'The Coming Great Conflict': Civil War, Major Market Crash | Peter Grandich
What this covers
Peter Grandich, Founder of Peter Grandich & Co., discusses his outlook on markets, political tensions in the U.S., commodities, and mining stocks.
Watch Peter's last interview with me: https://youtu.be/-l0KZwwiFRg?si=obCO-SSZKPJW7rVb Ray Dalio's "The Coming Great Conflict": https://time.com/6991271/civil-war-conflict-ray-dalio/
*This video was recorded on July 8, 2024
Subscribe to my upcoming newsletter: https://davidlinreport.substack.com/ Listen on Spotify: https://open.spotify.com/show/510WZMFaqeh90Xk4jcE34s Listen on Apple Podcasts: https://podcasters.spotify.com/pod/show/the-david-lin-report
FOLLOW PETER GRANDICH: Twitter (@PeterGrandich): https://twitter.com/PeterGrandich Peter Grandich & Co.: https://petergrandich.com/
FOLLOW DAVID LIN: Twitter (@davidlin_TV): https://twitter.com/davidlin_TV TikTok (@davidlin_TV): https://www.tiktok.com/@davidlin_tv Instagram (@davidlin_TV): https://www.instagram.com/davidlin_tv/
For business inquiries, reach me at david@thedavidlinreport.com
*This video is not financial advice. The channel is not responsible for the performance of sponsors and affiliates.
0:00 - Intro 1:50 - Market correction outlook 4:50 - Government bail outs 7:07 - Ray Dalio’s “The Coming Great Conflict” 14:11 - ‘Financial ark’ 15:58 - Gold outlook 20:34 - Mining companies 22:05 - Uranium 24:10 - Copper 27:30 - How to pick junior miners 34:35 - Bonds and the economy 38:00 - Presidential election 41:27 - Dissolution of EU?
#economy #investing #stocks
Source description (no synthesized summary yet).
Peter Grandich argues that political paralysis, debt saturation, and institutional complacency have eliminated the government's ability to bail out the financial system in the next crisis, making capital preservation and strategic positioning in commodities and junior mining the prudent investment stance.
- The U.S. debt level is so high the government cannot print trillions and have markets accept it as positive, unlike 2008
- Political dysfunction prevents coherent policy responses, ensuring the next crisis will be worse and longer
- The concentrated market rally in mega-cap tech with no breadth signals a structural vulnerability similar to 2000 but with fewer policy tools available
This asset isn't compiled yet
You're seeing its claims, ranked. Compile it to build the argument threads, weight them, and check each claim against your library — the full view.
For AI, EV adoption, and energy transition to proceed globally, the world will require enormous increases in electricity generation and new major mineral deposits (particularly base metals like copper) to support infrastructure, yet capital has not been spent on exploration for 15 years.
“if the world is going to need and grow because of AI it's going to need tremendous more electricity EV all that stuff it's going to need findings of new base Metals particularly and we have not spent any real money for a decade and a half to find these new big major deposits and the supply and demand scenario for these medals just get bullish and more bullish as each week goes by”
The primary structural reason to be bearish on the stock market is the lack of market breadth as a few stocks (mega-cap tech) continue to rise while 8 out of 10 sectors decline, which historically precedes major corrections.
“the the lack of of following and Improvement as those few stocks went up eight to nine out of 10 times Pro Troublesome down the road”
Two sectors that offer growth potential are: (1) anything related to power generation and distribution infrastructure (because Democrats and Republicans both recognize U.S. needs massive increases in electricity capacity for AI and EVs), and (2) companies that increase food production capacity and efficiency (because many populations are losing ability to eat well).
“there are two sectors if I was your age and as handsome as you are I would tell you that things related to power the enormous amount of we just had Congressional hearings today it won't make a lot of news but it was an amazing watching Democrats and Republicans say the same thing at a committee normally they're up against each other and they were all speaking about how much more power just here in the United States we're going to need in the next 5 to 10 years to meet the needs of what's happening in the AI sector and all talked about how we don't presently have it we're going to have all these brown outs and blackouts”
Nuclear power must be a significant part of governments' power generation strategy in coming decades, making the uranium thesis fundamentally sound, but most junior uranium companies will fail and only a small number of producers exist, making junior uranium speculative.
