Exclusive Grandich on The Resource Mkt, European Crisis & Shorting Bonds

Posted by Peter Grandich via Bull Market Thinking

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via Bull Market Thinking: For those who don’t know, over the last 25 years Peter is one of a few people in the world to have correctly called major market tops and bottoms—warning investors of the 1987 top, the 2007 top, and the 2009 bottom—within days of their actual nominal peaks and bottoms. During the interview, when asked about the most impactful item in the marketplace for investors to be aware of right now, Peter said, “The onoing crisis in Europe grips the markets on a day to day and almost on an hour to hour basis…there’s still somewhat of an expectation…that there will be a QE3 in earnest…We’re seeing just a dramatic slowdown in all areas of the world now, places like China that was once seemingly insulated from the world slowdown, is no longer the case.”

When asked about his thoughts on the mining share market, Peter said, “The further you go down into the food chain of the resource market, the uglier it’s been…it’s hard to imagine it, because unlike other declines…the metal prices are pretty much where they’ve been on average the last year, the general equity markets have not sold off in a big way—there’s nothing unusual happening in the metals and mining industry…yet as we go down that food chain from major producers to explorers, we see the damage acute.”

In regards to his extensive background and experience in the junior resource market, and whether or not this is just another “typical” down cycle he’s become accustomed too, Peter responded that, “The lack of sleep and the aggravation that has come with the territory, as someone who makes a livelihood in working with the juniors—it’s not fun to almost every day read hate-mail—I like to joke and say that’s from my family, let alone my readers! But the bottom line is…since the venture exchange was created about ten years ago, it’s gone through something like 7 or 8, or 9 boom and bust cycles. One thing that is familiar is when we’re at this bust side of it, we have a feeling or a sense of hopelessness, that’s [it’s]never going to reboundagain, and ‘How are these $.20 cent stocks ever going back to a dollar?’ [type of attitude]. But during the last ones [cycles] it did—[but] it took several years.”

He further added that, “This one is a little bit different, because it really came out of left field. It really wasn’t part of something that we can point to in the past as I noted earlier and said, ‘Ah-ha, now you can see why the market has come off in the way that it did’, and I think the shock of it has left people dazed.”

On the concept of the coming American debt crisis, and the idea of shorting 10 year US government bonds ahead of rising interest rates, Peter said,“Europe has been a few years ahead of us in the debt crisis. No matter what anybody wants to think, America is no better off from a debt level [perspective], than most of the European countries that are going through the crisis…Once the European position looks like it’s past it’s worse, the focus I believe will come to the United States, and the realization will be, ‘We’re as every bit as bad as Greece, Italy, and the others’,  and then the bond market no matter how slow the economy is, no matter how much the fed is printing, will get hit, and get hit very hard and interest rates will actually rise dramatically—something that people just can’t see happening with such a slow economy.”