William Green (00:03:05):
Hi everyone. I’m utterly delighted to be here with today’s guest, Jim Grant. Jim, it’s lovely to see you. Thank you so much for joining us.

Jim Grant (00:03:12):
Well, it is lovely to be here, William.

William Green (00:03:15):
Thank you. I wanted to start by asking you about your early years. You had a somewhat unusual early life. As I understand it, you came from a very musical family and it looked like you were poised to become a French horn star and were going off to college and then something changed rather dramatically. Can you talk about those early years if possible?

Jim Grant (00:03:36):
Yes. My father was a Juilliard trained tympanist. He played with the kettle drums in the Pittsburgh symphony. My mother played this. And World War II came along and he came back from it, and he and my mother presented the world my brother and me. And my father at length turned to business to make a living. And I, for my part became enchanted with the horn. Dennis Brain was the great reigning virtuoso. He was a Brit. And I resolved to become Dennis Brain, and also the first baseman for the Brooklyn Dodgers, a dairy farmer and a naval officer. And succeeded at actually none of those things. The highest rating I attained in the Navy was gunner’s mate third class, but I devoted many hours a day to practice, about two or three and was quite serious. And for the French horn players listening, William, I attempted to play-

William Green (00:04:40):
There are so many of them, jim. That’s one of our biggest demographics, I think.

Jim Grant (00:04:44):
I attempted the Strauss Second Concerto. Not the first mind you, but the second, and… Rather, I butchered it. So I was actually quite good. I was not quite good enough, I think, to have been a really top flight professional. And it was either for that reason or others that… Well, I joined the Navy when I was, the day after I was 17. It was the Naval reserve. I was still in high school. This committed me to two years active duty and four years reserve.

Jim Grant (00:05:22):
So I wanted something, evidently, at the age of 17 which had do with the horn or even with women. And that something was, I guess, adventure and patriotism. I admired my father since World War II. So he was Naval and served aboard attack transports. I wanted some of that life as well. And it did indeed live it for a time. So I went to college for one whole semester before I chose to go on active duty. This was in 1965. And I served for a couple of years, a gunner’s mate aboard the USS Hornet, which was an aircraft carrier.

William Green (00:05:58):
And this is during the Vietnam war, right?

Jim Grant (00:06:00):
Right. Correct.

William Green (00:06:01):
Am I right in thinking that you were off the coast of Vietnam?

Jim Grant (00:06:06):
For a time, yeah. Yes, we were.

William Green (00:06:10):
You wrote to me yesterday sort of saying something along the lines of, my personal story lacks the heroic element. But as I was saying to you, when I was 19 or 18, I was at boarding school throwing darts at a friend of mine, pouring milk on this carpet that was said to be waterproof to see if I could make a swimming pool. So I wasn’t doing anything very heroic at all. So I wanted to get a sense of what you were doing.

Jim Grant (00:06:40):
Our ship was an anti-submarine carrier. We specialized in helicopters and in fixed wing aircraft that would pursue and sink Soviet subs. So the enemy was not actually the Soviet Union, although at one remove is certainly was, but the Vietnamese navy, happily for us, was undeveloped. So we mostly steamed off the coast. The air crews were certainly, , in great danger. We were not. We would refuel our destroyer escorts. We would hand off ammunition to them. They would go and bombard the coast, but it was mostly quite routine. As I say, I never got shot at nor did we fire a shot.

Jim Grant (00:07:29):
Once, we encountered a Soviet freighter off the coast of Haiphong and gave him the middle finger. So that was kind of an offensive gesture. We saw Vietnamese fishing boats, which had the biggest radios. Nice people, but big radios. So it definitely a war. But as I said, we were… I guess I was to the Vietnam war as the residents of Scarsdale were to the New York City, urban crisis. Near it, but not in it.

William Green (00:08:09):
And three of your comrades, if I remember rightly-

Jim Grant (00:08:12):
Oh, yes.

William Green (00:08:12):
… As gunner’s mates went back for something like four years on swift boats to get shot at. And you didn’t, right? You decided-

Jim Grant (00:08:19):
I did not.

William Green (00:08:19):
… You had enough.

Jim Grant (00:08:20):
I wanted to go to college. But gunner’s mates, von Esson and Wickes, and Simpson, three wonderful characters reenlisted for four years for the privilege, mind you, the privilege of serving on swift boats and indeed getting shot at, and shooting. Full of admiration for them. I’ve lost touch with over the years, as one does. And I attempted to get back in touch with them on the occasion of an exhibit that the New York Historical Society was putting on about the Vietnam war.

Jim Grant (00:08:55):
And wouldn’t you know it? I couldn’t come up with Wickes’ forwarding interest, but two of the three friends I had, had just died prior to this thing. It’s kind of sad. One of them, Dale E. Simpson, gunner’s mate third class, was in fact a story book character. He was forever getting into trouble, but in the way you want a fighting man to get into trouble. He was absent without leave. He was, overstayed Liberty in the Philippines. And came aboard late and was definitely hung over and watched with the saddest countenance as the ship pulled away from the pier, and he watched his unclaimed laundry recede into the distance. Anyway. So they went to Vietnam and I did not.

William Green (00:09:51):
And I remember you saying he spent something like two weeks in the equivalent of solitary confinement? Being punished by [Crosstalk]-

Jim Grant (00:09:59):
One time, he really, as they say, missed movement, which was a… Used to be a capital offensive in war time, but no longer. So what happened? So he was flown aboard the ship, which was kind of a cool thing. He landed in a plane aboard the carrier and got a… Not a hero’s welcome, by everyone. Kind of a villain’s welcome from the authorities. And was given what was called Captain’s Mast, which is a form of judicial inquiry and sentenced to two or three weeks or a month in the brig. And he was the best and toughest prisoner the Marines ever had. So he was our John McCain.

William Green (00:10:40):
That’s great. So-

Jim Grant (00:10:40):
He was our John McCain.

William Green (00:10:42):
… So Jim, how did that period of early service in your life actually either shape you in terms of your values and your character, or just reflect your values and character, which seemed to have been adopted to some degree from your father? Who you obviously respected?

Jim Grant (00:11:01):
I think both. Certainly. So I got out after two years and I worked a little between that discharge and my return to college. But when I did return to college, the privilege of study, the unimagined gifts of study and solitude. Even though on an aircraft carrier, you can never be alone really. So these privileges and the gifts, return to college, I think it allowed me to have the kind of college experience that middle aged people could have if they could do all over again. I returned a couple of years older than my classmates at Indiana University. And I could see that they didn’t cherish what they were doing the same way I did.

William Green (00:11:53):
Yeah. I think I blew my college experience because I was young for my year anyway, because I was born in August. And I was done with Oxford by the time I was 20, which was just about the time when I was mature enough to start appreciating that I was there. And-

Jim Grant (00:12:07):
You must have had an Edward Gibbon experience, right? Unsupervised.

William Green (00:12:14):
I’d been at boarding school where you had total supervision and no freedom at all. And then suddenly I was thrown… And brilliant teaching. And then suddenly I was at Oxford and had the freedom to wake up at 11:00. So I think I went to something like one lecture in three years, although I did read an enormous amount. So I mean, I really read a tremendous amount. So it was good in that sense, but yeah, that’s interesting. So you had this kind of intensity and seriousness by the time you were studying economics at Indiana University. And then I think you started international relations at Columbia, but somewhere along the line there, if I’m right in thinking, you got a summer job on Wall Street, didn’t you? And I’m curious to know what that early experience taught you.

Jim Grant (00:12:59):
Very formative thing. I got a job on Wall Street. I got out of the Navy in early February and I got a job soon thereafter at a firm called McDonnell and Company on Wall Street. And I earned, instead of $75 a month, I earned $75 a week. Fabulous. However, I was by far the lowliest employee in this room of what we call institutional sales. When people, the stock brokers for banks and insurance companies. They all earned a hundred thousand dollars a year, which was not such a small sum today, but a quite magnificent one in 1967.

Jim Grant (00:13:40):
So I could almost smell the money. I decided I liked it and I liked the markets. So by that time I had resolved from… Returned to college. I went to Indiana, which was a mecca of a state conservatorium. It was a very good school, especially for horn players. As I drove back from the west coast to the east coast, upon my discharge from the Navy at Long Beach, California, I stopped by Indiana. And I announced to one of the virtuoso, I said, “I have been accepted as a horn player.” And he said, “Oh really? I never have been.”

Jim Grant (00:14:22):
And that was such a deflating, little… And I think that’s what put me off music. Anyway, I came back and chose economics on the strength of my six or seven or eight months, whatever it was, at McDonnell and Company.

William Green (00:14:38):
And do you think there was some sense in which you saw, either from your summer job or your six to eight months on Wall Street and from your experience studying at Indiana University, that there was a big difference between your image of what was actually going on in the trenches on Wall Street and the reality? Which presumably was pretty insalubrious at the time and not that intellectually rigorous. What did you discover? What did you see that kind of informed your skepticism and cynicism about Wall Street that marks a lot of your journalism?

Jim Grant (00:15:11):
The skepticism and cynicism about Wall Street was, attained that gradually and by degree. I was quite open eyed in Indiana and what I mostly imbibed, in my economic study in Indiana was the history of economic thought, which then was a very serious subspecialty in economics. It’s no longer taught. Everything happened 15 minutes ago, as far as the economists today are concerned, which is in part how I make my living. Is by recalling episodes that people have put out of mind.

Jim Grant (00:15:44):
There was a professor named Scott Gordon, who taught History of Economic Thought, which I just loved. And there were others as well who introduced me to some of these ideas.

William Green (00:15:56):
So did you come out of that experience with abiding principles from say the Austrian economists that kind of defined-

Jim Grant (00:16:05):
Not then. That came rather later, but I came out with a fairly good grounding in the principal thinkers of economic theory. And the course was, now that I look back on it, was rather heavy on Keynesianism and monetarism. Milton Friedman was one of the demigods. Certainly Keynes was in the forefront. And I’ve come to [inaudible 00:16:34], feet of both economists and both set of acolytes. But the convictions that I have since adopted concerning free markets and the Austria, so-called Austrian approach… We could talk about what that actually is. That came a little bit later.

William Green (00:16:50):
So then you got a job. I think your first real job in journalism was at the Baltimore Sun on the financial desk.

Jim Grant (00:16:59):
Yes.

