We Study Billionaires - The Investor’s Podcast Network - RWH012: Fear the Fed w/ Jim Grant

Episode Date: August 21, 2022

IN THIS EPISODE, YOU’LL LEARN: 18:35 - How the Great Inflation of 1965-81 shaped Jim Grant’s views on our current predicament. 25:31 - How history shows us that human behavior around money has never really changed.  30:50 - Why it’s futile to forecast interest rates, but wise to know what’s happened in the past. 42:53 - How the Federal Reserve sparked rampant inflation, why it’s scary, & how to deal with it. 55:16 - How central bankers illustrate the perils of overconfidence & the need for humility. 1:03:20 - How the Fed could wreck the U.S. economy while attempting to tame inflation.  1:07:01 - What investment opportunities Jim sees in this high-risk economic environment. 1:10:43 - Why he’s bearish on bonds as a 40-year cycle of falling interest rates comes to an end. 1:19:40 - Why Jim likes gold, not Bitcoin, as a protection against financial chaos & monetary folly. 1:35:07 - Why he adamantly refuses to invest in China. 1:28:47 - What Jim thinks of great investors like Seth Klarman, Paul Tudor Jones, & Bill Miller. 1:36:14 - How to handle the emotional challenge of investing when the stock market is tumbling. 1:40:57 - What we can learn from Bernard Baruch, one of the best investors of the 20th century. 1:44:22 - What you can learn from a classic investment book about the secret of “dying rich.” 1:53:10 - What Jim regards as “the most precious commodity” in life. *Disclaimer: Slight timestamp discrepancies may occur due to podcast platform differences. BOOKS AND RESOURCES Join the exclusive TIP Mastermind Community to engage in meaningful stock investing discussions with Stig, Clay, and the other community members. Jim Grant’s website for Grant’s Interest Rate Observer. Subscribe to Almost Daily Grant’s, a free (almost) daily commentary on financial markets. Grant’s Current Yield Podcast, which is co-hosted by Jim & his colleague Evan Lorenz. Jim’s annual investment conference in New York City. Jim’s book Bernard M. Baruch: The Adventures of a Wall Street Legend. Jim’s book Bagehot: The Life and Times of the Greatest Victorian. Jim’s investment recommendation, Palm Valley Capital Value Fund. William Green interviews Bill Miller about Bitcoin on the “Richer, Wiser, Happier” podcast. William Green’s book, “Richer, Wiser, Happier” – read the reviews of this book. William Green’s Twitter. NEW TO THE SHOW? Check out our We Study Billionaires Starter Packs. Browse through all our episodes (complete with transcripts) here. Try our tool for picking stock winners and managing our portfolios: TIP Finance Tool. Enjoy exclusive perks from our favorite Apps and Services. Stay up-to-date on financial markets and investing strategies through our daily newsletter, We Study Markets. Learn how to better start, manage, and grow your business with the best business podcasts.  SPONSORS Support our free podcast by supporting our sponsors: Bluehost Fintool PrizePicks Vanta Onramp SimpleMining Fundrise TurboTax Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Learn more about your ad choices. Visit megaphone.fm/adchoices Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm

You're listening to TIP. Hi there. My guest today is Jim Grant, who founded an investment publication called Grant's Interest Rate Observer back in 1983. Jim has been the editor for nearly 40 years now. A subscription costs more than $1,400 a year, so it's not exactly cheap, but it's widely regarded as required reading for the world's most successful investors. In fact, when institutional investor magazine wrote a long profile of Jim a couple of years ago, it described him as a Wall Street cult hero. One reason for Jim's cult status is that he's a superb economic historian, and he draws on this deep knowledge of the past to shed light on what's likely to happen in the

future. He's made a lot of famously prescient calls over the years. For example, at the height of the dot-com bubble back in 1999, he declared that it was one of the most perilous junctures in investment history and warned that America was dangling by a thread, financially speaking. A year later, the bubble burst, the NASDAQ index collapsed and plunged almost 77%. Then in the years before the global financial crisis struck in 2007, Jim was one of the very first people to warn about the toxic mortgage securities that ultimately led to the meltdown of the global economy. More recently, Jim's been warning for several years that the Federal Reserve has been engaging in a reckless monetary experiment that was very likely to trigger rampant inflation.

Unfortunately, it turns out that he was right once again. Inflation recently hit its highest levels in more than four decades. As you'll hear, Jim's disdain for the Federal Reserve runs deep. He recently described the Fed as the most dangerous financial institution on the face of the earth. In this conversation, we talk about the treacherous situation that investors now face, with a worrying combination of runaway inflation, slow economic growth, and historically high asset prices. Jim explains how hard it will be for the Fed to get inflation under control without wrecking the economy. He also explains why he's bearish about bonds, why he likes gold, and

why he dislikes Bitcoin, and also why he adamantly refuses to invest in China. He also talks about some great investors like Seth Claremont, Paul Tudor Jones, Bill Miller, and a legend named Bernard Baruch. For me, this conversation was an absolute delight. Jim is one of those rare people who's not only incredibly knowledgeable and articulate and thought-provoking, but also extremely funny. I hope you enjoy our conversation as much as I did. Thanks so much for joining us. You're listening to The Richer, Wiser, Happier Podcast, where your host, William Green, interviews the world's greatest investors and explores how to win in markets and life. 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. Well, it is lovely to be here, William. 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, you were poised to become a French horn star. and were going off to college in Ithka. And then something changed rather dramatically. Can you talk about those early years, if possible? Yes, my father was a Juilliard-trained tippinist.

He played in the kettle drums in the Pittsburgh Symphony. My mother played this. And then 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 Prane was the great reigning virtuosa, he was a Brit. And I resolved to become Dennis Spring.

And also the first base was from Brooklyn Dodgers, and a dairy farmer and a naval officer. And succeeded at actually none of those things. The highest rating I attained in the Navy was Gunners, made third class. But I devoted many hours a day to practice two or three and was quite serious. And for the French horn players listening, William, I am. There are so many of them, Jim. That's one of our biggest demographics, I think. I attempted the Strauss second concerto, not the first nine, but the second. And rather, I butchered it. And but, but, but, but, but, but, but, but, but, but, but. But, but, but, but, but, but. But, but, but, but. But, but, but, but. But, but. But, but, but, but, but, but. But, but, but. But,

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, 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' activity and four years' reserve duty. So I wanted something evidently at the age of 17 and had nothing to do with. the horn or even with women. And that something was, I guess, adventure and patriotism. I would say,

I admired my father as World War II. So he was a naval officer 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 served for a couple of years. and Gunners made a boy of the USS Hornet, which was an aircraft carrier. And this is during the Vietnam War, right? So you were, am I right in thinking that you were off the coast of Vietnam? For a time, yeah. Yes, we were.

