Peter Grandich, founder of Peter Grandich & Co., discusses what he believes are the asset classes that are critically overvalued right now. "We're in some very, very deep troubled times, perhaps the most troubled times for America, ever," Grandich told David Lin, anchor for Kitco News.
The Bitcoin price has fallen over the weekend on news that Turkey has banned cryptocurrencies as a form of payment. Speaking with us today is Peter Grandage of Peter Granich and company. He's going to be talking about Bitcoin, the financial markets and what he believes is still the biggest bull market opportunity right now.
Peter, welcome back to the show. Always pleasure actually to pleasure's all mine, David. Thank you very much, Peter. We're going to be talking about what you believe is the biggest bubble right now. We're going to get into that. But first let's talk about Bitcoin because you and I spoke about flying. And you, you, you said in your words, you came out of the closet, so to speak on being bearish on Bitcoin.
Well, first of all, I've, I've worked with you for quite a while. I, this was not an entirely a surprise to me, given that you are a little bit on the fence about Bitcoin before, when I asked you about it, but now you're a little more overt and open about how you think. Bitcoin prices will. Correct. So tell us about that and why you think that, uh, why is it that you've been getting hate mail from the crypto community?
Well, that's only been in the last few days after, uh, so-called coming out of the closets, uh, aggressively, uh, tying it to the, uh, IPO of Coinbase. So as you're, as you're correct, I've always believed, been a believer in the crypto currencies. And when Bitcoin was much less expensive, I didn't have issues when clients and friend asked me, should they own some, but as you know, in recent weeks, uh, up to that, uh, IPO because of the tremendous gains and simply just people are those reasons.
Uh, I began to certainly anyone that wanted to listen to suggest maybe it's time to take something off the table, but because the, uh, the commentary and the, the not only enthusiasm, but the, the arrogance and certainty that people were expressing and numbers every day being tossed out five to 10 times.
20 times higher than even the current prices. It suggested to me that, uh, tying into the Coinbase IPO, it was time at least to say to people. I really just don't think you should own it anymore. I mean, I just think at 65,000 or wherever it was exactly around that area when I said it, even if it doubles from here, there were a lot of other things that I felt could still double.
Uh, especially like in a market. I know we're going to talk about, but not have the big risk of loss of principle. So I spoke about that and of course the, you know, the hate mail grew exponentially. Uh, as soon as that hit, you know, out there and people circulate that. But again, uh, the biggest fear that I ever had, you talked about Turkey was that regulatory people had not come out.
And may dad comments on what side of the so-called coin are they going to end up? And my feeling was that governments are never going to support Bitcoin. Once it gets passed just as faculty trade, which was starting to, and I think in the coming days and weeks, we're going to see that more and more that governments are really going to be outspoken on a negative basis on the Bitcoins of the world.
Peter. You're not the only person I've spoken to who is somewhat negative or bearish on Bitcoin for a variety of different reasons. I've heard bearish cases on Bitcoin. The counter-arguments usually from the crypto community where people who believe in Bitcoin are usually, well, you don't understand Bitcoin, you know, Bitcoin has a volatility profile.
That's unique in its own. It's not like any other asset, right? What goes up, must come down. Maybe it's come down a little bit from its highs this weekend, but it's still on an upward trajectory. You know, we've seen a correct 80% only to skywalk at 10000%. The next year I would respond to any of these catercorner counter-arguments.
Well, I'm probably going to give you the answer that none of those other people who've been crushed. I know some of the names they've been bearish for years on it. I wasn't that case, but he is. Here's my response to everybody. I've been at this going in my 38th year. I've watched wall street promote. And recommend if that's the original word, but more promote and hype, and I've never seen them do a better job in achieving something than they've done in Bitcoin.
Here's what I've never seen. I've never seen the last sentence of that story end with, and the general public lived happily ever after. It just never has happened. This may be the first and I'll be the first come out and say, wow, you were right. It really did get to 200 or 500,000 or what have you. But right now I considered it the most crowded overcrowded.
