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-- Posted Tuesday, 2 October 2007 | Digg This Article

Brief Comment on Markets October 2, 2007   10:00AM EST

By Peter Grandich

While I’ve sat down to pen a very detailed newsletter on world markets and our list of client companies, it will be several days before I finish it, so I want to provide you a brief summary of my current market views.

U.S. Stock Market –

Back in August, most Wall Street professionals and individual investors had wished they didn’t own large quantities of equities. The problems that seemed acute then have not gone away. In fact, they have gotten worse; yet, those very same people are now urging everyone to jump in with both feet. As I will explain in my upcoming newsletter, a near perfect storm of economic, social and political upheaval is upon us and it’s not a question of “if” it hits but “how much damage will occur,” IMHO.

It would be hysterical if it wasn’t so sad to see the “Don’t Worry, Be Happy” crowd led by TOUT-TV’s arrogant Mark Haines exclaim how bullish the Fed’s rate cut is and how the stock market will fly due to it. Let’s not forget that former Fed Chairman Greenspan’s opening wide of the credit spigot, which drove interest rates dramatically lower, was the leading cause for the credit crunch crisis in the first place. Yet, here today, the wolves of Wall Street are howling about how lower interest rates are a sure fire bet for higher stock prices. Mark this down: we shall look back at this and last August and learn that many of the sheep were last heard going off the cliff saying, “Fool me once, shame on you, fool me twice, shame on me!”

I hold my short position and will look to add to it on a further substantial rise in this blow-off short squeeze.

Gold –

In my heart of hearts (which doesn’t mean any certainty, but explains how emotionally tied I am to this belief), I believe over time gold is going much, much higher. After almost 25 years in and around financial markets, you develop a sixth sense that doesn’t require standard technical or fundamental analogies. Call it gut-feelings, hunches, etc., but you just know something and it’s as clear as black and white.

Ever since the spring of 2003, when gold was barely over $300, I’ve maintained a very bullish stance, with the exception of a couple of short-term correction beliefs along the way. After basically tripling from its low and dramatically outperforming the U.S. stock market during that timeframe, gold remains mostly a barbaric relic (I think that’s how Mark Haines and his like would describe it) to almost all on Wall Street. THANK GOD IT DOES!!! When the moment arrives that they finally embrace it, yours truly will head for the door and don’t stand in my way.

On the assumption that most read my comments because you believe they are worthy of your time, and that many of you have at least a half-interest in gold (if not a whole lot more), I’m going to make an extraordinary and rare recommendation that I truly hope you will listen to – Take a paid subscription to http://www.lemetropolecafe.com/ ASAP.   Editor Bill Murphy has greatly aided me in remaining on the right side of gold for over four years and while his style is atypical, the results so far have been second to none. Now, I have no arrangement of any type with Bill, have nothing to gain, nor does Bill even know I’m writing this, but if I’m to pick one source outside of my own work that has not only helped me more on gold in the past and hopefully in the future, it’s Bill’s newsletter. Crazy Bill needs to remain a voice in the metals market and while we don’t see eye to eye on everything, I can tell you I open his daily commentary the moment it hits my in box.

This “stealth” gold bull market is the best of all worlds. We continue to move up in stages and go through some healthy corrections and long periods of sideways base-building. We’re very overbought near-term and the bullish consensus hit levels last seen in May 2006, whereupon the market suffered a sharp correction. I don’t expect anything like that now and the surprise could be how fast this pause ends. The fact that gold started to get some significant mainstream press was also an indication of a need to consolidate. The masses have missed gold’s move and are not about to jump in, IMHO, until such time that the big fanfare of going through the old highs around $850 take place – an event I believe is a question of “when,” not “if” in 2008. When American investors ask me for a gold stock versus a tech stock, then I will know it’s time to start becoming a seller and not a buyer.

U.S. Dollar –

From near 100 on the U.S. Dollar Index, I began to state, “The only party who doesn’t know the U.S. Dollar is dead is the U.S. Dollar.” It has lost over 20% since then during what has to be among the biggest jokes ever played on the American public by the U.S. Treasury – “A strong dollar policy” –LOL!  Ladies and gentlemen, if we’ve had a strong dollar policy, please pray we never have a weak one!

The U.S. Dollar is quite oversold and a bounce back to or even above past critical support of 80 on the U.S. Dollar Index is healthy. You can be certain the “Don’t Worry, Be Happy” crowd will hail this as a new beginning of a bull market for the U.S. Dollar. I also suspect that the Europeans would like to see this, as concerns of a too-strong Euro are already being expressed. No matter what you hear, remember the Fat Lady has not only entered the building but she has already sung the opening verse.

Oil –

It, too, is quite overbought and a correction to the 60s is even possible but with an extremely serious geopolitical crisis developing in the Middle East (more in a moment).  I wouldn’t want to be short oil.

Geopolitical –

What gets you in trouble in investing is not being prepared for the unexpected. While there are a whole host of known economic problems, the markets are not prepared (or pricing in) a potential “explosive” (pun intended) situation in the Middle East.

http://www.jpost.com/servlet/Satellite?cid=1191257212152&pagename=JPost%2FJPArticle%2FShowFull 

The recent attack by Israel into Syria on a suspected convoy of potentially nuclear-related items from North Korea is greatly unsettling to many of the most important players in the world stage and among key “think tanks.” I will expand on this in my upcoming newsletter, but for now know I fully expect a major geopolitical event from the Middle East at anytime and believe it will greatly impact the markets.

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-- Posted Tuesday, 2 October 2007 | 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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