“that argument is still strong nuclear power must and I would underline must be part a significant part of governments to provide Power in the coming years and decades there's no question about that the problem always falls back to why I originally just stuck with producers and not Juniors there's only a small amount of producers the rest of people are all wannabes”
The political, economic, and social unrest now occurring globally makes the geographic jurisdiction of mining operations a critical selection factor (more important than it was 20-30 years ago), with North America being the safest jurisdiction for mining.
“the second most important thing now which used to be fourth to 5ifth 20 years ago is where they're looking because the political economic and social unrest that's now occurring in many parts of the world wasn't happening 20 or 30 years ago you didn't worry too much about where you were exploring and Mining but now you have to”
As societies move from Dalio's stage 5 (populism, polarization, class warfare) toward stage 6, moderates become extinct, and during times of increased hardship people increasingly view others through stereotypical class-based categories rather than as individuals.
“in stage five moderates become the minority in stage six they cease to exist in stage five class Warfare intensifies that is because as a rule I uh as a rule during times of increased hardship and conflict there is an increased inclination to look at people in stereotypical ways as members of one or more classes”
Political and geopolitical factors are severely underweighted in mainstream financial services industry analysis and in investors' portfolios; this is a critical blind spot that will prove costly.
“the weight of the politics on what's Happening is not being carefully analyzed and considered in the people's Investments right now it's an thought and what's transpiring this and the separation and the political paralysis not just here but in other places in the world particularly in Europe”
The European Union is experiencing the beginning of the end; rising nationalism in key countries (France, United Kingdom, Ireland) is making populations view the EU as harmful rather than helpful, and German economic dominance (which previously anchored EU) no longer exists.
“I believe that we're seeing the beginning of the end of the European Union and uh that is also going to open up uh a whole can of worms on the geopolitical fronts”
Gold should be treated as insurance in portfolios: people should own some and hope it doesn't go up, because if it does go up significantly, it signals that other portfolio holdings are likely declining sharply.
“I would not want to see most people that I meet from working class right up to the athletes I dealt with not having at least some gold in the portfolio Let me tell you why I always tell them own some and hope it doesn't go up and Dave they all say the same thing Mr granish why do you want me to buy something that's not going to go up and my answer always is the same Dave because if it goes up a lot chances are what you own a lot is going to go down”
Management quality and proven past success in finding, developing, and selling mineral deposits or bringing mines into production is the absolute key factor in selecting junior mining stocks, because failure is the norm in the industry (only 1-2 of 10 juniors succeed).
“I learned again that management is the absolute key when it comes to Junior resource companies and proven past results of being able to do what most others can't because the resource industry is failure is the norm every 10 companies that are out there all honorable all rolling up their sleeve all trying their hardest three or five years from now will come back one or two found developed sold or or brought into a new mind failure is the norm”
The discrepancy between BLS employment data and household survey data exists because BLS counts a person working three jobs as three employed people, while household survey counts them as one person working three jobs.
“I would just say to you that that's why there's such a discrepancy from the monthly employment numbers and the household survey because in the monthly BLS which really should just be called BS if you work in three different jobs they'll count you as three different employed people even though it's one person as you said working three jobs in the household survey that would be just counted as one person working three jobs”
The BRICS alliance and the formation of an alternative trade/monetary system will have the same transformative impact on world trade in the next 3-5 years that the Industrial Revolution had, and this is the most critical geopolitical development that investors should be monitoring.
“I believe the bricks and the formation of the bricks and I've said this to you for a year now in the next three to five years probably shorter than later what they will do to World Trade will have the same impact that the industrial revolution had so the most important thing we should be talking about outside of our own place is the bricks and we're going to hear more about that in the fall”
The rise in gold prices over the past year is primarily driven by central banks and foreign institutions recognizing the BRICS nations' plans to create some form of gold-backed trade system, not by inflation concerns or traditional investment demand.