William Green (00:17:00):
And then went to-

Jim Grant (00:17:00):
No, the first… It was covering police and fires and writing obituaries. Yeah, that was the-

William Green (00:17:06):
But then you got demoted to cover the financial world.

Jim Grant (00:17:10):
Right. Well, it was the least, by far the least prestigious post in the paper. There was a certain amount of fake derring-do about covering crime. Although there’s, you’ve heard, I’m sure, you must have heard about a show called The Wire.

William Green (00:17:29):
Yeah. I was at high school with Don West who played McNulty. He was a close friend of mine back in those days, yeah.

Jim Grant (00:17:36):
Wow. Well, anyway, I was a reporter who supposedly knew something about crime. I had no idea any of this was going on. I must have seemed to the criminals of the city of Baltimore, the most pure innocent.

William Green (00:17:56):
Were you walking along the mean streets wearing your bow tie, Jim, back in those days?

Jim Grant (00:18:01):
I was thinking, “What a peaceful city.” It’s like. So I watched this series with your friend with a sense of, every fan watched with an immense admiration for the series, but also in my case with a certain amount of humiliation, but all it was such a surprise. I should not have been quite so surprised as a police reporter on the Sun. Anyway. So an opening came up in the finance department and I was the Warren Buffet of the newsroom, having spent eight full months at one stretch, and then not to mention summer vacations working on Wall Street.

William Green (00:18:35):
Then you went to Barron’s, right? From something like ’75 to ’83? And you originated the current yield column. And I wanted to ask you about that period because it must have been an incredibly formative period, because for those of us who… I was born in 1968. So I wasn’t really aware of what was going on at the time, but this great inflation that ran from 1965 to 1981 was forming the backdrop of your career in those days as a financial writer. And I wondered if you could describe for us for those of us who didn’t experience it firsthand, what you saw and how it shaped your views about the importance of sound money, fiscal discipline and the like. Because it must have been kind of a rude awakening to see. I think, didn’t inflation hit something like 15% in 1980? I mean it was a terrifying time.

Jim Grant (00:19:26):
Yes. Although it became rather… One became rather acclimated to it. I think never wholly adapted to it. But my goodness. Inflation rate had been tripping up since 1965. And the authorities then as today said, first of all, “Not us. Oh, we didn’t do it.” And then, “This’ll pass.” And then actually before very many years had gone by, William McChesney Martin, who was then the Fed chairman and a great rhetorical foe of inflation, would give these speeches say condemning it and vowing to slay it like a beast. But towards the end of 1967, in close confines of the meeting of the Federal Open Market Committee, he said, “The horse of inflation is out the barn.” So he was about ready to give up.

Jim Grant (00:20:21):
I said, “Most we can do is make sure this steed does not gallop too far, too fast.” So then ensued, year upon year, the deteriorating purchasing power of the dollar, of rising interest rates, of contracting, what we call valuations for stocks and the price you pay in relation to what the company can earn. Is valuation. Where we express this as a ratio of stock price to profits. Call it a price earnings ratio.

Jim Grant (00:20:53):
And during the good times the stock prices go up and people are going to pay a higher and higher price for a given dollar of profit. And when inflation hits and when interest rates go up, the opposite happens and people pull back and they’re willing to pay less and less per dollar of profit. And that was the story of this great inflation. There were of course ebbs and peaks and undulations. And one of the things that happened then, that I think is very great relevance today, is people were all too ready to declare an end to things when inflation receded. Now nothing says that today is going to repeat the experience of yesteryear. In fact, rather the odds are against that just simply because history is never… It’s never so helpful as to repeat itself literally, otherwise imagine how rich the historians would be. They say, and what they say is true, that one’s first experience in markets and with money is deeply formative, imprints itself on you. And the best investors, the nimblest and most successful are the ones who can put that formative experience aside, or at least put it into perspective and not imagine that they must repeat the experiences of their youth in their middle years. And perhaps that experience was too deeply imprinted on [inaudible 00:22:18]. I have, I guess, have seen inflation under rather too many bedposts, under too many mattresses as the years have gone by.

William Green (00:22:28):
But you were right in the end. And so we’ll come back to that at great length later in the-

Jim Grant (00:22:32):
Let us not forget to come back to that.

William Green (00:22:34):
We will return. This will be the heart of our conversation. But you then left Barron’s. I think there was some sort of squabble at the top.

Jim Grant (00:22:43):
Oh, it was. The smaller the financial stakes, the more intense the domestic politics. You can see it in college English departments. And my mentor at Barron’s was a wonderful guy named Robert M. Bleiberg. Robert M. Bleiberg was a infantryman during World War II, served and was wounded. People who had that experience are forever pissed off at some level. And Robert M. Bleiberg combined a patrician’s modulated speaking voice, with a wonderful rich vocabulary of obscenities. And he would storm into the office and say, “Tell them, the corporate chieftans, to get us the things we need. Penny wise, pound foolish bastards.” So he’d get away with cliches and away with obscenity. And it was wonderful to listen to him. He enunciated. He’s like a stage actor.

Jim Grant (00:23:52):
He was a dyed in the wool free markets guy who had no use for the state. No use for the Fed. Was properly and deeply cynical about the undertakings in the central banking world. And I certainly absorbed much of that from him. I also, as the fellow who wears bow ties even when he doesn’t have to, I went to the public library on the weekends and I read bound volumes in [inaudible 00:24:17] featuring the works of Walter Badgett, famed Victorian author [inaudible 00:24:23] street.

Jim Grant (00:24:24):
We can talk about [inaudible 00:24:26]. And also wonderful, leading articles, as you would say, in the Economist. And I would actually count his words to get a sense of this. I could tell his style, his style and style was marvelous. He invariably had the money market comment in the Economist and he wrote under of course the regime of the gold standard.

Jim Grant (00:24:48):
He wrote in the 1860s, 1870s. And it wasn’t exactly through him entirely, nor through Bleiberg entirely, nor through my readings entirely. I think must have been a character trait or flaw, lifelong abiding fascination with gold, the gold standard. I admire its simplicity and elegance. It’s efficacy. And so all this, these ideas, and these… What do we call them today? Influencers combined to lead me in the somewhat eccentric financial direction I have taken. I said somewhat eccentric. I should say very eccentric.

William Green (00:25:31):
So before we dispatch with Badgett who I’m likely to forget if we don’t talk about him right now, briefly. Badgett, you ended up writing a biography of, which I have on my back table here, but I’m embarrassed to say I haven’t read yet because I was reading-

Jim Grant (00:25:44):
There’s all the time in the world, William.

William Green (00:25:46):
There is. I was reading your Bernard Baruch book, which we’ll talk about later, which is a wonderful book. But if there’s one enduring lesson from Badgett that stuck with you from studying this guy who you regard as the greatest Victorian. Is there something that’s of relevance to our audience that we can get the 30 word version of Badgett’s life from you.

Jim Grant (00:26:10):
It is that interest rates, a topic that does not enchant everyone, are critically important and that when you suppress them, otherwise manipulate them, you generate adverse consequences. They caused a, reaching for yield, somewhat hygienic phrase. It doesn’t do it justice. What it means is scrounging around in the worst, the leftover remains of the investment markets for things that return you something on your capital, and taking inordinate risk to do so.

Jim Grant (00:26:42):
So Badgett taught this lesson. He said, John Bull, alluding to the national symbol of [inaudible 00:26:48]. “John Bull can stand anything,” said Badgett. “He can’t stand 2%.” Meaning that if you impose an interest rate as low as 2%, 2%, my goodness, that seemed at times in recent years, rather lofty. But if you impose as little as 2%, people will send their money abroad. They’ll send it to Argentina and they’ll lose it. They’ll send it to, I don’t know, they’ll send it to Cuba and there lose it. So they’ll take risk. So that’s one abiding lesson.

William Green (00:27:22):
So that’s hugely relevant, as we’ll come to later, to the last 12 years, this experiment, since the 2009 crisis.

Jim Grant (00:27:31):
One gets a sense, not just in reading Badgett, but, and reading financial history that yes, human beings change. Certainly technology changes, but to the interaction of people with money is enduring and rather stable. People talk about the efficient market hypothesis. I think people are just as efficient around large sums of money as they are around attractive people of the relevant sex. I was about to say opposite sex.

William Green (00:28:00):
Yeah, that was a nice save Jim. I appreciate your dexterity. So you then… We’ll come back to some of these lessons from the past that inform this current period. But you then quit Barron’s. And as I understand it, you went and founded what I would call Grant’s Interest Rate Observer, but I’m aware that it has to be Grant’s Interest-

Jim Grant (00:28:21):
No, it’s Grant-

William Green (00:28:22):
I’m so sorry. And I mispronounced your name as well at the start. So Grant’s. So you quit, I think with something like $75,000 from your profit sharing plan at Dow Jones.

Jim Grant (00:28:34):
Right.

William Green (00:28:34):
And you had two kids on the way and started this business in 1983 with something like 35 people subscribing to your first issue. What were you thinking?

Jim Grant (00:28:44):
I was thinking bankruptcy. But Patricia, my wife and I, were first movers in the automated spreadsheet called Lotus 1, 2, 3. My technophilia ended about 1983, the year it began. And we were capable of generating most-

Jim Grant (00:29:03):
And we were capable of generating the most implausibly full of shit projections by putting in what turned out to be the most impossible assumptions that we assume I know. My readership at Barron’s was like 150,000. So I figured if only half of them subscribed, half subscribed-

William Green (00:29:25):
Half.

Jim Grant (00:29:27):
… that we would have major tax problems before the year would be up. So we didn’t have any … We had no tax problems, but we did have a revenue problem. And the revenue problems persists. I don’t think I took a salary until like 1987 or something, 1988. So it was, since the world had enough to read, as it turned out, even then had enough to read, and Patricia, in addition to … she had four kids, by the time I took a salary, but she was working at Lehman Brothers, which so long ago was that the Lehman Brothers were still solid. Yeah. And it paid her a good salary as an investment banker. So she supported all of us, as Grant’s came into its own, or began to come into its own.

William Green (00:30:11):
And then once it came into its own, she became a neurologist, right, which is an extraordinary transformation.

Jim Grant (00:30:17):
She did. She went to medical school. We had to … was it only four? It seemed like 40 kids, but she did it. And she got her … she graduated from the Albert Einstein School of Medicine at the age of 49- plus.

