Comments on: JEREMY GRANTHAM: THIS IS THE LAST HURRAH http://pragcap.com/jeremey-grantham-this-is-the-last-hurrah Sat, 20 Mar 2010 10:10:08 +0000 http://wordpress.org/?v=2.9.2 hourly 1 By: Paul http://pragcap.com/jeremey-grantham-this-is-the-last-hurrah#comment-8290 Paul Sat, 31 Oct 2009 12:15:57 +0000 http://pragcap.com/?p=11599#comment-8290 when you screw up royally, can we abolish you? when you screw up royally, can we abolish you?

]]> By: Ron Sinclair http://pragcap.com/jeremey-grantham-this-is-the-last-hurrah#comment-8204 Ron Sinclair Thu, 29 Oct 2009 16:35:43 +0000 http://pragcap.com/?p=11599#comment-8204 In answer to your request about Jeremy Grantham and timing, see on GMO's website his interview with Steve Forbes titled Grantham's big call. He bailed out of Emerging Markets equities in 2008 at just the right time and saved his clients a ton of money. In answer to your request about Jeremy Grantham and timing, see on GMO’s website his interview with Steve Forbes titled Grantham’s big call. He bailed out of Emerging Markets equities in 2008 at just the right time and saved his clients a ton of money.

]]> By: Rob http://pragcap.com/jeremey-grantham-this-is-the-last-hurrah#comment-8165 Rob Wed, 28 Oct 2009 21:41:49 +0000 http://pragcap.com/?p=11599#comment-8165 Willy2, Grantham is talking about a fair value based on long-term trends. When interest rates and inflation were high from 1973 to 1982 the market traded below its longer-term fair value for years. The market didn't anticipate that there would be years of lower inflation ahead. Also, treasury yields were huge and stocks needed to complete with Treasuries. From about 1985 until October 2008, the S&P500 traded above the long-term trend almost continuously - going into bubblish territory from 1996-mid-2002 and mid-2003 to mid-2008. Unless interest rates skyrocket, it would be very surprising to see the S&P 500 at your fair value estimate of about 600 (P/E of about 11) for any length of time. With interest rates low, what would keep the market from trading above its long-term fair value for some time to come? Willy2,

Grantham is talking about a fair value based on long-term trends. When interest rates and inflation were high from 1973 to 1982 the market traded below its longer-term fair value for years. The market didn’t anticipate that there would be years of lower inflation ahead. Also, treasury yields were huge and stocks needed to complete with Treasuries. From about 1985 until October 2008, the S&P500 traded above the long-term trend almost continuously – going into bubblish territory from 1996-mid-2002 and mid-2003 to mid-2008.

Unless interest rates skyrocket, it would be very surprising to see the S&P 500 at your fair value estimate of about 600 (P/E of about 11) for any length of time. With interest rates low, what would keep the market from trading above its long-term fair value for some time to come?

]]> By: SAM http://pragcap.com/jeremey-grantham-this-is-the-last-hurrah#comment-8094 SAM Wed, 28 Oct 2009 03:21:18 +0000 http://pragcap.com/?p=11599#comment-8094 I disagree about Fisher's track record. He's got a track record you can check in a few places, including on Forbes but also in his 2006 books he prints his long term track record. It easily beats the S&P 500 by a wide spread. I just read a article Steve Forbes wrote about him, and he said Fisher beat the S&P on average by 5% a year since 1997. Fisher missed the bear call in 2008 but has been bullish this year when a lot haven't been (like Grantham), and boy has that turned out to be the right thing to be. I disagree about Fisher’s track record. He’s got a track record you can check in a few places, including on Forbes but also in his 2006 books he prints his long term track record. It easily beats the S&P 500 by a wide spread. I just read a article Steve Forbes wrote about him, and he said Fisher beat the S&P on average by 5% a year since 1997. Fisher missed the bear call in 2008 but has been bullish this year when a lot haven’t been (like Grantham), and boy has that turned out to be the right thing to be.

]]> By: Willy2 http://pragcap.com/jeremey-grantham-this-is-the-last-hurrah#comment-8089 Willy2 Wed, 28 Oct 2009 01:44:56 +0000 http://pragcap.com/?p=11599#comment-8089 "The stock market overvalued by 25%" ???? Overvalued by a "mere" 25% ??? According to my information the overvaluation is some 80 % !!! I repeat, 80% !!! “The stock market overvalued by 25%” ???? Overvalued by a “mere” 25% ??? According to my information the overvaluation is some 80 % !!! I repeat, 80% !!!

