-- Posted Wednesday, 4 October 2006 | Digg This Article

Grandich Letter Special Alert

Wednesday, October 4, 2006

9:00 a.m.

“I believe God is managing affairs and that He doesn't need any advice from me. With God in charge, I believe everything will work out for the best in the end. So what is there to worry about?”

                                                - Henry Ford (1863-1947) 

I returned from a short trip to find my voicemail and email (please read special note at end of this alert) full with concerns, criticism and even a death threat (I confirmed it wasn’t my wife). I actually watched CNBC-TV with the sound on and if I didn’t know any better, I could have sworn they rang a bell for the top in gold and bottom in equities and I missed it. Is it just me, or is anyone else not going to be surprised to see the CNBC-TV anchors all wearing DOW 12,000 hats and blowing those New Year’s Eve gadgets in preparation for the second coming of the great equity bull market? For the love of God, please just watch CNBC’s counterpart in Canada, http://www.robtv.com just one day so you can realize exactly how biased and unprofessional most of CNBC-TV really is – (and how classy all of ROB-TV is).

I should just reprint my September 12, 2005 newsletter (http://www.grandich.com/docs/alertGL_09-12-06.pdf). The fact is, IMHO, nothing has changed in any of the markets I follow except the prices. But just like the media who always need some sort of drawn out explanation versus a simple “more sellers than buyers” (or the opposite) to explain market movement, I will indulge a little to bring my latest thoughts to you.

Gold –

The good news is all systems remain go for new, all-time highs in 2007. The bad news is, there’s not only been significant technical damage done short term, but the next few trading sessions are likely going to impact where we head for much of the balance of 2006. It will be unlikely for gold to break much below $570 on a closing basis without further declining to at least $540 (May lows). As hard as that will be to endure, it may be best so that a complete washout can occur. If the thought of $540 sickens you, then me stating gold could fall all the way to $500 but still be in a long-term bull market can only upset you even more.

$540 and $500 have to be discussed for no other reason than being realistic on what has become an obvious trend now of selling rallies versus buying dips. Justifiable or not, this is likely to be trader’s mentality until we at least close above $610, and even more importantly, above $640. Gold is in one of its more defensive positions since the bull market began several years ago. So, if you’re gun shy, wait until if and when $610 is taken out to the upside. If you’re ultra conservative, wait until either $640 is taken out to the upside or $500 is tested on the downside.

VERY IMPORTANT: Just try to remember that we remain in a secular bull market and that a four digit price target remains -- even if we need to first go as much as $70 lower.

Silver –

Because it’s the kissing cousin of gold, I give it a pass to simply be thrown in with all other base metals (about which, by and large, I’m very bearish). I’ve made it clear that while I support the manipulation argument on gold in the bigger picture, I don’t believe it occurs day in and day out. But anyone who watches silver trading, understands the fundamentals and has been in the trenches for a number of years, would have to at least question trading patterns even more than in the gold market. Unfortunately, silver is such a small market overall and effects so few people that I never expect to see a smoking gun emerge. I expect silver to mirror gold with occasional sharper spikes and sell-offs.

Platinum and Palladium –

I’ve been anticipating a 10% correction and, voila, here we are. I continue to expect these two metals to be like watching paint dry but I become more interested in palladium the lower it gets under $300.

Copper –

I was cocky bearish on oil when the world was sky high on it above $75 heading for $100. I’ve been cocky bearish on copper and believe it’s the no-brainer metal to the downside. I believe it is heading for the low $2s in 2007.

Uranium –

Love it! Please read my uranium comments from my September 12th issue

http://www.grandich.com/docs/alertGL_09-12-06.pdf

Oil –

I felt like the “Maytag” repairman when oil was above $75 and daring to suggest the bull was topping out in the face of widespread forecasts of $100 oil. As recently as mid-summer, with oil near $78, I said the next $15 move was down. Now, peak oil theorists are no longer in the limelight. Forecasts for $40 or even $30 oil are now being tossed around. While I don’t think we’re going to new highs anytime soon (remember how many times I said the peak oil theory was correct, only one economic cycle too soon), I don’t see oil breaking below $50 and we may see a strong counter-trend rally occur in the next few weeks.

I also foresaw natural gas under $5. I now believe we’re getting close to a major bottom and could see it as high as $10 within 12 months or less.

Be careful for a little while longer in the energy market. I suspect we shall hear of more hedgefunds that went long energy blowing up. But make no mistake about it, the bulk of the declines are at hand.

U.S. Dollar –

Remains on life support despite all sorts of “Don’t Worry, Be Happy” forecasts of happy days are here again on the heels of a new, all-time high in the DJIA. Again, read my September 12th issue.

http://www.grandich.com/docs/alertGL_09-12-06.pdf

I believe once 83.80 is taken out to the downside, the eventual test of 80 basis the U.S. Dollar is only a question of when, not if. While it may take more than once or twice to break 80, I think it, too, is only a question of when, not if. The world should then get a sell signal and a proper burial for the U.S. Dollar can take place.

