Peter Grandich Predicts Trouble Ahead For U.S. Economy & Stock Markets

October 15th, 2007

Peter Grandich, of The Grandich Letter fame (he successfully predicted several market crashes and their recoveries with extreme accuracy), is predicting some troubled times ahead for the U.S. economy and stock market. It doesn’t take a genius to realize he is on to something. I’ve believed for years that there will be some troubled times ahead. His basic premise is that a combination of an aging population, geopolitical troubles and mounting debts will ultimately cause some problems in the future which are NOT priced into the market. You may be better off not being a blind bull.

Peter Grandich’s Latest Commentary: “Man Your Battle Stations”

In this latest commentary “Man Your Battle Stations“, published on October 14, 2007, Peter Grandich outlines his views of the economy and his reason behind his views of what may occur. It is a well written 33 page article with plenty of information and lots of external links and sources. I recommend EVERY single reader take the time to go through it. This is stuff that I have always thought is going to occur and I’ve been putting these pieces together myself for quite some time. It’s an honour to finally see a respected financial guru also begin to talk about the same things. It further reinforces what I have been seeing will come in the future - maybe I’m not crazy!

I’m not a doomsday preacher and I’m not a pessimist; I think we can do many great things in the future and it can be very bright, but we must start to address the mounting issues before they become even more severe… and instead of talking about them, people are discussing what Britney Spears is doing!?!?! WTF. These predictions are not for the next day, month or even year… but are much longer term forecasts about the issues that will plague us over the coming decade(s). I’m telling you this stuff because I believe they are the MOST IMPORTANT ISSUES we will face and many people may lose their entire retirement nest eggs if they continue to blindly follow the Wall Street Crowd which would have you believe that the stock market will go up and up forever and ever.

An Aging Population

This is one of the big problems I’ve noticed (and everyone should be noticing this!) is around the corner. The baby boomer’s are retiring and with them goes a large qualified, hard-working segment of the population. I’m from the young generation and while I’ve seen plenty of hard workers my age, I also see way too many brats (they’ve been given everything for nothing) that have a less-than-perfect work ethic and little loyalty to their employers (and for good reason… they’ve witnessed their own parents get laid off after spending a lot of years working their butts off for nothing - damn corporate restructuring! Employers that don’t show any loyalty to employees shouldn’t expect employees to show any loyalty to them!).

The real problem is that the most productive bracket of society will ultimately become the biggest drain as they get old, frail and require a lot of care and support. Whether it is health care or pensions, there doesn’t seem to be enough money being put away to fund the social programs that will help care for our elders.

Debt Doesn’t Help!

I hate to say it, but I’ve spoken about this a few times as well. The mounting debts only create more problems. You can’t keep buying things today and paying for them tomorrow, especially when you will eventually retire (in one way or another). You can only buy so many expensive homes before you realize its going to take you 30 years to pay for them and if you don’t plan on working another 30 years there is a slight money problem that is easily identified with arithmetic! This isn’t helping the value of the USD either… with a slowing economy and mounting debts, bad things happen.

Geopolitical Concerns

The Middle East… need I say more? Will Israel or the West let them (Iran, Syria, et. al) get nukes when they have told us they will use it to destroy Israel and the West? Then throw oil into the mix and there are some real problems. Add a few Islamic Extremists and things don’t seem to get any better.

Mounting U.S. debts owned by China and others is another key problem. They have started to threaten the U.S. and use their control over U.S. debt as leverage - how long should Democratic U.S. play hostage to Communist China? China wants Middle East oil as well and is behind the scenes helping the Mid East fight the West… I call that a proxy war.

I’m not spending an awful lot of time on these geopolitic problems, but they are extremely important and very obvious!!! (Can’t stress this enough!)

A Falling USD

The USD is worth over 60% less today than it was five years ago against the Canadian Dollar. Obviously a Canadian Exporter who sold goods for $1 million USD five years ago got $1.60 million Canadian… now he gets less than $1 million Canadian! Obviously Canadian Exporters are hurting… but even we are more worried about the USD than our exporters. Not only is a STABLE USD critical to the Canadian economy, but it is critical to a stable world economy! Resources continue to be priced in USD. Oil is up a lot… but when you factor in the drop in the USD compared to many other countries… is oil really up much at all? Are any resources really way up? Don’t forget to factor inflation and the rising cost to explore for resources and build mines and oil rigs, the labour crunch that is going on in other nations… these are some of the reasons why production isn’t shooting up as fast as people expect it would when prices for the resources have shot up.

Regardless, the bigger picture is that the world economy is becoming destabilized on MANY fronts… whether it be the price of resources, the labour crunch, mounting debts, sky rocketing health care costs, unfunded pensions, real estate prices dropping, oil becoming harder to find (and costlier), Islamic Extremists gaining control of nuclear weapons, Communist countries (China) threatening to crash the USD by dumping debt, illegal immigration, etc… the list goes on. The USD is the closest thing we have to a world currency and its beginning to fail. This is a sign that the US economy is not as healthy as a lot of CNBC “experts” would like you to believe.

