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.
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Lorem ipsum dolor sit amet, consectetur adipiscing elit. Quod cum dixissent, ille contra. Duo Reges: constructio interrete. Paulum, cum regem Persem captum adduceret, eodem flumine invectio? Haec quo modo conveniant, non sane intellego. Quam si explicavisset, non tam haesitaret. Quorum altera prosunt, nocent altera. Occultum facinus esse potuerit, gaudebit; Sed non alienum est, quo facilius vis verbi intellegatur, rationem huius verbi faciendi Zenonis exponere. Nam quibus rebus efficiuntur voluptates, eae non sunt in potestate sapientis.
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Lorem ipsum dolor sit amet, consectetur adipiscing elit. Erat enim Polemonis. Sed non alienum est, quo facilius vis verbi intellegatur, rationem huius verbi faciendi Zenonis exponere. Non modo carum sibi quemque, verum etiam vehementer carum esse? Duo Reges: constructio interrete. Quod quidem iam fit etiam in Academia. Sed videbimus. Eam tum adesse, cum dolor omnis absit; Quod autem satis est, eo quicquid accessit, nimium est;
Sin tantum modo ad indicia veteris memoriae cognoscenda, curiosorum. Quae cum dixisset, finem ille. Qua tu etiam inprudens utebare non numquam. Primum cur ista res digna odio est, nisi quod est turpis? Theophrastus mediocriterne delectat, cum tractat locos ab Aristotele ante tractatos? Item de contrariis, a quibus ad genera formasque generum venerunt. Virtutibus igitur rectissime mihi videris et ad consuetudinem nostrae orationis vitia posuisse contraria. Ut alios omittam, hunc appello, quem ille unum secutus est.
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Ego vero volo in virtute vim esse quam maximam; Si qua in iis corrigere voluit, deteriora fecit.
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Quare ad ea primum, si videtur; Tecum optime, deinde etiam cum mediocri amico. Qua tu etiam inprudens utebare non numquam. Aliud igitur esse censet gaudere, aliud non dolere. Nam quid possumus facere melius? Id est enim, de quo quaerimus. Videmusne ut pueri ne verberibus quidem a contemplandis rebus perquirendisque deterreantur? Ab his oratores, ab his imperatores ac rerum publicarum principes extiterunt. Atqui reperies, inquit, in hoc quidem pertinacem;
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Nos quidem Virtutes sic natae sumus, ut tibi serviremus, aliud negotii nihil habemus. Quid censes in Latino fore? Expressa vero in iis aetatibus, quae iam confirmatae sunt. Quod si ita se habeat, non possit beatam praestare vitam sapientia. Aperiendum est igitur, quid sit voluptas; Cuius quidem, quoniam Stoicus fuit, sententia condemnata mihi videtur esse inanitas ista verborum.
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Nulla erit controversia. Hoc non est positum in nostra actione. Videmusne ut pueri ne verberibus quidem a contemplandis rebus perquirendisque deterreantur? Sed vos squalidius, illorum vides quam niteat oratio.
Post enim Chrysippum eum non sane est disputatum. Cum praesertim illa perdiscere ludus esset. Et quod est munus, quod opus sapientiae? Sin aliud quid voles, postea. In quibus doctissimi illi veteres inesse quiddam caeleste et divinum putaverunt. Earum etiam rerum, quas terra gignit, educatio quaedam et perfectio est non dissimilis animantium. Tanta vis admonitionis inest in locis;
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