I mean, I know 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 a boarding school kind of throwing darts at a friend of mine, you know, pouring milk on this carpet that was said to be waterproof to see if I could make a swimming pool. You know, so I wasn't doing anything very heroic at all. So I wanted to get a sense of what you were, what you were doing. Well, we were, our ship was an anti-submarine carrier. We specialized in helicopters and in fixed-wing aircrafts that would pursue and sink Soviet subs. So the enemy was not actually,

the Soviet Union, although at one remove it 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. So 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. Once we encountered a Soviet freighter off the coast of high fong, and we 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 was 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. And three of your comrades, if I remember right here, as Gunnersmates went back for something like four years on Swift boats to get shot at, and you didn't, right? You decided you had enough. I did not.

I wanted to go to college. But Gunners' mates, Fond Essen and Wicks and Simpson, three wonderful characters, re-enlisted for four years for the privilege mine, the privilege serving on Swift boats and indeed getting shot at and shooting. And full of admiration for them. Yeah. So, you know, I lost touch with open years as one does. And I attempted to get back in touch with them on the occasion of an exhibit. the New York Historical Society was putting on about the Vietnam War.

And wouldn't you know it, two of the, I couldn't come up with Wix's forwarding address, but two of the three friends I had had just died prior to this thing. He's kind of sad. One of them, one of them, Dale E. Simpson, gutters made third class, was in fact a storybook 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. She was overstayed liberty in the Philippines and got a, and came aboard late and was

deathly hung over and watched with 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. And I remember you saying he spent something like two weeks in, you know, in the equivalent of solitary confinement being punished by the Marines. One time he was, he really, as they say, missed movement, which used to be a capital offense in wartime, but no longer. So what happened?

So he was flown aboard the ship, which is kind of a cool thing. He landed in a plane aboard the carrier and got a, kind of a, not a hero's welcome by everyone, kind of a villain's welcome from the authorities. And it was given what was called captain's mask, masque, with mass, which is a form of judicial inquiry and sentenced to like two or three weeks or a month of the break. And he was the best and toughest, toughest prisoner that the Marines ever had. So he was our John McCain. That's great.

He was our John McCain. So, Jim, how did that period of early service in your, your life actually either shape you in terms of your values and your character or just reflect your values and character, which seem to have been adopted to some degree from your father, who you obviously respected. I think both. It's certainly, yeah. So I got out after two years and I, you know, 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 gift of study and solitude, even though on an aircraft carrier you can never be alone, really. So the privileges and the gifts of 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 it 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. 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. You must have had like an Edward Gibbon experience, right? Unsupervised. Yeah. And I'd been at boarding school where you have. had total supervision and no freedom at all. And then suddenly I was, and brilliant teaching. And then suddenly I was at Oxford and had the freedom to wake up at 11.

So I think I went to something like one lecture in three years, although I did read an enormous amount. So it was, 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. Very formative thing. I got a job on Wall Street. And I got to 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 heard. $175 a week.

Fabulous. However, I was the, by far the loeliest employee in this room of what we call institutional salesmen, people, stockbrokers for banks and insurance companies. They all ordered $100,000 a year, which was not such a small sum today, but a quite magnificent one in 1967. So I could almost smell the money. I decided I liked it. and I liked the markets.

And so by that time, I had resolved from return to college. I went to Indiana, which was a mecca of kind of a state conservatory. It was a very good school, especially for foreign players. Oh, as I drove back from the west coast, to the east coast, upon my discharge from Navy at Long Beach, California, I stopped by India and I announced to one of the Virtuoso. one of the virtual scene, I said, I have been accepted as a horn player. And he said, oh, really? I never have been. And that was such a deflating little. 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 McDonald's chapter. 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 unsolubrious 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? Well, 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 sub-specialty 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 might be living. is by recalling episodes that people have put out of mind. There's a professor named Scott Gordon who taught a history, history of economic thought, which I just loved. And there were others as well who introduced me some of these ideas. So did you come out of that experience with abiding principles

from, say, the Austrian economists, the kind of defined... Not then. 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 monitorism. Bill & Friedman was one of the demigods, certainly Keynes was in the forefront. And I've come to see that clay feet of both economists and both set of action. but the convictions that I have since adopted concerning free markets and the

Austrian approach we can talk about what that actually is. That came a little bit later. So then you got a job. I think your first real job in journalism was at the Baltimore Sun on the financial desk. Yes. And then went to- No, it was covering police and fires and writing obituary. Yeah. That was the-

But then you got demoted to cover the financial. financial world? Right. Well, it was the least, by far the least prestigious post in the paper, there was a certain amount of kind of a fake, daring do about covering crime. Although, you know, you've heard, I'm sure you've listened to about a show called The Wire. Yeah, yeah. I was at high school with Dom West who played McNulty.

He was a close friend of mine back in those days. Wow. Yeah. Well, 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. Were you walking along the mean streets wearing your bow tie, Jim, back in those days? I was thinking, what a peaceful city.

So I watched this. 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 of it was such a surprise. I should not have been quite so surprised as a police reporter or something. Anyway, so an opening came up in the finance department, and I was the Warren Buffett of the newsroom, having spent eight full months at one stretch, and not to mention some of vacations working on Wall Street. And 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. 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. Nope, we didn't do it. And then this will pass. And then, you know, actually before very many years had gone by William McChesney Martin, who was then the chairman of the great rhetorical foe of inflation, to give these speeches, condemning it and vowing to slay as like a beast. But towards the end of 1967 in close confines of the meeting of the Federal Open Market Committee said the horse of inflation is out of the barn. So he was not ready to give up. He said most we can do is to make sure this steed does not gallop wait too far too fast.

So then ensued year upon year of deteriorating performance. purchasing power of the dollar, of rising interest rates, of contracting what we call valuations for stocks, and you mean the price you pay in relation to what the company can earn. It's a valuation. And we express this as a ratio of stock price to profits, go a price earnings ratio. 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 with profit.

And that was the story of this great inflation. There are, of course, ends 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 is seated. Now, nothing says that today is going to repeat the experience of yesterday year. In fact, rather the odds are against that, just simply because history is never so helpful as to repeat itself literally, otherwise imagine how rich the historians would be. You know, they say, and what they say is true, that one's first experience in markets and with money is deeply form and imprints itself on you. And the best investors are nimblest and most successful are ones who can put that formative experience aside, or at least put it in the perspective and not imagine that they must repeat the experiences of their youth and their middle years.

And perhaps that experience was too deeply imprinted on your, or allowed it to be too deeply imprinted. But I have, I guess, have seen inflation under rather too many bedposts, under too many mattresses of the years have gone by. But you were right in the end. And so we'll come back to that at great length later. But let's not forget to come back. 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. Oh, it was. You know, the smaller the financial stakes, the more intense, the domestic politics. You can see it in college and English departments. And my mentor at Barons was a wonderful guy named Robert M. Plyberg. Robert M. Bliberg was a. was an infantryman during the World War II served and was moved at Okinawa, serving the Philippines in Okinawan.

People who had experience were forever pissed off at some level. And Robert M. B. Leibern combined a patrician, the tritians modulated speaking voice with a wonderful, rich vocabulary in cities. And he would come storm into the office and say it, and this mildness and say, tell them, you know, the corporate chiefings, to get us the things we need, pennywise, pound foolish bastards. So he'd get away with cliches and away with obscenity. And it was wonderful to listen to him.

