Mr. Market Miscalculates: The Bubble Years and Beyond
True believers aside, it’s hard to imagine that anyone is an unbridled enthusiast for the machinations of Wall Street over the last decade or so. Yet we find ourselves in an era when the ‘wisdom of crowds’ is trumpeted as being the next great saving insight. (We’ll get to that subject another day. Suffice it to say at this point that I find it a dubious concept at best.) But Wall Street does enshrine one concept that the rest of the business world does not accommodate easily: the contrarian. There lies the paradox of the Street: when the metric is making money the underlying belief system matters not one whit.
Which brings us to Mr. Grant, a contrarian’s contrarian if ever there was one. The publisher of Grant’s Interest Rate Observer, Jim Grant has been watching the markets for decades now and if your accountant can’t find a way to deduct the $850 or so that an annual subscription costs you can probably find this tome in a local library as I did. Yep, at ten years old some of the particulars are dated but as a guide to thinking skeptically about whatever nonsense is being peddled (and bought) the writing is timeless.
The book sitting back on a shelf waiting for another interested reader to check it out I can’t dwell on details. But this was one rewarding read. Since 1999 I have listened to friends who should know better and 20-somethings who thought they’d found a new key to wealth without working tell me about the virtues of buying QQQ at 5K and auction rate securities and the benefits of synthetic derivatives and so on. Most of these propositions struck me as warranting a response along the lines of ‘you can’t be serious.’ Being ever outside the wise crowd can feel awfully lonely.
Then there’s Jim Grant. I get the distinct sense he actually revels in being outside–sometimes way outside–the mainstream. The litany of problems identified years before they ever made the pages of the business press let alone everyday news outlets is staggering. Sub-prime mortgages. CDOs squared. The alchemy of packaging loans of questionable quality into bonds–bonds!–bearing the highest ratings from the purported experts at rating debt securities. It’s all there and more often with a level of explanation that’s yet been found in other media.
Here’s my bottom line: dated Jim Grant beats no Jim Grant. He might not put it this way, but Marvin did: People say believe half of what you see, son, and none of what you hear.