The Fed has created monetary heroin and if they even try to ween the addict off of it, it causes all sorts of issues, long-time market watcher Peter Grandich told our Daniela Cambone.
"It would be hard to expect the U.S. stock market to continue going higher without Chinese and Japanese stocks going higher. It's a canary in the coal mine," Grandich warned.
Chinese stocks fell on Friday, rounding off a volatile week for investors. The CSI 300 index fell 0.8% on the day and 5.5% for the week, the worst since February. In Hong Kong the Hang Seng Index, which earlier this week saw its biggest two-day loss since 2008, dropped 1.4%.
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See Full Interview Transcript Below
Daniela Cambone: We are talking the meltdown in the world's second largest economy and can it spill over into US equities. I'm happy to welcome back to Stansberry Investor.com Peter Grandage of Peter Grandage.com. He's also the author of Confessions of a Wall Street Whiz Kid. Peter, welcome back. Good to see you. And welcome to our summer series.
Peter Grandich: Well, it's always a pleasure to be interviewed to me the most objective financial journalists I was ever interviewed by. So I don't mind doing this at all.
Daniela Cambone: I am always honored to have you on and thank you. Thank you always for your support. Peter, happy to get your thoughts. It's a while since we've last spoke. And it really is a mid year touch base. So I'm interested to learn about your exposure these days. But first, let's talk about what's happening. You know, I'm looking at numbers right now in Hong Kong's Hang Seng Index. It's at its lowest level since November 4 2020. And I just want to pull up a quote by someone I follow closely. It says Fen Hendrick founder of Northmen trader.com. He's questioning, are they China, concerned about an asset bubble? And they're letting the Arab before pops hard and does more damage? Or are they the canary that says the recovery has already peaked, or both? One wonders if either of these are true, then US equities are at a risk of spill over. Now, I found this really interesting. We are in a crazy level of euphoria here right now, Peter, how do you see it?
Peter Grandich: Well, first of all, you talked about a gentleman who's most enjoyable to read both from a human standpoint as well as knowledge standpoint. And I think the answer to me at least is both those points are correct. I think it is a canary in the coal mine. And I think they are trying to let theirs down before the bigger effect if they didn't would come when ours eventually bust. To put it in perspective. In July, I told people for the first time I never really liked to use this word. But I had to and that I was petrified of where we stood in terms of, you know, the general stock and bond market and, and the complacency is that levels that are that are off the meter. And so a first thing I said is I personally hope before the year was out to have cash as my single largest position, which hasn't been in decades. Then on Friday, after many 1000s of points, thinking of shorting the market, where I would have gotten my head handed to me if I did, I actually took a short position. And it's the first one since January of 2020. So I obviously I'm not in the bullish camp, I do think there are a whole host of factors. But and that's the risk. And I don't like using that word. It's not a word that should be used by people that are giving advice or opinions to others. This is an on most unusual time, we've not had markets where literally the Fed has created what I've coined monetary harrowing. And what once you're addicted to it, and that's what Wall Street is, they're almost at a point where if they tried to even when the attic off of it, it causes all sorts of issues. And that's the problem we have. And anytime that there's even a hiccup in the stock market, there's a call for more of the monetary heroin. problem is that China, we could argue is very close, equal to our being the world's number one economic power, they certainly are in a better financial position to us to not indebted up to their ears as we are. So if they're starting to do this, and they're starting to see this and feel it's reason to, I'll just remember an old saying that a wonderful man who is long gone was a wonderful newsletter writer Kennedy Gammage said, and he says if he we used to say is about Japan, now I substitute a US China, if China has sneezes, we can get a cold. And it'd be very hard to expect the US stock market to continue going much higher without the Chinese and Asian markets and emerging markets participating. So I think it's at least a canary in the coal mine.
Daniela Cambone: I mean, look at the headline. Peter mean, Tesla reports more than 1 billion in net income in Q2 that's up tenfold from a year ago. And I know offline, I was saying Don't tell me they've sold that many Tesla's? I mean, how much higher Can we go here?