He'd be enunciated. He's like a stage actor. So he was, he was a died in the world. free markets guy. 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 absorb much of that from him.

I also, is the fellow who wears bone ties and the way he doesn't have to. I went to the public library in the weekends, and I read bound volumes in the economists featuring the works of Walter Badgett, a famed Victorian author of Lombard Street. book we can talk about if you can decide that's relevant

and also wonderful leading articles as you Brits say and the economist and I would actually count his words to get a sense of this. I could tell his style and style was marvelous but he was invariably had the money market comment

in the economist and he wrote under of course the regime of the gold standard he wrote in 1860s 1870s and it wasn't exactly a through him entirely, nor through Blyberg entirely, nor through my readings entirely. I think it must have been a character, you know, trade or flaw or whatever. I have a lifelong abiding fascination with gold and the gold standard.

I admire his simplicity and elegance, his efficacy. And so all this, all these ideas and these what we call them today, influencers, combined to lead being in the somewhat eccentric financial direction I have taken. I say somewhat of eccentric. I should say it's very eccentric. 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 your...

Oh, there's all the time in the world, William. There is. I was reading your Bernard Baruch book, which will... talk about later, which is a wonderful book. But if there's one enduring lesson from Badgett that's stuck with you from studying this guy who you regard us, 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? 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 call it, reaching for yield, some of a hygienic frame. It doesn't do it justice. What it means is scrounging around. And the worst of the leftover remains of the investment markets for things that return and do something on your capital and taking inordinate risk to do so. So Badgett taught this lesson. He said, John Bull alluding to the national symbol of Rink. John Bull can stand anything, said that you can't stand 2%, meaning that if you impose an interest rate as low as 2%, 2%, my goodness, it seemed at times in recent years rather lofty.

But if you oppose as low 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 they'll lose it. So they'll take risk. So that's one abiding lesson. So that's hugely relevant, as we'll come through later, to the last 12 years, this experiment since the 2008-2009 crisis. You know, one gets a sense, not just in reading Badget, but in reading financial history,

that yes, human beings change, certainly technology changes, but 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. Yeah, that was a nice say of 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 grants interest rate of but I'm aware that it has to be grants interest. I'm so sorry, and I mispronounce your name as well at the start. So grants. So you quit, I think, was something like $75,000 from your profit sharing plan at Dow Jones. 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? I was thinking bankruptcy. Patricia, my wife and I were first movers in the automated spreadsheet called Lotus 1, 2, 3, the biotechnophilia ended about 1983 the year began. And we were capable of generating the most plausibly bullish projections by putting in what turned out to be the most... impossible assumptions that we assume I don't.

My readership and Barrens was the next 150,000. So I figured if only half of them subscribed, half subscribed, that you would have major tax problems before the year. Yeah. So we did not have, we had no tax problems, but we did have a revenue problem. And the revenue problem persist. I don't think I took a salary until like 1980s. or something.

So it was, 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 the Lehman Brothers, which so long ago was,

if the Lehman Brothers was still solid. Yeah. And it paid her a good salary as an investment banker. So she supported all of us. And grants came into its own or began to come into its own. And then once it came into its own, she became a neurologist, right? Which is an extraordinary transformation.

She went to medical school. We had to, he had, it was the only four, it seemed like 40 kids, but she did it. And she, she graduated from the Albert Einstein School of Medicine at the age of 49 plus. Wow. The second oldest in her class, she would have us, no, not the oldest. I was very excited to have dinner with you and Patricia, your wife, a couple of months ago. I was happy to meet you. And then I left thinking, God, she's formidable.

I should have a different podcast where I interview Patricia. She's a remarkable person. But one of the things that struck me is 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 profit. 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 grants 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 Well, from put it, unfathomable. Well, it's a closed book, isn't it? And one can pretend. And at intervals over the course of 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 a bouts of delusion. So strong can one's conviction become about a certain stock or bond or market that one, heals to an unbecoming and certainly mostly unprofitable dogmatism.

But just as you say, William, Marcus are about the future, and if you can't know the future, you must continue something to the difficult, but necessary job of imagining it, right? It dogmatized 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't investigate the alternative. As 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 say, well, no, the test does not look very good. So that's disturbing. And what do we do about that? He said, well, you know, we really can tell very much. We can kind of handicap the odds a little bit. You know, thanks. But that's kind of Wall Street, too, right? We can't know the future, but we can't handicap the odds based upon some knowledge of the past.

Again, not a dogmatic rendering or overlay of the past in the future. I use this word dogmatize a lot because I hear people, especially the ones who are not 75 and a half, say things as if they knew them when you know, I see myself in a lot of this and I hear people say, here's the ways 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, you know, we'll know more next year. Let's take a quick break and hear from today's sponsors. All right. I want you guys to imagine spending three days in Oslo at the height of the summer. You got long days of daylight incredible food, floating saunas on the Oslo Fjord, and every conversation you have is with people

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All right, back to the show. 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 grants 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 instead of seeing what was wrong with the housing market and actually got praised in the movie The Big Short as the guy. Wasn't that sweet? 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 know, 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 would directionally correct with all of these things, but the,

but the actually timing them in a way that makes it actionable is excruciatingly difficult. All of 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 being, by having such a tactile sense about the ebbs and flows of cycles and about the interior of the market's mind, you're kind of reading the psychology, the marketplace, and, you know, great traders, John Paul Tudor Jones, Stan Druck in the which name only to have this capacity in that. So I, 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 depth 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. He used to father was a high school-educated autodidact who became the dean of music at Penn State College, as he was then known. But he went on margin in 19.

I'm sure he got exactly the top on margin in 1929 and lost everything. My father had nothing to do with stocks. Everything reminds him in 1920. I know I didn't imbibe that directly, but I have, I think, inherited a sense. sense of deep appreciation of the downside. That's 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, You know, people like Dan Gertner, who kind of decoded the horrifically complex mortgage derivatives that we were able to explain to people. But, you know, also we asserted in 1996 or something that stocks were over the value. My God, they had not begun to paraphrase the Federal Reserve today. They had not begun to think about becoming over that in 1996. the elapsed time between having declared stocks overvalue in 1996 and the top in 2000, that was about 50 years of psychological time and coming to terms with all that.

So I've one that's confronted with the old medical school gag that Patricia had related to me that everything you learn here. Now of all the things you learn here, half is going to be wrong. What we don't know is which half, right? everything you think about markets, half of what you think of this is going to be wrong. We don't know which have, 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 unfalatable future.

That's what we do for living sometimes more successfully than others. 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. You can relapse into the native tongue. Grant's interest rate observer. That sounds much better. 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, 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 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? Yes, inevitably, it's not so very helpful train of thought introduced into an investment periodical. I think Keynes says something to the effect that if you say something is going to happen in our lifetime, say, you know, thanks. But we don't like Keynes. 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 the way. of the Great Recession, central banks of the world, led by New American Federal Research, decided to stimulate that means that word, to stimulate business activity through suppressing interest rates,

thereby tending to raise up the prices of stocks, bonds, 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 a rather fancier name. This was the portfolio balanced channel theory of the best. Christ's sake, what are you saying? You're saying we're going to lead some other nose into the stock market, which they did.