“I think the reason is and we'll we're going to see it and I'm you know I'll come back and be the first to say I was wrong but I think we're going to see a lot more advancement of the Brick Nations and where they're going as these fall meetings come together and I think we're going to get a real minimum hint of how go may play a role in whatever they're planning from the monetary side of things”
If forced to speculate on high-risk, high-return investments, junior mining stocks (explorers, not major producers) are the only asset class that Grandich can still argue is undervalued across the sector.
“that's mining shares and particularly in the Juniors because it's very hard to find a sector as a whole right now that's greatly undervalued and anywhere anywhere in the world at least how I look at it even mining shares the major producers have rallied since February the only the only sector that isn't up are the companies that basically do The Grudge work and make the initial discoveries”
Political paralysis in the U.S. (Democrats and Republicans unable to pass worthwhile legislation, each party fractionalizing toward extremes) means when the next crisis arrives, there will be no political will to fix it, unlike in previous crises.
“Political paralysis David here in the US Democrats and Republicans cannot go in a room and make any worthwhile legislation anymore and on top of that they each have a faction in their party that wants to move more extreme away from their Center so I don't believe if and when the next Crisis comes that there's the political will to fix it this time”
Most investment advisors and professionals have not embraced physical gold despite it being one of only three tier-one investments available in the world (along with stocks and bonds), which is a major oversight.
“why has gold performance it has and why still have most investment advisors not embraced one of the three tier one investment you can have in the world people got plenty of stocks they got plenty of bonds but they have very very little physical gold in their portfolios yet it's the only one of three tier one Investments you can make in the world”
The widening political divide in the U.S. and other countries is driven by two factors: secularly by the division of income (wealth concentration while workers struggle) and philosophically by the abandonment of the moral compass that religious traditions and living within one's means provided for centuries.
“I'm going to give you two answers I'm going to give you the secular answer and then I'm going to give you the Peter grandage answer the secular answer has been a division of of income it has been realistically where a small percentage of people have become increasingly wealthy while the bulk of the people have struggled due to enormous things that we can speak ours about that's the secular answer the Peter grandit answer is I believe the more we moved away from the moral compass that a lot of different religions respect I'm not talking about any other one and we lived within a means that worked for this country for a couple hundred years a moral is basically gone”
The biggest investment mistakes people recall making happened during highly stressful times, so recognizing how difficult things may become is important to avoid emotional decision-making.
“I don't care who you speak to whatever if they're willing to admit about their past mistakes and they've actually made them I've made a lot of them biggest mistakes that I can recall people making were during highly stressful times and I don't think people have recognized how difficult things may be and therefore suddenly will hit them and they will make decisions out of emotion when it comes to investing emotion is one of the poorest factors to incorporate into investing decisions”
In the current environment, capital preservation now outweighs capital appreciation as an investment priority; the ultimate investment error is not being wrong initially but staying wrong, and complacency typically leads to reactive rather than proactive decision-making.
“I think the important thing is is preservation of capital now outweighs capital appreciation means it's okay you can still try to turn a dollar two or three but you need to focus more on protecting what you already have than trying to add to it I think the other thing is is that the ultimate crime in investing won't be wrong it's staying wrong”
The solution to future instability is for individuals to adopt a 'less is more' philosophy, living below their means, avoiding consumerism and status-seeking competition, contrary to multi-generational shift toward lifestyle expansion.
“I've had a model for over a decade almost actually 15 years that less is more I lived it myself David I I could conceivably have a bigger home I could have a more expensive car all those things is still to many people a way of life I think we have to recognize that past Generations yours families mine did with a lot less smaller dwellings not as big cars all that stuff but they still got through I think excess or or or living and trying to keep up as we like to say with the Joneses has led to a a lot of our issues”
Spiritual and moral renewal—a return to recognizing a higher power beyond political leaders and money managers, and reintegrating religious teachings into public life—is necessary to prevent societal collapse.
