Knowing that soothsayers are only as good as their last call, yours truly has gathered in his tea leaves, ouija boards, horoscopes, lucky numbers, rabbits’ feet, horseshoes, lucky underwear (clean) and all other forecasting “tools” in order to “see” the future.
Two very important facts must be considered when you’re in the business of “seeing” the future:
1 – Only God really knows the future (sorry, but Cramer is not God).
2 – Those of us who fool ourselves into thinking we can look into a crystal ball and know the future always end up eating a lot of broken glass.
With this in mind, I will discard all the tools mentioned above and try to simply make an educated guess based on my 25 years of experience, (some of which was spent making some awfully poor predictions). There’s no “one-size fits all” analogy so please make sure you discuss any and all investment ideas with your financial advisor (if you haven’t fired or shot them by now).
Overview – Back in late 2007 when I turned as bearish as one could without slitting his throat, I stated on Canada’s Business News Network-BNN (www.bnn.ca – what a financial cable station should be) that we wouldn’t see a secular bull market again in my lifetime. I remember that statement made one of the anchor personnel raise his eyebrows (I can guarantee that by killing myself before one would start). I’m 53 and while I feel I’m moving into my last home as we speak, please God have a need for me to be around long enough to see grandchildren running around in it.
You have to remember that the DJIA had just recently made an all-time high, so to say we won’t see another mega bull market for perhaps 20+ years was going out on the limb at the time.
We all know what has taken place since then, including the greatest bear market rally ever (and thanks be to God I fully participated in it). This rally allowed the mortally wounded “Don’t Worry, Be Happy” crowd on Wall Street, aided by ground, air and sea support from a tout’s best friend, CNBC-TV, to come out from their foxholes and hospital beds and declare “Green shoots for everyone.”
Call me crazy (but please call me), but I think not only has the “happy” gang got it wrong again (funny how the word wrong is not in their vocabulary), but what lies ahead is actually going to be worse. Now I know the “madman” on CNBC-TV gave an all-clear signal (virtually at the top again) and your financial adviser is not only answering his or her phones again but calling you with “ideas” like old times, but what we went through up until now was only the opening act.
The good news is this time around it won’t be a free fall of pure panic but rather a slow torturous multi-year trek down with occasional moments of sunshine followed by one storm cloud after another. What’s good about that? Well, just maybe some will actually prepare this time around.
Bottomline – America as our parents and grandparents knew it is gone! Let me repeat that – the America of our parents and grandparents is gone!
I could write until the cows come home all the reasons for saying this but I’ll make it easy for you and me: we’ve lived way beyond our means for too long, have taken on so much debt in order to live a lifestyle we didn’t deserve and that debt has become too large for us to repay over any length of time.
As a nation, we won’t be able to generate enough cash flow to pay down debt after we pay for necessities of life and taxes that are going to skyrocket on all levels of government, leaving us no choice but to seek forgiveness of part or all of the debt and/or to monetize it.
Listen very carefully as I’m only going to say this once; this is why more and more countries want to get rid of the U.S. Dollar as the world reserve currency. They know what your friends in Washington know but can’t bring themselves to tell you, and that is “The only party that doesn’t know the U.S. Dollar is dead is the U.S. Dollar” (which I have been saying for the past few years).
I can write endless pages of very justifiable facts and figures that can support my argument including how by the time it’s said and done, President Obama will end up making every surviving American and foreigner who now dislikes George Bush beg Mr. Bush to run again. Laugh now, but it won’t be too long before deep down in your liberal bellies you will know how true what I say has become.
This will cause hate email for me but here goes anyway – Obama will be the straw that finally broke America’s back. He has set off a chain of events that have already terminally damaged the very fabrics that once made this country great. The day he forced secured GM creditors to fall behind unsecured creditors will be looked back in history as the watershed event. Just because 99% of Americans and so-called professional financial advisers don’t grasp what this meant (or care), doesn’t make it any less horrific.
As weeks turn into months, this should become more evident and show up in our financial markets.
With this in mind, my generic investment model looks like this:
- Own little or no U.S. equities except those related to metals and other commodities I may be bullish on at the time. Because I expect the U.S. stock market to go into a broad trading range of DJIA 6500 to no more than 10,500 for years to come, there may be times to go long U.S. equities in general but only for trades.
