Jeremy Grantham gave an insightful interview to Fortune magazine, which they have subtitled “Fed bashers have a new hero.” Business Week picked up the story, calling Grantham a “noted gloomster.” This is what passes for analysis in journalism today. Everything is ad hominem and partisan. If you have actually read Grantham’s published research, you know that he is rigorous, objective, and precise. When he says that stocks are overvalued, this is based on solid analysis of corporate earnings – documented elsewhere by his colleague James Montier. Temperamentally, Grantham is bullish on America, but he is not in business to make overpriced investments.
“The only ones who have really benefited from QE are hedge fund managers.” – Jeremy Grantham
A related headline is, “Grantham calls Yellen ignorant.” What he actually said was, “either she is ignorant of the markets, or else she is cynical about manipulating them.” Congress had asked the Fed Chair if markets were overvalued, which is not her area of expertise. The Fed studiously avoids pricing stocks, gold, or Bitcoin. They look instead at employment, yields, and consumer prices. Financial analysts, obviously, feel the Fed should also study the markets.
The New York Times presents this roundup of Fed bashers. The Times is married to Paul Krugman’s idea that printing money somehow helps the common man – dogma long past its sell-by date. Opinions are more varied than the tabloids let on, and the consensus is much as Jeremiah has presented. The Fed was right to step in with the first round of quantitative easing, but now it has gone too far. Easy money has created a variety of perverse incentives and moral hazards.
Speaking of moral hazards, look at the list of Fed critics – Gundlach, Grantham, Einhorn, Hunt, Chanos, Spitznagel, and Druckenmiller. The Times says they’re all wet – and a minority. So, what does the rest of Wall Street have to say? Not a damned thing. They’re taking the money.
See also: Inflation at Tiffany’s