Jim Grant, interest rate expert and founder of Grant’s Interest Rate Observer, recently spoke with Marla Bartiromo of Fox Business News about his outlook for markets, interest rates, and Fed Policy. In addition to expressing his usual skepticism about the role and appropriateness of Fed policy, Mr. Grant articulates an increasing concern that market events are poised to get out of the Fed’s control and that the current Fed interest rate hiking cycle is to be short lived.
Mr. Grant notes:
“I think that sometimes we over estimate the extent to which public policy drives events and we under estimate the extent to which events set the agenda for public policy. You know Janet Yellen would have us believe that the Fed controls outcomes… I have lived to see many episodes in the history of the Federal Reserve in which events were driving the Fed and I think that the future will hold more of those. I think that Janet Yellen is not the arbiter of future outcomes… She is going to be the person who is driven by events. She is going to take her cue from events.”
Marla Bartiromo later asks, “So it doesn’t sound like you are buying this whole interest rate increasing cycle that we are about to enter, we believe.” To which Mr. Grant replies, “I think that they will attempt it and I think that they will retreat from it, and I think that in the retreat, the world will reconsider the nature of our monetary affairs and the nature of money itself.”
In terms of his outlook for markets Mr. Grant remarks: “I say that there is more risk than reward in this market and I say that stocks at current levels are worrisomely high, interest rates are absurdly low, and I would say that we are unreasonably complacent with respect to the capacity and the judgement of the Federal Reserve System, and of central banks generally, and I say that now is a great time to not be caught up in the crowd which has to invest as if by compulsion. Never before have we had so many trillions of dollars invested without regard, at any degree, to valuations and price. We calculated like $21 trillion dollars worth… of central bank buying, index buying, ETF buying that is done without a single check on the nature of the value that is being purchased.”
There is much more to the interview so enjoy it below: