Episode 118
What’s the Price of Mispricing Risk? Interest Rates, Repo Markets, and an Activist Fed | Jim Grant
Episode 118
Jim Grant
What’s the Price of Mispricing Risk? Interest Rates, Repo Markets, and an Activist Fed | Jim Grant
summary
In this week’s episode of Hidden Forces, Demetri Kofinas speaks with Jim Grant, founder of Grant’s Interest Rate Observer, a twice-monthly journal of the financial markets.
Born in New York City and raised on Long Island, Jim had thoughts, first, of a career in music, not interest rates—french horn was his love. But he threw it over to enter the Navy. Following his stint in the Navy, Jim enrolled Indiana University where he studied economics under Scott Gordon and Elmus Wicker and diplomatic history under Robert H. Ferrell, and later, obtained a master’s degree in international affairs under the guiding tutelage of cultural historian, critic and public intellectual Jacques Barzun.
In 1972, at the age of 26, Grant began working as a cub reporter at the Baltimore Sun, moving to Barron’s in 1975. The late 1970s were years of inflation, monetary disorder and upheaval in the interest-rate markets—as Jim Grant says, “of journalistic opportunity.” Barron’s editor Robert M. Bleiberg, tapped Grant to originate a column devoted to interest rates. This weekly department, called “Current Yield,” he wrote until the time he left to found the eponymous “Interest Rate Observer” in the summer of 1983.
During his long career, Jim Grant has written a series of books including three financial histories, a pair of collections of Grant’s articles and four biographies, the most recent of which is about the life and times of Walter Bagehot, whose ideas about central banking informed the U.S. Federal Reserve’s response to the Global Financial Crisis of 2007-09.
This conversation is unusually convivial, even by the normal standards. Demetri and Jim discuss actions by the Federal Reserve in the repo market (including official and unofficial explanations for the turmoil seen in mid-September 2019), the recent WeWork and SoftBank debacle, a possible bubble in the leveraged loan market, and much more.
During the overtime to this week’s episode, Jim shares information about how he invests his own money (and who he invests it with), delves into some of Grant’s value analysis research and provides insights into his own work process as an editor and interviewer.
If you want access to the overtime or to the transcript and rundown for this conversation, you can do so through the Hidden Forces Supercast Page. Subscribers also gain access to our overtime feed, which can be easily be added to your favorite podcast application.
Producer & Host: Demetri Kofinas
Editor & Engineer: Stylianos Nicolaou
Subscribe & Support the Podcast at http://patreon.com/hiddenforces
Join the conversation on Facebook, Instagram, and Twitter at @hiddenforcespod
bio
James Grant was born in 1946, the year interest rates put in their mid-20th century lows. He founded Grant’s Interest Rate Observer, a twice-monthly journal of the financial markets, in 1983, two years after interest rates recorded their modern-day highs.
Born in New York City and raised on Long Island, he had thoughts, first, of a career in music, not interest rates—french horn was his love. But he threw it over to enter the Navy. Following enlisted service aboard the U.S.S. Hornet, and, as a newly minted, 20-year-old civilian, on the bond desk of McDonnell & Co., he enrolled at Indiana University. There he studied economics under Scott Gordon and Elmus Wicker and diplomatic history under Robert H. Ferrell. He graduated, Phi Beta Kappa, with a Bachelor of Arts degree in economics in 1970. Next came two happily unstructured years at Columbia University that produced a master’s degree in something called international affairs but, more importantly, the privilege of studying under the cultural historian, critic and public intellectual Jacques Barzun.
In 1972, at the age of 26, Grant landed his first real job, as a cub reporter at the Baltimore Sun. There he met his future wife, Patricia Kavanagh, and discovered a calling in financial journalism. It seemed that nobody else wanted to work in business news. Grant served an apprenticeship under the longsuffering financial editor, Jesse Glasgow. He moved to Barron’s in 1975.
The late 1970s were years of inflation, monetary disorder and upheaval in the interest-rate markets—in short, of journalistic opportunity. It happened that the job of covering bonds, the Federal Reserve and related topics was vacant. In the mainly placid years of the 1950s and 1960s, those subjects had seemed too dull to care about. But now they were supremely important—even interesting—and the editor of Barron’s, Robert M. Bleiberg, tapped Grant to originate a column devoted to interest rates. This weekly department, called “Current Yield,” he wrote until the time he left to found the eponymous Interest Rate Observer in the summer of 1983.
