James Grant: A Contrarian at the Helm

This article is from the archive of The New York Sun before the launch of its new website in 2022. The Sun has neither altered nor updated such articles but will seek to correct any errors, mis-categorizations or other problems introduced during transfer.

The New York Sun

Throughout the late ’90s, when it was not fashionable to do so, James Grant, contrarian business journalist and publisher of the newsletter, Grant’s Interest Rate Observer, repeatedly compared dot-com stocks to the often financially troubled air conditioning sector.


Just because a company makes something beneficial to society, he said, doesn’t mean it will make a dime for shareholders.


Though he was finally vindicated by the dot-com crash of 2000, the stress of having the market move up for nearly a decade when he was writing every two weeks that it should drop sharply forced him to conclude that he needed to write about something unrelated to markets. “So I landed on the idea of writing a biography of John Adams, since if I had to be giving up nights and weekends for something, better it should be something I could master,” he said.


The book, “John Adams: Party of One,” is due out from Farrar, Straus and Giroux in February.


Along with celebrating the publication of his new book, Mr. Grant also recently marked his 21st anniversary at the helm of his twice-monthly financial markets newsletter.


The New York Sun spent an hour with the lanky Mr. Grant at his 2 Wall Street office, as he reflected on entering his third decade of investigating the little-known and the overlooked in the capital markets.


Mr. Grant said he founded Grant’s Interest Rate Observer in 1983 because he didn’t want to get “a real job as a reporter” after he left Barron’s. Mr. Grant said he left the publication, which he had joined in 1975 from The Baltimore Sun, after he got “On the wrong side of one of those intense internal squabbles that are usually seen in college English departments.”


With his savings from the Dow Jones corporate profit-sharing plan as seed capital, he became a publisher in November 1984. Before describing the process of going into business for one self, he told the Sun he had two goals in mind: to retain the voice and style he had been allowed to develop at Barron’s, and to get very rich. “I had a spreadsheet that told me that if I retained about 90% of my Barron’s readers and added a certain amount of new readers, I would have so much money that I might have tax problems.”


Mr. Grant soon discovered that while he certainly had financial problems, they were not due to a surplus of revenues.


“The profit-sharing money went after nine months and I learned to distrust spreadsheet projections,” he said. Right before the bank account went to zero,Mr. Grant managed to get an investor interested in keeping the office lights on and the presses rolling. Though he declined to name the investor, he said the investor has kept his investment for 21 years.


Grant’s Interest Rate Observer has a cult-like following among many of its 3,800 readers, most of whom are money managers who value in-depth analysis. Which is good, since Mr. Grant and his pair of assistants appear to view research as something of an Olympic sport.


The June 4 issue is a case in point: Eight of the issue’s 12 pages are dedicated to an analysis of the direction of the bond market. Moreover, the sources cited include a doctor friend of Mr. Grant’s, various Federal Reserve governors and officials, a pair of economic historians, Senator Lieberman, a Democrat of Connecticut, and, of course, a report on inflation from the Bank of International Settlements.


A Grant’s reader of 20 years, New York-based money manager Mike Harkins, said he reads the newsletter religiously because it is “Startlingly well written. I have to read volumes of badly written stuff daily, most of whose authors have tried mightily to have no opinion.” He considers Mr. Grant one of the great stylists to have ever written for the financial press, citing as his favorite Grant turn of phrase a July 2003 assessment of the bond market, which was then offering the lowest yields in over 40 years: “The bond market offers a broad variety of return free risk.”


Mr. Harkins said another distinguishing feature of Grant’s is its accuracy. “If he says it, you don’t worry about its accuracy. If Grant’s gets it wrong, they’ll do everything to correct it in the next issue.” Moreover, he said that Mr. Grant’s love of writing about the details of capital flows and asset valuations shows through, especially in comparison to the work of other financial journalists – “If you read the New York Times or other publications, you sometimes get the feeling the business reporters are not interested in what they are reporting about.”


With respect to spotting trends in the capital markets, Mr. Grant describes what he does in stark terms: “We go through smart phases and we go through stupid phases.” He said that the constant skepticism he expressed about the junk bond issuance explosion through the 1980s was “a smart phase.” So was being among the first writers to spot the balance-sheet crisis among money-center banks – such as Citicorp, which was addled with bad international and real-estate loans and whose stock was trading at $10.


This was immediately followed by what he called “A sustained and brutal onset of ‘a stupid phase’ that lasted much of the ’90s.”


By “stupid,” Mr. Grant refers to his record of printed befuddlement at the raging bull markets of the 1990s.


For the near future, Mr. Grant said he has “seven years left on a 10-year lease” and isn’t planning on doing anything other than publishing his newsletter.


He deemed both real estate and the value of the dollar as worthy targets of continuing investigation; the greenback particularly in that, “Eventually, the economic laws governing our trade deficit will kick in and it should go down.” He paused for a second, thinking back to the stock bubbles of the 1990s, and added, “Or not.”


The New York Sun

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