One of The Best Minds I’ve Known on Wall Street Interviewed on BNN
December 4th, 2008I learned more about economics in a cab ride from the airport to a conference in New Orleans with Jim Grant then everything I ever heard from the Talking Heads on CNBC. Jim was a columnist for Barron’s for years before going out on his own. I’ve had the pleasure of being on the same program at conferences with Jim around the world. Like with Jim Rogers, I’m all ears when I’m blessed to have some private moments with these folks.
I saw on BNN’s website Jim was interviewed on BNN today. As always, he was most informative:
Many of us on the speaking circuit called Jim Clark Kent. See if you agree.
December 5th, 2008 at 2:02 am
Sitting here before turning in and wondering what could be done with the auto industry. Sadly, it’s headed for shutdown of about 50% capacity with or without a bankruptcy and it will ripple thru the supply chain of nearly 2,000 companies. Most of the suppliers are bankrupt and many are probably overseas so maybe the consequence won’t be so severe. One of the unspoken consequences could be an interruption in parts flow and delayed assembly production which would bring havoc to continuing operations. A good number of suppliers will probably be liquidated. So many many problems. Often I feel that we’re sinking into a Black Economic Hole.
Anyway, the interview with Jim Grant was a little too brief and the interviewer should have asked, “Where does this all end up?” In the absence of his response, I would say that it all ends up in Hyperinflation. There’s no formula to calculate how much deficit financing and money creation will send prices spiraling up nor when. For my guess it could be anytime after arrival of the next stimulus checks, but by the next decade which is approaching.
Time will tell.
December 5th, 2008 at 9:54 am
Hi Peter, do you think it is a good time to buy some Oil ETF’s such as the “HOU” on the Toronto TSX– It seems to have reached your approx of low 40.00’s
Thanks
Anna
December 5th, 2008 at 10:04 am
Anna - keep your powder dry. The economy is in total free fall now. OIl is almost certainly going to be where I head but at this very moment time appears on the side of us who are standing on the sidelines.
December 5th, 2008 at 10:51 am
One analysts this am called for 25 dollar oil…yikes
Interesting video of IMPORT cars building up in California
http://news.bbc.co.uk/2/hi/programmes/world_news_america/7764066.stm
December 5th, 2008 at 12:18 pm
Peter, do you have an opinion of what is going on with the sabre rattling between Irasel/ Iran. I’m wondering if they would possibly , god forbid make a strike at Iran’s nuc. facilities before Bush signs off. If oil does falter as low as some of these predictions gold will have to decouple or face the risk of testing long term supports???….so if inflation is aways off….what else…
December 5th, 2008 at 12:24 pm
And tp boot several hedge funds have halted redemptions for fear of total colaspe…..can you imagine being told in this market that you can’t get your money out…yikes. I mean with all of this verrry scary stuff going on what’s with gold…it’s looking very weak again.
December 5th, 2008 at 2:16 pm
They say that some things are to good to be true,well I’m in the oil business and I work in the Oil Sands.Another major project was cancelled or delayed today.Why is this to good to be true??We will see a rise in the price of Oil again and the next time It should not come down.We have postponed projects that were to supply us with oil in 2015 and when supply meets demand look out.Oil may go to 35.00,but it will not stay there and this will be your oppurtunity of a lifetime to cash in.There will be a bottom and the top will be much higher than we have senn.You see we are not finding any oil and other suppling nations are running out esp S .AMERICA.The USA will have none to speak of in 2015 so my question is Where is it going to come from.Certainly not the Tar Sands.Start saving your loonies ans twonies for the buy of your life time.
December 5th, 2008 at 2:53 pm
Personally, I think owning gold bullion or highly capitalized gold stocks is prudent at this time. It may be the only hard asset that will hold any value if the money system falters. It has also held up better than most other investments in the current environment. Once this period of deflation comes to and end, inflation, or possible hyper inflation will raise it’s head and that should be good for gold prices. If and when that scenario unfolds is anybody’s guess. Currently, the spot price of gold is being controlled (manipulated) by the paper market. Until a large holder of paper calls for delivery and can’t get delivery due to supply shortages, prices will remain in the domain of the paper market. A weakening U.S. dollar will also be good for gold.
The only thing that is disconcerting to me is the amount of money that has flowed into the retail gold market via the Ishares Gold Trust (GLD). It now holds approximately 750 tons of Bullion and growing. It is the 8th largest holder of gold in the world. If that trade begins to unwind it could do so with a vengeance. So there is also some downside risk. As Peter says, keep your powder dry. Any market exposure should be hedged on market rallies to preserve your capital.