So that happened in a quantifiable way. So the inquiry part had to do with the mind of the market, the expectations of the market, and what came to be absorbed, what people came to believe. is the Fed would be there for them. The Fed wanted things to go up, that the Fed would make us rich, and that if, if perchance, if by accident through some cyclical hiccup,

the market pulled back, the Fed would make it go back up again. Okay, so this takes to say, let's think it's 2020. Well, fast forward 2020. And the pandemic comes the falling off of the cliff in March. And what does the Fed do? But Fed,

never mind the kitchen sink. The furnace, the plumbing, the furniture, everything in that house got tossed at the problem. So to go into the active voice and passive voice, the Fed took charge of making sure that this pandemic did not lead to depression. And what followed 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 showing growth year over the year in excess of 20 percent, never foreseen. It's a short period. Interest rates collapsed. The specular of fervor that all of this critical.

It was lifting. Stocks, bonds, real, everything, cryptos, NFTs, everything that wasn't nailed down. Nothing was nailed down. It's a massive levitation from everything bubble, some of us called it. And what also occurred was an undesired inflation on Main Street itself.

The cash rate is the checkout. So the Fed never minded inflation at the corner of Broad and Wall Street's 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 mainstreams, right?

That wrecks wages, that wrecks budgets, that distorts the values that gets elected officials defeated at the polls. That's that kind of inflation they don't like. But we got that too. So now, here we are. With inflation rampant, it's not an exaggeration. Stock price is still elevated by historical lights. Bond, interest rates, bond yields are still very low by historical record.

So what does the Fed do? Well, it's rather than a quandary. And that's where we stand today. So I remember you warning on your Grant's current yield podcast, which is terrific, which I really encourage people to listen to that. Well, that's high praise. No, it's really good. 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? Like, 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, worth meddling or actually dangerous to meddle?

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 where this 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 opposed one is the discovery of interest is the product of decisions taken by people who have no idea what their counterparties are doing, but they're all trying to maximize their own welfare in the world. They all go to work in the morning, wanting to do better. They make decisions. So the conflation of these myriad 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. We call it, we call us a grant. We call the current standard, we call it PhD standard, it's distinct from the gold standard or other standards of yesterday. And, you know, ages ago in 1930s, I guess. Not so ages ago, but a while ago. It was an economist named, I think Henry Simon's 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 has become. It has to know what the Fed is doing. The Fed has become ubiquitous, as handsy as some politicians we know. It has become like the referee in a football game or a soccer game. games or cricket or baseball. A proper game, cricket. So when you get to know the name of the umpire or the referee,

you know that umpire or referee is not doing a job. That doing is her job. That person is supposed to be invisible. The game is a 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, it was a 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. So now we've explained to some degree the cause is 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 kind of like to ask it, why is inflation so fearsome? Why is this thing that we've kind of forgotten this looming loophness?

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? Well, Nessie, I think, might not exist. I don't know for sure. But inflation was consigned to the status of Nessing by a generation of economists who, like preceding generations of economists in 1960s, believes that they had found the philosopher's stone. And they, through. their dexterous manipulation of this and that level of policy could forestall and neeliorate, as I said it in case it. 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 simply ask the following question, the answer was 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 regulation? When it materializes money as it has never materialized those dollar bills before, and as it borrows and spends in space 18 months, as it has never burned before, what is life would be the outcome? and the schoolboy of your was like, yeah, inflation.

Notice that no one said, of course inflation. There's a baseball story having a guy say, 1968, Bob Gibson was the reigning pitcher of baseball, imperious, logistic, and dominating and domineering figures Bob Gibson, Sam Lewis Gardens. And he played with an infield named Ducky Schofield. Ducky was very good.

in the field, not much of a batsman. Batsman, that's a great turn. 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. And he says, Ducky, what did you expect? So similarly, today, with inflation, You know, what did they expect? Well, what they did not expect was the obvious. We met with pieces together by all of us. But the fact that it was not obvious speaks to muscle memory. It speaks to the conceit of the economic forecasting for China.

And it speaks simply to, I guess, to the foibles of human perception. I mean, this is a really important point just to 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-de-do-do. I want to digress. So years ago, there was a bunch of medical science got together to examine somebody. A cadaver discovered in a melting ice in Italian Alps. This thing was called the Iceman, right?

So the greatest heart specialists and physiognit. I mean, anatomists, people with a scientific interest in the human form, came to the relevant hospital in Italy to examine this icemic, right? And they spent weeks going over with the advanced tools that are 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 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 if the scientists who missed this were not, they didn't have financial, they weren't leveraged in the market betting on some outcome, right? They didn't have an option position open. They had no financial interest in the outcome. They were studying this and is disinterested academically if they missed it. So we wound up saying grass class. So how is it with people through force of financial interest, client interest,

how any of us solve it, given all of the impediments to clear perception in finance? So that's why things appear on. gets 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? 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 that possibly prematurely. Yes. Yeah, absolutely. That seems to me a really profoundly important lesson for any investor, just to be aware of the fact that if people are 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? But there's an extreme in this direction as well. And the extreme is something called the efficient market's hypothesis, which is a thing. It has held widely in academia. And what it holds is that prices at any given moment in stocks, bonds, are just where they should be. Because information is instantly absorbed and processed through the human brain and through algorithm that bot, and like so, don't try to out, guess the market, just take pretense it. So no, because that fails to recognize the capacity of humans for crowd behavior and for

a mass hypnosis under the spell of the Federal Reserve. So it's a lot more interesting than the efficient market's hypothesis, right? So that's what lends the steel and the poetry into this line of work. Yeah, you like me. You must know, but you can't know. Yeah, and I think both. If you follow. 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. But, you know, I've just, I wrote to revise the preface for the next edition of security analysis, Seth Farmer and I 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 have been great, how little they yield to an investor

over the past dozen years. Because Benjamin Care was all about a margin of safety. But when markets are levitated, as they did in the late 90s, for example, or in Japan from the 80s into into 1990. A 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. Yeah, I think it depends how seriously you take the question of survival.

Yes, exactly. So, right, right. And also, how long is your investment horizon? If you're starting after you're 22 years old, got your first job, you can actually afford to pay no attention to the cyclical fluctuations because you're all the time in the world for things you recover and for compound interest to work, it's magic. You know, that's fine. But if you are even a little bit older, it pays to work. Oh, okay, so I can help your, I can help this one thing at least on this lovely podcast.

That is a book suggestion. And the author is Fred Schwed Jr. S-HW. G. Schwed. and the book is, where are the customer's yachts? It came out in 1940, and Fred Schwedd says at one point. He's heading in this chapter is a little wonderful advice.

