Hey Bobby,
Just got through talkin to my goood friend Peter Grandich.
Here is his latest take on this market and his speech to be delivered at the Calgary Gold show. The booth positions are empty bacause they have not been placed yet but the content is REAL GOOD.
Tally Ho
Ray
From: "Peter Grandich" <petergrandich@hotmail.com>
Date: Mon, 27 Sep 1999 06:54:41 EDT
September 27, 1999
Dear Friends,
I hardly slept as the phone and e-mail was ringing into the wee hours
regarding the explosive up move in gold bullion prices. Key banks around
the world have pledged to greatly curtail their sales of gold bullion. This
has led to a mad scramble by what now should be evident has been a dramatic short position (sorry Lord, but I take delight in seeing these bastards squeezed!).
My hat goes off to Bill Murphy, editor of www.lemetroploecafe.com. As noted in my bulletin last week, Bill's organization, GATA, has been a one man army against what I think is clearly evident now of a massive short attack on gold. To fully appreciate the job he has done, including scooping
everyone on hinting something big was afoot like this just announced bank
statement, I truly hope the major media like CNBC-TV and others give him
his moment in the Sun. They certainly have given the shorts air time!
Enclosed is my speech for the upcoming Calgary Show. I know most of you
won't make it so I thought you would like to read it.
It is my firm belief that the new millennium, in which we are about to
enter, will coincide with the single most important turning point in our
financial markets since the early 1980s. Just like in the early '80s, the
vast majority of people will neither be in a position to take advantage of
what has just begun to unfold, nor will they be willing to recognize it
until the turn has already been underway for quite some time.
In the early '80s, the social, political, and economic conditions caused
most people to become full of anxiety when thinking of the future. Now,
when looking into the new millennium, the vast majority have an unusually
high degree of confidence, if not cockiness, that their destiny is not only
pleasurable, but that they themselves control it.
Isn't it ironic that in 1982, the ten richest people in the world were oil
sheiks from The Middle East. The near-universal belief in North America was that these people would cause us great hardship due to their control of the world oil supply. Now, however, it seems that gentler, kinder rich men are at the top. People like Bill Gates and others, who made their riches via
technology, are perceived as not only harmless, but could be models for us
to follow. Perhaps we, too, could open up an Internet company and sell it
to the public for millions.
Over the next forty minutes, I will make my observations known regarding
the financial markets and the economy. I will pay particular attention to
some companies exhibiting here. I will mention that The Grandich Letter is
being "Born Again," and I will tell you about my association with offshore
money management.
It is fair to say that the US stock market, back in 1982, was indeed
reflecting the then current economic, social, and political environment. It
would also be fair to say that the dramatic rise in equity prices since
then has been due to actual and perceived changes for the better in regard
to those environments. Like pondering which came first, the chicken or the
egg, we could debate--did the market foresee the changes for the better
first, or did they react to them after they occurred?
Think for a moment. Could the people who actually believe that we'll live
happily ever after and will never again come close to the conditions back
in the early '80s be wrong? If so, then the question becomes "Does the
market anticipate the next change before the events unfold, or does it wait
for it to become evident and falls sharply thereafter?"
Well, let me first say, ladies and gentlemen, that the first hurdle is to
establish what indicator truly defines the health of the stock market.
The media, like so many others, likes to quote the DJIA when indicating
what the stock market has done. But is it fair to use just thirty out of
more than several thousand stocks that make up the stock market? If the
answer is yes, then those who have accepted this method certainly would not
have had a reliable indicator in the last year.
While the DJIA has traded to marginal new highs recently, the average stock
has fallen nearly twenty percent since April 1998. While 1998 was
considered a good year for stocks, over 50% of stocks closed lower than
they did the year before. In fact, nearly one in four NYSE stocks listed
and NASDAQ market stocks are now below their Summer-Fall 1998 lows. Since May of 1998, the majority of stocks trading on the NYSE have been below their 200-day moving average 80% of the time. The new highs in the NASDAQ need to be looked at carefully because just three stocks, Microsoft, Intel, and Cisco, account for nearly a quarter of NASDAQ's total value. Their combined PE is a mere 65.
