Episode Overview
Title: A Matter of Perspective
Date: May 17, 2024
Podcast: Grant's Current Yield (Grant’s Interest Rate Observer)
Host: Jim Grant
Guest: Sean Fieler (Investor, advocate for monetary reform)
Co-Host: Evan Lorenz (Deputy Editor)
This episode explores the contrarian world of high finance, focusing on out-of-favor assets and markets, including gold, mining stocks, and overlooked frontier/emerging markets. The conversation, rich in historical context and humor, also draws parallels between the present macro environment and the 1970s, considers political risks, and dissects policy choices impacting investors.
Key Discussion Points & Insights
1. FTX Debt Recovery and Market Sentiment
- The recovery from FTX bankruptcy exceeded all expectations, with claims "recovering more than everything" [01:35].
- Evan Lorenz: “We didn’t exactly expect them to recover everything, but now they're talking about them recovering more than everything.” [01:35]
- Jim Grant: “You can't keep a good asset class down, I always say.” [01:48]
- Reflection on the oddities of market reactions, referencing Coinbase/Robinhood rallying on a Wells notice. [01:51]
2. The Challenge of Contrarian Investing in Gold and Mining
- Sean’s investment approach is intentionally outside the mainstream: obscure frontiers, gold over Bitcoin, and long holding periods.
- Jim Grant: “Sean chooses another way, which is to pick the most obscure countries that you wouldn't want to visit, invest in them and buy gold bullion instead of Bitcoin.” [03:12]
- The struggle for sound money advocates and the endurance required for contrarian investing—mining stocks (GDXJ) are down two-thirds since their 2011 peak, despite “some survivors” figuring out how to make money [05:13-05:50].
- Sean Fieler: “For the last 13 years has really been... certainly a challenging 13 years in the space.” [05:13]
- Investing for long horizons is tough: “Sometimes you have a bad decade.” [06:04–07:18]
3. Frontier/Emerging Markets: Risks and Opportunities
- Fieler details his strategy—resource investing in West Africa and selective corporate holdings (telecom in Ghana, Nigeria’s largest bank).
- Sean Fieler: “If you have all these different perspectives on the same geography ... you really understand the operating environment.” [08:33-09:20]
- Investing only in countries he is willing to visit, though not necessarily as a tourist [09:31].
- Asian emerging markets were generational bargains after their late-’90s crises, but now off-the-radar regions like Georgia, Ghana, and Nigeria offer more value [10:38–12:46].
- Valuations have become "crazy" (extremely cheap) due to issues like currency controls and lack of capital inflows [12:46].
4. Extraordinary Valuations in Forgotten Markets
- Current EM fund PE is below 5, matching bargain levels not seen since Asia's late-’90s crises, but high inflation means PE ratios are less meaningful [13:48].
- Liquidity is thin—fine for funds under ~$700 million but unsuitable for huge asset allocators [14:39].
5. Behavioral Barriers: Why These Opportunities Persist
- Americans have little appetite for investing in unknown companies in untouristed, volatile regions—that's a key part of the opportunity [15:22].
- Overarching theme: successful contrarian investing = “Don’t do what others are doing” [16:19].
6. Monetary Policy, Politics, and Historical Parallels
- Jim and Sean draw comparisons between the 2024 election year and 1972 (Nixon vs. McGovern), noting persistent inflation, political manipulation of oil prices, and potential for post-election inflation acceleration [17:00–20:22].
- Sean Fieler: “They're likely to see higher inflation post election...the Fed and the administration are really playing with fire here.” [18:19-20:22]
- Debate over Treasuries market functioning and Fed interventions, with references to historical “sinking fund” concepts and deep skepticism towards ongoing market manipulation [22:20–23:29].
- Jim Grant: “My approach to the smooth functioning of the Treasury market: it ought not to function smoothly if the supply of securities is greater than the demand ... It ought to sell off... and to send a message to the people who are doing the borrowing.” [23:02]
7. China’s Role: Gold, Capital Flows, and Resource Control
- China is both the world’s largest gold producer and consumer—a “black hole of gold” [24:39].
- Sean advocates a US policy that encourages private gold ownership, paralleling China’s approach [28:17].
- Chinese companies are now starting to buy gold mines in Africa, becoming key drivers in that M&A market.
8. Gold Mining Sector: Valuations and M&A Prospects
- Depressed mining equities may be 8x or more below M&A valuation levels from the last cycle [27:17].