And he says, here's how you can have pleasure of dying rich. He says, what you want to do is when everyone is selling stocks, you buy. Now, you won't get the bottom, and they'll go lower, pay no attention. and then wait, and they 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 have pleasure of dying rich. And the charming story, and there's a lot of very helpful human truths in this book, but that is about the least possible thing to do for the average human beings,

because we're all carried away by glue at the bottom and by euphoria at the top. We're just perversely wired. It's just the devil himself wired his for finance. Yeah, absolutely. 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 very much. 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. At three at most. 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. the end. Well, one of the great Austrian thinkers of yesterday, a blue fake Von Mises, sounds like he had to be conducting the anti-philharmonic. But Von Mises was a great economist as you're, 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 your car. And then to fix the problem, the driver backs up and runs over you in reverse. So what the Fed does in the language of economics is to pursue a course of demand destruction, proverbially and trivially inflation. It's too much money chasing too few goods, too much demand in relation to supply. So demand destruction is a thing, right? So you want people to spend less, to want less, or if people want it, but they have to give them less money to do it. How do you that? Well, you wreck the economy. So you raise, you. the rate of interest.

And 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 with the margin, but not so much as to sink us as a society into a slump. 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 Yankee Get Tablecloth. from under a set table of China, glassware, and porcel. Now, if you go on WikiHow to investigate how to do this,

WikiHal will advise, always try it with plastic cutlery in cups. But notice the Fed has not got that option because the table is set proverbially and metaphorically is set with most brittle glassware. the most precious porcelain and bull market champagne fruits because of the 12 years of suppressed interest rates, which have fostered risk-taking, which have brought forth into the world. All these companies, because some are called unicorns because they come to market worth a billion dollars and generate not much earnings. So the world is full of uneconomic, economic projects fostered through financial stimulus.

It's principally low interest rates, right? So what happens when you raise the rate of interest on companies that need to borrow to stay alive? Well, they can't stay alive. So they're cascading failures and companies that supply those uneconomic things. Think of the craft beer makers that sold beer to rework in the day, right? So there's a whole chain of economic activity that goes to support uneconomic activity. So that is the, that's the metaphor for the Yankee the tablecloths. It's not plastic cup, not plastic cups in the table.

This is glassware. And the glassware has made all the more brittle through the feds earlier stimulus. So we're sort of flying blind here. Yes. Is your bet that the U.S. economy can escape a recession, or is your bet that it's going to get pretty ugly? Well, I mean, I know that. But, William, here we come face to face with personality and character and vested interest, right? So what would be better for grants that calling another disaster?

I can imagine the motion pictures. I can imagine a parade is probably true. Well, I could imagine our circulation going up a lot. The big short part two. Right. So here's what. So without obsessing on interior dialogue, and motivation, what I try to do is to reserve mine share, mind space for the not impossibility,

not impossible outcome, things work out. The United States economy is something that is demonstrating the greatest resiliency over the years. I mean, I think one here is rather too much about American Americans, not singularity, but exceptionalism. So America is exception on many ways. Certainly, its economic history is exceptional. So there's a can-do spirit here. There's a spirit of enterprise that not even the Fed can extinguish

through its malogeoid policy maneuvers, or President Biden extinguished through the elections in the pulpit. So, yeah, it's possible that through luck and maybe the Fed's learned some. But I think that, so the question then becomes, where do the risks lie and where the opportunities lie? Given that the outcome is indeterminate, are you being paid well to think one thing that is possible, indeed, probably, is are there bargains in other words? Are there bargains that people are neglecting because they more or so single-minded and focused on something? 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 is Evan Lorenz. He's the deputy editor of grants and he does fabulous work and analyzing the digital stock. So we had been very bearish on Facebook, and the courage we came out. And Evans did this fine work, and he says that Facebook is now a 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 are to pay attention because it is now a value in the label and stuff.

It's a margin of safety. So there are these opportunities cropping up. The risk is, and I see this a lot in people who manage this called value portfolios, is that the cheap stocks do go down with the 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 the bond market. Although if there's a recession, bonds will go up and price and down, you know, 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've 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 an institution, you must protect yourself against rather than to trust in. In that case, This is something I've been expecting for as long as I've been alive off. And that case, it's going to be very well. Let's unpack some of this in a bit more detail so that we can give our listeners a bit of a kind of practical sense of what most likely they should avoid and where they should kind of 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. that, for example, I remember Jack Bogle once telling me, you know, you could just make a one, a single decision of having a balanced fund that had, you know, 60, 70 percent stocks, 80 percent stocks or whatever, depending on your age and then 20, 30, 40 percent 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? Yeah, a bond is a promise to pay money. And the best thing that happens to you with the bond is you get your money back with interest. That's the upside. And Ben Graham writing about bonds reminded us, reminds us readers, that a bond is not going to triple because management's chance on us a wonderful intention. As the upside is limited, so are there risks great? So bond selection is one of exclusion rather than selection.

You approach it with the idea of avoiding risk. So what about Treasury securities? They're characterized as super safe in the Wall Street Journal. They have anchored most retirement portfolios for most of the past four decades. Well, how do we analyze this? one way of looking at it is to observe that over the course of 150 years of financial 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, 14 years, and so on,

starting from the late 19th century to the present. They have fallen for 40 years since 1981. one. Now, it might be that cycle has broken. I have been a little too eager to declare the end of that cycle. And in my newly found humility on that point, I will not now say, at least not out loud, I might think it, that the bond market still might prefer to going down motion time. But if indeed the cycle has ended and rates you're 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. And so the 60, 40, or the 70, 30 portfolio is not the thing for you.

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 office. And what that's something might be is kind of in the room 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 the cash for all the damage that inflation does the cash. But the cash is going to be the thing rather than longer-dated bonds. So one would have a 60, 40, or a 70-30 portfolio, but the 30 or the 40-percent portion would be in a near-cash thing,

maybe a one-year treasury bill, for example, or a short-dated municipal bond fund, rather than 20 or 30-year securities yielded more. You sacrifice some yield for the protection against capital loss that is in parcel of the longer-dated security. Let's take a quick break and hear from today's sponsors. No, it's not your imagination. Risk and regulation are ramping up, and customers now expect proof of security just to do business.

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be found in the income fund fund's prospectus at fundrise.com slash income. This is a paid advertisement. All right, back to the show. 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 Grants Interest Rate Observer, where you were talking about, I'm getting the hang of saying grants 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. 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 who has a terrific name, he's called Doherty Twit on Twitter, this gentleman named Bob Doherty 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 Jim make the argument that gold could be part of the solution? And then someone called Dr. Hugh Axton, 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? It's like it's come from me rather like a difficult child,

always make excuses. First of all, it is true that gold has disappointed. It's many fans. actually not some, but those fans that has disappointed. It has not twigged on to the fact that the competition it faces from interest rates. It's a very meager competition because, after all, with a 9% inflation rate, we're still losing basively on a bond that yields three or four percent. 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. the loss of price. Back in the early 80s, bond would down 15% in a year. And that's fine, because the coupon was 15%. You could absorb the loss. Okay, so the interest competition against

gold, a non-interest pay asset, is slight to meager. Yet, gold has retreated in the face of just the Fed's promise to raise interest rates. So it betrays, the gold market betrays, a 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 explain it. Maybe it's, you know, I can recite reasons why gold hasn't done well and I will.