William Green (00:30:31):
Wow. Wow.

Jim Grant (00:30:32):
The second oldest in her class, she would have us note. Not the oldest.

William Green (00:30:36):
I was very excited to have dinner with you and Patricia, your wife, a couple of months ago-

Jim Grant (00:30:40):
That was delightful.

William Green (00:30:41):
… and I was happy to meet you, and then I left thinking, “God, she’s formidable.” I should have a different podcast-

Jim Grant (00:30:48):
Got the wrong person on the podcast.

William Green (00:30:50):
… where I interview Patricia. She’s a remarkable person. But so one of the things that struck me is that the name of your publication, and you once wrote, “It wasn’t false modesty that led me to choose the word observer for the banner of my 12 page journal, rather than, say, soothsayer or prophet. The truth is that I can’t forecast interest rates, and neither can many other people. Yet the temptation to forecast is ever present.” And so can you talk a bit about that idea, of setting up a publication, Grant’s Interest Rate Observer, that would observe rather than predict. Because this strikes me as kind of one of the essential quandaries that we’re all facing as investors. That we have to position ourselves for the future, and yet the future is somehow, as you often put it, unfathomable.

Jim Grant (00:31:37):
Well it’s a closed book, isn’t it? And one can pretend, and at intervals over the course of even that, almost 39 years now, I’ve been doing this, with considerable help by the way, but over the course of these nearly 39 years, I have sometimes given into bouts of delusion, so strong can one’s conviction become about a certain stock or bond or market that one yields to unbecoming and certainly mostly unprofitable dogmatism. But just as you say, William, markets are about the future, and if you can’t know the future, you must contribute something to the difficult but necessary job of imagining it. 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 least remunerative. Not always, but often. So it’s like you can walk into a doctor’s office, and the doctor will be saying, “Well, the test does not look very good.” And, “Oh, that’s disturbing. Well, what do we do about that?” He said, “Well, really can’t tell very much. We can kind of handicap the odds a little bit.” “Thanks.”

Jim Grant (00:33:09):
But that’s kind of Wall Street, too, right? We can’t know the future, but we can handicap the odds, based upon some knowledge of the past, again not a dogmatic rendering or overlay of the past on the future. I use this word dogmatize a lot because I hear people, especially ones who are not 75 and a half, say things as if they knew them, when they … I see myself in a lot of this. I hear people say, “Here’s the way it’s going to happen.” And sometimes they’re right, which only makes it worse. But again, you can’t cop out and say, “Well, we’ll know more next year.”

William Green (00:33:50):
Yeah, I thought it was striking, I was looking at some of your greatest hits over the years, and obviously you made some really big, prescient calls that helped to make you and Grant’s an important force in the world. So I mean I think I’m right in saying you were incredibly prescient in predicting the implosion of the whole junk bond bonanza fueled by Michael Milken and Drexel. You were incredibly prescient before the Global Financial Crisis, in sort of seeing what was wrong with the housing market, and actually got praised in the movie The Big Short as the guy-

Jim Grant (00:34:28):
Wasn’t that sweet? Yeah, that was sweet-

William Green (00:34:29):
… that was kind of lovely, and likewise incredibly prescient in being an early critic of companies like Valiant and WeWork that blew up after lots of very smart people thought that they were wonderful. And yet on the other hand I can also see there are these things where you’ve been criticized for telling people to sell stocks in the ’90s during the bull market, way before the tech bubble burst. Or you were warning about the bond bull market ending in 2016, way before it ended. And I wonder if you could just talk about the moral of that. Of the … I mean is the moral the general futility of market timing? Is it important … because it seems like you were directionally correct with all of these things, but the … actually timing them in a way that makes it actionable is excruciatingly difficult.

Jim Grant (00:35:21):
All that is true, and I don’t want to say that … I don’t want to speak for others by asserting that no one can do that. There are people who have made a fabulous living on Wall Street by not getting everything correct, by having such a tactile sense about the ebbs and flows of cycles, and about the interior of the market’s mind, kind of reading the psychology of the marketplace, and great traders, Paul Tudor Jones, Stan Druckenmiller, to name only two, have this capacity in that. So there are those who do that, and I think … but what I have discovered about myself, and it’s not a recent discovery, but I’ve come to understand the depths of how I operate, I think I do my best with disaster. I’m a critic and I’m not a child of 1929. My father was. My father watched his father go broke. His father had no business doing anything in the stock market. His father was a high school educated autodidact who became the dean of music at Penn State College, as it was then known, but he went on margin, in 19 … I’m sure he had exactly the top on margin, in 1929, and lost everything. My father had nothing to do with stocks. Everything reminds him of 1929.

Jim Grant (00:36:55):
Now I didn’t imbibe that directly, but I have, I think, inherited a sense of deep appreciation of the downside. Not so much fear of it, but I kind of relish the idea of catching onto it, of seeing it, and then warning others. It’s a sweet line of work if you can do it right. And it was sweet to have been validated in 2007 and 8 and 9, with the help, certainly, of people like Dan Gruvner who kind of decoded the horrifically complex mortgage derivatives that we were able to explain to people. But yeah, also we had asserted in 1996 or something that stocks were overvalued. My God, they had not begun … to paraphrase the Federal Reserve today, they had not begun to think about becoming overvalued, in 1996. The elapsed time between having declared stocks overvalued in 1996, and the top in 2000, that was about 50 years of psychological time in coming to terms with all that. So I have … when this … confronted with the old medical school gag that Patricia related to me, that everything you learn here … no, of all the things you learn here, half is going to be wrong. What we don’t know is which half. Right?

Jim Grant (00:38:25):
Everything you think about markets … no, half of what you think is going to be wrong, but we don’t know which half, et cetera, et cetera. So I want to confess to this tendency, this trait, this weakness, but I also don’t want to convey that we have given up trying to do something about helping people understand the unfathomable future. That’s what we do for a living. Sometimes more successfully than others.

William Green (00:38:53):
I spent part of the last few days reading back issues from the last year or so of Grant’s Interest Rate Observer, and it’s still so painful for me to say this, and-

Jim Grant (00:39:05):
You could lapse into the native tongue.

William Green (00:39:06):
Grant’s Interest Rate Observer.

Jim Grant (00:39:08):
That sounds much better.

William Green (00:39:09):
And I was thinking, “God, I wish I had read this earlier.” That it would have made me … I mean, like you I’m sort of a pessimistic journalist who always assumes that everything’s going to go to hell, so I didn’t take crazy risk, but I think it would have sharpened, reading your analyses would have really sharpened my sense that something historic has been going on in the last 12 years since the financial crisis, that’s this kind of wild experiment, that nobody knew or could know what it would lead to, and that the conditions were increasingly fragile. And I wonder if you could talk about that, about, because now the thing that you were warning about for years has come to pass, and we’re suddenly seeing this surge in inflation, and all the fragility that you were warning about has become exposed and revealed. Can you put in context, for ignorant laymen like myself, what was actually going on during those dozen or so years since the Global Financial Crisis, in terms of this kind of reckless monetary experiment, that you were warning would lead inevitably to this kind of crisis that we’re now seeing?

Jim Grant (00:40:19):
Yes, inevitably is not so very helpful train of thought to introduce into an investment periodical. I think Cain says something to the effect that if you say something is going to happen in our lifetime, thanks, but we don’t like Cain’s. All right. So two things have happened. One you can quantify and the other is rather inchoate, but still, all for that, still important. The quantifiable thing is that in the wake of the Great Recession, the central banks of the world, led by the American Federal Reserve, decided to stimulate [inaudible 00:40:58] word, business activity through suppressing interest rates, thereby tending to raise up the prices of stocks, bonds, and real estate. And Ben Bernanke himself, in a Washington Post op-ed, I think 2010, announced this was the intention of the Federal Reserve’s low interest rate policy. He was going to buy bonds with the expectation others would follow suit, people would pay more for a dollar of those corporate earnings, stock prices would rise, and the rate that profits were capitalized would rise, and people would come into capital gains. They’d feel richer and be richer and thereby spend more. So we used to call this trickle-down, but now it took up a fancier name. This was the portfolio balanced channel theorem.

Jim Grant (00:41:53):
For Christ’s sake, what are you saying? I’m saying we’re going to lead us by the nose into the stock market, which they did. So that happened in a quantifiable way. So the inchoate part had to do with the mind of the market and the expectations of the market. And what came to be absorbed, 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 that if perchance, if by accident, if through some cyclical hiccup, the market pulled back, the Fed would make it go back up again. Okay, so this takes us to, say … let’s take us to 2020. We’ll fast forward to 2020, and economy’s … pandemic comes, falling off of the cliff in March. 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.

Jim Grant (00:42:57):
So to go into the active voice from the passive voice, the Fed took charge of making sure that this pandemic did not lead to a depression. And what follows was one of the most astonishing light shows in the history of central banking. By the time the 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 all of this created was lifting stocks, bonds, real, everything, cryptos, NFTs, everything that wasn’t nailed down. Nothing was nailed down. Massive levitation of everything bubble, some of us called it. And what also occurred was an undesired inflation on Main Street itself. At the cash register, the checkout. So the Fed never minded inflation at the corner of Broad and Wall Street, 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 to ameliorate, if it does occur, inflation at Main Street. It wrecks wages, that 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.

Jim Grant (00:44:39):
So now here we are with inflation rampant. It’s not an exaggeration. Stock prices still elevated, by historical lights, bonds, interest rates, bonding [inaudible 00:44:52] still very low by historical reckoning. What does the Fed do? Well, it’s rather in a quandary. And that’s where we stand today.

William Green (00:45:00):
So I remember you warning on your Grant’s Current Yield podcast, which is terrific, which I really encourage people to listen to-

Jim Grant (00:45:06):
Well, that’s high praise, from William Green.

William Green (00:45:07):
… No, it’s really good. And I’ll include a link to it in the show notes here. You said at one point the Federal Reserve is the most dangerous financial institution on the face of the earth, and then you described them as the handsiest people in finance, which I liked. So you were saying how they’re always meddling and having to improve and intervene and interject. Before we get to the current problem, is there just this illusion that it’s helpful to intervene and interject? Why … where’s the philosophical difference that you have and that someone like Jerome Powell, the Fed chief, has, in terms of believing that it’s worth meddling, or actually dangerous to meddle?