A boat I've ever saw. In fact, I used that in my work to show people an extremely crowded boat. And then I actually took when gold got on the 1700 and empty boat. And I said, I just feel much more comfortable on the empty boat than the overcrowded boat. So there are a lot of other reasons and time will tell.
I think that you're right. I think the jury is still out. I would say that this, this is not a certainty that it's reached its peak, but for me, and the way I look at things and the way I value things and maybe. People say I've been only here 37 years in the people that only been here, 12 months seem to know more I'll ever on what I've learned over 37 years and 37 years told me it was time to move on from something like Bitcoin.
Okay. Peter, does this go back to your investing principle that you usually don't go into something that you believe is a crowded trade that, uh, even though the masses, like it very much in are in your words, promoting it, like. Never like never before seen on any other assets. Why, why would that not be a bullish case?
Why would you not ride the wave? Jump on the bandwagon right into the moon. Well, early on the masses together can make money. And that's what we saw. And that's why you had the gains that you spoke about. You've had the retracements and the rights. The problem now is, is that since it became more widely known and exposure, it's opened the eyes and ears to the government and the regulators and governments have already started to speak negatively.
The ECB president has come out negatively. India has spoken quite openly about wanting to ban it. China is sending out vibes that it would look to see something that it would like to have other than Bitcoin. So to tell you the truth is it's nice to have investment bankers, but you know what, David. 20 or 30 years ago, penny stocks used to be promoted.
Like Bitcoin's been promoted. They were throwing people out of the business, but saying that something can go up 20 or 30 times without any risks. And the one thing that was missing in all of this was any caution. I've never heard. Anyone that predicted those things going up, even give the slightest caution that it might not work, or it might not be everything for everybody.
And whenever that's happened in any product I've seen in 37 years, it ends up a bad story in the end. All right. Um, I'm going to move on to the financial markets after this question, but let me just try to play devil's advocate. Let me try to convince you. To buy Bitcoin. Let's just play this little fun game here right now.
Now I may not be successful, but let me just try it for the sake of argument. Now you have mentioned penny stocks before as an example of things that have been hyped up and crashed and not ended up well for the general public. I agree with that, but so take this into consideration. Bitcoin has. A much higher market capitalization than penny stocks by definition, it can't be, it has a $1 trillion market cap.
Now institutions are adopting it. Governments are using it around the world as alternative forms of payment. In some cases we're seeing visa, PayPal adopting Bitcoin as a form of payment on their platforms. So people can actually now go and buy it. We've got companies like Tesla offering to sell their cars.
Using Bitcoin, you can buy a Tesla vehicle now using Bitcoins. So we've seen adoption on this, on this thing, this asset, like we've never seen before it's being adopted on all levels, not just the private investor being suckered into the penny stock mantra. How would you respond to that? What you've seen in each area that you spoke of was a handful of companies within that industry sector.
Take him forgetting them out. That wall street was wall. Listen, as far as officer, and since you want to have a real debate, as far as I'm concerned, most of those people that you speak about, you could toss them off the empire state building all the way down. They all say the same thing. Hey, so far so good.
So I'm not going to depend on those people that gave me proper balanced advice. Yes, it's true. A handful of groups and people within certain industries have tried to legitimize it, but to be considered a widely used acceptable factor. Most importantly, by true government regulators and the key people in government now are central bankers has not been the case.
So until that happens, I will stand here and disagree with you respectfully. I believe the point you make is valid and that's the reason why people are buying it. I see the cup half empty. You see the cup half full we'll soon. See who ends up with the better part of the cup? All right. Well, uh, the cup is half filled.
It says the diplomat, the neutral diplomat let's move on to the financial markets. Now, Peter, you were talking to me offline about what you see is the biggest bubble of all time. What are you referring to? Exactly? Well, the last two financial, uh, that were triggered 2008 and 2000, which over half of financial advisors and 80% of the young public has never even experienced, uh, we're centered primarily in one or two industries.