The Future Can Be Bright, But We Need To Deal With Some Issues Head On

I’m not a pessimist either! I think the U.S. and the West can have a bright future but we must stop buying things we don’t need. Stop taking on debt and balance the budgets is the very first thing. Cutting costs will involve cutting some social programs, for which lots of people will not let happen without crying - my reply is NOTHING IS FREE.

Obviously you can’t let extremists get nukes or that will cause a world war. You can’t be soft on some of these issues… THEY WANT NUKES AND THEY WANT WAR. Many pacifists will never get swayed until their families get nuked, but we can’t let it come to that. We need a stable USD as well or the world economies won’t be stable… and without a stable world economy it’s a lot harder to keep peace. We need to deal with these issues and much more… but once they are on people’s radar screens we can stop making the problem worse and begin to deal with the mess we’ve gotten ourselves into.

The U.S. Needs Inspiration & Direction & To UNITE

And finally, the West, The U.S. and the World need to have a new inspiring vision of the future, something to look forward to and work towards. Ultimately I think that will be going to space and mining/colonizing it AND changing away from an oil based economy. There are plenty of resources for every man woman and child in space and this may help to stop wars over resources (at least on this planet I hope). It might not stop wars over religion or other issues but it can help provide enough resources for every human on Earth. By spending our time developing new technologies to travel beyond this planet, perhaps we will eventually get to a world where peace is easier to come by.

Peace is not easily had when people in one country have plenty and across an imaginary line in the dirt in another country, the people starve… that is not a recipe for peace. Even within a country as rich as the U.S. (or poor and heavily in debt depending on who you ask), millions can’t properly feed their own families (which ends up causing plenty of problems within the country!). We need a new vision and some inspiration - a direction. The best days for the U.S. was when it was inspired, united and had a goal (like jumping into WW2 and later going to the moon!). Things got done quickly and the nation had a mission to accomplish.

Somewhere along the lines the U.S. lost its ambition to push forward to the future. Almost forty years later our goal is to… RETURN TO THE MOON? That’s the best that could be accomplished in forty years of being a super power? Read “Confessions of an Economic Hit Man” and John Perkins sequel “The Secret History of the American Empire: Economic Hit Men, Jackals, and the Truth about Global Corruption”. Perhaps you will see that the U.S. has been struggling to help keep itself well positioned on this planet. Instead it should be thinking about moving technology forward and reaching for all the riches and resources contained in space and getting beyond an oil based economy.

Imagine all that money, time, human resources and other capital had been spent trying to colonize and mine other planets, asteroids, developing a system to get solar power from that big fusion generator (the Sun!)… there is more power from the Sun alone than all the oil contained on this planet. What have we done? Fight for scraps of oil on this planet. Small thinking! Thinking like that is going to cause problems. I’m ranting and probably no longer coherent so I’ll stop for now.

Grandich Shorts The U.S. Stock Market

Peter Grandich states that he has shorted the U.S. Stock Market for one of the first times ever (he has done it a few times before, but its very rare). He shorted the market by buying two ETF’s; ULTRASHORT QQQ PROSHARES (symbol QID), and ULTRASHORT S&P500 PROSHARES (symbol SDS).

Grandich Likes Gold!

Peter Grandich believes the inverse relationship between gold and the value of the USD will continue to hold despite attempts to manipulate it. With the continuation of the devaluation of the USD, he remains very bullish on gold and likes its supply/demand fundamentals.

Want To Know What Else Grandich Predicts?

Grandich makes some commentary on Gold, Silver, PGMs, Base Metals, Precious Metals, Uranium, Oil, and the USD. I highly suggest you go read the stuff! It’s all on par with what I believe and I am delighted that someone else is finally discussing it and warning investors to be aware of it! I’d hate to see people lose their retirement nest eggs and I think everyone should step back and look at the bigger picture of all the factors coming to play. Only then will you make informed decisions as an investor.

To top it all off, Grandich even makes some commentaries on some great mining companies and you can even see some of his holdings! BTW, he recently announced his biggest family holdings are now in Geologix Explorations [TSX-V: GIX] which trades at $2.10. He also speaks about how he believes Northern Dynasty Minerals [TSX-V: NDM] is on one of the best mining companies in the world with its 50% stake in one of the worlds largest mineral finds (it trades at $12.30).

Summary

Step back and look at the bigger picture. Even if you don’t agree with my (or Peter Grandich’s) assessment of things, it is imperative that you think about how these issues will affect the U.S. economy and stock market - and ultimately your future. That is all I ask. Think about it carefully and address some of these issues yourself in any way you can. Set up your portfolio so that if things do go bad, you don’t end up being a victim. Start to pay off your debts and think about the future! I guess all I can ask is that you sit down and really carefully think about the future, what may happen and what you can do so you’re not part of the problem.

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