Jim Grant (00:45:49):
Well, I think that the Fed believes … I know the Fed believes, because they do this stuff, the Fed believes that they can select a rate of interest, a policy rate of interest, that will at once encourage maximum employment, minimize the rate of inflation, and keep the financial markets percolating. And I say, many of us say, that that rate is known not to God, but to individuals operating in a free and untrammeled market, and discovering, that word is price discovery, the phrase is price discovery, discovering a rate of interest. And what makes the discovered rate of interest better than the artificial or the imposed one, is the discovered rate of interest is the product of decisions taken by people who have no idea what their counterparties are doing, but they are all trying to maximize their own welfare, and the world. They all go to work in the morning, wanting to do better. They make decisions, so the conflation of these million decisions is going to give us a better outcome than the somewhat arbitrary and necessarily ill-informed pronouncements of the former college economics professors who populate the halls of the Federal Reserve.

Jim Grant (00:47:08):
We call this … we call the current standard, we call it PhD standard, a stigma from the gold standard or other standards of yesteryear, and ages ago, in 1930s, so that’s ages ago, a while ago, there was an economist named I think Henry Simons, University of Chicago, who said that business enterprise ought not to be a speculation on the future of monetary policy. That’s kind of what it’s become. Everyone has to know what the Fed is doing. The Fed has become ubiquitous, or handsy, as some politicians we know. It has become like the referee in the football game, or a soccer game. Or cricket or baseball. I’m trying to help you.

William Green (00:47:56):
Proper game. Cricket.

Jim Grant (00:47:59):
So when you get to know the name of the umpire or referee, you know that umpire or referee is not doing a job, not doing his or her job right. That person is supposed to be invisible. The game is the thing, right, and not the rules. When the rules are paramount, and the arbitrary decisions of the referees are paramount, that is not a game, it is a … I don’t know, Kabuki theater, whatever it is, it’s not the game we came to play. And I think that we’re not playing the game of enterprise as we ought, because the Fed is too much with us.

William Green (00:48:35):
So now we’ve explained to some degree the causes, the backdrop that led to this mess. Let’s talk in some detail about what can or should be done to fix it. So yesterday … this podcast will be coming out in a couple of weeks, but yesterday the Labor Department announced that inflation has been rising at a rate of 9.1%, cost of food was up, I think, 12%, in the last 12 months, electricity up nearly 14%, gasoline up about 60%. So first of all, I mean the most obvious question, it sounds so mundane, but I actually like to ask it, why is inflation so fearsome? Why is this thing that we’d kind of forgotten, this looming Loch Ness monster, beneath the surface of the financial waters, so terrifying? Why suddenly is everyone sitting up and saying, “Oh God, there’s a real problem here”?

Jim Grant (00:49:24):
Well Nessie, I think, might not exist. I don’t know for sure. But inflation was consigned to the status of Nessie by a generation of economists who, like preceding generations of economists, 1960s, believed that they had found the philosopher’s stone. And they, through their dextrous manipulation of this and that lever of policy, could forestall and ameliorate, as I said in the case of … Okay, so that was the conceit, but I think, to go back to a sporting metaphor, I think that muscle memory played a great part in conditioning everyone to expect everything except inflation. Now, if you were to simply ask the following question, the answer is going to be, yeah, inflation. And the question is this. What will happen when the government pays people not to work, when indeed it subsidizes the lack of production through various rules and regulations, when it materializes money as it has never materialized those dollar bills before, and as it borrows and spends in the space of 18 months as it has never done before. What is likely to be the outcome? And any schoolboy of yours would say, “Yeah, inflation.”

Jim Grant (00:50:47):
Notice that no one said, “Of course, inflation.” There’s a baseball story, 1968, Bob Gibson was the reigning pitcher in baseball. Imperious, majestic, dominating and domineering figure, was Bob Gibson, St. Louis Cardinals. He played with an infielder named Ducky Schofield. Ducky was very good in the field, not much of a batsman. Batsman, that’s cricket term.

William Green (00:51:15):
Yeah.

Jim Grant (00:51:16):
And one day Ducky strikes out, storms back to the bench and curses up a blue streak, smashes the water cooler, and Gibson can’t stand him. He summons Ducky to the end of the bench and points to his batting average, which was .226. He says, “Ducky, what did you expect?” So similarly, today, with inflation, what did they expect? Well what they did not expect was the obvious [inaudible 00:51:47] piece it together by all of us, but the fact that it was not obvious speaks to muscle memory and speaks to the conceit of the economic forecasting fraternity, and it speaks simply to, I guess, to the foibles of human perception.

William Green (00:52:06):
I mean this is a really important point just to underline before we move on, because it really gets at this question of just having to be a little bit humble about our own ability to self-delude.

Jim Grant (00:52:19):
Ah, okay, I want to digress with a story. Years ago there was a bunch of medical scientists, got together to examine a cadaver discovered in the melting ice in the Italian Alps. This thing was called the Iceman, right? So the greatest heart specialist and physiologist, I mean, anatomist, people with a scientific interest in the human form, came to the relevant hospital in Italy to examine this Iceman, right? And they spent weeks going over it with the advanced tools then available to them, x-rays and things that I can’t know. And it wasn’t until the very end that someone said, “Yeah, there’s the arrowhead right there.” And the relevance of this is that … and the ones who missed it were so embarrassed and so humbled. And we wrote a piece about this and headline was Perils of Perception, and our story wound up that the scientists who missed this were not … they didn’t have financial … they weren’t leveraged in the market betting on some outcome. They didn’t have an options position open. They had no financial interest in the outcome. They were studying this as disinterested academics. They missed it. So we wound up saying, [inaudible 00:53:41], So how is it that with people through force of financial interest, client interest, how are any of us solvent, given all of the impediments to clear perception of finance?

Jim Grant (00:53:59):
So that’s why things periodically get so messed up. Everyone has a different set of perceptions, but the population of people who are paid to have a disinterested perception, it’s a very small population. And of course they are human, right?

William Green (00:54:16):
Yeah. So even the fact that you’re trying to be aware of your own bias, your own proclivity to be gloomy, and to see problems, to protect people from problems, possibly prematurely-

Jim Grant (00:54:30):
My own character traits, yes.

William Green (00:54:31):
… yeah.

Jim Grant (00:54:31):
Absolutely.

William Green (00:54:33):
That seems to me a really profoundly important lesson for any investor. Just to be aware of the fact, that if people as smart as all of these PhDs working at the Fed can be as wrong about the unfathomable future, and as overconfident about their own brilliance, it should give us pause, especially for someone like me, who doesn’t have any of that training, to start to think, “Well, on what possible basis do I think I can predict the future of the economy?”

Jim Grant (00:55:00):
But there’s an extreme in this direction as well, and the extreme is something called the efficient markets hypothesis, which is a thing. It is held widely in academia, and what it holds is that prices at any given moment in stocks, bonds, what have you, are just where they should be, because information is instantly absorbed and processed, through the human brain and through algorithms and bots and the like, so don’t try to outguess the markets, take … so no. Because that fails to recognize the capacity of humans for crowd behavior and for mass hypnosis under the spell of the Federal Reserve. So it’s a lot more interesting than the efficient markets hypothesis. Right? So that’s what lends the steel and the poetry into this line of work.

William Green (00:55:55):
Yeah, you, like me-

Jim Grant (00:55:57):
You must know what you can’t know.

William Green (00:55:59):
… yeah.

Jim Grant (00:56:00):
If you follow.

William Green (00:56:03):
And both of us I think come much more from the school of Ben Graham, of saying, “Yeah, far from this being efficient, Mr. Market is crazy, and once in a while gets so carried away that that’s what creates tremendous opportunities for really smart, dispassionate investors.

Jim Grant (00:56:19):
But I just … I revised the preface for the next edition of Security Analysis. Seth Klarman and I are involved in this project, and others. And I was reminded while doing this of how little the precepts, the wonderful, true, and logically consistent precepts of Ben Graham, how little they yield to an investor over the past dozen years. Because Benjamin Graham’s all about a margin of safety, but when markets are levitating as they did in late ’90s for example, or in Japan from the ’80s into 1990, the margin of safety is the last thing you need. If you want to keep up with the Joneses, you have to throw all that aside. So it’s not a very comfortable theory for yes, but guys.

William Green (00:57:09):
Yeah, I think it depends how seriously you take the question of survival.

Jim Grant (00:57:15):
Yes, exactly. So, right. Right. And also how long is your investment horizon. If you’re starting out, if you’re 22 years old, got your first job, you can actually afford to pay no attention to what the cyclical fluctuations, because you have all the time in the world for things to recover, and for compound interest to work its magic. That’s fine. But if you are even a little bit older, it pays to … Oh, okay, so I can help with one thing at least on this lovely podcast. There’s a book suggestion. And the author is Fred Schwed, Jr. S-C-H-W-E-D, Schwed, and the book is Where Are the Customers’ Yachts. It came out in 1940, and Fred Schwed says at one point, it’s the heading-

Jim Grant (00:58:03):
… [inaudible 00:58:01] says at one point, the heading in this chapter is, A Little Wonderful Advice. And he says, “Here’s how you can have the pleasure of dying rich.” He says, “What you want to do is, when everyone is selling stocks, you buy. Now, you won’t hit the bottom, and they’ll go lower. Pay no attention, and then wait, and they’ll go up a lot. And when they go up enough, just sell. They’ll go up more, but again, pay no attention. And repeat. And you will have the pleasure of dying rich.”

Jim Grant (00:58:32):
And it’s a charming story, and there’s a lot of very helpful human truth in this book, but that is about the least possible thing to do for the average human being, because we’re all carried away by gloom at the bottom and by euphoria at the top. We’re just perversely wired. The devil himself wired us for finance.

William Green (00:58:55):
Yeah, absolutely. Well, I shared some comment of yours on Twitter the other day, which I know I could rip off from you because I know that you’re not on Twitter, where you talked about … I’ll get this wrong, but it was something about how, at the top of the market, we’re all convinced that two plus two equals five, and at the bottom, we’re all convinced that two plus two equals three. And this just seems like a really recurring trait.

Jim Grant (00:59:17):
Yeah, that’s about … three, at most.