I am not here to cause panic, but keep this thought in the back of your
mind. For two years before the crash of 1929, breath was extremely
negative. You wouldn't know this by the mood of investors at the time or by
the reports from the so-called Wall Street experts. Now, let me point out,
that 67%, or 2 out of 3 NYSE-listed shares, are now trading below their
200-day moving average. The Dow transports and utilities are also below
their 200-day MA.
Now while I would argue that these facts alone are indications of trouble
ahead, the reason I bring this to your attention is to point out that when
we look for clues, we must first make sure the evidence we ponder is
worthy. I firmly believe that the day-to-day, mumbo-jumbo we hear on shows like CNBC-TV does more to hurt the average investor than to help him.
There are numerous technical and fundamental indicators that suggest the
"change in tide", that I mentioned earlier, is definitely forming, or has
already taken hold. Breath of the market absolutely stinks. Despite new
highs in a few averages, we continue to have more new 52-week lows than
highs. The cumulative breath line is screaming bearish. In short, there are
very few of the troops participating. While it's true that the generals
have still managed to make new ground, we all know it's the privates who
win the war, not the generals.
Call me old-fashioned, but I like to think that in the end, the stock
market's single most influential factor is the economy. Now, some would
like us to believe that we are in a new era. Well, call me foolish, but I
am not about to get rid of factors that worked for a very long time just
because a 25-year-old, hot-shot analyst from some investment house told me
on CNBC-TV to throw all the old books out.
Ex-fed Governor Lawrence Lindsey made what I think are some of the best
objective observations regarding our economy. He said there are three
guideposts: the labor market, the US current account, and the yield curve.
They all work because they represent physical or financial constraints on
the ability of the economy to expand.
Let's start with the labor market. We are quickly running out of workers.
The number of unemployed people without college experience has fallen from 2.7 million to 2.1 million in the last four years. Seventeen years ago when the expansion began, there were 8.5 million such unemployed workers. At this rate, this market is less than a year away from equaling the already tight market for college-trained workers. The labor market constraints are ceasing to be hypothetical ones and quickly becoming a solid brick wall. Of course, markets tend to create an airbag of soaring labor costs to cushion the economy before it hits the brick wall. The most recent employment cost index suggests that the airbag is beginning to inflate.
In the US, we have seen our current account deficit explode. We are
borrowing $300 billion a year. If the savings-and-borrowing trend continues
as is, our deficit will double in just 18 months. Make no mistake about it,
no government official is going to discuss the acuteness of this problem. I
believe the recent decline in the US dollar is directly related to the
alarming numbers recently released regarding our account deficit. At some
point, foreign creditors are going to demand that America demonstrate the
ability to finance itself. This brings us to the American dollar. The Fed
knows all too well how much we are dependent on foreign borrowing. They
know that any significant fall in the US dollar can only increase the pull
on the already strained string with which they have managed to secure the
dollar.
Despite what some have reported to be the best economic times in the modern era, we still have one of the highest real interest rates. If there is
truly no fear of inflation, then shouldn't there be no risk premium
associated with the term of lending to creditworthy borrowers? If the risk
premium could not be withered down during boom times, what will become of it if the "Don't Worry, Be Happy" crowd is wrong about the new millennium?
>
To measure how big the bubble has grown, one only has to listen to the
financial media report. Despite a rise of five-tenths of one percent in
the producer price index, all was well because the core rate was up only
mildly. The core rate does not take into account food and energy prices.
Wouldn't that be nice if we could do the same? Imagine how we could go
through life without fuel for our cars or food for our bodies.
For several years, I stated the bull market wouldn't end until there were
four straight weeks of net redemptions out of equity mutual funds. Such a
stance has proven worthy but it's hard to deny the serious changes
underway; albeit, these changes are only now noticeable to a small minority
of us. However, they are showing up on more radar screens.
I believe the best course of action is to no longer rely on the overall
market to lift all boats. Investors should strongly consider why
overweighed in equities is still prudent. Four letter words like cash and
gold just may become part of the market vocabulary as we enter the year
2000.
While bonds may be the lesser of two evils, the trend in interest rates is
higher. Therefore, I recommend either a timing program (I am familiar with
this and would be glad to share it, if you ask) or stagger your bond
maturities and consider foreign bonds based on the anticipation of a weaker
US dollar.