Mining Shares –

While a relief rally is likely to take place before gold finally bottoms, I think as a group we have to kiss away the rest of 2006. There are only about eight weeks of real trading left (the last three weeks or so in December are historically thin). Knowing how the average retail investor thinks (they think in calendar years and most like to jettison the holdings that cause them the most pain in order to start the new year fresh), we may see large-scale tax loss selling as early as November. The last 5-10 trading sessions of the year are the best for stink bids (put in a bid real low and assume it won’t get hit but if it does, you’re happy to own it).

U.S. Equity Market –

I have spoken about my personal desire for a new, all-time high on the DJIA. Some would ask why, given how bearish I was on the outlook for the United States?  One of the best selling opportunities is when a new high is not confirmed by other indices. Such is the case with the DJIA new high. In fact, only 10 of the 30 DJIA stocks are higher today than they were when it last hit a new high six years ago and only one is at an all-time high.  There are all sorts of screaming negative divergences like far less new highs vs. new lows, more stocks under their 200-day moving averages versus above them and on and on. Unless there’s a sharp and greatly broadening rally very soon, this new high can not only be a chance to go short, but allow for a bigger bear market to develop – one that I believe can eventually take out the old lows of five years ago.

North of The Border –

I had been very bullish on the Canadian equity market itself until this summer. I then said with an expectation of a sharp sell off in oil, the TSX was likely to get hammered. While I believe the bulk of the move down in energy is now at hand, I don’t think we’re going back to new highs here either, as the upcoming recession in the U.S. is going to have a negative spillover for the Canadian markets.

Special Note from Editor Peter Grandich –

With subscribers on a pace to hit 10,000, I think this is a good time to discuss some important facts.

Grandich Publications (http://www.grandich.com) is one of two businesses I own. The other is Trinity Financial, Sports & Entertainment Management Company (http://www.TrinityFSEM.com).  Between the both of them, my schedule is quite busy. In addition, I’m involved in several Christian ministries, and devote a fair amount of time to two of them- http://www.goodnewsinternational.net and http://www.nynjaia.com. The combination of all this, plus my family life, makes for a hectic schedule at times.

I’m telling you this primarily so I can address the daily happenings within Grandich Publications. As noted earlier, our subscriber base is quite large and continues to grow. While I believe we always made it clear what our primary business purpose is, I always try to make my personal observations on the markets known. I’ve always felt it’s the very least I could do for people who are also hearing about companies we work for. That’s why we try to send out all our comments in the media in addition to our newsletter.

The sheer size of our readership has led to a literal onslaught of daily emails and phone calls from both subscribers and other parties that hear or read about us. There are simply not enough hours in the day to even begin to respond in earnest to most. Please don’t take a non-response as a sign that we don’t care or what you’ve called or written about is not of interest to us. We read and listen to all emails and take all what is said into account when formulating future newsletters and interviews in the media.

As much as I wish I didn’t have to address it, I must also comment about postings on the Internet. I want to make it perfectly clear, I don’t employ, engage or ask anyone to post on the Internet on my behalf, our firm or any of our relationships. I also want to again urge readers to ignore any supposed comments and/or actions of mine that are reported by some anonymous poster on an Internet site. Only consider those you read in my publication or I stated in a media outlet or an audience that’s verifiable and not hearsay.

Finally, please don’t call or email me trash talk from an Internet site that involves me. There will always be a very small number of people who will find criticism, justifiable or not, in anything I say or do, but will use the anonymity of the Internet to vent in manners not deserving of a response by anyone. Engaging them by you or me will serve no useful purpose other than to give them the belief that their accusations have merit. Trust me- if they ever thought their claims had the least bit of validity they would go through proper channels. Maybe it’s my personal schedule, but I never would give any credence to a poster who claims significant knowledge but appears to have both day and night to spend on the Internet. Somehow, I think someone that is blessed to be free of the daily grind life offers, would be doing something other than just posting day after day, night after night.

I truly appreciate the many who write and call with words of encouragement and will do all I can to make my observations known in appropriate fashion.

                                    God Bless,

                                    Peter Grandich

-- Posted Wednesday, 4 October 2006 | Digg This Article

Peter Grandich is the Managing Member of Grandich Publications, LLC (www.grandich.com).
The company publishes The Grandich Letter (first published in 1984) which covers the metals and mining industry, follows world markets and economies, and covers the Canadian markets from an American prospective.

Grandich also provides a variety of corporate finance and development services to publicly-held companies.

Peter Grandich is also the Managing Member of Trinity Financial, Sports & Entertainment Management Company, LLC (www.trinityfsem.com), a Registered Investment Advisor in the State of New Jersey. Trinity provides investment advisory services to individuals, small to mid-size businesses, professional athletes and entertainers.

Peter is a long-standing member of The New York Society of Security Analysts and The Society of Quantitative Analysts.

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