A compilation of articles from Grant's Interest Rate Observer
Demobilizing the reserves
(July 26, 2013) One day soon, banks will have on deposit at the Federal Reserve $2 trillion more than the rules require them to hold, a mountain of excess reserves that could, at the outer limit of what is theoretically possible in money and banking, support $20 trillion of new lending. Now under way is a speculation on the meaning of this imminent fact.
If accountants ruled the world
(June 28, 2013) In the second quarter, the net asset value of the portfolio
that Ben S. Bernanke manages declined by one-third of 1%. In contrast, the net asset value of the portfolio that Bill Gross manages declined by 5.2%. How did the chairman, a non-moneymaker, outperform Gross, a storied moneybags? Especially how did Bernanke achieve this distinction with a portfolio leveraged 63:1? Footnotes to the Fed’s H.4.1 report reveal Bernanke’s secret: the Fed refrains from marking its securities to market.
(May 3, 2013) Before Babcock & Wilcox Co. (BWC on the Big Board) got into the nuclear power business, it was in the coal-fired power business, and before it became the Navy’s virtual nuclear power monopolist, it was outfitting the engine rooms of President Teddy Roosevelt’s Great White Fleet. Now unfolding is a bullish analysis of an underachieving stock.
Shot clock for capitalism
(March 8, 2013) Matthew Klecker, a paid-up subscriber from Chicago, was watching a basketball game when he got the big idea. It came to him in a flash that the Fed’s toy interest rates give economic actors too much time to stall and dither. Zero-percent rates institutionalize delay in everyday business and investment transactions. They lead to postponement of needed adjustments. It’s as if, he said to himself— and subsequently to the editor of Grant’s—that basketball never got the shot clock.
Rain of grain
(March 8, 2013) Do you happen to know when the nation’s farmers planted more acres to corn than the consensus of informed opinion expects them to plant in 2013? The year was 1936.Or when farmland values in the fivestate Seventh Federal Reserve District (the headquarters of which are in Chicago) appreciated as much over a three-year period as they did in the ZIRP-facilitated boom of 2010-12? It was in 1974-76. Now unspooling is the Grant’s farm report. Cropland values, money printing and wheat are on the agenda.
For the unrepressed
(February 22, 2013) David M. Rubenstein, founder and co-CEO of the Carlyle Group, used the occasion of a talk in Miami last week to recall the arcadia of easy money, effortless fund raising and record-breaking deal making that came to a screeching halt in 2007. Why, said Rubenstein, in that culminating year, the fattest of five fat years, global buyout transactions worth $860 billion were signed, sealed and delivered.
In case the music stops
(January 25, 2013) Institutionally sponsored bearbaiting arrived on Wall Street with the Jan. 3 debut of a financial instrument created to punish the short sellers. Deutsche Bank is the promoter of this, the “U.S. Short Squeeze Index.” The investor who owns it gains an economic interest in a rotating group of 25 American-listed companies that people who actually read financial filings have gone to the trouble of betting against. Probably, we think, Deutsche Bank would not be marketing the index (only to professional investors, incidentally) unless its clients asked for it, and its clients wouldn’t have asked unless they were very sure of themselves. Many seem to be.
Ben on a broomstick
(November 30, 2012) On Nov. 15, the editor of Grant’s addressed the Investment Decisions and Behavioral Finance meeting at the Harvard Kennedy School. The text of his remarks follows.
Good evening, Harvard! It is an honor and a pleasure to be with you to explore the connection between witchcraft and superstition, on the one hand, and modern central banking, on the other.
Bullish on the one with the hair
(August 10, 2012) “Charlie,” General Motors CEO Rick Wagoner addressed the talk-show host Charlie Rose on Aug. 18, 2008, the year of the 100th anniversary of GM’s founding, “I think the future’s very bright.” Let us only say that the former GM boss was early. Now unfolding is the bullish case for the company they call—but may not long continue to call—Government Motors.
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contrary-minded journal of the financial markets.