I had the chance recently to reconnect with Peter Grandich, Senior Market Commentator with Money Talks. It was a powerful conversation as Peter just issued a new bearish call on U.S. equities markets, which is the fourth time in his career of having done so.

Peter is known for having donned his “bear-suit” in 1987 right before the largest stock market crash in Wall Street history, as well as in 2007, only months before the 2008 financial crisis.

Now, according to Peter, financial conditions have warranted a return of the “bear-suit,” led by two primary factors—both of which are long-term positive for gold.

The most troubling sign of a major market top Peter noted during the interview, was the recent completion of, “What we like to call a megaphone [chart pattern]…It took several years to work to the top of the megaphone line. So I suspect the most likely scenarios will take several years to work to the lower end. That lower end is somewhere in the 6000 to 7000 area on the Dow. But that doesn’t mean that as it goes lower, there won’t be intermediate bear market rallies that can be substantial.”

Chart: Megaphone Topping Pattern

(click to enlarge)

The second most troubling sign of a major market top in Peter’s opinion, is the notion that, “The very same [financial institutions] that are now telling everybody, ‘the coast is clear…keep buying stocks and bonds, gold is the worst place you can be’—these financial institutions back [in 2008] were selling financial products, knowing full well, that not only would they fail but they actually took the other side [of the clients' trades].”

Taking the other side of client trades designed to fail, “Is the same as if we learned today, that Chrysler, Ford and GM knowingly manufactured cars that would crash and bought life insurance policies on the people that bought those cars so they could collect twice when they crashed and died,” Peter explained.

“Now those very same institutions,” he continued, ”Many of whom we had to bail out because they got in such dire straits—are making record profits again. They are the very same people that are encouraging everybody…[to be] aggressive in financial assets, and they’re really one of the most negative as a group [on] things like gold and silver.”

When asked to further comment on precious metals, Peter indicated that, “There has been something very, very wrong in the gold market. We know the paper price of gold has declined…from almost $1900 to…now a little bit over $1200 and that’s nothing to sneeze at. That is a decline. But usually when something declines in value like that, there’s a great physical exodus from it.” 

“[As a market] example, when I was a kid, [during] the first oil shortages – we had big cars then. If you had a big car, the value went down. End of story. When the real estate market took a hit, houses went down across the board. Yet when the paper market went down, demand for actual ownership of gold went up and it just hasn’t made sense, such physical purchasing and yet the paper market was going down.”

That market discrepancy Peter concluded, has led to, “[A] great shift of gold ownership out of the West…into where people who truly still have purchasing power—the Far East and Asia…is near completion and when it does happen…then we will see a dramatic rise back. I believe we’re starting to see that now.”

This was another powerful interview with one of the top market commentators of our time. It is required listening for serious investors and market students.

To listen to the interview, left click the following link and/or right click and “save target as” or “save link as” to your desktop:

>>Interview with Peter Grandich (MP3)

To follow Peter’s regular market commentaries, visit: MoneyTalks.net

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Tekoa Da Silva
Bull Market Thinking

Photo source.