The New York Observer, May 14, 2001
By James Verini
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 sopessimistic.”
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 market).
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 invigorating.
“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 jokes.
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.”