Grant’s books include three financial histories, a pair of collections of Grant’s articles and three biographies. The titles are these: “Money of the Mind” (Farrar, Straus & Giroux, 1992), “The Trouble with Prosperity” (Times Books, 1996) “Minding Mr. Market” (Farrar, Straus & Giroux, 1993), “Mr. Market Miscalculates” (Axios Press, 2008) and “The Forgotten Depression, 1921: the Crash that Cured Itself” (Simon & Schuster, 2014), which won the 2015 Hayek Prize of the Manhattan Institute for Policy Research.
Also, “Bernard M. Baruch: The Adventures of a Wall Street Legend” (Simon & Schuster, 1983), “John Adams: Party of One” (Farrar, Straus & Giroux, 2005) and Mr. Speaker! The Life and Times of Thomas B. Reed, the Man Who Broke the Filibuster” (Simon & Schuster, 2011).
Grant’s television appearances include “60 Minutes,” “The Charlie Rose Show,” Deirdre Bolton’s “Money Moves” program on Bloomberg TV and a 10-year stint on “Wall Street Week”. His journalism has appeared in a variety of periodicals, including the Financial Times, The Wall Street Journal and Foreign Affairs, and he contributed an essay to the Sixth Edition of Graham and Dodd’s “Security Analysis” (McGraw-Hill, 2009).
Grant is a 2013 inductee into the Fixed Income Analysts Society Hall of Fame. He is a member of the Council on Foreign Relations and a trustee of the New-York Historical Society.
He and his wife live in Brooklyn. They are the parents of four grown children.
transcript
content locked
or Subscribe to Access Premium Content
Lorem ipsum dolor sit amet, consectetur adipiscing elit. In eo enim positum est id, quod dicimus esse expetendum. Et ille ridens: Video, inquit, quid agas; Quem Tiberina descensio festo illo die tanto gaudio affecit, quanto L. Quia nec honesto quic quam honestius nec turpi turpius.
Confecta res esset. Ea possunt paria non esse. Tecum optime, deinde etiam cum mediocri amico. Qui autem de summo bono dissentit de tota philosophiae ratione dissentit. Hinc ceteri particulas arripere conati suam quisque videro voluit afferre sententiam. Cupit enim dícere nihil posse ad beatam vitam deesse sapienti. Quae cum essent dicta, discessimus.
Sed nimis multa. Duo Reges: constructio interrete. Varietates autem iniurasque fortunae facile veteres philosophorum praeceptis instituta vita superabat. Hoc ne statuam quidem dicturam pater aiebat, si loqui posset. At cum de plurimis eadem dicit, tum certe de maximis.
Nec tamen ullo modo summum pecudis bonum et hominis idem mihi videri potest. Quid, si reviviscant Platonis illi et deinceps qui eorum auditores fuerunt, et tecum ita loquantur? Praeclare hoc quidem. Ex quo intellegitur officium medium quiddam esse, quod neque in bonis ponatur neque in contrariis.
Full Episode
content locked
or Subscribe to Access Premium Content
Lorem ipsum dolor sit amet, consectetur adipiscing elit. Huic ego, si negaret quicquam interesse ad beate vivendum quali uteretur victu, concederem, laudarem etiam; Quae quidem vel cum periculo est quaerenda vobis; Nonne videmus quanta perturbatio rerum omnium consequatur, quanta confusio? Te ipsum, dignissimum maioribus tuis, voluptasne induxit, ut adolescentulus eriperes P. Itaque nostrum est-quod nostrum dico, artis est-ad ea principia, quae accepimus. Quarum ambarum rerum cum medicinam pollicetur, luxuriae licentiam pollicetur.
Duo Reges: constructio interrete. Vitiosum est enim in dividendo partem in genere numerare. Non quam nostram quidem, inquit Pomponius iocans; Tu vero, inquam, ducas licet, si sequetur; Summus dolor plures dies manere non potest? Habes, inquam, Cato, formam eorum, de quibus loquor, philosophorum. Non est enim vitium in oratione solum, sed etiam in moribus. An potest cupiditas finiri?
Itaque ad tempus ad Pisonem omnes. Addidisti ad extremum etiam indoctum fuisse. Atqui haec patefactio quasi rerum opertarum, cum quid quidque sit aperitur, definitio est. Isto modo ne improbos quidem, si essent boni viri. Tu autem negas fortem esse quemquam posse, qui dolorem malum putet. In quibus doctissimi illi veteres inesse quiddam caeleste et divinum putaverunt.
