L2 Capital Podcast #02: Chat with Jim Grant - Interest rates and opportunities

L2 Capital

The L2 Capital Podcast focuses on potential opportunities in the market, and brings to you industry leaders and intelligent conversation about their respective areas of expertise.

In this episode, Marcelo speaks to the famous editor and founder of Grant’s Interest Rate Observer, Jim Grant, who has been writing in this publication focused in the Capital Market since 1983 and has also written books, such as The Forgotten Depression.

The conversation starts on the strong numbers coming from the Unites States: unemployment rates, the fiscal stimulus, and also the strong GDP, for instance. Questioned about the prospects on what is probably going to happen in 2019, Jim Grant says he believes the essential narrative today is about the growth of interest rates and its consequences. He talks about what the current FED policies and what they have wrought: great distortions and the pricing of assets.

Looking back on what the FED did in the years of 2007 to 2009, Jim Grant highlights the need to do its best to raise the interest federal fund rates. However, he believes that the USA won't follow Japan's steps. Jim also talks about the anomalous condition in the world of finance: it has rising equity values and very low interest rates. Another issue that he explains is the asset price inflation, considering the fact that a lot of the dollars of federal reserve has been locked up.

Does he see a recession going forward? What would be the impact for emerging markets? Jim Grant explains why there's a tendency for the contraction of credit. After presenting some concerning information, he admits there's more risk than happiness in financial matters - even though he doesn't see a recession coming. Jim Grant also says where we can find yield at the moment, and gives a very specific example that clarifies a lot.

After that, Jim explains about gold and what would make it go up: the loss of confidence in the institution of managed currencies and the federal reserves. He presents some ways of looking at gold market and points out an implicit suggestion for investors. After teaching us all about how things are not as they seem, Jim also talks about uranium and how 2019 will be the year for uranium investors and brings an opportunity he sees in the markets right now based on a question about the risks that we have right now.

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