Long-term, general equity holdings are likely to be only Asian, Canadian or selectively world-based but none at this time.
- U.S. Interest Rates are going to rise dramatically regardless of the state of the U.S. economy once the Fed can no longer keep its finger in the dike. That time is very, very near. Most U.S. Dollar denominated bonds should be avoided. The next crisis is municipal bonds as more U.S. States become California I, California II, California III….
- Once gold closes comfortably above $980 (and that should happened no later than after gold’s seasonally weakest period of June-August is past us) we can see four digit gold here to stay and a steady rise to $1,500 in the next 3-5 years.
- Because parts of the world should return to growth, demand for certain commodities like copper, oil and food commodities should make them part of one’s portfolio. But gains should be within a trading range and therefore a simple buy and hold attitude is ill-advised.
For those who can financially and mentally afford the risks of gambling (speculating is just a word Wall Street created so not to have to say gambling), I do think some selective stock holdings can be beneficial. This is my model portfolio as of today.
If you don’t have any exposure to physical gold and silver bullion, one should acquire some ASAP. Some of the ways I like to do so are:
gold and silver ETFs like GLD-NYSE and SLV-NYSE. CEF on the Altnet is also quite useful.
If you’re one of those “Blood in the streets” people, actual physical bullion that you can tuck under your bed and next to your guns, dry food and directions to your log cabin in the woods is okay. I don’t bother with that scenario since if you end up needing the guns, food and log cabin, you won’t be able to hold onto your gold for long. Me? I’ll just go down to my church and ask God for a fast and painless exit (kind of like the Canucks losing in the playoffs year after year).
My favorite currency continues to be the Canadian dollar. I wish Canadians wouldn’t mind calling it the Loonie as they should avoid any possible association with anything called a dollar. FXC-NYSE is a way to play the Canadian dollar/Loonie.
I’m looking to add new ways to bet on higher U.S. interest rates but for now my two favorite ways are PST-NYSE and TBT-NYSE.
I was very fortunate to catch oil virtually at its lows and rode it up for some great gains. But I turned quite bearish on it of late and my crystal ball saw it heading back to the 50s. If and when that occurs, I should look at getting long again so stay tuned.
Finally, I’m a gambler/speculator at heart and a sucker/buyer of low-priced stocks. With this in mind, the following companies are not only on my list, but I also personally own them.
- Continental Minerals (KMK-TSX-V $.91) – China is becoming more aggressive in its accumulation of commodities and unlike poor Uncle Sam, is using its cash reserves to expand its holding into hard assets. Copper is an extremely important metal to China and KMK has one of the most attractive copper projects in their backyard.
The uniqueness of the project besides two great deposits is the way the joint venture partnership was struck. KMK basically is carried so it makes sense for the Chinese partner to take out KMK now versus later. Rumors have circulated about such a move and led to a sharp rise in the share price. Like so often, nothing public comes out and the stock retreats. Overall weakness in the markets in general has added to the retreat. This doesn’t change the dynamics and, in fact, makes it even more attractive. Aggressive speculators/gamblers should add to their aggression with the share price under a buck.
- Nevsun Resources (NSU-Altnet$1.15) – The market grew tired as the second quarter ended because NSU management kept speaking about their financing being done by then but it wasn’t. This led to distress selling, which I took advantage of to buy shares. Ninety-eight percent of all deals in the mining game take longer than first thought and NSU is no different. Once this financing is done, IMHO NSU’s days as an independent public company are numbered.
- Northern Dynasty Minerals (NAK-Alnet $6.65) – The largest undeveloped copper-gold deposit in the world today. It may have taken a lot longer than first thought (thanks in part to the worldwide financial crisis), but I continue to believe a takeover of NDM is a question of when, not if. The closer to $6 U.S., the more attractive the shares become.
- Taseko Mines (TGB-Alnet $1.60) – Expanding production, lowering costs and developing assets that can greatly add to shareholder value is what Taseko is all about. Clarity to earnings potential is likely to continue, which should only enhance share price over the long run.
All four are takeover candidates, IMHO. Please note NAK and TGB became clients of Grandich Publications after I put them in my model portfolio. KMK, while not a client, shares the same management team as NAK and TGB.