William Green (00:59:20):
At most, that’s right. That’s right. You’re remembering your quote better than I did. So, to get back to the current issue that we’re facing, this burst of inflation, what are the Fed’s options for actually dealing with inflation? And you’ve talked about the risks of accidental outcomes that it faces. So can you talk about the high risk of a financial accident that could be created by the Fed, which as you’ve pointed out, is not entirely omnipotent and omniscient?

Jim Grant (00:59:47):
Yeah. Well, one of the great Austrian thinkers of yesteryear, Ludwig von Mises, sounds like he ought to be conducted the Vienna Philharmonic, but von Mises was a great economist, as you are. And he said, “The trouble with what the Fed does to rid us of inflation” … So, first of all, it overdoes it, thereby causes inflation. So it’s like a driver who runs over you with a car, and then to fix the problem, the driver backs up and runs over you in reverse. So what the Fed does is in the language of economics, is to pursue a course of demand destruction, proverbially and trivialing inflation, it’s too much money changing too few goods, too much demand in relation to supply.

Jim Grant (01:00:35):
So demand destruction is the thing, right? So you want people to spend less, to what less; or they want it, but they have to give them less money to do it. How do you do that? Well, you wreck the economy, so you raise the rate of interest. So the question before the House is whether the Fed artfully can raise its rate just enough to destroy just a little bit of demand at the margin, but not so much as to sink us as a society, into a slop.

Jim Grant (01:01:05):
Now, 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. It’s set with the most brittle glassware and the most precious porcelain and bull market champagne flutes, because of the 12 years of suppressed interest rates which have fostered risk-taking, which have brought forth into the world all these [inaudible 01:02:02] they’re 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?

Jim Grant (01:02:18):
So, what happens when you raise the rate of interest on because 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 the 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. It’s not plastic cutlery, not plastic cups on the table. This is glassware. And the glassware is made all the more brittle through the Fed’s earlier stimulus.

William Green (01:03:01):
So, we’re sort of flying blind here.

Jim Grant (01:03:04):
Yes, yes.

William Green (01:03:04):
Is your bet that the US economy can escape a recession, or is your bet that it’s going to get pretty ugly? I mean, I know that-

Jim Grant (01:03:14):
Well, here we come face-to-face with personality and character and vested interest, right? So, what would be better for Grant’s than calling another disaster? I can imagine the motion pictures. I can imagine … a parade is probably a trope, but I can imagine our circulation going up a lot, so I-

William Green (01:03:38):
The Big Short Part 2.

Jim Grant (01:03:39):
Right? So, without obsessing on interior dialogue and motivation, what I try to do is to reserve mind share, mind space, for the not impossible outcome that things work out. The United States economy is something that has demonstrated the greatest resiliency over the years. And I mean, I think one hears rather too much about American … What is it called? American … not singularity, but exceptionalism, right? But America is exceptional in many ways. Certainly, its economic history is exceptional. There’s a can-do spirit here, there’s a spirit of enterprise that not even the Fed can extinguish through its maladroit policy maneuvers, or President Biden extinguish through recent elections, from the pulpit. So yeah, it’s possible that through luck, and maybe the Fed’s learned something.

Jim Grant (01:04:37):
So I think that the question then becomes, where do the risks lie, and where do the opportunities lie, given that the outcome is indeterminate? Are you being paid well to think one thing that is possible, indeed probably? Are there bargains, in other words, are there bargains that people are neglecting because the world was so single-mindedly focused on- And I don’t see many just yet, but we have a very good equity analyst here, who does other things well, but his name’s Evan Lorenz. He’s the deputy editor for Grant’s, and he does fabulous work in analyzing individual stocks. So, we had been very bearish on Facebook. But the current issue came out, and Evan did this fine work, and he says that Facebook is now buy. It’s cheap on its merits, on its earning power. It has been unduly punished for its foibles and its managerial errors. And now, we ought to pay attention, because it is now a value-laded stock. There’s a margin of safety.

Jim Grant (01:05:37):
So there are these opportunities cropping up. The risk is, I see this a lot in people who manage what’s called valued portfolios, is that the cheap stocks do go down with ones that are too expensive. I know of value investors who have suffered losses this year on the order of 20% or more, although they thought the stocks they owned were so cheap that they were inured to such things, but no. So it’s been a brutal year for many people. But in answer to your question, what we try to do is keep scouting for opportunities. We don’t see it in the bottom market, although if there’s a recession, bonds will go up in price, and down, and interest rates will fall, likely. We see opportunity in gold stocks, which are almost universally ignored and scorned. They’re about as cheap as they’re ever been in relation to the metal. But if the Fed is seen not to have the great answer, if the Fed is seen to be the institution you must protect yourself against rather than to trust in, in that case, this is an area, especially for as long as I’ve been alive, almost, in that case, gold’s going to do very well.

William Green (01:06:43):
Let’s unpack some of this in a bit more detail so that we can give our listeners a practical sense of what most likely they should avoid, and where they should look for opportunity. So, you’ve talked a lot about historic bear market cycles for bonds, and the impact that interest rates have in terms of these really long cycles. And as I understand it, the moral of reading what you’ve been writing about this recently is we just had basically a 40-year bull market, driven by ultra-low interest rates that are now reversing. And I’m trying to get a sense of whether what you’re saying is, “We’re done, just stay away from bonds, basically.” For example, I remember Jack Bogle once telling me that you could just make a single decision of having a balanced fund that had 60%, 70% stocks, 80% stocks, or whatever, depending on your age, and then 20%, 30%, 40% bonds. And there are people now saying, “Well, actually, the 60/40 portfolio is done. You’re toast with that.” Can you talk about what this knowledge of the history of these huge bond market cycles tells us about whether we should just avoid bonds totally now?

Jim Grant (01:08:01):
Yeah, a bond is a promise to pay money, and the best thing that happens to you with a bond is you get your money back with interest. That’s the upside. And Ben Graham, writing about bonds, reminded us, reminded his readers, that a bond is not going to triple because management has changed onto some wonderful invention. As the upside is limited, so are the risks great. So bond selection is one of exclusion rather than selection. You approach it with the idea of avoiding risk.

Jim Grant (01:08:36):
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. Well, how do we analyze this? 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. I have been a little too eager to declare the end of that cycle. And in my newly found humility, I’m not quite, I will not now say, or at least not out loud, I might think it, that the bottom of the market still might revert to going down most of the time.

Jim Grant (01:09:50):
But 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 or the 70/30 portfolio is not the thing for you.

Jim Grant (01:10:33):
Now, this is still speculative, but I think that it’s likely to be the case. And people ought to be alert to the idea that something new is in the offing. And what that something might be is kind of in the womb of time, but we can guess a little bit about it. It might be that, I don’t know, 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, but 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 the 40% portion would be in a near-cash thing. It’d be a one-year Treasury bill, for example, or a short-dated municipal bond fund, rather than 20- or a 30-year securities that yield you more. You sacrifice some yield for the protection against capital loss that is part and parcel of the longer-dated security.

William Green (01:11:40):
So, we had several questions over Twitter about where to find safe havens, where to hide, particularly if bonds … if there’s a fair chance that they’re likely to be lousy for a significant period. And I remember there was a lovely line from you, I think in Grant’s Interest Rate Observer, where you were talking about … I’m getting the hang of saying “Grant’s” now … where you say investors feel compelled to own bonds, not as income-producing vehicles, but islands of safety. And you were talking about the delusion that they’re intrinsically safe. And you were pointing out that they were dubbed certificates of confiscation back in 1981, and were deemed intrinsically unsafe.

William Green (01:12:19):
So if we accept the hypothesis that although we don’t know the future of the bond market, at least we now know they’re not intrinsically safe, there are periods in which bonds can be a terrible investment, so this raises the question, where should we hide? And so there were several questions about gold. Someone called who has a terrific name. He’s called @dockertytwit on Twitter. This gentleman named Bob Dockerty said, “Grant has said that gold is not a hedge against monetary disorder, it’s an investment in monetary disorder,” which is what we have. And he says, “How would you make the argument that gold could be part of the solution?” And then someone called Dr. Hugh Akston, who describes himself very nicely as a former hedge fund manager striving to see the world as clearly as possible, says, “Why hasn’t gold performed better in this environment with rampant inflation and negative real interest rates?” So, could you talk a little bit about why and whether gold should be a place we should hide?

Jim Grant (01:13:21):
I will. This can come, from me, rather like a difficult child, always making excuses. First of all, it is true that gold has disappointed its many fans. Actually, not so. But those fans it has disappointed, it has not twigged on to the fact that the competition it faces from interest rates is a very meager competition because, after all, with a 9% inflation rate, you’re still losing massively on a bond that yields 3% or 4%. The rate of inflation is taking most of your money. And because the coupon, or the rate of interest it pays, is so low, there’s no protection against some loss in price.

Jim Grant (01:14:01):
Back in the early ’80s, bonds went down 15% in a year. And that’s fine, because the coupon was 15%. It could absorb the loss. Okay, so the interest competition against gold, a non-interest paying asset, is slight to meager, yet gold has retreated in the face of just the Fed’s promise to raise interest rates. So the gold market betrays a most unbecoming trust in the institution that we are meant to be hedging against. So, that part of it is fabulously annoying to me. It’s as if Mr. Market does not read what I take the trouble to write every two weeks. So I can’t explain it. I can deplore it, but I really can’t explain it.

Jim Grant (01:14:52):
I can recite reasons why gold hasn’t done well, and I will. For example, the dollar is the worlds great reserve currency. It is Hercules itself in relation to the Euro, which has as its money master or mistress Christine Lagarde, who has to this date kept the policy interest rate of the European Central Bank at one-half of 1% below zero. That’s in the face of raging inflation in the economy of Europe. When you look at Japan, you have a major currency the dollar competes against. The Bank of Japan has chosen to suppress its bond yields at just about zero, and let the yen exchange rate go to just about zero, seemingly. I mean, the exchange market is eviscerating the dollar-yen exchange rate. Okay, so …

William Green (01:15:45):
So you’re saying it’s three gangs that can’t shoot straight, sort of firing-

Jim Grant (01:15:51):
But one at least possesses a weapon.

William Green (01:15:54):
Yeah.

Jim Grant (01:15:55):
Yeah, so that’s one reason. And I think, also, gold is up against its very tangibility. One of the oddities of 2021, apart from the levitation of Bitcoin, was the millennial obsession … it was a very brief live thing, but tungsten cubes. Did you hear about this? Tungsten cubes-

William Green (01:16:19):
I loaded up on them, Jim.