I have been banging the drums on commodities for a year and have been
encouraged with the clear turnaround in most commodities, particularly oil.
There is of course, one commodity, gold, which up until two weeks ago,
had not only failed to rally, but had sunk to lows I honestly didn't think
anyone felt was possible just a year ago.
It would take a day, if not two, to truly review and discuss the factors
that I believe have led gold to where it's at now. Quite frankly, in order
to ponder where something may be heading, it's important to know how it got to where it now wants to get from! I don't have the time here but will
share my thoughts with you throughout the conference and I will on my
website. I can tell you that I don't think it's crying over spilled milk if one
suggests there has been some sort of manipulation. In fact, I think the
manipulation is evident to anyone who still cares to admit to have been a
part of this market for any length of time. The only question is, "Who is
manipulating and why?"
Back in October 1996, I spoke in London to the European Mining Analysts
Association. I stated that the business of gold loans was rapidly growing
and could grow to be a dominating negative on the overall gold price. With
gold near $400, I actually had the gall to believe the worst case for gold
could be near $300. Now, of course, I pray daily for such a price.
So how does the manipulation come to an end if it exists at all? Two ways.
First, the manipulators win! They drive the price to where they can profit
from their deeds and move on. Or two, the one I so much prefer if there has
been blatant manipulation, an event takes place that prevents them from
moving out unscathed and actually begins a domino effect that makes their
situation worse, not better.
As noted in a recent e-mail blast of mine, such an event had occurred in my
mind. I stated that the results of the second auction by the Bank of
England, and in particular, the fact that two world-mining giants bought,
or attempted to buy large quantities of gold through the auction, had led
to a line being drawn for the bottom of gold. Up until then, I had been
suggesting that purchases of gold bullion under $261 an ounce would not
only prove to be wise, but offer far less risk than US equities. While it's
still early, this advice has certainly managed to get out of the starting
gate in front.
My philosophy on gold has been constant for several years now. I have
repeated the same crucial factor throughout; that gold's number one nemesis
was the bull market in financial assets. And so long as financial assets
were king, there would be no room for gold in the court of public
investors. Based on the belief that the stock market is in it's worst shape
in quite some time, and there are so many developing bullish factors for
gold, I believe the chances are strong that, like equities had gone from
reports of death in 1982 to their biggest bull run ever, gold's recent obituaries worldwide can also prove false and lead gold substantially higher. It's too early to tell how high, but we know the pendulum swung 180 degrees from the early '80s' price to the lows a few weeks ago, so why can't the pendulum swing back towards the other side again?
I have banged the table throughout 1999 that commodities in general had
seen their lows and were beginning a new and dynamic bull market run. As
usual, the talking heads on shows like CNBC-TV fail to take into account
the true ramifications of the dramatic rise in the price of oil. How these
brain-dead, so-called authorities get away with telling John Q. Public that
the rise in producer prices is a blip when oil has doubled in price is
beyond me. The cost of producing a vast majority of products is directly
or indirectly impacted by the cost of oil. These bumble heads would have
you think that you don't need to worry about the cost providing you don't
need a home to heat, a car to drive, or a plane to fly.
Independent advice is hard to come by. I have yet to meet anybody who does
it for no monetary gain or benefactor other than the bettering of mankind.
I, too, have biases but I clearly note them. Yet, people will look at a
financial magazine, like Money, and consider it unbiased. I suggest that
those folks look at the enormous amount of ads from mutual fund companies
in Money magazine each month and ask themselves do they truly ever expect to pick up an issue and read a headline about why mutual funds may not be the best investments. If you agreed with me that you won't ever see such an article, then not only must you look at Money magazine with an asterisk, but also every other piece of financial advice you read, watch, or listen to, including my own.
The bottom-line is that the world of investing is not fair and the table is
clearly tilted. Anyone who operates under any other guideline is asking for
trouble. Just like the overriding belief back in the late '70s and early
'80s that bad times were here to stay ended up wrong, the "Don't Worry, be
Happy" love-in crowd on Wall Street is about to get served a subpoena to
Divorce Court.
For me, I'd rather be a live chicken than a dead duck going forward!