Peter Grandich: Well, you know, it's like bottle rockets. I don't know if you did. And when you were younger, even though they mostly should only go a distance, there was always a couple that almost came like a roman candle went twice as far as anybody thought it can be. That's kind of the stage we're at. I like to tell people it's like on that meter where there's a danger red zone. That red zone has a wide spread. We're in that red zone, but it can always talk a little bit more before the whole thing blows. So you know, can it go up another 510 20% over one month or six months? Yes. But I think the biggest Question is, and this is what investors always complained about, they would say, hey, you Wall Street guys always tell us what to buy, but you never tell us when to sell? And my answer has always been simple, but I think it's very sane. And that is, could you first step in today and buy what you own without any reservation? I find most people hesitate when I asked them that. And I think that's the first signal. And I certainly couldn't begin a general equity or bond portfolio. And if I may just add bonds at 1%, or one and a half percent, the consumer price index is at least three, I think it's higher. But bonds are an automatic loss. If you buy it now at 1%, just based on the current inflation rate, yet, you know, people are raving that you got to get into long bonds, or like I said, we could spend hours talking what I think are a lot of concerning points. But I just think this is the time to be alive chicken versus a dead duck. And that's how I'm acting.
Daniela Cambone: I'm really happy you brought up the bonds angle and how that's a critical point for you right there. Before I dig a little deeper, just on a more general point on the economy, I know you've been critical of this current administration. But I just want to talk about the disconnect here that we're seeing in the stock market. You know, on the flip side, we have this $1.3 trillion infrastructure plan, build back better plant, just want to get your comments if you can talk to overall the current state of the economy. And this complete disconnect, like I said, between the stock market and reality for so many Americans
Peter Grandich: Well, at least for about half of Americans, and I'm one of them. I believe that if you took the movie, the producers and writers of the movie staying along that Weekend at Bernie's, they would both be super impressed how they were able to get the gentlemen who currently is sitting in the White House, not only in, but to stay there. And I think we're seeing signs that weekend in Bernie's is not too far away. So the and why I bring that up not just to be sarcastic, and I'm only half sarcastic, because I'm half worried too because of that. But why I bring that up is Wall Street advisors, which over half have only been doing it since the last financial crisis. So they don't even know what a bear market looks like. The swoon from the pandemic only lasted a few weeks, they have not taken into account something that years ago, I'm in this 38 years was very important in your analogy, and that's geopolitical. No one's taking into potentially how politically? Well, let me just tell you this, then yeah, and one thing I know for certain other than the United States silver war, I don't think America has ever been more split socially and politically, that there is no more middle ground, you're either left or right. And sooner or later, no matter what the stock market thinks, how it can separate itself. Political social factors will impact the economy. And I think we're at that point. And so with $3 trillion, with $30 trillion of our debt, talk about interest rates supposedly being normalized again. Okay, so let's say they go back to 5%. Daniela, that's $1.5 trillion in interest expense, hey, our best year was 2019, we took in 3.5 trillion. As an economy, half of interest, half of the money is going to go just to pay interest you. We can't sustain this this is unsustainable, doesn't mean it can't keep going like that bottle rocket. But we're well past the point of what I call the old movie failsafe, there is no return, there is a big price to pay unfortunately, Daniela, people like yourself with young children at all, I think they're going to pay the deer price and somebody that you know, well, well advanced in the natural life.
Daniela Cambone: Okay, good thoughts there, Peter. So let's break it down in terms of your exposure, your plays right now, you brought up cash before, and I'm seeing a trend. You know, I've been doing these interviews for a very long time. And this year, more than any other year, more and more of the experts who have come on my show, are telling me how they're completely exiting the banking system, one after one repeating the same story, they don't want cash in the bank. What I'm hearing from you, though, you still like holding a percentage in cash?