“I really believe we need to return to recognizing that there's somebody far superior than us and they're not running for president or they don't run a big money management firm and those words and those teachings need to be brought back into line and understood and without it I think we're just you know we're a mess and we're going to have much bigger problems down the road”
Copper has experienced a recent short squeeze pushing prices to $5 per pound, but the fundamental supply-demand scenario is so bullish that copper should continue higher, particularly as Chile (historically opening new major mines every 1-2 years) has not opened a large copper mine in a dozen years.
“it was a big short squeeze yeah and that hindsight investing uh and but since that time let's not forget it was just a few months back when we couldn't get above four and a lot of the Bears we're talking about 250 and three the bottom line is as we get into especially past this year into 2025 and 2026 the supply demand scenario turns such incredibly bullish and think about this Chile that just about every year or two used to open up a brand new copper mine hasn't opened a real large copper mine in a dozen years”
For U.S. equity investors beyond junior mining, underperforming small-cap and mid-cap stocks should be preferred over large caps, and equity index annuities offer a way to gain upside while protecting principal (important for older investors without time to recover from losses).
“I don't want to own any general us Equity is not related to Natural Resources but what I tell people are if you do then you have to look at the ones that have greatly underperformed and that would be in the small cap sector and even the midcap sector if you are like me and you find that there's certain types of companies that are not traded in the US but do similar business elsewhere then you can look overseas and merging markets in that General me the safest is an equity index annuity and and I'm not here to give this is not investment advice but something where I can be assured of upside but not losing principle”
Unlike previous financial crises (1987, 2000, 2008) where the government could print trillions and have markets accept it positively, the government can no longer deploy this solution because public perception has shifted to believe the U.S. may not be able to make interest payments, making bailouts politically and economically infeasible.
“the only difference is between 87 and 2000 and 2008 there was the ability for the government to step in and bail out if we have a crisis we no longer have that availability because we became so indebted and we're spending so much money each year more than we have we will not have the ability to Simply print five or 10 or 15 trillion whatever it takes to whatever ends up happening and have the market accept that as that's a that's a net positive that's the big change”
Ray Dalio's concern about civil unrest and a 30% probability of civil war is more likely now than at any other time in the stock market, and the widening divide between political extremes makes this risk material.
“I do think it's more likely now than in any other previous time in the stock market”
Capital markets management and the ability to raise money at the right time and spend it wisely ('a book of matches' rather than a 'single match') is critical to junior resource companies, because juniors are like 'a burning match' that goes out if they run out of capital.
“capital markets the people that know how to raise money at the right time recognize how to do it efficiently and spend it wisely you're talking about... the critical uh I'm not the originator of this and forgive me for not remembering who originally said it but somebody used to say at the mining shows a Junior resource companies a burning match and it always goes out so if you don't have a book of matches if you only have one match you're done”
India's Prime Minister Modi visiting Russia (as of the conversation date) and India-Russia alignment in BRICS are signals of geopolitical restructuring that financial markets are not accounting for.
“and you know just as today as you and I go off pres the India's prime minister and and Russia's leader are together happy I mean it's it's these are things that are just not being considered people on the geopolitical front that need to be”
Employment data from the BLS (Bureau of Labor Statistics) has become unreliable; revisions of 100,000+ month-to-month suggest the Fed and policy makers are making monetary policy decisions on false data, making the recent 'bloom off the rose' moment where employment numbers are being questioned.
“I mean think about it they came out with the employment number last Friday Friday before and they had to change by a 100,000 David they lowered a how could you be possibly how could the if the Federal Reserve was truly using these numbers at face value how could they be making planning monetary policy when the people who provide you the employment numbers have such great discrepancies month after month after month and I think that that bloom is off”
Corporate bonds should still be avoided despite Grandich's belief that interest rates have peaked for the cycle, because the next move in rates will be lower (2-3 Fed cuts as early as September or after the election) due to a coming drop in economic activity.
