Worst Era Since Great Depression Next: ‘Perfect Storm’ Forming Warns Investor | Peter Grandich

Peter Grandich (0:00)

These are a lot of things that are coming together here at a time, politically, socially, and economically, that are setting up probably for one of the worst potential eras since the last Great Depression.

David Lin (0:12)

We're not at war with Canada, what are they going to do? They're going to take their two submarines out of the Edmonton Mall and say, come on, did you watch that clip?

Peter Grandich (0:17)

Yeah, that was, can I just tell you, his viciousness and arrogance gets to a point where it's just disgusting.

David Lin (0:24)

It's Wednesday, September 9th, the US 10-year yield is now at 4.83%, three-month bill is nearing 3.91%, and the VIX is holding near 15 as markets stare down geopolitical turmoil as well as the looming midterms. Reuters finds no midterm premium in the VIX curve, despite a massive average 17% drawdown occurring in stocks for each month of the past 13 midterms. Now, last month, September 8th, Treasury Secretary Scott Besson told students in a fireside chat that this is the house now on the yen carry trade. We're going to be talking to our next guest about the implications of what the Treasury may do next, what the bond market is signaling, and what markets are signaling overall. He's Peter Grandich, a well-known guest and frequent guest on this program. Peter, welcome back to the show.

Peter is the founder of Peter Grandich & Co. Check him out. Links down below. Welcome back, Peter. Good to see you again.

Peter Grandich (1:18)

As I always like to tell you, David, it is a true pleasure to speak to you.

David Lin (1:22)

True pleasure to have you back. Let me play for you a quick clip of Treasury Secretary Scott Besson speaking yesterday. I referenced his remarks in the introduction. Take a listen to this and we will react together.

Scott Besson (1:37)

based government, Ecuador, Bolivia. So all these countries are following the same thing. And whenever people say, oh, well, Treasury Secretary is taking a risk, well, it's my dream. I have asymmetric information. I am the house now.

So when we intervene with the Japanese Yen, I have pretty good insight into what the Japanese, what the Bank of Japan is going to do, what Japanese policymakers are going to do. And you can bet against me if you want.

David Lin (2:21)

This was at the Cox School of Business in Dallas.

Okay, what are your interpretations of that remark? He's talking about the Yen Intervention, which already happened end of July. Could there be more interventions in the way, Peter?

Peter Grandich (2:33)

Well, one thing is clear. This administration is not afraid to talk about insider trading and do it. He's basically saying, I'm using insight that you guys don't have, and beware that that can come back to bite you. At least, that's what he hopes is going to happen. What I think he's actually done is, I think he set himself up on a lonely island, and the currency market and the bond market is much bigger than the stock market, which this administration has been able to stroke with key timings of words that kick in algorithm programs and save the troubles that were happening during the height of the Middle East crisis, although it's starting again.

As you know, I've been an outspoken person, and I'm far from alone that the yen carry trade was going to come back to bite, especially the US., because we have used it as a liquefying event for our own financial markets. And there's just no way in my view that the Japanese are going to sacrifice themselves so the United States can have an easier time. I think they've been quietly, and we've seen statistics now, they've been selling their bonds along with the Chinese and others.

And I think they're going to sell more US security assets in order to put more of their house in order. And what are we doing? We're going down the same road that they went down. We're going to cheapen our paper. We're going to issue more short-term bonds by supposedly paying off long-term bonds. It's like having a mortgage, Dave, and saying, you know what, I'm just going to use my credit card to pay it off. That'll solve the problem. It doesn't solve the problem at all. So I think he set up a contest, that this is one that the United States is not going to win. And let me just add this, for the gold bugs out there, for the people for 20, 30 years who've been talking about these things, this has now finally happened. And what's happened is because people have heard it for so long, it's been dull in their mind. But understand this, this is tremendous. The United States has isolated itself on the world stage, monetarily, economically, militarily, trade-wise and all. And now this is where the dollar really is going to pay the dues for all these years of easy access. So I think it's big news. I think it's going to be further big news. And I think he comes out on the short end of the stick.