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Grandich: Update 5:30 pm July 6, 2009
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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 ( 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 II...
- 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.
GRANDICH PUBLICATIONS, LLC.
P.O. Box 243 o Perrineville, NJ 08535
www.Grandich.com
phone: 732-642-3992
Peter Grandich is Chief Commentator at Agoracom.com, Canada’s largest small-cap investment community and the only provider of monitored communities to public companies. Grandich is formerly publisher of the internationally-read Grandich Letter, which began publishing in 1984 and has amassed a loyal army of readers. Grandich’s commentary can now be viewed on his blog at www.Grandich.Agoracom.com.
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