Mr. Market Miscalculates
The Bubble Years and Beyond
Author: James Grant
ISBN: 978-1-60419-008-3
Why is America in financial crisis today? This book, better than any to date, explains it all-how we got here and where we are going. The how we got here is brilliantly described in a collection of pieces from Grant's Interest Rate Observer, the Wall Street insider's Bible. The where we are going is treated in Jim Grant's up-to-the-minute introduction. No fan of Greenspan or Bernanke, Grant tells the unvarnished truth about America.
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Wall Street newsletters come and go, but Grant’s Interest Rate Observer has gone on and on. It has enlightened, enriched and provoked Wall Street’s most successful investors every two weeks for the past 25 years. Its thousands of readers treasure it not only for its insights and analysis, but also for its clarity and wit.
This special anniversary collection of Grant’s articles traces the tumultuous events of America’s bubble era: from the dot-com boom of the late 1990s to the house-price levitation of the early 2000s to the subsequent worldwide mortgage collapse. The essays contained herein make up no armchair history, but a living record comprised in the heat of events. They chronicle what happened and why—and what, in editor Grant’s best judgment, was likely to happen down the road.
The “Mr. Market” who figures in the title of this volume is the imaginary gentleman who, on account of some untreated mental imbalance, is prepared to buy or sell shares of stock at radically different valuations almost from one phase of the moon to the next. But there is more to the aberrant behavior of the past 10 years than fallible humanity, as these essays so entertainingly show. At fault, too, are the currencies and central banks in which savers and investors so uncritically repose their trust.
In finance, as this Grant’s treasury amply demonstrates, most everything is cyclical. Ideas, securities, markets, and nations have their seasons. But good writing and sound judgment—qualities present here in abundance—never go out of fashion.
Overview
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Foreword
One: Gallery of the Immortals
First There Was J. Pierpont Morgan
Emulate Henry Singleton
Inside Isaac’s Head
At the Bank of Graham and Dodd
Thomson Hankey was Right
Two: On Planet Stock Market
Crisis of the Big Guys
The Economic Consequences of Air Conditioning
Just in Case
Bull-to-Bull
Three: New Eras on Parade
Thank Mother Russia
Real Estate 36,000
Nasdaq’s Peak was Greenspan’s
Meet the New Mary Meeker
Whom Blodget Displaced
Snoopy Deploys Capital
Four: Perils of Tranquility
Parable of Perception
There Ought to be Deflation
Deflation a la Eisenhower
Not Too Big to Hit the Wall
Fill in the Suez Canal
Five: Mr. Market Buys a House
Hock-a-Home
Rope for the Neck of the Homeowner
Meet “Mr. I.O.–P.O.”
For a Considerable Period
Your Home is Your Debt
The 29th Bubble
In Kansas We Busted
House Prices: Prepare for the Impossible
Six : Mortgage Science Projects
Find That Risk
Inside ACE Securities’ HEL Trust, Series 2005–HE5
Age of Aquarius
Inside the Mortgage Machine
Up the Capital Structure
Wheezing CDO Machine
Seven: Mr. Market in the Dock
Carter Glass, R.I.P.
The Miscreants We Deserve
Mr. Market’s Shiner
Houses of Ill Repute
The Peoples’ Wrath—Delayed
Eight: Federalized Interest Rates
Monetary Regime Change
So It’s the Government’s Yield Curve
Mission Creeps
Bonds: The Next Generation
Nine: Bonfire of the Currencies
Paper Tigers
Money Less Bad
Broadside of the Barn
End of the Honor System
Ten: Lenders Don Lampshades
Missing Bankruptcies
Value at Risk
Our Friends, the Creditors
Subprime Companies
Fire the Brainiacs
Eleven: The Fine Art of Security Analysis
Pariahs’ Club
Bearish on Corning
Risk in a Cheap Stock
Glowworm Will—Eventually—Turn
Three Years Later and Still Not Cheap
Bullish on Tata
Swing and a Miss
Postscript: The Close of the Era of Peace and Quiet
Index
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ISBN-13: 9781604190083
Publication date: 12/16/2008
Pages: 430
Product dimensions: 6.10(w) x 9.10(h) x 1.50(d)
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Reviews
“Remarkable prescience—infused with the author’s generous spirit and rich sense of humor.”
—Publishers Weekly
“Jim Grant thinks outside the box—Please read him, listen to him.”
—Nassim Nicholas Taleb (bestselling author of The Black Swan: The Impact of the Highly Improbable)
“In the past quarter century, Grant’s Interest Rate Observer earned and maintained a place on the ‘must read’ list of every serious student of markets.” Jim Grant’s trenchant observations and elegant prose never fail to illuminate and educate. For those without the perseverance to review the superb writing in each issue from the past twenty-five years, Jim Grant offers a greatest-hits collection in Mr. Market Miscalculates.
Read, learn, and enjoy. Happy Silver Anniversary, Grant’s!”
—David F. Swensen (Chief Investment Officer, Yale University)
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“Like many other market participants, we eagerly await each and every release of Grant’s Interest Rate Observer. It provides a uniquely insightful, astute, witty, and penetrating analysis of key economic and financial factors. Indeed, there is only one thing better than receiving our regular edition—and that is having access to this amazing compilation of some of Jim Grant’s very best writing. I am certain that you will come away from reading this anthology with an incredible grasp of the natural forces, policy decisions, and human abuses that have shaped markets in the U.S. and abroad. You will also gain an exceptional perspective for analyzing what lies ahead. Simply put, it’s a must for anyone that seriously seeks to understand the past, dissect the present, and postulate future scenarios.”
—Mohamed El-Erian (author of When Markets Collide: Investment Strategies for the Age of Global Economic Change, co-CEO and co-CIO of PIMCO, and past president of Harvard Management Co.)
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“Collected from speeches and editorials by Grant, the editor of Grant’s Interest Rate Observer, these essays are remarkable for their prescience.”
Publishers Weekly
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“Such proofs of Grant’s foresight—the power of mind over mania—fill his new anthology, Mr. Market Miscalculates, a bracing tonic as US equities suffer what may prove their worst year since 1931.”
James Pressley (Bloomberg.com)
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“Unlike investment banks, credit rating agencies . . . this hedge fund manager obviously did his homework. We can do a little of the same for ourselves in order to come to grips with the financial mess that has resulted by reading James Grant’s new book Mr. Market Miscalculates.”
Kirk W. Tofte | LewRockwell.com (11/17/2008)
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“Throughout the last decade, James Grant has been . . . foretelling disaster. . . . The proof is in his recently published book, Mr. Market Miscalculates: The Bubble Years and Beyond.”
Neil Lyndon | TheFirstPost.co.uk (1/22/2009)
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“Grant’s new book is destined to give experts and neophytes alike an ‘astute, witty and penetrating’ understanding of the tumultuous events of America’s bubble era . . .”
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About the Author
James Grant
James Grant, the founder and editor of Grant’s Interest Rate Observer, was born in 1946, a year of baby-size interest rates. He pursued his undergraduate and graduate studies—at Indiana University and Columbia University, respectively—as the gold-backed dollar gave way to today’s paper model, and he served his journalistic apprenticeship at the Baltimore Sun and Barron’s during the 1970s great inflation. Author of five books (four on finance and financial history, a fifth a biography of John Adams), he is the father of four grown children and lives with his wife in Brooklyn.