Jim Grant (01:16:20):
… became a thing. And I was thinking to myself, “Huh. If you want to buy a monetary metal, why don’t you try one that is actually money?” But I-

William Green (01:16:30):
Yeah, and weren’t these just … they were pictures of tungsten, or something. I don’t know.

Jim Grant (01:16:33):
Yeah, yeah.

William Green (01:16:35):
I feel like 140 years old when I read that.

Jim Grant (01:16:38):
Granted, it’s very heavy. It has certain metallurgical properties. But anyway, so I think that the world, for whatever reason, has turned its back on gold. So the question before the House is, that’s the past, that is indeed the present. Does the future shine any brighter? Any my case for gold is that it is the monetary asset that is not in the world of credit. Credit is the promise to pay money, right? It’s the bond market. It’s the loan market. So we live in a world, a financially honeycombed world of promises, financial promises, debts. And the ratio of these debts to income, worldwide, is at an all-time high, especially so in China. And I think that before long, how long, oh Lord, I don’t know, before long, the world will see in gold an island of safety from the world of credit. It’s a monetary asset without a counterpart. No one owes you anything on gold. It’s value in itself. And the trouble is people don’t see the value yet, but I think they will.

Jim Grant (01:17:52):
Now, gold stocks, even worse than gold. I think I’m safe to say, never have they been cheaper in relation to the price of the metal, because people don’t believe the central banks can really come a cropper. Now, so old am I, I have seen central banks become completely marginalized and discredited, in the 1970s under Arthur Burns and G. William Miller, and indeed before them under William McChesney Martin. Paul Volcker himself was discredited as an assistant secretary of the Treasury, before he became the deity of modern central banking. So my bet on gold is that it is indeed an investment in monetary disorder, which to date is still latent and not manifest. This could be a web of rationalization that is going to get nobody anything except trouble. That’s the way I think.

William Green (01:18:45):
And in practical terms, I remember reading that part of your own investment portfolio that you manage is the part that’s in gold. Can you give us a sense of what would be a sensible way to invest in gold, for people who believe that they should?

Jim Grant (01:19:03):
Sure, yeah.The threshold question, or two threshold questions here. One is, do you want to own the metal itself, or the mining shares? And the second one, if the metal itself, do you want to own the exchange-traded fund, which is the metal, but in paper form, or the things that you can possess? So I’ve chosen to own Krugerrands, one-ounce coins. And they are available from …

William Green (01:19:27):
From under Jim’s bed. We can all … in the show notes, there’ll be-

Jim Grant (01:19:33):
Those aren’t for sale–.

William Green (01:19:35):
I’ll be publishing Jim’s address in the show notes so you can go visit his Krugerrand stash.

Jim Grant (01:19:41):
What do they call that, when the Supreme Court judge gets … Anyway.

William Green (01:19:45):
Yeah. So really, that’s a better bet, to own Krugerrands?

Jim Grant (01:19:49):
Well, it seems to me that if you want protection against bad things happening in the world of finance, especially in the world of credit, then you want a tangible protection, and not something that itself is part of the problem, or could be part of the problem. So you want the physical thing. All right. But, mining shares offer a value proposition. They’re deeply counted, widely … not so much unliked as ignored. So I own some, for example, they’re called the Sprott Gold Mining Trust, I think. Anyway, John Hathaway, this guy who used to be called the Tocqueville gold fund, but now it’s called Sprott.

William Green (01:20:29):
And he’s smart? He’s someone you would [crosstalk].

Jim Grant (01:20:31):
Yeah, he’s a very good gold skillset manager, so that’s one. So, that’s gold. So, you know my reasoning for it, and you know some of the ways to look at things. There are also some alternatives to John’s fund. There are also some alternatives to owning individual Krugerrands. But those are some of the ways to approach it.

William Green (01:20:49):
So Jim, you mentioned tungsten NFTs, which I’m guessing you weren’t loading up on. But there are a lot of people out there who, in terms of cryptocurrencies, have been saying that Bitcoin is a valid and worthy hedge against financial chaos and against the kind of reckless monetary policies that you’ve been seeing. I’m guessing that you just see the crypto boom as a kind of outbreak of irrational exuberance and the madness of crowds, but could you talk a little bit about your perspective on Bitcoin as probably the most … I hesitate to annoy loads of people, the most defensible of the cryptocurrencies? Do you give it any credence as a hedge against reckless monetary policies, or-

Jim Grant (01:21:36):
No.

William Green (01:21:38):
Why?

Jim Grant (01:21:38):
So, first of all, let me give props to the people who did see this for the Thing, capital T, it has become. I remind myself of Lloyd Blankfein, the chairman of Goldman Sachs in the day. And Lloyd Blankfein was asked about gold in, say, 2011, when it was like $1, 900 an ounce. And he said, “What do I know?” He said, “I was bearish at $35 an ounce.” And similarly, with Bitcoin. So having given proper props to those who saw it for what it was, then, so, what is it? Is it money? No, it’s not money. Is it something you can transact with? Well, it’s awfully clunky for that. Is it a store of value? Well, I don’t know. Draw down’s like 80%. I mean, has anyone ever taken out a mortgage in Bitcoin? Would Elon Musk, when he was besotted by Bitcoin, would he have written a Tesla warranty in Bitcoin? One day it’s worth $4,000, the next day, it’s worth $40,000 to the buyer; to him, it’s a cost, $4,000. No, he hasn’t done that, nor has anyone taken out a mortgage in Bitcoin, I think…

Jim Grant (01:22:58):
So if you’re really a zealot on Bitcoin, what you are saying is the world of technological innovation will never create something better. I’m telling you, it’s crazy. Bitcoin trades like a tech stock. It is as vulnerable to disruption as any other tech stock. I mean, who’s to say it’s not the PalmPilot of cryptocurrencies? I used to work with a software program, a word processing program called MultiMate. I loved MultiMate, nevermind that I actually lost a book chapter once. It just vaporized. But still, I loved it. But these people cling to Bitcoin. What, down from 60,000 to 19,000? I said, “Oh, I still love it.” But I think that Bitcoin is vulnerable to that.

Jim Grant (01:23:46):
Also, Bitcoin used to be the thing you used to … say if you wanted to buy, I don’t know, a container full of surface-to-air missiles. You’d go to the dark web and you’d use Bitcoin, right? It’s perfect for it. But now Bitcoin wants to become respectable. You’re like, “You wait.” So, Bitcoin is now being regulated. Now, it’s all this leverage. The snake in the Garden of Eden: credit has now entered the world of cryptocurrencies. I know this because of the serial bankruptcies of hedge funds and lending platforms.

Jim Grant (01:24:21):
So the thing that the inventor of Bitcoin wanted to get away from, which was central bank centrality and credit and credit risk, right, nope, hasn’t escaped it. There’s all sorts of ways that this is not decentralized, all sorts of ways in which it is vulnerable to the vicissitudes of the world of credit. And believe me, there ain’t nothing more given to vicissitudes than the world of borrowing and lending.

William Green (01:24:53):
Are there other places that you’re seeing a lot of opportunity at the moment in terms of Japanese stocks, which I remember reading recently in Grant’s, you were saying they’re underfollowed and conservatively capitalized.

Jim Grant (01:25:06):
Yes. Yeah. Yep. I think that there are a lot of good things happening in Japan at the company level. I think their guy that’s running monetary policy is … his obsession and focus on raising the rate of interest is doing enormous damage to the Japanese credit market. But however, at the company level, many good things are happening in the simple business of making a profit. And that’s not being widely recognized. There are financial institutions worldwide, but perhaps especially in Europe, that are being tarred with the Ukrainian war, Russian-Ukrainian war, and that are selling at [inaudible 01:25:47]. I don’t want to name them, because I own a lot of them.

Jim Grant (01:25:49):
I’ll tell you about something that people might take a shine to. There’s a tiny mutual fund that is interested only in owning valuated stocks, and it’s called the Palm Valley Capital Fund. And people who found it were very good investors, but who would not participate in the levitation, in the everything bubble. And they went off on their own and they said, “All right. Here’s what we got to do. We’re going to wait until we see things, stocks that are absolutely cheap, then we’ll buy them. But we are not going to keep up with the Joneses.” And I found what they did … I daresay they have our Grant’s story up on their website. They’d be foolish not to. I think the world of the two of them. Eric Cinnamond is one of them, and Jayme Wiggins. But I think the world of them. They discipline their adherence to the doctrines of margin of safety. So they are going to be around whatever happens, and the stocks they own will do very, very well after the dust settles, and there will be dust.

Jim Grant (01:27:03):
… the dust settles, and the dust will … there will be dust. There will be dust.

William Green (01:27:07):
What about China, Jim? I read a lovely line from Grant a while back where you talked about the West’s financial love interest being China, despite as you put it, “Such so-called waters, autocracy, tyranny, the official persecution of minority peoples, the subjugation of formally free Hong Kong, threats against Taiwan and the creepy omnipresence of the Chinese Communist Party.” I was wondering whether since prices have fallen in a lot of tech stocks, among other things in China, whether you’ve become more enamored, or whether that language suggests that you’re still a China skeptic?

Jim Grant (01:27:47):
I’m a seller at zero. No, China’s the worst. I mean, and China is getting its come-comeuppance there as we speak. There is a spreading nationwide strike against paying one’s mortgage interest or and choosing failed promise in some real estate developers. China is the most leveraged, most corrupted marketplace, not just corrupted … Well, let me put it this way. If you ever see a currency with one side there’s a picture of a masked killer, you don’t want to own that country. This is a country with Mao on the currency. They’re telling you something, just don’t do it.

Jim Grant (01:28:36):
It’s like Bob Gibson. What do you expect? You lost all your money in China? Yeah. What were you expecting? Gah, I can’t stand that place.

William Green (01:28:47):
I’m glad I asked. In terms of your own investments, over the years you’ve known so many remarkable investors. I know that Paul Isaac, who I interviewed for my book, but I didn’t write about, who’s brilliant, is an old and close friend of yours, Seth Klarman, obviously you’ve been close to for many years and has written for Grant’s Interest Rate Observer, Jim Chanos, the famous short seller, has been a great source and friend. I think your daughter went to work for him as an analyst at one point.

Jim Grant (01:29:16):
Yes. Yeah.

