That longtime “perma-bear” Jim Grant had turned bull late this summer was one of the year’s big surprises.
He wasn’t early to the rally by any means, but his public conversion didn’t “ring the bell at the top” as some had assumed.
In the latest NYMag, Hugo Lindgren has a nice profile of the newsletter author and economic philosopher. In it Grant reiterates his belief that the economy is basically a bouncing ball, which flies of the cement at roughly the same velocity it hit.
What makes Grant refreshing is his unwillingness to say how the recovery will work. Take, for example, the unemployment situation:
In a worrying climate of dying professions, it’s hard to get a grip on what takes their place. “Though we humans do our best,” he wrote, “we usually underestimate the capacity of market economies to reinvent the nature of work.” How exactly it will work this time, says Grant, we don’t know. We never know until after the fact.
Lindgren also captures another sub-story playing out, which is Grant’s failure to account for the big rally in the 80s, right after the economy was mired in a deep recession.
Over a quarter-century in which the economy mostly boomed, Grant stayed mostly gloomy. His view has been that the economy is a Frankenstein creation of cheap credit that drove up prices and instilled a false sense of prosperous stability.
At critical moments, such as the great collapse of the eighties boom, this analysis proved brave and useful, swelling Grant’s subscriber rolls and turning him into a star of sorts. But it also led to him advising caution and restraint as some of the most vigorous bull markets in history commenced. Indeed, the nineties was not kind to pessimists. “In this business,” he says, “everything is cyclical, including one’s evident IQ. One goes from genius to moron all too quickly. And so I went from being regarded as one of the brighter people on Wall Street to being, let’s see, a perma-bear, and there was truth in that. I wasn’t supple enough, wasn’t flexible enough. I was in love with our story, which had been so successful, and didn’t see the world change.”
Having made this mistake more than once, Grant is determined never to make it again.