The last one was mortgage and real estate, which was the cause that led to the overall crisis. And before that it was the internet bubble. Now, unfortunately there's a much more widespread overvaluation, uh, uh, enthusiasm beyond belief in, in a wide variety of sectors at a time when socially, politically, and even economically.
Both here and abroad, but I focus mostly here for the U S we're in some very, very deep troubled times, perhaps the most troubled times for America. So, uh, it's very hard and mostly importantly, In the past, we've been either economically sound come out of those. Well, now we're at almost 30 trillion. When I started in the business, we were the world's largest correct a nation, but even more importantly is there's no more political will that you could count on that.
If suddenly tomorrow there was a world or U S financial crisis that both parties can cross the aisle and work together to solve it. I don't even think they could be in the same room. So I think there's a lot of differences now. Where financial markets have become overvalued or what have you then the last two crisises.
And I think there's a fall as chance to come to an easier way to solve it. I think it would be far more difficult this time around. All right. So financial markets are overvalued. What should investors do then? Should they be shorting? Should they be getting out, stocking up in cash? What do you, what's your advice?
Well, I never liked people to be shorting because it's, uh, it, it to many people it's, un-American, it's like bedding the don't pass on the crap table, even though at a crap table, the pass line and the don't pass line basically offer the same opportunity. Very few people go to the don't pass. Cause it's like on American.
It's the same thing about shorting. What I do think people should recognize is is that. The sooner they're going to need their principal. The more conservative they should be. So their age is probably gonna pay a lot of reasons to how much conservative they should be and not have total exposure to general equities.
Now I've talked about cash and everybody goes. Why do you want on the dollar? I don't want all the dollar, um, just backed up the truck to buy gold, but I want to have cash because I think assets in general and perhaps as early as a year for certainly the next few years, I'm going to be a lot cheaper because I see a major downturn.
So I do want to own cash and I have not want to have cash up until now. If I wasn't in the stock market, I was fully in gold. If I wasn't in gold, I was fully in uranium and gold. Then I was in copper. But now cash is an important part of my segment, even though it doesn't earn anything, but I think it's purchasing power of general assets is going to become worthy in the not too distant future.
We're going to, we're going to talk about golden just a bit. I want to ask you about taxes, corporate taxes, if that's a risk for you as well as valuations, or if you are writing that off as a non event, as you know, the Biden administration has proposed a $2 trillion stimulus plan. The other side of the corner of that plan.
Now Peter is an increase in corporate taxes and Jenna Yellin, treasury secretary, uh, has actually proposed at the G 20 countries all raise their corporate taxes together. What does this mean for investors? Well, corporate taxes are gonna go up just as, as I said, all taxes are gonna go up. You can't listen.
In 2019, we have one of our best years. You can say it was Trump. You can say it wasn't Trump, whatever it was. But we had a very, very good year economically, as far as the government was concerned because we took out almost over three and a half trillion dollars in tax revenue. Uh, interest bill on our current debt at the time was 440 billion.
So it was like 12 to 14%. We're approaching $30 trillion in hot debt now, okay. Now we hear that someday interest are going to revert back to normal and things are going to get better and we'll all be living happily for the area after. So let's buy that argument for a second and rates just go back to four or 5%, which we're at a very high rate.
Uh, by most people, we're going to be looking at it. Interest rate built in the United States between a billion and a billion and a half or almost half of the total revenue that the country took in so that you can escape. So not only are we going to see corporate taxes going up, but we're going to see taxes going up in States and cities who don't have printing presses.
So. Taxes are a key thing, but if I may David, and this is an area which is still where I focus on and it's, you know, state planning, the government yelling is talking about two things that are and want it petrifies me. Uh, we know they're gonna lower the level of the estate tax or the inheritance tax.
