He Speaks About Debt and Energy

By Kevin Michael Grace

Peter Grandich was a busy man at the Cambridge conference Sunday. He gave a workshop, “Why Junior Resource Stocks Will Work One of These Decades,” as well as a keynote speech, “World Ends In 2012… Film at 11.” ResourceClips.com caught up with him between these two engagements. Grandich was resplendent in a Vancouver Canucks jersey (he was at their game Saturday) and in a state of high excitement, because his beloved New York Giants would be playing the San Francisco 49ers in the NFC championship game in a few hours.

Grandich was clearly taken by the scope of the 2012 Vancouver Resource Investment Conference.” I remember when Joe Martin ran this as a one-man operation out of the Hotel Vancouver,” he says. “Now it rivals PDAC.”

But he is not taken with the mantra that the US dollar is the world’s safe haven. “When you think about all the things that have happened in the world in the last few years, the low on the US Dollar was 70 in 2008, down from a high of 150. Now it’s 80; what kind of rebound is that? What kind of safe haven is that?”

Grandich is similarly dismissive of the “safe haven” explanation that while the United States may be sick, the rest of the world (especially Europe) is sicker. “Yes, the world is sick,” he says. “But the full diagnosis for the US has not been seen by the rest of the world. There’s no question we are worse off than even Europe, but Americans don’t want to face it. And the financial institutions, who of course make the world go round, are not going to tell the full story.”

For all the talk of financial renewal since 2008, Grandich say little has changed. “To put it into simple terms, what happened was like the world’s leading car makers sold hundreds of billions worth of cars they knew were faulty and were going to crash. Then they bought life insurance on the drivers, so they could collect when they crashed. That was the mortgage scheme. Those same people are still in control of the game now. There’s no vested interest in it for them to disclose how bad the US really is. We can’t service the interest and pay off the debt because we don’t produce enough cash flow. We just keep adding on to the debt and the problem is just accelerating. Can we kick the can down the road again? Absolutely. But the longer this goes on, it only makes the problem worse.”

Grandich is keen to point out that the financial crisis is primarily a crisis of overextended banks, not the “supposedly sovereign nations” that are being punished to aid them. “Look at Iceland,” he says. “They decided not to agree with Too Big To Fail, and they said, ‘OK, default on us.” So what happened? Iceland is now one of the few countries that is rebounding and growing again… As James Sinclair says, the big problem is all these CDSs. If the bankers get a hard default, a volunteer haircut, these CDSs don’t get exercised; the insurance doesn’t get called upon. At the end of the day, that’s really what they’re trying to prevent. It’s not about trying to save Greece.”

Grandich is big on Canada. As he likes to remind audiences, he changed his money from US to Canadian dollars “back when [the latter] traded as 80 2cents.” He expects the Loonie to rise to $1.10 to $1.15 American in the next few years. Canada, he argues, “has two key things going for it: energy self-sufficiency and food self-sufficiency.”

Most Americans don’t know that their biggest energy supplier is Canada. Not Saudi Arabia or Venezuela. Grandich knows well how crucial Canadian energy is to the American economy, so he is appalled by President Obama’s decision to reject the Keystone Pipeline. He concludes, “This could turn out to be the worst economic decision America has made in the last 100 years.”

Peter Grandich is the founder of Grandich.com and Grandich Publications, LLC, and is editor of The Grandich Letter, first published in 1984. Grandich Publications, Inc. provides research, analysis, and investor relation services for certain of the companies featured in the articles appearing in its publications. Grandich is the author of Confessions of a Wall Street Whiz Kid, which Kevin Michael Grace reviewed here.