Peter Grandich: Well, you know, that there's a great debate and, you know, people talk about, you know, the banks and wanting to and that's one of the things why the bitcoins and cryptocurrencies have gone and so forth and so on. I don't live in that total doom and gloom, atmosphere. It simply because, you know, my faith is my life is not all caught up in just this one. I'm counting on that there's something else besides it. But even if you are just looking at this as it First of all, if we ever got to the point where the United States couldn't make good on money that was in in banks, and there really be no other place you could escape to will impact everything and everywhere. So I'm not going to not keep money in the bank because the whole thing is going to blow up. Are there other alternatives to have? Yeah, for instance, I would soon Be in the Canadian currency right now I would soon to be in the Australian currency, if I was looking at from a currency standpoint, but so long as you know, the United States still has the taxing power and still has the ability to pay anything that's 250,000 or less. I'm not going to keep it in my, you know, even though they're not paying me anything. But what I say why to have cash is not because I love the dollar ending, because I think assets like general equities and bonds are going to come off a lot over the next couple of years. And I want to be in a position to enter them when the pendulum swings to the other side. If the good Lord still has me here.
Daniela Cambone: He will we need you, Peter, you got to stick around. And to that point, you recently you tweeted this photo that I want to use today of two boats, one filled with people and as you call the Bitcoin, Bitcoin and equities boat, and then you have another boat, which you say you're on with three of your other gold bull friends, you feel like a lone wolf. in your, in your quest and exposure to gold here, Peter.
Peter Grandich: What was kind of you saying that there was three others I feel sometimes there's only maybe one or two. But I haven't seen a lack of bullishness for gold since when I first returned to it 2018. In fact, that's what ended up. I had not done an interview for almost seven years. And you were kind enough to bring me back to talk about at that time, you know, 12 or 13 $100 Gold, you know, why do you like it? Well, even though we're up closer to 1800, the sentiment factors are as bearish if not more bearish. And realistically, even the ones that were like perma bulls, I would always be speaking, they seem to move on to some place. So the boat is pretty empty for a true gold bull. Now listen, I don't ever expect Main Street, Wall Street to embrace it. In fact, they will always look at it as kryptonite. Because if you're selling financial assets as a livelihood, you don't want to sell something that really contradicts that ownership. But what's really interesting besides all of that, that the people who used to be so negative 10 to 20 years on gold are among the positive and that central banks, they continue to be net buyers of it. That's also because I believe that they recognize that eventually the dollar won't be the reserve currency. And you know, we can go into a long story about that. But the other factor, of course, trades into a potential investment offer that is the major producers, the mining industry, I'm not talking about the juniors that are you know, taking a shot somewhere, has never been in better financial shape. Since the day I entered 30 something years ago. And it's really interesting that a time when finally, they really have their act together, they've cleaned up their balance sheets, they've, they've gotten conservative, they're in the best, you know, cash flow, free cash flow, things that are coming that we never used to see and produces. And hardly anybody talks about it or wants ownership in it. And they're often in other worlds. So that contrary in of me, just makes me jog, you know gyrate back to that. But if I may just say quickly, we can't discuss it. Even better than the gold market even more, to me, positive likelihood of a great turnout as the uranium market there. I think a perfect storm has come together. And we haven't even begun the scene the best yet. But what I think is going to be a tremendous bull market run, and which I called I believe, will be the best bull market I ever participated in.
Daniela Cambone: Why do you feel the bullish case for uranium here? What are the fundamentals? The top fundamental driving right now
Peter Grandich: Is very simple. Everybody's talking electrification, everywhere you talk, everything is gone. electrification, even airplanes, all of it. Well, we already seen the troubles that we're having now providing electricity during heat waves and things of that necessary. We're gonna have a need to electrify and yes, infrastructure and all that has to be done. But solar and wind and all those other things that everybody talks about is just no way going to be able to support all that nuclear energy has to be a key part in this movement, the green and carbon free and all that stuff. Never Have we seen the supply and demand scenario more bullish. And what's most interesting about that is you can put on one hand and count two producers in the uranium business. So if and when Wall Street or whoever wakes up to that factor, their natural tendency is going to be Hey, let's go to the people that sell this stuff. While you didn't count on your hands comical was the to me the bellwether, but that will spill down to even the more riskier, you know, exploration companies and so forth and so on. And those utility companies basically most of them, their long term contracts that are ending this year and next they have to go in there now, to assure themselves to have the proper at a time when the supply and demand scenario has switched tremendously favorable in demand side. So it's a market that whose market cap if you take Uranium stocks doesn't even equal a Franco Nevada. So I just think uranium is our screamingly bullish. And I think if I had to own one group would not own anything else. It would be the uranium group.
