Brendan McDermid/Reuters
- Rock-bottom interest rates led to a historic "everything bubble" in markets, Jim Grant says.
- The easy-money era made the US financial system more fragile, the Wall Street guru says.
- Grant is bearish on stocks, dismissive of crypto, and expects a harsh recession to strike soon.
More than a decade of cheap money inflated a dangerous "everything bubble" in asset prices and weakened the US financial system, paving the way for last year's market slump and a painful recession to come, Jim Grant says.
Grant — the editor of "Grant's Interest Rate Observer" for the past four decades — delivered the grave warning during a recent Rosenberg Research webcast.
He also touted gold as a haven asset, scorned cryptocurrencies, and said he was bearish on stocks at their current lofty valuations.
Here are Grant's 9 best quotes, lightly edited for length and clarity:
1. "Can you imagine having a publication called 'Interest Rate Observer' and having no interest rates to observe, except the derisory ones pitched below zero?" (Grant was joking about the prolonged period of rock-bottom rates before the Fed began hiking last spring).
2. "Inflation is a permanent thing. There is no getting back the purchasing power lost to inflation."
3. "We had a decade in which money grew on trees. It promoted yield overreach and magical thinking, leverage build-up and unicorn breeding and federal debt accretion. All this was in the service of ever-rising asset prices, a great rollicking good time among people who buy and sell things for a living. But it also instituted a deep fragility in the nation's financial structure."
4. "The product of artificially low rates was artificial balance sheets. The product of artificial balance sheets is a new macroeconomic fragility. It would be odd if that fragility did not express itself at some moment in a recession that was surprising by its depth and its virulence."
5. "Everywhere one looks, one sees evidence of the everything bubble. Skeletons, just in time for Halloween." (Grant pointed to regional banking, commercial real estate, private equity, and private credit as "skeletons in the closet" that could run into trouble and rattle markets.)
6. "There ought to be a recession nearer rather than further, because of the preceding everything bubble and all the financial shenanigans that were part and parcel of that."
7. "The stock market is not something that strikes me as especially appealing. I think I've earned the moniker of bear — it's a bed I've made and I'm sleeping in, a little uncomfortably at times. I like to buy things low. I like to have a margin of safety. I don't see a margin of safety much anywhere in the financial markets."
8. "I regard gold not as an inflation hedge so much as an investment in monetary disorder. Not a hedge against it, because we have it."
9. "Crypto's not really a monetary asset. It's a speculation. It's not exactly functional. It's like a credit card but without the airline miles. It seems rather 20th century in its clunkiness. I don't get it – but that's not to say that's the end of the story."