For example, the dollar is the world's 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 to the European Central Bank at one half of 1% below zero. That's in the face of raging inflation in the continent of Europe. And we look at Japan, another major currency, the dollar competes against, Bank of Japan has chosen to suppress its arms 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 yet exchange rate. Okay, so.

So you're saying it's basically three gangs that can't shoot straight, sort of firing, firing. But one at least possesses a weapon. Yeah. That's one reason. And I think also gold is up against, it's very tangibility. One of the oddities of 2021, apart from limitation of Bitcoin was a millennial obsession. It was a very brief, live thing, but tungsten cute, you read this? Tongston.

I loaded up on them, Jim. It became a thing. And I was thinking to myself, huh, if you wanted to buy a bunch of. monetary metal. Why don't you try one that is actually money? Yeah, weren't these just, they were pictures of tungsten or something? Like, I don't know. I feel like 140 years old when I read that. It's very heavy. It has certain metallurgical properties. Anyway, so I think that the world is whatever he has turned its back on gold. So the question for the house is

that's the past, that is indeed the present, is the future, shine any brighter. And And 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 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 is itself. It's value in itself. The trouble is people want to see the value yet, but I think they will now. Gold stocks are even worse than gold. never have they been, I think, I'm saying, have they been cheaper in relation to the price of the medal?

Because people don't believe the central banks can really come a cropper. Now, I've seen, so old a lot, I have seen central banks become completely marginalized and discredited in 1970s, to Arthur Burns and Gene William Miller, and indeed before them, under William McKesson. Paul Walker himself was discredited as an assistant secretary of the treasury before he became the dean. city of modern central banking. So my bet on goal is that it was 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. And in practical terms, I remember reading the 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? What were your threshold question? If you are two threshold questions, 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 in paper form or the things that you can possess? So I've chosen to own Krugaran's one-ounce coins and they are available from, you know. From under Jim's bed. We can, in the show notes, I'll be.

Those aren't for sale. I'll be publishing Jim's address in the show notes so you can go visit his Krugerrand stash. What do they call that when the Supreme Court judge gets, it's, anyway. Yeah. So really, that's a better bet to own Krugman's. Well, it seems to me that if you want protection against bad things happening in the world of finance, especially 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 what's the physical thing? Okay.

So what about, but mining shares offer a value proposition there, deeply decounted, widely, not so much unlike as ignore. So there's, I own something, for example, called the spry. gold mining trust, I guess. Anyway, John Hathaway, this guy used to be called the Tocqueville gold fund, but now it's called Sprott, S-P-R-O-T-T-T. And he's smart. He's someone you would trust in this area. He's a very good gold site manager. So that's one, this one. So that's gold. I said, so this, you know my reasoning for it. You know some of the ways to look at playing. There are all sorts of alternatives to John's fond of all sorts of options of alternatives to owning individual crew rats for those in some ways to approach it.

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. And I'm guessing that you just see crypto, 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 cryptocurrency is. Do you give it any credence as a hedge against reckless monetary policies? Nope.

Why? So first of all, let me give props to the people who did see this for the thing, capital. It has become unminded. I remind myself of Lloyd Blancfein, the chairman of Goldman Sachs in the day. Lloyd Blankfein was asked about gold in, say, 2011. It was like $1,900 an ounce. They said, what do I know? I was bearers 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? something like. Is it something you can transact with? Well, it's awfully clunking for that. Is it store of value? Well, I don't know. The drawdowns 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. 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 a mortgage in Bitcoin, I think. So I think that, and so if you're really as zealous on Bitcoin, what we're saying is the world of technological innovation will never create something better. 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 Palm Pilot of cryptocurrencies? I used to work with a software program, a word processing program called Multimates. Oh, I love Multimates. Never mind that I actually lost a book chapter once. I'm multiple. It just vaporized. I loved it.

Money of people cleaned of Bitcoin. Down from $60,000 to $19,000? I said, oh, I still love it. But I think that Bitcoin is false. Also, Bitcoin used to be the thing you say if you wanted to buy, I don't know, a container full of surface-to-air business. You go to the dark web and you use Bitcoin, right? It's perfect for it.

But now Bitcoin wants to become respectable. You're like you, like me. So Bitcoin is now being regulated. Now it's, oh, this leverage. Ah, the snake in the garden of the media credit has now entered the world of cryptocurrencies. I know this because of the serial bankruptcies, its hedge funds, and the lending platforms. So the thing that the inventor of Bitcoin, why does you 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 necessitutes of the world of credit. And believe me, nothing more given to the vicissitudes in the world of borrowing and lending. 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 grants, you were saying they're underfollowed and conservatively capitalized. I think that there are a lot of good things happening in Japan at the company level.

I think the guidance, the monetary policy is a, is a, his obsessive focus on raising the rate of interest is doing enormous damage to the Japanese credit market.

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, they're being tarred with Ukrainian war,

or Russian Ukraine or and that are selling at really fetching multiples. I don't want to name them because I own a lot of them. I'll tell you about that some of the people might take a shine to. There's a tiny mutual fund that is

interested only in owning value-laden stocks. It's called the Palm Valley Capital Fund. And people who founded 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 I'm going to do. We're going to wait until we see things, stocks that are absolutely cheap, then we'll buy them.

We're not going to keep up with the Joneses. And I found what they did. I dare say they have our grant story up on their website. I bet they'd be foolish not to. I think the world of the two of them and Eric's. Sinabon is one of them and Jamie Wiggins. But I think the world of them, they discipline, their adherence to the doctrines, 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 sentence. And the dust will be dust. There will be dust. What about China, Jim? I read a lovely line from grants a while back where you talked about the West's financial love interest being China, despite, as you put it, such so-called warts as autocracy, tyranny, the official persecution of minority peoples, the subjugation of formerly free Hong Kong, threats against Taiwan, and the creepy omnipresence of the Chinese Communist Party. And 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. I'm a seller at zero. Now, China is the worst. I mean, and China is getting its comeuppance there as we speak. There is a spreading nationwide strike against paying one's mortgage interest going to the failed promises of Sunday real estate developers. China is the most leverage, 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 mass killer, you don't want to own that country.

So this is a country with Mao on the currency. What are they, they're telling you something. Just don't do it. It's like, you know, Bob Gibson, what do you expect? You lost all your money in China? Yeah. What are you expecting? God, I can't stand that place.

I'm glad I asked. So in terms of your own investments, over the years, you've known so many remarkable investors. I know that Paul Isaacs, who I interviewed for my book, but I didn't write about who's brilliant, is an old and close friend of yours. Seth Klaman, obviously, you've been close to for many years and has written for Grant's Interest Rate Observer. Jim Cheneos, the famous short seller, has been a great source and friend. And I think your daughter went to work for him as an analyst at one point. And so I'm wondering over the years, given that you're sort of the insider's insider, whether you ended up investing with some of these remarkable people,

yourself? Yes, my family has a fair amount of money with Paul Isaac, who has been having a very rough time. He's been buying the aforementioned financial stocks. Some of the Europe are selling at less than two times earnings. I mean, everyone is afraid that, oh, they're afraid of the gas getting turned off. They're afraid of inflation that they're spreading, that the European Central Bank seems to be very comfortable with. So, you know, his view, my view, is that these things will pass. You know, I think the underlying idea is that value outs, value comes out in the end, is a trial while waiting for that to happen.