]]> By: Rob http://pragcap.com/jeremey-grantham-this-is-the-last-hurrah#comment-8084 Rob Tue, 27 Oct 2009 23:19:24 +0000 http://pragcap.com/?p=11599#comment-8084 How is Grantham on timing? If he was bearish from 2003 to 2007, he was probably underinvested through the whole cyclical bull market. Does anyone know how he was invested during the post tech bust cyclical bull market? Did he further reduce exposure before the end of 2007? He made one large reinvestment in October 2008 which took him "to about halfway between neutral and minimum equities". (Neutral apparently being about 65% equities in most cases.) His piece from March 4 on "Reinvesting When Terrified" is absolutely excellent. His current outlook for 7-year asset class return forecasts has below average real returns for US and foreign equities (an equal mix of US and foreign equities excluding specific high quality issues might deliver about a 3.75% real return which still compares very favorably to bond returns.) Grantham is most bullish on US "high quality" stocks of any asset class. He thinks high quality stocks can exceed the long-term historical real return on US equities of 6.5% over the next 7 years. If interest rates on bonds stay low, what will put downward pressure on equities? The answer: "the gravitational pull as US stocks reach +30%-35% overpricing in the face of an extended difficult environment." When will that happen? His best guess is early in the first few months of 2010. Sometime before the end of next year equities will once again approach fair value or drop below. Nevertheless, Grantham has only pulled back from neutral equity position (at 65%) to 62%. Not very far considering his bearish outlook. He seems to feel the craziness has some room yet to run. Grantham strikes me as equally sensible as Benjamin Graham. How is Grantham on timing? If he was bearish from 2003 to 2007, he was probably underinvested through the whole cyclical bull market. Does anyone know how he was invested during the post tech bust cyclical bull market? Did he further reduce exposure before the end of 2007?

He made one large reinvestment in October 2008 which took him “to about halfway between neutral and minimum equities”. (Neutral apparently being about 65% equities in most cases.) His piece from March 4 on “Reinvesting When Terrified” is absolutely excellent.

His current outlook for 7-year asset class return forecasts has below average real returns for US and foreign equities (an equal mix of US and foreign equities excluding specific high quality issues might deliver about a 3.75% real return which still compares very favorably to bond returns.) Grantham is most bullish on US “high quality” stocks of any asset class. He thinks high quality stocks can exceed the long-term historical real return on US equities of 6.5% over the next 7 years.

If interest rates on bonds stay low, what will put downward pressure on equities?

The answer: “the gravitational pull as US stocks reach +30%-35% overpricing in the face of an extended difficult environment.” When will that happen? His best guess is early in the first few months of 2010. Sometime before the end of next year equities will once again approach fair value or drop below.

Nevertheless, Grantham has only pulled back from neutral equity position (at 65%) to 62%. Not very far considering his bearish outlook. He seems to feel the craziness has some room yet to run.

Grantham strikes me as equally sensible as Benjamin Graham.

]]> By: ChickenLittle http://pragcap.com/jeremey-grantham-this-is-the-last-hurrah#comment-8043 ChickenLittle Tue, 27 Oct 2009 14:35:05 +0000 http://pragcap.com/?p=11599#comment-8043 If you don't want to register, here is the link. http://www.gmo.com/websitecontent/JGLetter_ALL_3Q09.pdf If you don’t want to register, here is the link.

http://www.gmo.com/websitecontent/JGLetter_ALL_3Q09.pdf

]]> By: tradeking13 http://pragcap.com/jeremey-grantham-this-is-the-last-hurrah#comment-8037 tradeking13 Tue, 27 Oct 2009 13:41:05 +0000 http://pragcap.com/?p=11599#comment-8037 Actually, I hope the Fed screws things up royally so we can finally abolish them. Actually, I hope the Fed screws things up royally so we can finally abolish them.

]]> By: Rob http://pragcap.com/jeremey-grantham-this-is-the-last-hurrah#comment-8032 Rob Tue, 27 Oct 2009 12:45:45 +0000 http://pragcap.com/?p=11599#comment-8032 Underweight, not out. Underweight, not out.

]]> By: TPC http://pragcap.com/jeremey-grantham-this-is-the-last-hurrah#comment-7955 TPC Tue, 27 Oct 2009 05:02:08 +0000 http://pragcap.com/?p=11599#comment-7955 Fisher's track record is not good. There are no solid numbers on Saut. Grantham is the only one with a long-term track record. If memory serves me, he remained bearish all through the 03-07 bull only to turn bullish when the market tanked late last year. To his credit, the economy has essentially played out exactly as he thought it would over the last 10 years. He is one of the great investment minds around in my opinion. Fisher’s track record is not good. There are no solid numbers on Saut. Grantham is the only one with a long-term track record. If memory serves me, he remained bearish all through the 03-07 bull only to turn bullish when the market tanked late last year. To his credit, the economy has essentially played out exactly as he thought it would over the last 10 years. He is one of the great investment minds around in my opinion.

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