Jim Grant: “The Fed Reminds Me of A Speculator on The Wrong Side of The Market”
The comments below are an edited and abridged synopsis of an article by Christoph Gisiger
This is an interview with Jim Grant, editor of Grant’s Interest Rate Observer. He warns of the rampant speculation in the stock market, and worries that central banks are underestimating the threat of persistently high inflation. He explains why gold has a bright future.
The financial markets are high. The S&P 500 recently closed on a record high. Particularly in demand are red-hot stocks like Tesla and Nvidia with fantastically rich valuations. Together, the two companies have gained around $600 billion in market value in the past month.
For Grant, this is an environment that calls for increased caution. He says that investors have to beware of an explosive cocktail combining exceptionally easy monetary policy, a pronounced appetite for speculation and the high degree of leverage. He also thinks that central banks are underestimating the risk of persistent inflation.
“The Fed reminds me of a speculator who is on the wrong side of the market,” says Grant.
The fact that the Fed is now beginning to taper its bond purchases makes little difference in his view.
“It’s like pouring a little less gasoline on the fire,” he said.
In this interview, edited and condensed for clarity, the outspoken market observer and contrarian investor compares today’s environment with the second half of the 1960s and explains why he expects persistently high inflation rates. He outlines what this means for the US dollar as well as for gold, and where the best investment opportunities are with respect to the challenge of global warming.