Now before I share my thoughts on some industries and individual situations
I like, including some companies exhibiting here, I would like to note that
I am involved with offshore money management.
Ladies and gentlemen, there is a tidal wave of money fleeing the shores of
North America. It has been reported that one-third of all the world's money
and half of the world's business transactions are now being done in
offshore banks. Why? Because people in the know recognized that no one
single country is a safe haven for their wealth. Feeling threatened,
certain governments, particularly in Canada and the US, continue to react
with ever-harsher means of extracting wealth from people who they seem to
have forgotten their government jobs were created to protect.
There are four main reasons why offshore investing is exploding:
#1-Financial privacy. In the US, privacy virtually doesn't exist anymore.
Your private bank statements, phone logs, credit card purchases, brokerage
statements, and so forth, are largely available to those who might want to
harm you. Information on your property holdings, leases, credit financing,
credit information and the like is readily available. Predatory lawyers and
government employees are free to draw adverse conclusions from their
records as they build a profile on you.
#2 Asset protection in the US. The fastest and surest growth industry, in
my opinion, is 1-800-Sue the Bastards!!! Seriously, our legal system is
out of control. The first words from a young baby is no longer mommy or
daddy but "Can we sue the doctor?"
70% of all the world's lawyers reside in the US.
94% of the world's lawsuits are in the US.
Litigation on commission, or what is better known as contingency, is
illegal virtually everywhere in the modern world except the US.
And, in my opinion, here's the straw that will break the camel's back.
There are as many law students in school right now as there are practicing
attorneys. In just a few years, the amount of lawyers will double. Where
will they find work?
#3 Tax-free and tax-deferred advantages. In the US, 25% of the wage earners carry 80% of the tax load. Our liberal media would like us to believe that the so-called rich don't pay their fair share but the fact is, that $4 out
of every $5 collected in taxes is paid by only 25% of the taxpayers. I, in
no way want to belittle the lower income earners, but the bottom 50% of
income earners contribute only 4.8% of American tax receipts while the top
10% of income earners pay 58.2% of total taxes.
By going offshore legitimately, many people have found tax relief.
And the fourth main reason offshore investing is growing by leaps and
bounds, is the fact that there are certain attractive investment vehicles
not available in the US.
Ladies and gentlemen, there is a revolution going on in North America. It
doesn't involve bullets or blood, but is about education and economics.
Smart investors who have taken the time to learn something beyond the party line and carefully act upon their newly found knowledge, move rapidly
beyond the rank and file. They literally have become members of a new class of enlightened, self-directed, financially solvent, independent and prudent citizens.
I would welcome the chance to speak with you on an individual basis. May I
suggest two websites: www.offshorecorpservices.com and
www.offshore-investors.com
Now, let me give you a couple of industry groups and some individual stocks I fancy.
By being in Calgary, I hope not to be perceived as singing to the choir
when I say I very much like the oil & gas industry. Without question, we
can kiss the days of $10 or $12 oil good-bye. OPEC has gotten its act
together and the fact that oil will become harder to come by in the new
millennium has led to a revitalization of the energy business. There are
many plays in this area so a mutual fund approach could be wise. But I do
like a turnaround play- Pennzoil-Quaker State symbol PZL on the NYSE around 12-13 and yields over 4%.
As the bubble continues to leak in the overall US market, value investing
will become more in vogue. The recreation and entertainment group trades at
a nice discount to the market. The US Department of Commerce estimates that
Americans are spending $573 billion a year on sports, music, toys,
amusement parks, movies and the like. Stocks like Coachman
Industries-symbol COA on the NYSE, trading at just 9 times earnings look
okay.
Now, there is an industry group that I think can become dare I say "hot"
and develop a craze similar to the Internet craze we saw a while back. I am
speaking about the biotech stocks. Now I must tell you I am not a walking
encyclopedia on this but it's clear that cloning is no longer just science
fiction and the things that science and medicine can do is truly awesome.
I think Genentech, symbol DNA is the Godfather of the group but the biggest gains will likely come from the speculative plays. A company exhibiting here, Medicure, could be one of them. They are currently developing therapeutics for cardiovascular diseases. Their primary focus is on the development of its lead product, which has demonstrated favorably as a cardio-protective therapy for victims of heart attacks and angina. There
are other promising developments and the company is being lead by one of
Canada's premier biotech experts. They are in booth _______.