See: http://www.zealllc.com/2007/gldetf3.htm
See:http://en.wikipedia.org/wiki/Official_gold_reserves
December 5th, 2008 at 3:24 pm
*** THE TINDER BOX ***
Sometimes investors become caught up in overly negative or bullish sentiment and the emotional distortion leads to errors or missed opportunity. This is perhaps an investors biggest challenge - to separate and filter out the noise. This is a part of it.
A news brief this morning states that 10% of all outstanding mortgages are either in arrears 30 or more days (6.99%) or foreclosure (2.97%). That was at the end of September and the mortgage arrears are probably related to unemployment which is rising sharply. There’s still a lot more to come with a probable auto industry downsizing. If they carry that excess capacity hoping for a cyclical recovery, it will simple drag the inevitable on longer. There’s nothing in sight to arrest the downtrend and the service sector is under pressure too.
So if we consider the immense mortgage arrears, the probability that credit card debt is shoring up the mortgage arrears, the corporate debt problems, and ordinary debt problems weighing upon banks, and everything else, including beleaguered State governments, it leads me to wonder - How can the banking system survive? Whatever’s left of the 700 Billion Dollar TARP funds seems very inadequate. Will the banks be overwhelmed into mass failure? Between loaned funds & standby guarantees the Federal government has reportedly assisted the economy with 7.5 to 8.5 Trillion Dollars. Is it enough? How much of the government guarantees will be called for payment? The Trillions are flying by and there’s no end in sight. Then there’s spending on new programs by an incoming administration along with a push for ‘National Healthcare’. How could we be so fortunate to miss hyperinflation? How can we avoid monetizing the deficits? Where in the World could all this money come from other than Monetization?
Meanwhile, Silver seems to have traced out a clear five wave down pattern and is basing here. Gold is less clear, but perhaps is setting up a new base which now spans nine months. The strong demand for physical Gold seems to be a classical removal of supply ahead of a price advance and confirms ‘Accumulation’ in a basing phase.
Oil? Nearing $40 Barrel, producing Canadian Oil Sands could be at risk for shutdown and the U.S. receives almost 2 Million barrels per day. This price collapse is quite damaging to longer term interests. If the recent I.E.A. report is correct (And it is a study) the depletion rate is 9% per annum while worldwide demand is flat. It does appear that the Oil price decline is a paper driven event as the U.S. government chased speculators from the commidity pits and hedge funds liquidated. By all appearances It does seem that the respite from rising Oil prices will be brief. Worldwide grain supplies are at multi decade lows and plantings for 2009 may be down threatening higher prices ahead.
The U.S. Dollar seems to be struggling under distribution at these levels, but could stay aloft near these levels until March 2009. It should turn out to be another top.
The stock market? It appears that we are in a temporary counter trend that might be capped at or near 1000 on the S & P 500. Indicators and wave counts are notoriously unreliable, but it appears that we are preparing for the final part of the third wave (Down) . The third wave down in the U.S. stock market started in May 2008 and it may end in March 2009. Then we should have a counter trend rally before the final ‘Fifth Wave’ down. My opinion is that the S & P 500 is heading toward 500 or lower in the second half of 2009.
Once the ‘Third Wave’ down in U.S. stocks ends around March 2009, the intense part of the decline will have ended and this is the point where the market leaders begin to advance. I can almost promise you that Precious metal issues and the physical precious metals will be the market leaders, probably along with energy which could lag a bit.
Junior exploration issues? Uranium looks interesting again, and it could be basing. Precious metal exploration issues look similarly constructive perhaps because prices are at extremely low levels. The major Gold mining issues should hold above the October 2008 panic bottom as they prepare for a new advance in a ‘Third Wave’ which should persist for years and years.
So tying it all together —- —- The strong underlying fundamentals of Precious Metals & Oil, hyperinflation of the currency & enormous deficits, a new round of stimulus payments ahead, the coming end of the intense 3rd wave down in the stock market, continued economic deterioration and threat of a massive banking failure —- —- somewhere around March 2009, perhaps coinciding with mailing of the stimulus checks, the Precious Metals and probably Oil will resume an advance. That would herald the start of a price spiral of consumer goods some months later, around the start of the new decade. By then, most commodity prices will resume their uptrends.
This is a tinder box waiting to go off, and we’re almost through the severe correction for resources.
December 5th, 2008 at 6:37 pm
Great time to buy things if you have excess money,basically giving away elestronics and auto’s.Took a trip to Florida with the family in November and you get the picture,as all those towers that were pre-selling for $500,000.00 are now sitting empty with the lights off.There is probabley so much real estate sitting in the creditors hands that it will take years not months to play catch up.The auto industry is in the same state but if they had any smarts they could cut back production by half which means going to a shorter work week for the employees.They will scream but at least they would still have some income.The other choice is what is giving all those political guys and gals their nightmares.