- Sean Fieler: “Now's not the time to sell...it should be worth multiples of where it is today...that's part of the reason to stay invested.” [26:37–28:07]
- US investors' renewed interest in gold miners signals a possible shift after a decade of neglect, but generalists still lack knowledge and FOMO [29:36].
9. US Election, Financial Markets, and Monetary Reform
- Americans have become skeptical that political or bad macro news really impacts financial assets [31:09].
- Fieler expects post-election disruption, especially if Trump wins, potentially leading to volatility in stocks and bonds [32:26].
- Sean Fieler: “It's broken, it's manipulated, it's over-indebted... it's going to be messy... and there are going to be real effects on the stock market and the bond market when we get to that point.” [32:26–33:17]
10. Federal Reserve Independence: Myths vs. Reality
- Discusses presidents historically overstepping Fed independence, emphasizing the inherently political nature of money [34:52–36:58].
- Jim Grant: “Money is inherently political... It's as political as the New York City Council.” [36:58]
- Fieler outlines an ideal conservative monetary policy for Trump—advocating real price stability (0% inflation, not 2%) and attacking the Fed’s credibility only from the high ground [37:53–38:49].
11. Skepticism about Private Equity/Private Credit
- Fieler avoids private equity, focusing instead on inefficiencies in public emerging markets.
- Evan Lorenz critiques the premise of private equity’s supposed operational improvements: “They found that largely they don’t happen.” [41:46]
Notable Quotes & Timestamps
- Jim Grant: “You can't keep a good asset class down, I always say.” [01:48]
- Sean Fieler: “For the last 13 years ... it's been a challenging 13 years in the space.” [05:13]
- Sean Fieler: “Our PE in our EM fund is less than 5 at this point ...as you've had the move into passive money...there hasn't been new capital committed.” [13:48]
- Evan Lorenz: “So reading your letter, you said that some of the emerging markets you're investing in now actually have valuations on par with what you were finding in Asia in '97 and '98.” [13:38]
- Sean Fieler: “Don’t do what others are doing.” [16:19]
- Sean Fieler: “The Fed and the administration are really playing with fire here. And I don't think the stock market has really internalized what that's going to look like if we have this amount of debt to GDP and we have an inflation problem that's persistent that you can't really control.” [18:19-20:22]
- Jim Grant: “Money is inherently political. It's as political as the New York City Council.” [36:58]
- Sean Fieler: “Now's not the time to sell...it should be worth multiples of where it is today.” [26:37]
- Sean Fieler (on Trump/Fed): “He has to do it from the perspective of price stability. ... Price stability is not 2%. ... Price stability is zero.” [37:53–38:24]
- Evan Lorenz: “The pitch of private equity is we will take companies private and ... make the tough choices. ... Bain... found that largely they don't happen.” [41:46]
Timestamps for Major Segments
| Segment | Timestamp | |--------------------------------------------------|------------------| | FTX recovery and market quirks | 00:44–02:17 | | Fieler’s contrarian career and investing style | 03:12–07:18 | | Mining stock bear market & long time horizon | 05:13–07:18 | | Frontier/emerging market investing | 08:33–16:19 | | Theme: “Don’t do what others are doing” | 16:19–17:00 | | 1970s parallels, inflation, and political risk | 17:00–23:29 | | Treasure market interventions & buybacks | 22:20–24:09 | | China’s influence in gold and mining | 24:14–28:07 | | Gold ownership advocacy for US citizens | 28:17–29:36 | | US election, asset markets, and volatility | 31:09–33:17 | | Fed independence, political history, and Trump | 34:52–38:49 | | Private equity/credit skepticism | 40:05–41:52 |
Memorable Moments
- The mining sector’s “serenity and exasperation” [04:36]
- Grant’s metaphor: “looking for a parking spot in NYC—when there’s one, it must be a fire hydrant!” [07:52]
- African stock market trivia: “Ghana’s entire stock market is $1M/day turnover, one stock counts for most of it.” [11:57–12:46]
- Historical deep-dives by Grant on Fed independence: “Great Democrats have run roughshod over this institution” [34:58–36:58]
- Lorenz’s zinger: “Bain... found that (private equity margin improvements) largely don't happen.” [41:46]
Conclusion
This episode is an incisive, witty, and historically-grounded argument for true contrarian investing and macro awareness. Jim Grant and Sean Fieler warn investors not to chase the herd, highlight massive (if risky) value in overlooked international markets and gold, and challenge the conventional narratives about policy and central bank “independence.” The tone is erudite but always tinged with the dry, seasoned humor Grant is famous for—making a complex subject lively and thought-provoking for all.