Qui potest igitur habitare in beata vita summi mali metus? Itaque his sapiens semper vacabit. Nec vero sum nescius esse utilitatem in historia, non modo voluptatem. Quam ob rem tandem, inquit, non satisfacit? Hoc est non dividere, sed frangere. Si est nihil nisi corpus, summa erunt illa: valitudo, vacuitas doloris, pulchritudo, cetera.
intelligence report
content locked
or Subscribe to Access Premium Content
Lorem ipsum dolor sit amet, consectetur adipiscing elit. Claudii libidini, qui tum erat summo ne imperio, dederetur. Familiares nostros, credo, Sironem dicis et Philodemum, cum optimos viros, tum homines doctissimos. Qui potest igitur habitare in beata vita summi mali metus? Ex ea difficultate illae fallaciloquae, ut ait Accius, malitiae natae sunt. Qui non moveatur et offensione turpitudinis et comprobatione honestatis? Nondum autem explanatum satis, erat, quid maxime natura vellet.
Piso, familiaris noster, et alia multa et hoc loco Stoicos irridebat: Quid enim? Sed emolumenta communia esse dicuntur, recte autem facta et peccata non habentur communia. At hoc in eo M. Ut optime, secundum naturam affectum esse possit. Respondeat totidem verbis. Etenim nec iustitia nec amicitia esse omnino poterunt, nisi ipsae per se expetuntur. Non enim, si omnia non sequebatur, idcirco non erat ortus illinc. Ad corpus diceres pertinere-, sed ea, quae dixi, ad corpusne refers? Quae cum essent dicta, discessimus. Bonum negas esse divitias, praeposìtum esse dicis?
Duo Reges: constructio interrete. Atque ego: Scis me, inquam, istud idem sentire, Piso, sed a te opportune facta mentio est. Sit, inquam, tam facilis, quam vultis, comparatio voluptatis, quid de dolore dicemus? Equidem soleo etiam quod uno Graeci, si aliter non possum, idem pluribus verbis exponere. Quod autem in homine praestantissimum atque optimum est, id deseruit. Cur deinde Metrodori liberos commendas?
Nihilne est in his rebus, quod dignum libero aut indignum esse ducamus? Quid, si etiam iucunda memoria est praeteritorum malorum? Is ita vivebat, ut nulla tam exquisita posset inveniri voluptas, qua non abundaret. Quae sunt igitur communia vobis cum antiquis, iis sic utamur quasi concessis; Septem autem illi non suo, sed populorum suffragio omnium nominati sunt. Eam tum adesse, cum dolor omnis absit; Quid, si etiam iucunda memoria est praeteritorum malorum?
related episodes
Video
content locked
or Subscribe to Access Premium Content
Lorem ipsum dolor sit amet, consectetur adipiscing elit. Hanc ergo intuens debet institutum illud quasi signum absolvere. Hunc vos beatum; Iam id ipsum absurdum, maximum malum neglegi. At ille pellit, qui permulcet sensum voluptate. Prioris generis est docilitas, memoria; Experiamur igitur, inquit, etsi habet haec Stoicorum ratio difficilius quiddam et obscurius. Hoc Hieronymus summum bonum esse dixit. Duo Reges: constructio interrete.
Poterat autem inpune; Qui est in parvis malis. Ex ea difficultate illae fallaciloquae, ut ait Accius, malitiae natae sunt. Paulum, cum regem Persem captum adduceret, eodem flumine invectio?
Fortasse id optimum, sed ubi illud: Plus semper voluptatis? Duarum enim vitarum nobis erunt instituta capienda. Ampulla enim sit necne sit, quis non iure optimo irrideatur, si laboret? In motu et in statu corporis nihil inest, quod animadvertendum esse ipsa natura iudicet?
Idemne potest esse dies saepius, qui semel fuit? Quo modo autem optimum, si bonum praeterea nullum est? Nobis Heracleotes ille Dionysius flagitiose descivisse videtur a Stoicis propter oculorum dolorem. Tu quidem reddes; Sed existimo te, sicut nostrum Triarium, minus ab eo delectari, quod ista Platonis, Aristoteli, Theophrasti orationis ornamenta neglexerit. Non potes, nisi retexueris illa. Mihi quidem Antiochum, quem audis, satis belle videris attendere. Age nunc isti doceant, vel tu potius quis enim ista melius? Gerendus est mos, modo recte sentiat. Sed quot homines, tot sententiae;