Companies that introduce and develop new and improved technologies can
offer some of the biggest returns as well as potential losses. Therefore,
one should look for not only better mouse traps, but also have proven
management to bring the mice to the mouse trap.
There are two companies exhibiting here that fit that bill. The first is:
IQ Power technology symbol IQPT on the OTC Bulletin Board. The company had developed, tested, marketed, and now anticipates large scale licensing of a smaller, lighter, and more environmentally friendly car battery. Since the first "carriage buggy", the car battery has remained technologically deprived, while all other items in an automobile have truly entered the 21st century. IQ Battery is set to change that.
The battery weighs 40% lighter yet increases its charging capability a
minimum of 4 times, doubles the life of the product, and provides a data
interface making it possible to achieve further significant improvements in
vehicle electrical systems. This in turn, reduces the cost to the car
manufacturer and greatly curtails the number one breakdown, dead car
batteries. The market for this is mind boggling. There are 185 million car
batteries sold each year. Automobile makers are always looking to improve
their image and greatly curtailing the number one breakdown, dead car
batteries, can't hurt. The markets for this battery are enormous. Golf
carts and powered wheel chairs, a multibillion dollar market, would like
nothing better than to have a battery that takes one-tenth the time to
charge. Planes, tractors, and many other battery users are all potential
customers.
IQ Battery is in booth _____.
As I noted earlier, a proven management team that can complement a worthy
technology is the ideal one-two punch for speculative success. No company I know fits that bill better here than Senco sensors. The company has
developed an electrochemical gas-sensing technology that it has
incorporated into a highly sophisticated, state-of-art, resident carbon
monoxide detector. It wasn't long ago when virtually no homes had, or
required, smoke detectors. Now, nearly 9 out of 10 do. Carbon monoxide
poisoning has now become a key safety concern, and less than 2 in 10 homes
currently have a detector.
What I believe separates Senco sensors from the pack, is not only their
test-proven superiority in terms of quality and reliance in their product,
but the fact that their management has over 50 years experience in the
development, manufacturing, and marketing of gas and smoke detectors in the US, Canada, and Europe.
The upside potential is real and certainly attractive enough to warrant
your further investigation. Senco is in booth _________.
Finally last, but certainly not least, particularly if I am right about a
new bull market in commodities, exploration, and mining stocks, those that
are left anyway, may be offering some of the best upside potential in a
long, long time.
Here at the show, I would take the time to look at companies like Western
Copper _______.
Also, a company I helped finance, worked as a consultant for compensation,
and personally invested heavily in, is Foran Mining. The company is clearly
onto a major copper/zinc deposit with so much upside still left on the
exploration side. Zinc is perhaps the most favorable fundamental metal of
them all right now. Foran is in booth _______.
I am a member of the Board of Directors for Greater Lenora Resources.
Along with our sister company, RJK Exploration , we have made what we
believe is an important polymetallic discovery that has not received a lot
of attention. I think it holds great promise and would invite you to visit
booths _____ &___.
Not exhibiting here, but my single largest holding, is Nevsun Resources,
symbol NSU on the TSE. The company has two proven deposits totaling over 2 million ounces. Shares outstanding are 24 million. With the share price around $.50, we get a market cap of only 12 million minus cash of about 5 million so the real cap is just 5 million or less than three dollars per
ounce of gold. At just $300, the gold is worth at least $10 if not $15 or
$20. So if you believe in higher gold prices, NSU seems to be a
no-brainer.
Finally, I would like to let you know that The Grandich Letter which is
celebrating its 15th year of publication this month, will be part of a new,
Internet advisory service I will be offering out on a subscription basis
shortly. The service will include almost daily bulletins on the stock and
gold market, as well as individual situations. It will also host a regular
open forum chat with m , as well as guest commentators, for subscribers.
The subscription cost will be dramatically low relative to what you will
receive. Professional financial advisors can receive it for free if they
provide their business card. Again www.Grandich.com and it will be up and
running shortly.
Thank you all for honoring me with your attendance and may God bless all
your future endeavors
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