yeah.

Yeah, for sure. The name of that movie again, David, I should have mentioned it myself.

David Morgan (19:18)
Silver sunrise,

one word, silver sunrise.

Craig Hemke (19:22)
Just look at that, is it on YouTube?

David Morgan (19:24)
⁓ My producer is going to put it on his YouTube channel. I think we have it on our YouTube channel. I know I've just clicked the little icon and it'll start playing. So there's not much to it. Just go to that website, click a mouse and you're on.

Craig Hemke (19:40)
and at themorganreport.com you can find information about your services and subscriptions and all that.

David Morgan (19:46)
Yeah, free and paid both and ⁓ lots of stuff for free on the blog. mean, I've dedicated, I won't say more time than Mike Maloney, but I think, you know, Mike and, you know, Andy Sheckman and Sprott Money. mean, a lot of us have put a lot of free, our most valuable resource time into education, trying to empower people, trying to teach people, trying to help people. And I will continue on that path, but I also have to make a living. So, you know, I do have a page.

Craig Hemke (20:17)
themorganreport.com. My friend, thank you. Please keep going. need as much help as everybody needs, as much help as they can here in 2026, because it's going to continue to be bumpy, I'm afraid. ⁓ I sure hope, though, that we can do this again soon, and I can count on you for some more good information.

David Morgan (20:36)
My pleasure, Craig. Thank you.

Craig Hemke (20:38)
Always great to visit with you and thank you everybody for watching. Again, thank Sprott Money for putting this together. Hit the like or the subscribe button because again, we're only halfway through February. There's a whole bunch more information coming. You don't want to miss any of it you'll be notified of it as soon as it hits. If you're on that list of liking or subscribing. All right. Keep Sprott Money in mind as we go through the rest of this month and keep an eye on this channel too. David, thank you so much and we'll have more information for you as the month of February continues.