Daniela Cambone: Okay, so your bet would be on uranium. Just getting back to your points on gold. There are two things I want to bring up. I yes. If you said, I know, and I followed your career for a very long time you entered back in 2018. You bought all the way up until gold hit 2000. Last year, what are you? Are you still buying now at these levels? Or are you good now?
Peter Grandich: I have because I've become more cautious overall, and all markets, including uranium will be hit. If there's a very sharp sell off in the stock market, they're not going to somehow all stay up. They may not stay down as long and they may not come off as much. So I've narrowed my focus in the gold market to a handful of producers and wanted to special situations if I'm allowed to mention in my will it sure that's all right. Yeah, you mentioned. And so you know, when you look out there, like I said, the producers have become the major producers B have become very, very strong. I mean, to have the G dx in your portfolio. Now, I think it's just a good natural way if you're not very versed on following all the individual ones. But there's been a unique opportunity now in advanced stage exploration company, because so few people are paying attention to them. Now I have to tell you, I'm extremely biased. When I mentioned this, I own 9% of the company stock. So obviously, I'm going to see everything is you know, half as positive. But there is a company called American Pacific mining, and it has the uniqueness that I've searched for years and in a business. It has the right management, it has unbelievable projects, and now has the support of a tremendous financier, someone who I will call the next Frankie Giustra. Okay. And you know how I feel that bow Frankie gesture, I think he's one of the best people that ever walked in the natural resource industry. So I think there's much more opportunity to find things that is still undervalued in natural resources, uranium than trying to pick it in the technology industry or some other industry that you know, that's gone up to, you know, to the sky.
Daniela Cambone: But okay, so apart from your two special cases in mining, the other miners you like, are they juniors? producers? Are they the new months?
Peter Grandich: Well, I'm sticking with the majors. So I think that's where most people should stay. And there is diversification in some of these ETFs that play the juniors, I think it's very much more difficult to be a junior resource company now. The marketing ability, the capital raising, you're being shut out of markets if you're not an exchange traded fund, and also, and I just don't follow it that closely anymore. And you have advice about it. So you'd rather be in the GDX and the GDXJ I would be in both, but I'd be more weighted towards the major stuff.
Daniela Cambone: Okay. So going down the list now Okay, so you're in physical gold. You're in mining stocks, you're in cash, you're in uranium, are they equally weighted? Here is your like you said uranium is your favorite now? How down?
Peter Grandich: Well, I never liked that cookie cutter when somebody says 20% this everybody here I am asking you know everybody's different. Listen, I don't mind us fish. Like I said you are the most objective person that you could be on the complete opposite side and people would never know that that's a talent that God blessed you with But listen, that cookie cutter stuff is good. What I would just say is I would sooner own things uranium and gold then technology and Nope. Start trouble for me currency.
Daniela Cambone: Okay, now you mentioned it. Now I gotta go there. Can we stop now? No, and I please Bitcoin. Cyber Hornets leave Peter Grandich alone this is his opinion he's allowed to share it. No nasty voicemails please. You mentioned Wall Street acceptance of gold and I want to bring this up you know, because I started covering Bitcoin when I was three bucks. Okay. And it has surprised me how Wall Street has embraced Bitcoin and I don't know if you would agree with me here Peter. But you know there's now talk that Amazon may start accepting Bitcoin but you know apart from Amazon we have JP Morgan we have square we have visa we have PayPal. Yeah, we never saw this on the gold front and how long has gold been around? Is that surprised? A bit how Wall Street has warmed up to Bitcoin, but not ever gold.
