The transcript of Consuelo Mack’s recent interview with erudite, articulate, funny and opinionated Jim Grant has just been published. Click here for the text. This is must-read material.

In case you missed the video clip, click here for the original post.

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Some of Wall Street’s most prominent bears are turning bullish right now. But that doesn’t mean that your small-cap portfolio is safe. Here’s why these brilliant minds think that we’re back on the path to recovery — and why they’re wrong.

I was in Manhattan last week attending Grant’s Fall Investment Conference. The U.N. General Assembly is meeting there, and the streets were blocked off in places. The NYPD was out in full force. I heard one passerby complain about the inconvenience of it all to one police officer. He responded, “Don’t blame the NYPD, blame the General Assembly.”

With the General Assembly in Manhattan and the G-20 in Pittsburgh, government has taken over the headlines this week. It seems half the world is mostly preoccupied with telling the other half what to do. No doubt, bossiness is in a bull market.

At Grant’s conference, I heard presentations on gold, the dollar, oil,

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Risk aversion has re-entered the investment equation with risky assets such as equities and commodities bearing the brunt of the selling orders, while gold bullion, government bonds, the US dollar and the yen are attracting safe-haven money.

The global stock market pullback seems to be gathering momentum with three markets on my radar screen now trading below their 50-day moving averages, indicating a reversal of the secondary trend. These markets are China, Hong Kong and Chile, with most others uncomfortably close to this intermediate support level (see table below). I am of the opinion that more markets will fall below the 50-day lines and that we will at least see some degree of reversion to the key 200-day moving averages (often used to distinguish between primary bull and bear markets). The table provides the key levels, as well as the declines since the recent highs.

Click here

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Despite rising Treasury Note yields, US stock markets yesterday closed at their highest level for 2009. Also, commodities were driven higher by reports indicating that the recession is abating, but the US dollar retreated on concerns of the huge issuance of government bonds.

Elsewhere, Chrysler completed its deal with Fiat, the US Treasury Department announced that ten banks would repay TARP funds, and the Obama administration is dropping its plan to cap salaries at firms receiving bailout funds and has backed away from a large-scale reduction in the number of agencies overseeing financial markets.

Coverage of these events on camera this week included discussions with John Hussman, Chris Whalen, Peter Peterson, Paul Krugman, Mohamed El-Erian, Laszlo Birinyi, Jim Rogers, Jim Grant and Francisco Blanch.

The selection kicks off with the highly regarded John Hussman sharing his wisdom and concludes with an interesting snippet on Africa as an investment destination.

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John Stepek at Money Morning notes that Neils C. Jensen, in The Absolute Return Letter, reports that “using IMF statistics drawn from previous banking crises…the 12 most industrialised countries (including the US, UK and Japan) could need to issue a total of $33 trillion in debt to cover the costs of the crisis. And that’s not even a worst-case scenario – that’s based on the average rise in public debt in the three years following a banking crisis.”

From this, he calculates that $33 trillion is equal to “about a third of total global savings,” which is one hell of a lot of money, which is more than my wife can spend in a whole weekend.

Of course, this brings us to “Why You Should Be Worried About The Bond Market” by Dominic Frisby at Money Week, and instead of going over that old stuff about how bond prices

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By Chris Mayer, editor, Capital and Crisis "What marks our Great Recession for greatness is neither the loss of jobs nor the shrinkage in GDP, but the immensity of the federal response to those afflictions. The scale of the government's intervention is much more than unprecedented. Before 2008, it was unimaginable." - Grant's Interest Rate Observer, April 3, 2009 Earlier this month, I was at Grant's Spring Investment Conference in Manhattan. This is one of the elite investment conferences in the world. It draws a who's who of brilliant investors... people like investment master Jeremy Grantham... real estate legend Sam Zell... and short selling guru Jim Chanos. I try to attend this conference each year. The amount of intellectual "firepower" is just incredible. I met several of my advisory readers there. At our lunch table, the big topic of discussion was the inflation-deflation ...

In a recent post about “bubbly” Treasuries, we got some comments that deserve attention.

First, this is briefly what we said;

“Treasuries have reached bubbly levels, both in terms of low yield and the rate of change of price.

Interest rates will rise when the economy recovers, or when bond buyers demand more long-term interest to absorb trillions of new issues to fund recovery programs. Rising interest rates mean Treasury prices will fall.

… For investors who invest only “long”, closing long positions in long-dated Treasuries, or being alert to a trend reversal necessitating the closing of those positions is recommended.

… For investors who also invest “short”, being alert to a trend reversal creating a shorting opportunity is recommended. The current trend is strongly upward, but could reverse dramatically …”

Some commenters agreed and some did not.

A supportive comment was;

“The safe haven play into Treasuries is demonstrating a true example of a parabolic

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US Treasuries are in a bubble, making them ripe for shorting. But that trade is too obvious, says Justice Litle. And the situation is more complex now that the Fed is getting involved. Bernanke & Co could support T-Bills in the medium term, but that will only increase the odds of an epic decline after.

This from Taipan Daily:

U.S. Treasuries look so lousy here that shorting them has become the “obvious” trade. But there is more to this mystery than meets the eye, as Justice explores…

Jim Grant nailed it in a recent Financial Times piece. Known for their “risk-free return” in more normal times, Grant observes that U.S. Treasuries (or USTs for short) now offer “return-free risk.”

Treasury buyers, in other words, choose to lend to Uncle Sam for free these days… or, worse still, to pay for the privilege. As 2008 draws to a close, USTs are an

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PKey Reports (WSJ):brNo economic events are scheduled for today./P PQuotable brO farewell,brFarewell the neighing steed, and the shrill trump,brThe spirit-stirring drum, th' ear-piercing fife;brThe royal banner, and all quality,brPride, pomp, and circumstance of glorious war!brAnd O you mortal engines, whose rude throatsbrTh' immortal Jove's dread clamors counterfeit,brFarewell! Othello's occupation's gone./P PShakespeare, Othello Act 3, scene 3, 350–357/P PFX Trading – Underestimating the power of deflation is dangerous!brSometimes we are a bit absurd in this morning missive in an attempt to make a point.nbsp; Looking back at a recent issue, from the 2nd of December, titled “Can you say 1% Treasury Bond Yield?” we noticed the 30-year bond futures price has risen a bit since then; yields have fallen.nbsp; Yes, yields have plunged faster than expected—by us, and I imagine by many others. /P PIf you pay some attention to this stuff, barely a day goes by now when you aren’t being told by someone ...

Forget talk of a slump in gold, says Justice Litle. The precious metal is still on a long-term uptrend that started in 2001. And the “reflate at all costs” strategy of the Fed will eventually send gold soaring again as the world wakes up awash with dollars that it doesn’t want.

This from Taipan Daily:

Take a look at this long-term gold futures chart.

Stepping out to a longer-term chart is a bit like seeing the world from a higher altitude. As you head further out, the drama begins to recede. (From a far enough distance, the world is little more than a pale blue dot – as Carl Sagan liked to point out.)

So, too, with gold. There has been a lot of yellow metal angst in light of the recent credit implosion. But if we look back to

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