Grant isn’t so sure. He offered that the globalization of the labor market is a waning force, and that technology might not be a controlling force.
“And I think the astounding complacency toward, or indifference of, the evident excesses in our monetary and fiscal affairs … I think the lack of concern about those things is perhaps the most striking inflationary augur I know of,” he said.
So, where to invest if Grant is right and the Fed's attempt to tame inflation is akin to it trying to catch a tiger by the tail? He said that Treasury Inflation-Protected Securities, or TIPS, aren’t necessarily an obvious choice.
“They’re indexed to [the Consumer Price Index], but the government calculates CPI,” he said. “And TIPS are denominated in dollars. So you’re long the dollar and long to the federal approach to calculating inflation, which puts some limitations on your protection from TIPS.”
Given Grant’s predilection for gold (he’s an advocate of the yellow metal and says it’s in his personal portfolio), and given that the webcast was co-sponsored by the World Gold Council, it’s no surprise that he suggested gold as an investment option for the current times.
“Gold, to my mind, is not exactly an inflation hedge or a deflation hedge,” he explained. “To me, gold isn’t a hedge against monetary disorder. It’s an investment in monetary disorder, which is what we have. We have floating-rate currencies. We have manipulated exchange rates. We have manipulated interest rates.
“When the cycle turns, people will want gold and silver, and they will want something tangible,” he continued. “Gold now competes not only with fiat currencies and credit, but it now competes with bitcoin and the promise of decentralized ledger. When people take the measure of the Fed and its shortcomings and frailties, and they take the measure of alternatives available for a store of value, they’ll rediscover the value of our sponsor—Au,” he said with a chuckle, referring to the chemical symbol of gold.
And while Grant is circumspect about the high valuations of equities in general, he highlighted a sector he believes is undervalued.
“One of the things that’s fairly cheap in the market is gold mining equities,” he said. "Gold has been marginalized by the cryptos and people’s residual strong faith in the central banks. Rarely has the spread between the bullion price and the index level of gold mining equities been wider. And rarely has the so-called all-in costs of gold mining been as advantageously low as it is now in relation to the cost of bullion.”
As a habitual market contrarian, Grant has an aura of being a grouch, albeit one who delivers his opinions with a dry sense of humor. But grouchy contrarians can be a needed counterbalance during frothy, exuberant periods like today. At the very least, his jeremiads about the Fed, inflation and overinflated markets are fodder for thought.