Peter Grandich: So let me get a different form of hate now. The hate will come from the people that work in Wall Street when I respond to you on that, I only have to go back to the last financial crisis. Now the last financial crisis was caused, because too many people were sold mortgages and mortgage type investments that should have never bought that. And guess who sold it to them, it was mostly financial service firms, who not only sold it to them, but actually sold it to them in the short position that they didn't own it. So they not only made money when they sold the product, but then they profited from when it fell. Now, it's hard for the average investor worldwide, especially average American to understand that because it was terminologies that they just didn't comprehend shorting hot. The bottom line is, the way I describe it is imagine if you went to a car dealer, and they sold your car knowing full well it was gonna crash. And on top of it, they bought life insurance on you. So when it crashed, they collected twice. That's what Wall Street did. And I can go through a series of other things that they've done. So just because Wall Street has gotten behind a product, to me isn't the Good Housekeeping Seal. Now, there are some good people that are on the other side, because as you know, I really didn't comment on this until we made the all time high. And then I put out this thing sell all your Bitcoin. And boy did that create an interesting few weeks for me. But there are people that I think are proponent but that are on the bullish side worth listening to. For instance, you have this gentleman, I don't know him Vince land that comes on. And he paints a very credible, bullish reason to be bullish on Bitcoin. And if I can tell just two people out there one thing to grasp onto when I spoke at all these conferences, you used to cover them and all most people came to not to learn, they came just to get confirmation on what they already believed. In investing, you have to keep an open mind, I have to keep an open mind, just because I think negatively and view this product as a negative now, I still have to keep my ears open, because I may be missing something, it wouldn't be the first time I lost, you know, a lot of things. Wall Street has a terrible thing. They were like Ponzi, if you remember the Happy Days show, he couldn't say I was wrong. I've learned to say, you know, I've lost enough money to be able to say it. So I would just keep my mind open to this and what, and it's great that Wall Street's behind it. But what seems to be against it is the people that still control the game, and that is governments, central banks, etc. And that's what I said until they can get that acid test and get past it. And to me, everything looks like they're coming out against it. But here's the saving grace, just like the internet bubble, we're gonna have a bus is not going to be 8000 or 80,000 cryptocurrencies, there's gonna be a shakeout, and out of that, we'll be born, some great companies, I think Bitcoin will suffer because it was the first just like the first in any technology, there seems to be, in my view, better crypto currencies, better opportunities being born. And I think as people realize that Bitcoin will lose its share, like me, I don't want to I don't want to get into that because it just opens an aura of people that I just don't have time. Or, quite frankly, I don't want to have to pick out my house to see if I can go out and look at buying because that's what happened last night, face that. But I do think it's an industry that's here to stay. So I think it'd be a mistake. Like, you know, there are these negative guys that have been around for a while that always knock Bitcoin and they just blow up everything and they're wrong. This industry is going to more than survive, but I believe it has to go through a tremendous shakeout. And since I'm not positive on the stock market, and that turning down will make Wall Street have to take a step back and watch money and not be able to be as you know, while as it's been in this, that's not a positive either. So my simple, long, simple answer to you is, yes, crypto currencies are here to stay, but I wouldn't be a buyer of them right now. Okay, that's, yeah, I hope I hope that neutralizes some of the people out there. But otherwise, now I like this guy.
Daniela Cambone: I think that's a fair statement. We were saying offline. It's like showing up at a Philly game with the Giants jerseys. Yeah, that's like just asking for trouble. So yeah. So we won't do that. So getting back to equities, and just some so are you completely out of US equities right now, Peter.
Peter Grandich: Yeah, I don't own any general equities that aren't related to uranium, gold and copper.
Daniela Cambone: Gotcha. So in terms of warning signs, you said we could touch on them and I'd like to a little bit just if you could tell me your top three or top two or just one if you like, of really the red flashing signs that are saying, you know, get out of equities now.