Peter,
Canadians don’t mind calling it the Loonie. Heck, we invented the term.
Of course Cramer’s not God – but he is the pope of the Church of CNBC, therefore he must be infallible. Right?
Finally, that picture of BushObama is downright creepy. You shouldn’t show us these things. I may not sleep tonight…..
Thank you Peter. We’re just going to have to deal with it. And we will. I’m determined. Thanks for caring.
Peter,
Thanks for the update.
What would your outlook be for Canadian Government and Corporate Bonds with the rising interest rates you see happening. As the U.S. stock markets go down I would assume that the Canadian stock markets will follow. How would the above mentioned bonds hold up while the markets are heading towards the lower end of the trading range you predict (DJIA 6500)? Your comments would be much appreciated.
Pretty accurate assessment … posted some similar thoughts earlier today.
the prophet
thanks very much on the update.
any suggestion for old folks who need monthly income do with their investment? thanks again.
I believe in Taseko as well and now is a great chance to get in on a top mine for virtually free. Here is our analysis on the chart and company.
Taseko About to Move
PETER,
What is your investment advice for us Canadians – specifically around the gold ETF’s and US Dollar/Bond situation?
Should one be divesting of current oil stocks (Suncor etc.) to rebuy at new lows or hold on and ride out the next BUMP.
Rollar Coaster rides are supposed to be fun arent they?
Once gold closes comfortably above $980 (and that should happened no later than after gold’s seasonally weakest period of June-August is past us) we can see four digit gold here to stay and a steady rise to $1,500 in the next 3-5 years.
(Peter)
Peter, hope you won’t mind this question. When you said “$1,500″ within 3 to 5 years, are you referring to “AVERAGE” price, or a rally to $1,500? It sounds kind of a conservative # to go up only 50% in 2 to 4 years
What do you think of this Peter?
http://www.youtube.com/watch?v=_18t2_XvZRA
Some of the blog by, the orgproghet has agreat deal of basis for what I have been seeing across this country, so I too posted what I thought negated a lot of the nagativism going around by many pundits. Consequently, I find myself not agreeing with everything you envision. In the late ’70s and early ’80s, I was personally hit with bank interest rates as high as 24% on construction loans and survived , in fact I did quite well. Printing of money is going on by all nations , not just the USA, if fiat currency collapses, it will be worldwide with everyone in the same boat.
As to the stock market, I treat it separately from the economy and believe that a tremendous bull market could develope. As to oil, I believe and project crude going below to the 25-40 area for a long litany of reasons. I also see gold, taking a big correction and or consolidation at which I think will settle at that level, maybe 850. I realize that the trillions printed kills the dollar but at some point I think much of those dollars will be burned and destroyed. The full faith and credit of the USA will be the world standard and is why I believe in what I am projecting, all IMHO.
If you see gloom and doom in this thinking for this country, please show me !!!!!!
I would like to add, T-bills in 81 or ‘82 was at the index # 83, what are they now , nowhere near it !
I always pay attention to your macro assessments and to date you have not disappointed. …….and it is free!!
Many thanks.
Hi Peter,
Any updates on FAN – TSX?
Thanks
I thought you only joked about the Canucks while you’re speaking in Vancouver…
Peter, I have the same question of Chris. Gold expectation to $1500 in next 3-5 years sounds very conservative?? Other day u had posted a research report of ERSTE group with the forecast of $1300 in a year and $2300 long term target( if i m not wrong,long term means 3-5 years. FInally, thanks a lot for all ur great updation.
If Mr. Grandich could just stay clear of the politics and religion, he’d be such a great financial pundit. I agree with just about everything he’s saying about economic prospects going forward and investment advice going forward. I’ve admired Peter’s gold and stock market calls for years. But let’s get real about the politics. I’ve posted this before and I feel the need to do it again, because from a historical standpoint it is so important to get the accurate perspective on things. The mess we see today had it’s origins in Ronald Reagan’s presidency. Look at the charts of credit market debt as a percentage of GDP- http://www.urbandigs.com/total-credit-debt-percentage-gdp.jpg and national debt adjusted for inflation- http://yellowroad.wallstreetexaminer.com/blogs/files/2008/06/inflation.gif ).
