Odd Lots Jim Grant Sees an Era of Higher Rates That Could Last For Years
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Jun 5, 2023 Jim Grant, the founder of Grant's Interest Rate Observer, shares his insights on the rising trend of interest rates that he believes could persist for decades. He critiques the Federal Reserve's outdated strategies and the 'buy the dip' mentality among investors. Grant delves into the resilience of the housing market despite high rates, the financialization of companies, and the unique challenges of the corporate bond market. He also highlights how historical events shape current investment behaviors and the ongoing influence of central banks on market dynamics.
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Housing Market Paradox
- Interest rates have risen significantly, yet homebuilders are thriving.
- Homeowners with low mortgage rates are staying put, reducing supply and boosting builders' profits.
Fed's Rusty Tools
- The Fed's inflation-fighting tools are rusty due to years of focusing on a 2% target.
- Their dogmatic models and recent mortgage purchases have contributed to the current inflation.
Fragilities and Vulnerabilities
- Existing house prices have declined, but the anticipated widespread damage hasn't occurred yet.
- Fragilities exist in private equity and private credit due to high leverage.