They're gonna, we're gonna probably see it shrink from, you know, 11 to 12 million down to as much as little as one or 2 million, and you're going to have to pay a state tax. Now I hate the state taxes. I think it's very unfair. You work your whole life, you pay taxes, they got your money. Now you finally save something to finally pass on to your loved ones.
And they're going to tax that again. That's got to go on. The second thing that Biden is speaking about, that's very concerning is he wants to eliminate or greatly reduce the stepped up basis. So now when you die and you leave stock to your family, you use the current price. When the person passed as their cost, he wants it to revert back to whatever the original was.
Yeah, well that causes a lot of problems, but the biggest issue and Jaelyn is the biggest advocate of this. And they want to tax unrealized capital gains. And I don't think the general public understands what they're talking about. That means we buy a stock now and we're up a thousand dollars on December 30th come to tax.
It said he make it 20%. We own. 20% on a thousand, but on January 3rd, there's bad news on that stock. And it goes down below what we pay for it. We still own that tax. And then how do you do unrealized capital gains on people that invested in jewelry? A lot of antique cars, it opens up a box that is so bad.
And on top of this, we're now we'll do something giving so much, some certain people who didn't live up to their obligation student debt. We want to. Get away with that, which we only going to have to raise more tax money to make up for. So there are a whole host of things that the Biden administration, excuse me, it should really be called the Biden Harris administration.
They want to bring in things that are just not good for long-term investments, because it's going to take money away from markets. All right. The debt forgiveness plan. They're there. They're offering different plans now. Um, First of all, is this going to make a significant impact on people currently holding student debts, this is going to actually help people.
And second part of the question, how would they finance it? Well, by the forgiveness is not really financing. They're just taking it off and saying, okay, you don't own it. But what about a person like me that worked real hard? My wife worked real hard. We sent our kids to college. We either paid it off or we borrowed and we paid the loan.
Uh, those people that they're forgiving. They were in charge, usury rates. They paid the same rates. I did, they got their education, the same way my child got it. But now, because they supposedly are suffering from it and we relieve them of the burden. Well, that burden is still going to be a need for the tax to be replaced.
The government's going to need that money that it was depending on to come in and make it up somewhere else. So people like me who did the right thing, I'm going to be taxed now for that. So for the right thing, I'm going to pay twice and it's, here's the Pandora's box. It won't stop at student debt. The next thing will be is, Hey, what about all the people that have government mortgages in they're struggling?
Why don't we forgive that too? And where do we get to the point where we don't stop? And at the end of the person that pays is still the hard working person, that's paying taxes. And that's the real, if you want to ask me what could upset it caused the Democrats to lose control and our governments here as much as people think it's because of what's happening socially.
It's taxation. That's what this whole country was formed on. It, the people that were here just got tired of great Britain, taxing them to death, and that's going to be the, the albatross for the democratic party. If they go through with this topic for a second here, if I, if I were a college and, um, I, you know, I'm, I'm planning, tuitions and whatnot.
I'm thinking, okay. Biden wants to grant $10,000 of debt forgiveness for everybody. I'm just going to raise my tuition by $10,000, because I know that extra $10,000 a government is essentially going to pay for it. Isn't that just a subsidy wouldn't that make tuition go up even more. And w what you're hitting on David, which no one seems to be talking about in the media is the original culprit of audits.
The two biggest things that have creased in the United States and terms of course, is medical and education. And no one is going and looking at the colleges and universities who have charged sky high prices. Each and every year going up and up, and one of the reasons children and families had to borrow so much, and that should be where the focus should be.
There should be a freeze. They should not be able to able to raise their costs in the manner that they have. So there are a whole lot of things. Coming that again, that haven't been priced into the market or talked about because everybody's caught up in the excitement, which normally happens in bubbles, but eventually when the bubble breaks all these issues and more that you and I would spoke about just a little bit about today, I've got to come back to haunt us. .