William Green (01:29:16):
I’m wondering, of the year, given that you’re the insider’s insider, whether you ended up investing with some of these remarkable people yourself?

Jim Grant (01:29:26):
Yes. My family has invested a fair amount of money with Paul Isaac, who has been looking at a very rough time. He’s been buying the aforementioned financial stocks. Some of them in New York are selling at less than two times earnings. I mean, everyone’s afraid. Well, they’re of the gas getting turned off. They’re afraid of the inflation that is spreading that European Central Bank seems to be very comfortable with. His view, my view, is that these things will pass. The underlying idea is that it value-outs, value comes out at the end. It’s a trial while waiting for that to happen, but you wait.

William Green (01:30:14):
Do you have any advice for our listeners on how to handle those emotional challenges during those long periods where you’re trying to be rational, but you’re barraged with emotion? I opened up a couple of statements yesterday for hedge funds that I’ve invested in, and one of them I think is down 40% for the year. I look at it and I’m like, “Wow.” I’m fine because I don’t have any serious debt or anything like that, and I knew it would be volatile, and it was giving up some of the great returns. But it’s still kind of painful-

Jim Grant (01:30:48):
I’ll tell you, are you one of these people that gets tested every week for COVID?

William Green (01:30:53):
No. I just sit around in my study and read.

Jim Grant (01:30:55):
Great. Well, see, you can open the envelope and look. You don’t have to.

William Green (01:31:03):
Yeah.

Jim Grant (01:31:04):
One approach is to pay less attention. Now, that is exactly sticking one’s head in the sand. That is literally sticking one’s head in the sand. Now, that is an appropriate, I think, strategy. You’re 23 I’m gathering, looking at your picture.

William Green (01:31:19):
Yeah, just based on my physique and my handsomeness and my beautiful skin. Yeah, you’ve got it, Jim.

Jim Grant (01:31:25):
As one ages, one must pay closer attention and watch for draw downs as we sit there and clinically call losing money … what to say? I think one ought never to be fully invested in [inaudible 01:31:46] a lump of cash for the sake of opportunism, for the sake of what you can’t see, or can’t even imagine, but will come your way. Opportunities come in all sorts of guises. One of the age-old guises of opportunity is disaster.

Jim Grant (01:32:06):
How to cope? I think this is where financial mystery comes in. Just knowing that this too shall pass, but knowing that also if you don’t watch out, a lot of things do go to zero and stay there. That’s a risk that you can’t … I’m afraid some of this coming across as most unhelpful. People who have really gotten stuck cannot get unstuck by following the wise words of Bernard M. Baruch wrote to himself near 1930. “They become humbler as the market goes your way.” Oh, thank you a lot. Thank you a lot. That’s not now. Please, tell me that later.

Jim Grant (01:32:44):
I’m not exactly sure how to answer the question. I think it’s like if you come down with cancer, by the way, you ever spoke? Well, don’t have done that. Right?

William Green (01:32:57):
Yeah. Let’s talk about Bernard M. Baruch, because I’ve spent a very pleasurable portion of the last week reading this really lovely book of yours, which I’m holding up for those who are watching on video, and I’ll put in the show notes, which is called “Bernard M. Baruch: The Adventures of a Wall Street Legend.” As you were mentioning, he wrote this memo to himself in, I think, 1930.

Jim Grant (01:33:21):
Yeah. He wrote it to himself. Right.

William Green (01:33:23):
It’s an amazing thing. Can you first introduce us a little bit to who Bernard Baruch was?

Jim Grant (01:33:30):
Yeah.

William Green (01:33:30):
And then let’s talk a bit about what the lessons are that he figured out along the way, because he was one of the world’s great investors and speculators who’s largely been forgotten. But I think the lessons from him are actually really profound, particularly for those of us who’ve been going through difficult times lately.

Jim Grant (01:33:48):
His days were 1870 to 1965. He was born the post-Civil War South to a former Confederate surgeon, and grew up in very, very straightened circumstance. He moved to New York with his family. His family was very close. He was well-educated in New York City public schools, went to Wall Street, and by the time he was 30, was a millionaire. Now, that was millionaire with something.

William Green (01:34:14):
Yeah. He did it in about three years, right? It was something like 1897 to 1900, he went from nothing to a million dollars.

Jim Grant (01:34:24):
Some of these details are a little bit foggy. I wrote this about 40 years ago. But Baruch began as a trader in public securities, but he made his big money later on in what we would now call private equity. He became a principal, a very reluctant principal, in something called the Texas Gulf Sulfur Company. He, at the top … William, you might have a better recollection of this than I do. I have a footnote of this at the top of 1929 he was worth about $30 million or something?

William Green (01:34:56):
Yeah.

Jim Grant (01:35:00):
He was an old-fashioned millionaire. Gold was $20.67 an ounce. He was worth 30 million of this cause of that kind of dollar. He was a fabulously wealthy guy for his age. He was a political figure, and he was a speculator, and then he became respectable, and then a banker. But he was doing the same thing all the time. He was again saying that a speculator is someone who looks out into the future. Okay? Or knows the future, but you can’t, but you can judge life frequency. All right. He goes into the cash owning a lot of securities. Contrary to the myth surrounding his reputation, he was not in catch having expected the crash. He was rather a new era bull which had not expected, who was perfectly willing to admit the things looked toppy or overdone. But I think that the greatest chapter in his investing history was the recovery from that attitude towards one in 1930 that was very suspicious of what was then a very meaningful recovery in the stock market. In the spring of 1930, the market came back, a lot of people went “Ah, it’s over.” But Baruch was not so sure. He was very defensive, and it was at that time, he wrote this memo to himself. I’ve forgotten some, but it was a personal equipment-

William Green (01:36:22):
Yeah. I mean, I have it here, Jim. I mean, as I said to you before we talked, as I said, those two pages are worth the price of entry for the entire book. They’re pretty amazing. There’s one thing, I mean, yeah, personal equipment, and it’s all his advice to himself. For example, yeah, he’s talking about prudence and he says, “Be pliable, or you won’t be prudent.” He puts this in italics. It’s the quote you mentioned before. “Become more humble as the market goes your way.” And then, he talks about pliability and he says, “Consider and reconsider the facts and your opinions. Stubbornness is to opinions, cockiness must be entirely eliminated.” And he says later on, he talks about the unforeseen and he says, “Always make allowances for chance,” or chance as you would say. “Keep a financial and mental and physical reserve.”

Jim Grant (01:37:18):
Yes.

William Green (01:37:19):
There’s something about the humility of it, about the sense of someone who’s just had the crap beaten out of him, and he’s looking himself and he’s saying, “What have I learned? What does this tell you about the need for humility, the need for prudence, the need to avoid cockiness?” And yet he goes back in, and basically ends up with 25 million or so in his personal fortune, which as you say, was real money back then.

Jim Grant (01:37:43):
Yeah. Well, it’s a quite inspiring story, I think. A word on the word stubborn. It’s kind of a cliché on Wall Street that you’re stubborn if wrong, but you exhibit conviction and character if you’re proven right. Seth Klarman and Paul Isaac and Mike are examples of value investors who are quite comfortable in the skin of their own analysis. There was a seat covering, and the company was earning $4 a share. It’s priced at $40, so it’s 10 times those earnings. Right? So it’s 10 times your earnings.

Jim Grant (01:38:26):
And then, the fed clears its throat and it says it might tighten the stock crisis now at 36. Well, that’s not as good as 40, but this seems to warrant $4 a share. Now, the fed says something else when the economy hits a little rough patch and the price is now not 36, but 28, and now it’s earning $3.5, not four. But the ratio of pressure is much cheaper. Is it stubborn to hold in the face of what could be a very devastating bear market? Or are you exhibiting the clarity of perception and the analytical conviction of a properly informed long term investor by holding and buying more as the price comes down?

Jim Grant (01:39:11):
This is the eternal tension. It’s the eternal question. That’s why some people succeed on Wall Street and some don’t. It’s not as if anyone can do this. Not even the professionals can sometimes do this. It’s so hard. The analysis is hard. It’s hard. But that’s nothing compared controlling one’s own perceptions and emotions. Jack Bogle and I were, I count him a friend, not just a Wall Street acquaintance. He was kind enough to speak several times and give a conference for us [inaudible 01:39:40]. Jack spoke once and this was about 2000 and I think as memory serves, which it so infrequently does, it was 2009, 2010, the crash, the crisis was fresh in memory, when Jack confessed that he felt just the way that everyone else did. Yeah, the world the was ending. Yeah. Yeah, it was ending. But it does and it doesn’t.

William Green (01:40:04):
Not yet.

Jim Grant (01:40:05):
Right? So they say. But I don’t know, I’d like to see him go down and I’d like to see them for sale at the bottom. I love that. I love to sell. I love to collect values and bargains, so that’s my rudimentary interest.

William Green (01:40:26):
Yeah. There were a couple important lessons that I drew from your discussion of Baruch where you said at one point you wrote, “The best speculators seem to buy when everybody else wants to sell.” He did have this ability to buy cheap, but then at the same time, you said Baruch’s speculative genius was his trader’s flexibility. You talk actually about the opposite characteristic, which is saying a successful stock trader-

Jim Grant (01:40:52):
Yeah. I know. It’s the battle of cliche’s, isn’t it? One of the great bond ball of yesteryear, it’s the turn of the 21st Century in Wall Street. So and so, some great speculator, was all nerves and no nerves. It’s descriptive of a certain kind of personality. Steve Cohen, for example, a hedge fund guy who owns the Mets. I see that as a all nerve and no nerve.

William Green (01:41:20):
In what sense?

Jim Grant (01:41:21):
Unflappable in the face of adversity. That’s well, nerve in this case refers to flightiness or jumpiness, and you could be all nerve in the sense of having again, a tactile sense that something’s wrong, and just for no evident reason change your mind. That’s all nerve. No nerve in the sense of being impervious to the crowd, of standing aloof of crowd and its emotions and its stampede. That’s no nerve.

William Green (01:41:58):
I remember you writing at one point about the importance of intellectual flexibility, and it seems like that’s one of the things that you admire most in the best investors. This ability to be open to what you call seemingly heretical ideas.

