Not that there’s a link between the two, but as the legendary Peter Grandich celebrates his silver anniversary as a market commentator, he tells The Gold Report in this exclusive interview that having been left behind in the big run-up in gold, silver’s time has come to steal the limelight for a while. Peter, who started publishing The Grandich Letter 25 years ago and this month celebrates his first anniversary as Agoracom’s market analyst too, also considers the current stock market rally as a gift delivered in the eye of the storm. Longer term, he expects America’s underlying economic problems to result in prolonged sagging trading performance such as Japan has experienced over the past 20 years. Accordingly, he’s alerting investors “to remove their bullish hats if they’re still wearing them.” As Peter’s motto goes, “It’s better to be a live chicken versus a dead duck.”
The Gold Report: When he was in China, President Obama said “It’s important to recognize if we keep on adding to the debt, even in the midst of this recovery, at some point people could lose confidence in the U.S. economy in a way that could actually lead to a double-digit recession.” He went on to indicate that Congress or he would be considering some tax cuts, but also some fiscal spending to counteract the unemployment. Other than preparing the populace for another potential downturn, what’s wrong with this approach?
Peter Grandich: You can’t have your cake and eat it, too. So I think it was rhetoric and I think the market realized that he was speaking out of both sides of his mouth. If you’re going to use stimulus, someone has to pay for that stimulus and that stimulus will be paid for with higher taxes. The government, just like a company, can look to cut expenses, but they’re not; they’re spending more. They could work on entitlements and they are working on the healthcare side, but it’s evident, at least to me, that in the end we’re looking at a much higher cost.
TGR: If it’s rhetoric, why would he say there’s a potential second leg to this downturn?
PG: Political cover. You could argue that he’s saying what could happen down the road if people don’t support his agenda.
TGR: Wouldn’t that increase caution, when people are already cutting back because they fear there’s more to come?
PG: The problem is that there is no easy solution. Some of us felt a year ago that the best solution, although far more painful initially, would be just let the markets decide. Even if it meant a depression-like state, let the markets adjust for assets that are too expensive and for debt. That seemed better than throwing sand at the ocean, thinking that if you somehow hold the economy together—even though you create a whole lot of new money—you can magically take that money out of the system once things turn around. All we’ve really done is kick the can down the road and the can is much, much heavier to kick when the next time to kick it comes further down the road.
TGR: In the context of your kicking-the-can metaphor, you recently said that future historians will blame Alan Greenspan for the downfall of the U.S. economy, due to policies that led to the bubble of all bubbles. Can you elaborate on that?
PG: I think history will show that he was really a driving force in what led to the enormous problems that the United States now faces. Not more than three or five years ago, and certainly for 10 years before that, Alan Greenspan was hailed as the great financial and economic savior. He received many accolades for supposedly keeping the U.S. economic engine going and creating all sorts of growth. It’s become abundantly clear now that people have found what was swept under the carpet, that he really created the worst of all worlds by a monetary policy that was way over-stimulated. In fact, in the aftermath of the mortgage crisis in testimony before Congress, he basically admitted that he didn’t realize how severe the mortgage problem was. Imagine what would have happened to the market if he had said that when he was in office.
TGR: Will historians put some blame on Bernanke and Paulson, too, for increasing debt in reaction to the bubble’s bursting?
…..read more including Silver Commentary HERE.
On Major Moves, Grandich has been very right and not only saved many investors fortunes, but expanded them dramatically. On November 3, 2007 at the MoneyTalks Survival Conference, Peter Grandich of the Grandich Letter warned that “an unprecedented economic tsunami will hit American beginning in 2008”. Peter advised publicly to short the US market two days from the top in October, 2007 and stayed short until the last week of October, 2008. He began to buy stocks in March 7th, 2009. He also bought oil and oil related investments near the lows after the dive from $147.
….go to visit Peter’s Website.