“I still don't believe we should own corporate bonds even though I believe interest rates peaked for the cycle I actually think the next move on interest rates is going to be lower I think we're going to see two to three fed Cuts between possibly as early September but no later than right after the election and clearly into 2025 because we're going to see a tremendous drop off in the economy”
Economic turndown will be followed by increased political disharmony, and whatever party hoped a leadership change would restore conditions will find within months that disharmony actually increases, and political Harmony will be worse in 2025 than in 2024.
“the the turn down in the economy will also because of the political ramifications what I think a certain party who's hoping that someone replaces the person that's in charge now thinks once that person gets in things are going to just revert back to how they used to be may have some momentarily uh excitement but within a few months they're going to realize that as much as the people battled him before they're going to battle him even more going forward so as we get into 2025 I don't see any political Harmony be increased in fact I see more disharmony if possible in 2025 than we even had here in 2024”
Silver now has as strong an investment case as gold, historically outperforming bonds since the Millennium and alongside gold should continue to perform well in the coming period.
“and and let me add this because I used to get picked on because I never said the same positive things about Sila but right now silver has this good an argument in my book as gold does so I think both of them will continue to perform well”
Medical/healthcare technology sectors will continue to grow because people are willing to pay just about anything to stay alive, making healthcare a reliable secular growth theme.
“of course anything medical because people are willing to pay just about anything to keep alive so I still think there's places out there but at this point in time I don't think there's a lot of reasons to take a lot of risk in most of these sectors”
For near-term stock market movements (weeks to months), forecasting is essentially a guess, but over multi-year horizons (3-5 years), investors should expect significant declines (30-50%) as economic, social, and political conditions deteriorate.
“if you're interested in the next few weeks or few months I think that's anyone's guess I think you know flip a coin do what you want if you want to start talking about multi- years out and Resort back to us what a stock market ultimately is which is where you buy part ownerships of businesses and those businesses will mostly do well or not so well depending on economies then I would say I'd be quite bearish because I think things are going to get a lot worse economically socially and politically so I'm not so concerned about the next 10% or 10 weeks I'm more concerned about the 30 to 50% over the next three to five years”
Betting markets show approximately 61% probability of a Trump victory and 17-18% probability of Biden remaining, though these probabilities are estimated at time of interview and may have changed.
“I was looking at the betting uh numbers on the betting markets it's currently priced in today as we speak 61% chance of a trump Victory uh Biden trailing at 177% however there's only about a 40% chance of Biden stepping out of the race”
The former Chief Economist of the Labor Department said that when evaluating labor market health, they often resort to IRS data because it is more accurate than BLS data.
“I was ask talking to the chief Economist of the labor department um former Chief Economist and she said that uh when it comes to evaluating the health of the labor market often times they resorted to using IRS data that was more accurate than BLS data”
A record number of people are holding multiple jobs, which could be interpreted negatively (people need multiple incomes to survive) or as a positive (people running side gigs and freelancing from higher income levels).
“the number of people holding multiple jobs um is now a record high... one could argue that this is not great if you need a whole multiple jobs... the other argument I've heard is that well people who hold multiple jobs they're running gigs they're you know doing things they freelancing on the side those people generally are doing so because they have a higher income to begin with”
Biden will not be on the 2024 election ballot; he will step out of the race within the next week (as of the conversation date) due to either voluntary exit or Democratic Party pressure, after which an open convention will determine the candidate.
“I still believe that obviously now some people have more reason believe that's the possibility the problem I had with that was at the time which may not be the answer now is I said the person that would replace them if that name was said it'd be the two worst words we could ever hear and that was President Harris I do believe that we're going to likely see despite as you and I talk today uh within a few days to no more than a week or so we will learn that Biden will for whatever how they plan how to exit will suddenly stop running”
The Financial Arc (five pillars: debt/deficits, retirement crisis, immigration, BRICS, political paralysis) represents the five structural vulnerabilities that necessitate capital preservation over appreciation as the investment priority.