Peter Grandich: Well, the flashing sign we already discussed the number one, the fact that wall street is not take into account Count the political ramifications of what's happening politically here in the US. And socially, it is not in the formula or discussion in most other financial networks at all, and should be because they play a role in it. The second thing is you also touched on as you normally do, you're usually ahead of the crowd. And that is what's happening in China, you cannot not look at that. There's just no way, if they continue going lower, we're just going to keep going higher. I'm certain there'll be some guys on there and gals that will say that, you know, we separated ourselves and all that, but we have it. And then I think the simple thing is that, eventually, you have to recognize that we are a country that has really gotten itself in the hole, debt wise on every level, federal, state, corporate. And one last point which people haven't been making, I never thought I'd see this in my career, Daniela, the other day, so called junk bonds, or high yield bonds, were yielding lower than the CPI index. It's just unbelievable that something we used to call junk, we know right now is going to pay us less than what the current inflation rate is, I just don't conceivably can't bring myself to look at bonds in any way, shape, or form. And quite frankly, that's a very scary thing. And maybe I'll end with this plot. The fixed income market has been destroyed by the Fed. And that's the last part of my business, we I work with a group that specializes retirement and business and exiting and estate planning. The retirement business is completely up in the air, there's no longer any safe, secure, Principal secured investment out there, people have to now take risks to their principal in order to maintain some sort of, you know, financial stability, retirement, whatever it may be. And that's something we never thought was going to be when we started in this business. And that's the thing that's not being discussed by wall street, but will when eventually the market implodes, and then people realize that, hey, what how do I do? How do I keep maintaining my lifestyle? Because I can't I can't keep making 5%, 10 to 20%. Like it's simple.
Daniela Cambone: If I may, one final note on gold from you. Because back in April, I remember you really like the technicals for gold. You said a cup and handle formation was forming. It was a beautiful scenario, gold really should have broken out. And here we are today, and a lot of people are questioning, you know, when are we going to get back to at least 2000? At nominal high again, How far away are we from seeing that again?
Peter Grandich: Well, again, there's not that many people, but what's left is just a handful of people. And they tend to be the people that always been in gold. Those are the people that are concerned, you know, expressing that there is really no interest and gold as a as an investment in any real investment portfolio analogy these days, is even less now than it was when it was 12 or 13 $100. That alone that contrarian isn't me that bet against the crowd. You know, that guy had always said, Oh, he can't miss this field goal. I turned to a guy go up, he misses it. It's just that's my nature. It's always been what's kept me aboveboard. It tends to be too early sometimes. But one thing about investing, you'd rather be a year too early than a day too late.
Daniela Cambone: I'm laughing because he brought up the sports analogies. And if I may share what you did, at the start of the interview offline. Peter brought on Joe Flacco for a phone call, surprise phone call, completely caught me off guard.
Peter Grandich: Well, you're a diehard jet fan and your husband is and you know, I was privileged to work with a lot of athletes for 20 years. But what's happening in sports now and social justice calls me out. But I just thought I'd surprise you because I know how much of a diehard
Daniela Cambone: Beautiful surprise. That's why every time I interview you, I never know what's going to happen. So thank you for that. And Peter, thank you for joining me as part of the summer series. And one last point if I may, I know you recently celebrated your 40th wedding anniversary with your lovely wife. So congrats on that beautiful milestone.
Peter Grandich: Well, let me say something to you, which I know because people write to me, it is an extreme pleasure and honor to be interviewed by you. And your listeners are, don't recognize how fortunate and blessed they are. Because I know when I see you do other interviews that you're on the other side of the coin or who you're interviewing, but you don't attack them, you give them a chance to share their views in in a nice way. You bring up points that kind of point out where they may not be and I have to tell you, that's a blessing and gift and I just hope you keep it
Daniela Cambone: Means a lot to me, Peter, thank you so much. Thank you for those words. And again, thank you for your time. Come back soon to Stansberry Investor.com. Okay. Well thank you as always God Bless call. In the meantime, if you want more premium content specials offer special offers and a lot of other great stuff. Don't forget to sign up free at Daniela Cambone.com that's it for me.
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