What you find is that all the factors that precipitated this crisis began in the presidency of Ronald Reagan. The explosion in national debt, the explosion in consumer debt, the massive trade deficits, deregulation of all industries, but especially the financial industry, the origins of derivatives. Conservatives now try to pin the mess on Obama. But Obama is like the fire engine that is coming to try to put out the 100,000 acre forest fire. It is not Obama’s actions that created this mess. Obama has the choice of letting the forest fire burn and seeing the economy go into a 1930s style deflationary depression. Or he can take the FDR approach and try to stimulate our way out of the mess, which very well may lead to the inflationary catastrophe Peter Grandich and myself are worried about. In either case, we’re screwed. Go ahead and pick your poison. But don’t blame Obama for the catastrophe that’s coming. Because it was the credit bubble that created it. And Ronald Reagan, George W. Bush and even my man Clinton’s repeal of Glass Steagall and allowing Phil Gramm’s Commodity Futures Modernization Act to squirrel it’s way through that led to this mess. In sum it is conservative economics that produce Great Depressions (think 1920s and last decade) and it is more often than not liberal economics that at the very least try to clean up the mess the conservative economics created.
The DJIA Will Mirror The Decline Of The U.S. Economy
Wave ‘B’ (Up) may still be alive
Recently, Mr. Grandich said in an interview – that it’s easier to see where we’ll be in five years than in six months; and usually it’s the opposite. Very true.
So in the World of my amateur Technical Analysis, we can be right about the long term, but direction can change frequently along the way in false starts to trends.
There are three logical scenarios for the general stock market, not listed in order of probability:
a) An abreviated 5th wave or a basing phase which takes us back to or toward the lows of March ‘09.
b) A final Fifth Wave down which could be extended, cutting the DJIA at least in half from the recent partial recovery high of 9,000.
c) Continuation of the uptrend which started in March 2009, perhaps taking the DJIA up to, but just short of 10,000. That would equal the 1930 recovery of 48%, and the exact number would be 9,945.
Perhaps probability favors (B) but we would need a fast close below the Neckline of an apparent top which has formed over the past two months. That would be below 880 on the S & P 500.
At the same time, some of the indicators are running out of steam to the downside, approaching points that in the past mark a reversal from a short term down trend to up. We need equity prices to fall decisively if Scenario B is to follow through.
——————————————
So what happens if equity prices stay above the Neckline for a week or two? Then the past two months might be a base to stage a continuation of the advance. The DJIA could finish up in the area of 9,700 – 9,945 in the late Summer months.
That would likely be the end of the ‘B’ Wave, and the ensiung ‘C’ Wave could carry the market much lower over a period of many months if not years. In the end, we’ll look back someday to see that the charts of the DJIA mirrored the decline of the US economy.
Future generations may see the recent rise from the Panic of 2008 as a last opportunity to exit, similar to the early months of 1930 which stretched for 6 months.
In the end, everything will be destroyed and Common Stock prices are the most vulnerable.
Peter, must be worried about the Andrew Raycroft signing to bring the Canucks up in this blog entry.
Hallo Pete
I would value your opinion about Seagrave’s book: Gold Warriors, the secret recovery of Yamashita’s gold.
I’m just readin it now, and if true it’s a wild wild card in the gold market.
hundreds thousands tons black gold, completely unacconted for, in the hands of CIA, bullion banks and US presidents.
that could explain unlimited bullion banks control of market, and spells very bad for us poor gold investors, though part of this immense black gold pool should already have been digested by market itself.
many thanks for your valuable thoughts!
ciao
Aldo
Hi Pete,
There appears to be some contradiction in your note – at one place you mention about a multiyear trek downwards and at another, you talk about years of range trading between S&P 6500 and 10500!
I do respect your views very much and shall be gratful for clarification.
Many thanks.
Raj
(London)
Peter;
The credit card bill of rights has become a joke. I just got an agreement change from Chase that they were changing the 2% min. payment to 5% even though I have excellent credit and pay above the min. A $10,000 debt with min. payment of $200 will now shoot to $500. This appears to be following the path of the housing market foreclosure. Do you think this will tank the finanicals again?
Thanks