There is a place where smart bears gather. There is a place
where conservative investors with literature degrees, CNBC-hating index wonks,
articulate doomsday types and students of financial arcana get together to
commiserate and, these days, to lick their chops. It is called the Grant’s Interest Rate Observer Spring
Investment Conference-”Grant’s Conference” for short-and it happens just twice
a year (there is also a fall version). Not because James Grant, the editor of
his eponymously titled newsletter and the dean of market contrarians-and,
arguably, the most readable business journalist around-wouldn’t hold one every
week if he could; but because, as one participant in this year’s conference put
it, “It is something I only want to do once a year.”
Or, as another participant put it: “He’s got a group around
him, and they’re very bright. But they’re so
This year’s conference occupied most of Wednesday, May 2,
and all of the penthouse and ballroom at the St. Regis. It attracted about 150
financial professionals-most of them, it seemed, managers of funds or research
firms who came from across the country (as well as one soft-spoken risk expert
from London who warned of the impending collapse of the international credit
It started at 9 a.m. with a dizzyingly number-laden lecture
entitled “Opportunities in Distress,” and ended, a little after 4 p.m., with
Mr. Grant himself proclaiming to his flock that even with $5 trillion in market
cap vanished, the big Nasdaq bubble had only just begun to burst.
“We will miss this
money, and it will make a dent in consumption patterns,” he said.
He followed the theme of the day, invoking the name of Fed
chairman Alan Greenspan in vain.
“The Fed is doing what it said it would not-easing policy in
the teeth of rising inflation rates,” he said.
And he dissected the American mindset-”We Americans are,
more than anyone else in the world, currency-centric. We have come to believe
that the dollar is the first and last answer to everything”-before advising his
audience to invest in some mining company which even they seemed never to have heard of.
The whole thing was cerebral and scary. But it was also
oddly invigorating, in the way that a cold bucket of water in the face is
“Jim has tried to warn the populace of what ultimately
happens in every major market-valuation discrepancy, which is that it turns into
a Ponzi scheme,” said John Succo, managing director of Alpha Investment
Management, a fund of funds.
“He’s a very deep thinker …. He’s always right, and he’s
always early,” Mr. Succo said. He went on: “There’s a joke that goes around
that everybody loves to read Grant, but nobody has ever made money off him ….
Actually, it’s wrong. There have been many times when, if you followed his
thinking, you could have made a lot of money.”
One participant said Mr. Grant provides an untainted view.
“The conflicts of interest here on Wall Street are myriad and extensive,” the
participant said, “in terms of firms packing research to get people to buy
securities that they’re selling …. And for independent people to write about it
fulfills an important function. That’s what Jim does, and he does it well.”
The rest of the experts at the conference did it well, too,
especially when they put the PowerPoint presentations away.
The funniest and most flamboyant speaker was not Mr. Grant
himself but rather William Fleckenstein, a columnist for Grant’s online edition, who leaped onto the stage after lunch.
Where the lanky, blue-suited Mr. Grant would speak soberly of errors in
“seminal monetary policy” and “shifting consumption patterns,” Mr.
Fleckenstein-who also enjoys the sound of his own name (he runs Fleckenstein
Capital, a hedge fund, in Seattle), sports a mane of graying black hair and
tends in his attire toward grays and blacks-started right in with the Greenspan
In the course of about
two minutes, he referred to “Al-symmetrical Greenspan,” “Al Dot-Com” and “that
quintessential collector of useless data” in charge of the Fed, who “knows the
price of everything and the value of nothing.”
Mr. Fleckenstein, who bears a passing resemblance to Dennis
Miller, took the crowd by storm. To James Grant’s Dr. Jekyll he played Mr.
Hyde, delivering a kind of enraged-socialist rant about a “generation of
stockholders who thinks there’s no connection between a business’ stock price
and its value,” about “wildly overvalued” companies “swimming in excess
inventory” and “over-leveraged consumers” with three S.U.V.’s in the driveway
who “want everything and can really afford nothing.”
Reaching a wild-eyed froth, he promised that the current
market rally is “destined for failure” and proclaimed that, when the dollar
begins to devalue, as it surely will, “the emperor [Greenspan] will be revealed
to be wearing no clothes.” A
horrifying image, indeed.
It was not all true believers. There was, in the back of the
room, one fund manager who was not terribly impressed. “If we were back in
1982,” he mused, “before the bull market started, I think Jim Grant would have
the exact opposite type of conference.”