“the third is a debt and deficits the second is a retirement and aging crisis the third is an immigration Invasion the fourth is the bricks and that's a big story you're going to be talking about in the fall days there going to be a lot of stuff coming out the bricks that's going to shock Wall Street and then the fifth is the political paralysis”
Kennedy (the third-party candidate) could act as a spoiler in the election for either the Democrat or Republican side, and the role of third-party candidacy is not being discussed in relation to political outcomes.
“what isn't talked about and I think it's going to play a role especially if there is a change from the Democratic party how will that third party candidate Kennedy play a role in that people are not talking about that but I can tell you this uh he could be a spoiler for either side”
In Grandich's 40 years of market participation, he has never witnessed the combination of elevated market valuations, investor complacency, lack of fear, and bearish fundamental economic and social factors—suggesting extreme contrarianism is the appropriate stance.
“I've seen that I've never seen before in my 40 years given where market prices are where valuations are and giving what the mood of the market is the complacency among investors and the so-called professional public with all the fundamental economic and social factors that one could argue that are as much bearish as they can make an argument of bullish the fact that there's such a complacency and not a real fear at all that I see at all even at these high valuations suggest that what normally succeeds over time contrarianism is the thing to be”
Regardless of election outcome (Biden stays, is replaced, Trump wins, or Democrat replacement wins), approximately half the country will be angry the day after the election, so the election will not resolve underlying divisions or unrest.
“no matter what happens the election now whether Biden stays whether they replace him whether somehow he or whoever replace him wins or Trump wins about half the country is going to be pretty well mad the day after the election I don't think the election is going to solve anything”
Morgan Stanley's Mike Wilson's forecast of a 10% stock market correction between now and the election is too vague to be useful as a market forecast because it lacks specificity about timing and the timeframe is too broad.
“I am bearish but I think that's kind of a vague way that's fairly you know how many months away and there may be a 10% correction I don't know if that's a market forecast”
City Group and US Bank are forecasting gold demand to rise in coming months, pushing prices toward $2,700 to $3,000 per ounce by 2025.
“City Group forecast gold demand to rise analysts at US Bank City Group are forecasting that the demand for gold will rise in coming months pushing up prices they're projecting uh prices to reach between 20 $700 and $3,000 per ounce by 2025”
Ray Dalio's Time Magazine article on the risk of civil war and social unrest is more credible and worth taking seriously than mainstream financial industry commentary because Dalio's track record and position as a major investor gives him grounds to be heard.
“look where Ray doio is and look where some of those other people are I think you have to at least to respect what he's saying and try to justify how he may be wrong I don't heard anything yet that you said there that I greatly disagree with”
A potential factor in Biden's decision to exit could be his concern about his son Hunter's legal case in September and wanting to ensure the replacement candidate will pardon him before January 20.
“I think probably what's not being spoken about too is the concern is his son who's already been found guilty of one made of significant crime has a case in September and if I was him I would want to make sure that my deal whoever I arrange is is going to kind of take the place is going to make sure that they step up or before January 20th comes that my son will be pardon”
Grandich was a large investor in uranium when it was around $20 per ounce and exited around $45-50, missing the rise to $100+, acknowledging he was wrong to sell despite the thesis remaining valid.
“so my uranium friends are going to get upset because they know in January I bailed on them you know I was a big player in the uranium when it was around 20 and was buying things like camoo at 8 and when they got to 45 and 50 and got well over 100”
Arizona Metals is Grandich's largest current portfolio position and he holds 1 million shares purchased at $3.57, currently trading at $1.48, representing a significant loss, but he is holding because: (1) the project has always been strong, (2) past management has been replaced by proven Major League operators (two individuals with five successful development exits combined).
“the name of the company's Arizona medals just to be be the point but there is where management is going to make an absolute difference certainly for my money okay and just to disclose you're currently invested in Arizona is that something I am I am I am I I'll tell you what so you know so I said it publicly I don't hold anything back I own a million Shar $357 I think the stock today is a dollar 48 so you can figure out how much I'm losing”