Jim Grant (01:42:13):
Yeah. Well, some of the people who made money in Bitcoin were those who had no conviction at all of that utility. They share this evangelous now, someone from head public companies who say that the world will never be the same with Bitcoin. It changes everything. The people who perhaps make more money say, “Yeah, it’s a trade-”

William Green (01:42:41):
Bill Miller came on the podcast recently, and I’ve been interviewing Bill basically for 22 years pretty consistently. Bill is just one of the great agnostics in life, and he just said, he was talking about Buffet among us, saying that Bitcoin’s a non-productive asset like gold, and Bill’s like, “Since when was investing about owning productive assets?” He’s like it’s about making money.

Jim Grant (01:43:05):
Yeah. Well, all right.

William Green (01:43:07):
I thought it was interesting though.

Jim Grant (01:43:08):
But that’s Bill. I say that with half respect, or all respect, but a little bit of exasperation. I think that’s too cynical. Yeah. No, investing is not about lights on the Bloomberg scheme. Investing is about the allocation of … is cosmic sensors, macros, investing is about the proper allocation of funds into productive enterprise that society needs to grow and prosper. All right. When the central banks are directing investments in manipulation of the most important pricing capitals, the interest rates, that money gets misdirected. Bill Miller is fine in buying these. Maybe did Bill Miller ever get long electric truck manufacturers? He might have. They were lights that were probably lighting and flickering at him. He got one Bitcoin, it was a flickering light. I think it’s more than that. I think that’s way too cynical.

William Green (01:44:02):
Interesting. I guess what struck me is just there are different ways to climb the mountain, and it’s-

Jim Grant (01:44:08):
Yes. Oh, yes. All sorts of different ways to make money. But I’m saying that to completely separate the earning power and financial stability from money-making, I think it leads you into the newest fad, the hottest manager, the most speculative names, and that could bring the deepest remorse.

William Green (01:44:30):
But I think one thing I like about Bill that I think is very similar to you actually, is that philosophical open-mindedness, that ability to say, “Well, what is this thing?” I don’t think I’ve met an investor who’s more open-minded. You look unconvinced. For those that are listening to the podcast, let it be recorded that there was a pregnant silence.

Jim Grant (01:44:51):
I don’t understand Bill’s approach. I do understand and comprehend and admire his success.

William Green (01:44:59):
Yeah. Jim, one of the things as we begin to draw this to a close, since I don’t want to try your patience excessively-

Jim Grant (01:45:09):
It’s too late for that.

William Green (01:45:10):
Sorry about that. Yeah. We’re about an hour beyond that point. In your preface to the Bernard Baruch book, you mention in passing that the most precious commodity is time. I wonder now as you mentioned to me before the start, you’re approaching your 76th birthday, when you look back and you think about how you spent your time doing many books, much journalism, all this stuff. What gives you most satisfaction? What do you think you got right in life about getting the balance between your work, your family, your four kids, all of this stuff?

Jim Grant (01:45:56):
Well, one I got right in life is the former Patricia. I don’t know how to … what I got in life. What I got life in right. What I got right in life is the former Patricia Kavanagh. As to time and its uses, looking back on it, I mentioned getting, I spent hours practicing Mozart, Richard Strauss, or playing arpeggios and scales and A tunes. That was an isolation in a room, practicing, and then my life has been typing in a room. I guess I have chosen that, because that’s who I am, and what I wanted to do. But looking back on it, I wish I’d gotten out more. I love what I have done. Now, next time through, assuming we all get another shot, right? I want to be the kind of guy who not only enjoys having written, but a guy who enjoys writing. That’s going to save me an awful lot of aggravation.

William Green (01:46:49):
I’m so glad to hear that, Jim. Because when I read your writing, and I’m not trying to butter you up, you’re a really wonderful writer. Several times this week, I’d be on a call to my mother in London, for example, and I’d read her something that you wrote. The other day I had John Gartner, who’s a wonderful writer over, and I read him something you’d written, and I was just like, “This guy just can really write.” When I read you-

Jim Grant (01:47:12):
Oh, that’s sweet.

William Green (01:47:13):
No, you’re a really wonderful writer, and when I read your stuff, there’s a sense of exuberance and humor and joyfulness and panache, and I was thinking, “God, does this guy enjoy writing?” Because for me, it’s such torture. I was wondering whether you reached that stage where it seems casual and easy, because you’ve just written so much, you’ve done so many drafts, or whether there is a kind of delight for you in playing with the language.

Jim Grant (01:47:42):
I love the language, and the language, I must say. I am currently working on a book about Edmund Burke and Charles James Fox, and I am immersed in the 18th century oratory, and it charms me to no end. I think I have probably some shrink would say I’ve taken refuge in the past. But I love John Adams and all that autobiographical stuff, which reads his rhetoric. I love the language. I hate my first drafts. Second drafts are scarcely more presentable. I keep going until they appear spontaneous. A certain sense it’s got to take a village … but every accomplishment, every well-accomplished things appear as effortless, right? A double play in baseball or an arias in the opera sung by somebody who gives all of his or her lifetime in the practice room. All this appears effortless, so if it appears effortless, that’s good. That means that the sweat has been worth it. But I assure you, there ain’t no effortless in it.

William Green (01:48:50):
That’s heartening, because I mean, there’s a part of me … I spent five years working on my book, and I saw that you spent four years working on your great Bernard Baruch book, and there’s a part of me that’s like, “God, how soon can I climb that mountain again?” It’s really painful. Hearing that it’s been a struggle for you is kind of heartening.

Jim Grant (01:49:10):
Oh, man. Are you kidding? I do this also as part time for me, my life’s work is perhaps a [inaudible 01:49:17] observer, and that’s the most important thing I do professionally. But a close second are the books I work on. I spent nights, weekends, and the Fourth of July on Edmund Burke and Charles James Fox, so it has as an agent of a [inaudible 01:49:33] I find that it becomes rather a lot, however, the simple joy of my avocations is enough to carry me through. Such pleasure out of reading what these greats have written, and seeing the societies at work, and trying to decode them, et cetera. It’s a privilege to have the time, just as you say, or just quoting you today. Time is [inaudible 01:50:06], but 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.

Jim Grant (01:50:21):
As life goes on, you become to covet those heartbeats and husband them, and expend them in ways that are rather more carefully than you were known for throwing them around as if they were confetti. They’re not.

William Green (01:50:36):
When you look back on everything, on all the books, on all the 40 years worth of issues of Grant’s Interest Rate Observer, is there some common denominator, some theme, where you look back and you’re like, “That’s what I hope my legacy is.” Is there something?

Jim Grant (01:50:52):
Well, I will say this. We have been right and we have been wrong, but we have always been literate. I think we should apologize for ever reverting to baseball analogies. I do love the sport. One of the players of the Mets, Keith Hernandez, recently had the honor of his number being retired by [inaudible 01:51:18] not English football or cricket, but nobody will ever be whatever Keith’s number was, Keith Hernandez’s number. Was it 17 maybe? I don’t know. In tribute to him, one of the sports writers said he never threw away an at bat. He never trusts his emotions.

Jim Grant (01:51:39):
I can say that every single line of Grant’s was the best I could write at the time. Some of them I look back on it, some of them are not. I always want to rearrange something. But, nothing was ever tossed up on the wall hoping it would stick.

William Green (01:51:57):
That’s good. That’s lovely and for me, inspiring note on which to end as fellow struggler on the writing mountain to use-

Jim Grant (01:52:08):
Don’t you despair, William. The 16th draft is going to come out just the way you want.

William Green (01:52:13):
All right. Jim, thank you so much. This has been an absolute delight. I-

Jim Grant (01:52:17):
I hope the microphones were on, because I couldn’t do this again.

William Green (01:52:19):
I hope so, and I really admire your work greatly, and all of the wisdom you’ve shared over the years, and whether right or wrong, it’s always been a delight to read and also to listen to you. This has just been a total treat for me, so thank you.

Jim Grant (01:52:34):
Thank you, William. Okay.

William Green (01:52:34):
All right. Thank you so much.

Jim Grant (01:52:34):
All right.

William Green (01:52:35):
All right, folks. Thanks so much for joining us for this conversation. If you’d like to learn more Jim, and money’s not an issue, I’d highly recommend his flagship publication, which is called Grant’s Interest Rate Observer. I think of it as the Rolls-Royce of investment newsletters. It’s a little bit pricey for most regular investors, but if I were a professional investor, I certainly wouldn’t want to be without it. At the other end of the spectrum, Jim’s team also publishes a free commentary on the financial markets, most days of the week. It’s called Almost Daily Grant’s. I’ll include links to these and various other resources in the show notes for this episode.

William Green (01:53:12):
If you enjoy studying financial history, I’d also highly recommend some of Jim’s terrific books. I personally, particularly enjoyed his biography of Bernard Baruch, which is subtitled The Adventures of a Wall Street Legend. I’ve spent more than 30 years of my own life as a writer and editor, and I know how brutally hard it is to write well, so when I see someone like Jim who’s a profoundly gifted writer, I have huge respect for his talents, both as a thinker and as wordsmith. He’s really pretty remarkable.

William Green (01:53:43):
Meanwhile, many thanks to everyone who suggested questions over Twitter for me to ask Jim. For every episode of the podcast, I’d like to send out one autographed copy of my book, Richer, Wiser, Happier as a way of saying thanks for all of your excellent questions. This time around, the prize winner is Bob Daugherty, a listener who lives in California. Bob, I’ll be sending you a copy of the book very shortly, I hope.

William Green (01:54:07):
Feel free to follow me on Twitter @WilliamGreen72, and please do let me know how you’re enjoying the podcast. It’s always a pleasure to hear from you. I’ll be back very soon with some great guests. My next guest is Tom Russo, a terrific global investor, who’s beaten the market by a mile over the last 40 years or so. After that, I’ll be joined by the Nobel Prize-winning economist, Robert Shiller, who’s also the author of a blockbuster, best-seller called Irrational Exuberance. Until then, take care. Thanks so much for listening.

Outro (01:54:37):
Thank you for listening to TIP. Make sure to subscribe to We Study Billionaires by The Investor’s Podcast Network. Every Wednesday, we teach you about Bitcoin, and every Saturday we study billionaires and the financial markets. To access our show notes, transcripts, or courses, go to theinvestorspodcast.com. This show is for entertainment purposes only. Before making any decision, consult a professional. This show is copyrighted by The Investor’s Podcast Network. Written permission must be granted before syndication or rebroadcasting.