But we wait. 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 kind of 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 it's down 40% for the year. And I look at it and I'm like, wow. And I'm kind of fine because I don't have any serious debt or anything like that.

And I knew that it would be volatile. And it was giving up some of the great returns. But it's still kind of painful. I tell you what, are you one of these people that gets tested every week for COVID? No, I just sit around in my study and read. Right. Well, see, you can open the envelope and look, you don't have to. Yeah.

So one approach is to pay less attention. Now, that is exactly sticking one's head in the stand. That is literally sticking one's head in the stand. Now, that is an appropriate, I think, strategy. You're 23, I'm gathering, looking at your picture. Yeah, just based on my physique and my handsomeness and my. beautiful skin. Yeah, you've got it, Tim. So as one ages, one must pay closer attention and watch for drawdowns as we kind of clinically call losing money. What to say? I think one

ought never to be fully invested. There's a lump of cash for the sake of opportunism, for the sake of what you can't see, but can't even imagine, but will come new ways. Opportunities come in all sorts of guises. And one of the age-old guises of opportunity is disaster. So how to cope. I think this is where financial history comes in, just knowing that this two shall pass, but knowing also that if you'll watch out, a lot of things do go to zero and stay there. You can't, you can't, you can't, I'm afraid someone who's coming across is most unhelpful.

People who have really, you know, gotten stuck, cannot get unstuck by following the wise words of Bernard and Baruch to himself in the year 1930. You know, they become humbler as the market goes your way. Oh, thank you a lot. Thank you a lot. That's not now. Please, please tell me that later, you know. So 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?

And she said, well, don't have done that. Right. Yeah. Let's talk more about Bernard and Baruch, because I 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. And as you were mentioning, he wrote this memo to himself in, I think, 1930. Yeah, he wrote for himself, right.

And it's an amazing thing. I mean, can you first introduce us a little bit to who Bernard Baruch was? 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, who've been going through difficult times lately? His dates were 1870 to 1965. He was born in the post-Civil War South to a former Confederate jet surgeon.

He grew up in very, very straightened circumstances. He moved to New York. His family was very close. He was well-educated at New York City public schools, went to Wall Street. And by the time he was 30, he was a millionaire. Now, that was when a millionaire was something. Yeah. And he did it in about three years, right?

It was something like 1897 to 1900. He went from nothing to a million dollars. Some of these details were a little bit foggy. I wrote this about four years ago. But Rook was, began as a trainer in public securities. But he made his big money later on in what we would now call private equity. He became a principal, a rather reluctant principle, and something called the Texas Gulf Sulfur Company.

So he, at the top, you might have a better recollection of this than I do. I have a footnote. I remember this footnote. At the top of 1929, he was worth, what, $30 million or something? Yeah. He was an old-fashioned millionaire. Gold was $20. And 67 cents an ounce.

He was worth $30 million, let us call it, of that kind of dollar. He was a fabulously wealthy guy for his age. So he was a political figure. He was a speculator and then he became respectable and then a banker, but he was doing the same thing all the time. He had a saying he said that the speculator is someone who looks out into the future. I want to know the future. He can't, but you can judge life agreements. All right.

So he goes into the crash, owning a lot of securities. And contrary to the myths surrounding his reputation, he was not in cash, having expected the crash. He was rather a new era bull who did not expect who was perfectly willing to admit the things look topping 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 in a very meaningful recovery in the stock market. It said spring of 1930, the market came back. A lot of people were, ah, it's over. But Brooke was not so sure. He was very defensive.

And it was at that time he wrote this memo to himself. It was, again, forgive me, I forgot some, but it was like a personal equipment. Yeah. I mean, I have it here, Jim. And I mean, as I said to you before we talked, I said, those two pages are worth the price of entry for the entire book. They're pretty amazing. And there's one thing, I mean, it's, yeah, personal equipment. And it's all his advice to himself.

So, for example, yeah, he's talking about prudence and he says, be pliable or you won't be prudent. And he puts this in italics, as 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 in your opinions, stubbornness as to opinions, cockiness must be entirely eliminated. And then he says, later on, he talks about the unforeseen. And he says, always make allowances for, always make allowances for chance or chance, as you would say. Keep a financial and mental and physical reserve. And 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 at it 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 then basically ends up with $25 million or so in his personal fortune, which, as you say, was real money back then. Well, it's quite an inspiring story, I think. You know, one word on this, a word on the word stubborn. It's kind of a cliche on Wall Street that you are stubborn if wrong, but you exhibit conviction and character if you are proven right. So Seth Claremont and Paul Isaac alike are examples of value investors who are quite comfortable in the skin of their own analysis.

In the company, the company is earning $4 a share. It's priced at $40. So it's 10 times those earnings. Price is 10 times earnings. And then the Fed clears its throat and says it might tighten the stock price is now 36. Well, it's not as good as 40, but this is still ordering four dollars a share. And now the Fed says something else, when the economy gets a little rough patch, and the price is now suffering, not 36, but 28. And now it's earning $3.5 and not $4, but the ratio is a much cheaper.

So do you sell? Because 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. So these are, these are, this is the eternal tension, right? 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, but that's nothing compared to controlling one's own perceptions and emotions. Jack Vogel and I work, I count him a friend, not just a Wall Street

acquaintance. And he was kind enough to speak several times, but we have a conference once in a year now. Jack spoke once. And this was about 2000, and I think it was memory certain switch, she had so infrequently does. It was 2009, 2009, 2010. The crash, the crisis was fresh in memory. And Jack confessed that, yeah, he felt just the way everybody else did. You know the world was ending. Yeah, yeah, it was ending. And so, but it doesn't end, does it? Not yet. One, right.

So they say. But I don't know. I like to see them go down and I like to see them. I 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 rooting interest.

Yeah. And you, there were a couple of, there were a couple of 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. And so 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. So you talk actually about the opposite characteristic, which is saying a successful stock trader. It's a battle of cliches, isn't it? One of the great bomb moe of the

turn of the 20th century in Wall Street was so-and-so some great speculator was all nerve and no nerve that's kind of descriptive of a certain kind of personality Steve Cohen for example

the guy the hedge fuck guy from the Mets I see that as kind of an all-nerve and no nerve in what sense 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 kind of a tactile sense that something's wrong. And just for no evident reason, change your mind. That's all nerve. And no nerve in the sense of being impervious to the crowd, of standing aloof from the crowd and its emotions and its stampede. That's no nerve. 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've called seemingly heretical ideas. Well, some of the people who, some of the people who made money at Bitcoin were those who had no conviction, all about its utility. It was, you know, you hear these evangelists now. some of whom had public companies who say that the world will never be the same. It's changed everything. And the people who perhaps make more money and say, yeah, it's a trade. Bill Miller came on the podcast recently, and I've been interviewing Bill basically for 22 years pretty consistently.

