Jim Grant on time

I think Samuel Johnson said, "Reputation is the one thing that no man can give to himself."  I would say that time is something else that is not for sale.  You can't buy reputation, nor can you buy the heartbeats.  So as life goes on, you become to covet those heartbeats and husband them, and expend them in ways... rather more carefully than when you were known for throwing them around like confetti.  They are not.  

~ Jim Grant, interview with William Green, 1:48:10 mark, August 20, 2022

Jim Grant on writing

If it appears effortless, that's good.  That means the sweat was worth it.  But I assure you, there ain't no effortless in it.

~ Jim Grant, interview with William Green, mark, August 20, 2022

Jim Grant on Bitcoin: "It's simply crazy"

So if you're really a zealot on Bitcoin what you are saying is the world of technological innovation will never create something better.  It's simply crazy.  Bitcoin trades like a tech stock.  It is as vulnerable to disruption as any other tech stock.  Who's to say it's not the PalmPilot of cryptocurrencies?

~ Jim Grant, interview with William Green, 1:20:50 mark, August 20, 2022

Jim Grant on bond risks and the 60/40 portfolio

As the upside is limited, so are the risks great.  So bond selection is one of exclusion rather than of selection.  You approach it with the idea of avoiding risk.

So, what about Treasury securities?  They're characterized as super safe in The Wall Street Journal.  They have anchored most retirement portfolios for most of the past four decades.  How do you analyze that?  One way of looking at it is to observe that over the course of 150 years of the national history, bonds have tended - tended - to move over the course of decade-long cycles.  Interest rates will rise for 30, 40 years, and fall for 20, 30, 40 years, and so on, starting from the late 19th century to the present.  They have fallen for 40 years since 1981.  Now, it might be that that cycle has broken...  If indeed the cycle has ended and rates are going to go up, we are in a different investment world because bonds will not provide the hedge that they have against falling stock prices.

Just recollect that for everyone's investment memory really, when stocks got into a rough patch, you had some protection from falling interest rates and rising bond prices.  But if bond prices are falling and interest rates are rising, you are forever not getting a hedge, but rather a drag.  So the 60/40 portfolio or the 70/30 portfolio is not the thing for you.  Now this is still speculative, but I think that is likely to be the case and people ought to be alert to the idea that something new is in the offing.  And what the something might be is kind of in the womb of time, but we can guess a little bit about it.  It might be that... stocks are going to become more important after they reach a point at which they become truly cheap.  It might be that cash, for all the damage that inflation does to cash, that cash is going to be the thing, rather than long-dated bonds.  So one would have a 60/40 or a 70/30 portfolio, but the 30% or 40% portion would be in a near-cash thing.

~ Jim Grant, interview with William Green, 1:05:55 mark, August 20, 2022

Jim Grant on the everything bubble's malinvestments

I think the way to imagine this is to put ourselves in mind of the old college freshman fraternity initiation trick, and that is yanking a tablecloth out from under a set table of china, glassware and porcelain.  Now, if you go on WikiHow to investigate how to do this, WikiHow will advise, "Always try it with plastic cutlery and cups."  But notice the Fed has not got that option because the table is set proverbially and metaphorically... with the most brittle glassware and the most precious porcelain and bull market champagne flutes because of 12 years of suppressed interest rates which have fostered risk taking, which have brought forth into the world all these companies called unicorns because they come to market with a billion dollars and generate not much earnings.  So the world is full of uneconomic economic projects, fostered through financial stimulus, principally low interest rates, right?

So, what happens when you raise the rate of interest on companies that need to borrow just to stay alive?  Well, they can't stay alive, so they're cascading failures.  And companies supply those uneconomic things.  Think of craft beer makers that sold beer to WeWork in the day, right?  So there's a whole chain of economic activity that goes to support uneconomic activity.

So that's the metaphor for the yanking the tablecloth.

~ Jim Grant, interview with William Green, 58:15 mark, August 20, 2022

Jim Grant on the everything bubble

What people came to believe is that the Fed would be there for them.  The Fed wanted things to go up, that the Fed would make us rich.  And the if perchance, if by accident, if by some cyclical hiccup, the market pulled back, the Fed would make it go back up again...  

So fast forward to 2020, and comes the pandemic, comes the falling off the cliff in March.  And what does the Fed do?  The Fed - never mind the kitchen sink - the furnace, the plumbing, the furniture, everything in that house got tossed at the problem...  The Fed took charge of that this pandemic did not lead to a depression.  And what follows is one of the most astonishing light shows in the history of central banking.  By the time 2021 came to a close, the broadly defined money supply was showing growth year-over-year in excess of 20%, never before seen in such a short period.  Interest rates collapsed.  The speculative fervor that this created was lifting stocks, bonds, real estate... cryptos, NFTs, everything that wasn't nailed down.  Nothing was nailed down.  Massive levitation of the everything bubble, some of us called it.

What also occurred was an undesired inflation on Main Street itself, at the cash register, at the checkout counter.  So the Fed never minded the inflation at the corner of Broad and Wall Streets, New York Stock Exchange.  That was desirable because that made people spend and encouraged investment outlays and the like, but the Fed is in business to prevent and ameliorate, if it does occur, inflation at Main Street.  It wrecks wages, it wrecks budgets that distorts the values that gets elected officials defeated at the polls.  That's the kind of inflation they don't like.  But we got that, too.  

So now here we are with inflation rampant. It's not an exaggeration.  Stock prices still elevated by historical lights, bond yields still very low by historical reckoning.  So what does the Fed do?  Well, it's rather in a quandary.

~ Jim Grant, interview with William Green, 39:20 mark, August 20, 2022

Jim Grant on about imagining the future and thinking apart from the crowd

Just as markets are about the future, if you can't know the future you must contribute something to the difficult but necessary job of imagining it.  You can dogmatize about it.  You can conceive a view of it based upon the alignment of forces in the present, about the way people themselves are expecting the future to unfold.  If everyone thinks one thought, you have an edge, because you can investigate the alternative, because often as not the idea that's most popular is the least remunerative - not always, but often.

~ Jim Grant, interview with William Green, 29:20 mark, August 20, 2022