2012 Outlook from Peter Grandich
Excerpted from The Grandich Letter
U.S. Stock Market – Perhaps the best thing I did in 2011 was not to short this market despite lots of suggestions to, and I ended up making my only trade from the long side. While something unforeseen can take it down hard, it continues to look like for the early part of 2012 that the least resistance is to the upside. I think the “Don’t Worry, Be Happy” crowd will make the argument that the market held up despite an onslaught of so-called bad news like the European debt crisis and, with the U.S. economy grudgingly improving, can push share prices higher.

The key question is, can the November presidential election create another “hope” win for either party and therefore postpone until after 2012 the inevitable horrific fiscal crisis that is coming here at home… no ifs, ands or buts? I don’t know the answer, but I do know it’s not a question of if it gets real bad here, but when.

U.S. Bonds – Personally, I think it’s insane to lend anyone (let alone broke Uncle Sam) money for 10 – 30 years for interest rates of 2-4%. You would have to believe in Santa Claus and the Tooth Fairy and think that Elvis and Jimmy Hoffa are alive on an island somewhere to believe inflation is/will be less than these interest rates over the next 10 -30 years. In the end, I think bonds end up the worst bet for the next 10 years.

U.S. Dollar – Its main competition, the Euro, is in horrific shape at the moment and giving some wind behind the dollar’s sail. The problem with that is the Europeans have at least come face to face with the debt problem. Americans by and large still have their heads buried in the sand and have made an already bad problem worse. I don’t know the date or time, but the ability to kick the can down the road is nearing an end. The price to be paid will be enormous and shall eventually kill the U.S. Dollar.

I continue to believe the Canadian Loonie (dollar) is the only currency to own. I love Canada (I’m working on the Canucks part).

Gold – Whatever lows we make in this current correction (worse case is the low $1400s, best case is low being put in very near term), I suspect it shall be well within the 1st quarter and by the time 2013 arrives, we shall be at new highs. The mother of all gold bull markets remains, IMHO.