And Bill is just one of the great sort of agnostics in life. and he just said, he was talking about Buffett Amunger 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. Yeah, well, all right. I thought it was interesting, though. That's Bill. I say that with half respect and half and half, all respect, but a little bit of exasperation.

I think that's too cynical. Yeah. No, investing is not about lights on a Bloomberg scheme. investing is about the allocation of capital. It's cosmic sense. It's macro. Investing is about the proper allocation of funds into productive enterprise that society needs to grow and prosper. All right. So when the central banks are directing investments in manipulation of the most important price of capital, the interest rates, that money gets misdirected. And Bill Miller is fine in buying these. Did Bill Miller ever get long electric truck manufacturers on

might have. There were lights that were probably lighting and flickering at them. He got long Bitcoin. It was a flickering light. I think it's more than that. I think that's way too cynical. Interesting. I guess what struck me is just there are different ways to climb the mountain. Yes. Oh, yes. There are all sorts of different ways to make money. But I'm saying that to completely separate earning power and financial stability from money making, I think, that leads you into the newest fan, the hottest manager, the most speculative names, and the deepest remorse. But I think one thing I like about Bill that I think is very similar to you, actually,

is that kind of philosophical open-mindedness, that ability to say, well, what is this thing? And I don't think I've ever met an investor who's more open-minded. You look, I'm convinced for those who are listening to the podcast, let me be recorded, that there was a pregnant silence. I don't understand Bill's approach. I do understand and comprehend and admire his success. Yeah. So, Jim, one of the things, as we begin to draw this to a close,

since I don't want to try your patience excessively. It's too late for that. Sorry about that. Yeah, we're about an hour beyond that point. In your preface to the Bernard Baruch book, you mentioned in passing that the most precious commodity is time. And I wondered 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? well, what I got right in life is the former Patricia what I got life we got life and right what I got right in life is the former Patricia Kavanaugh. So as to time and its uses, looking back on it,

I mentioned in the beginning, I spent hours practicing Mozart, Ricard Strausser, orn, playing arpeggios and scales and A-toons. And that was an isolation in a room, practice room. And then my life has been typing in a room. And I guess I have chosen that because that's who I am, 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 it's room, assuming we all get another shot, right? I want you the kind of guy who not only enjoys having written, but guy who enjoys writing. That's going to save me an awful lot of aggravation. I'm so glad to hear that, Jim, because when I read your writing, and I'm not trying to butt you up, you're a really wonderful writer, and several times this week, I would be on a call to my mother in London, for example, and I would read her something that you wrote.

And the other day I had John Gertner, who's a wonderful writer over, and I read him something you'd written. I'm just like, this guy just can really write. And so when I read your, you're a really wonderful writer. And when I read your stuff, there's a sense of kind 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. And so I was kind of wondering whether you reach that stage where it seems casual and

easy because you've just written so much, you've done so many drafts, or whether actually there is a kind of delight for you in playing with the language. I love a language and new language, I was saying. I am currently working out a book about Edmund Burke and Charles James Fox, and I am immersed in the 18th century oratory. And it charms me no way. I think I've probably some shrink was say I take refuge in the past, but I love John Adams

in my biographical sentence for the reason of his rhetoric. So I love the language. I hate my first drafts. The second drafts are scarcely more presentable. I keep going until they appear spontaneous. So in a certain sense, it's kind of the Temkin village.

But every accomplishment, every well-accomplished things appear is effortless, right? A double play in baseball or an aria opera song by somebody who needs. devoted his or her lifetime in the practice room. You know, all this appears effortless.

So if it appears effortless, that's good. That means that the sweat has been worth it. So I assure you, right? No effortlessness. That's heartening because I mean, there's a part of me. I spent five years working on my book and I saw you spent four years working on your great Bernard Baruch book. And there's a part of me that's like, God, do I, how soon can I climb that?

mountain again. It's really painful. And so hearing that it's been a struggle for you is kind of hot thing. Oh, man, you're kidding. I do this also. It's part time for me. I have this is my life's work is grants and a T. Shreid Observer. And that's the most important thing I do professionally. But a close second of the books I work. I spend, you know, nights weekends in the 4th of July at Ben Burke and Charles James Fox. So it is at the age of, let us call it 76. I find that it becomes rather a lot. However, the simple joy of my avocations is enough to carry me to the such pleasure out of reading with these greats have written and seeing the societies at work and trying to decode them. It's such a privilege to have the time, should have that time, just as you say, or just according to time in time is,

I think Samuel Johnson saying reputation is the one thing that no man can give to himself and I would say the time is something else that is not for sale. Can't buy reputation nor can you buy the heartbeats. So as life goes on, you've become to covet those heartbeats and husband them and expend them

in ways that rather be more careful than than them were in a fellow throwing them around since they were confetti. They're not. And is there a, 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, is there some common denominator, some, some theme where you look back and you're like, that, that's kind of what I hope my legacy is, like maybe, is there something? Well, you know, I will say this. We have been right and we have been wrong, but we have

always been literate. And I think you should apologize. I apologize forever reverting to baseball analogies. I do love the sport. But one of the players of the mess, Keith Hernandez, recently had the honor of his number being retired. I'm not sure if they had this in English football or cricket, but nobody will ever be whatever Keith's number was, Keith Hernandez's number was 17 maybe or I don't. And in tribute to him, one of the sports writers said that he never threw away in a bash.

Never just went through the motions. And I can say that every single line of France was the best I could write at the time. Some of them I looked back on it. Some of them were stilted, I think. Some of them are not, I would have, I always went over relaying something. But nothing was ever tossed up in the wall hoping would stick. That's good. That's a lovely and for me, inspiring note on which to end as a fellow struggler on the writing mountain to use a...

Don't you despair, William, and the 16th draft is going to come out just the way you want it. All right. Jim, thank you so much. This has been an absolute delight, and I... I hope the microphone's wrong, because I couldn't do this again. I hope so, and I really admire your work greatly and all of the wisdom and you shared of the years. and whether right or wrong, it's always been a delight to read and also to listen to you. So this has just been a total treat for me. So thank you. All right. Thank you so much. All right, folks, thanks so much for joining us for this conversation.

If you'd like to learn more from 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, 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 grants. I'll include links to these and various other resources in the show notes for this episode. 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. 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 a wordsmith. He's really pretty remarkable. 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 Doherty, a listener who lives in California. So, Bob, I'll be sending you a copy of the book very shortly, I hope. Feel free to follow me on Twitter at William Green 72, 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 Rousseau, 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 Schiller, who's also the author of a blockbuster bestseller called Irrational Exuberance. Until then, take care.

Thanks so much for listening. Thank you for listening to TIP. Make sure to subscribe to we study billionaires by the Investors Podcast Network. Every Wednesday, we teach you about Bitcoin and every Saturday we study billionaires and the financial markets. To access to you, 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 Investors Podcast Network. Written permission must be granted before syndication or rebroadcasting.