In a recent Barron’s article, Boston-based asset management firm GMO’s co-founder Jeremy Grantham sets the record straight after what he calls “a few misquotes and misunderstandings by journalists.” The journalists, writes Grantham, implied that he believes high share prices are here to stay and that “regression to the mean has ended. This is, of course,” he asserts, “inaccurate, as readers of my quarterly letters know.” Grantham emphasizes his belief that the speed of mean regression has abated and become “sticky.” The slowdown, he explains, has occurred because “nearly all of the factors causing it are themselves unlikely to change fast. […]
“The market can stay irrational longer than the investor can stay solvent”, writes Jeremy Grantham in a recent Barron’s article. Grantham addresses the fact that, since 1996, the market mean PE ratio has risen by 65% to 75%. He covers various periods in history, respective rises and crashes, showing that while there are always oscillations they have settled at a much higher PE: He also notes that profit margins have grown by 30% and represent a higher share of GDP, referring to it as “double counting: above-average profit margins times above-average multiple will give you very much above-average price to […]
In a recent interview with Wealth Management.com, the founder of management firm GMO shared his insights on how the market has changed and where opportunities are going forward. Between 1935 and 2000, says Grantham, the market was “orderly” and experienced “mean reversion,” but it has since become more complicated. “Since 1998, price-earnings ratios have averaged 60 percent higher than the prior 50 years, and profit margins have averaged 20 to 30 percent higher. That’s a powerful double whammy,” he says. Grantham says that while the current market “doesn’t feel like a bubble,” we are “climbing the wall of worry.” He […]
The U.S. market is unlikely to “go bang” the way some have in the past, says Jeremy Grantham, chief investment strategist and co-founder of asset management firm GMO. In a recent Barron’s article, Grantham argues that we are not facing a “classic bubble, not even close.” In Grantham’s opinion, it is more likely that a correction, or mean reversion, will be “slow and incomplete,” leading to “dismal consequences for investors: we are likely to limp into the setting sun with very low returns.” He cites factors such as the decade-long decline in interest rates and a shift in the global […]
The phenomenon of robust stock market gains during the third year of a president’s term—coined the “presidential cycle” by fund manager Jeremy Grantham—may have been “killed off” by the Fed, according to an article in the Financial Times. Research conducted by Grantham, founder of the GMO fund management group in Boston, analyzed stock gains during the first, second and fourth years of presidential terms going back to 1932 and found that average gains during those years were 0.2% per month as compared to between 0.75% and 2.5% during the third year. This led to his prediction that the U.S. market […]
Jeremy Grantham authored a piece for Barron’s recently in which he argues that “the positive effects of low resource prices are underestimated,” maintains that we are not in a bubble and thus “a major market break [is] unlikely” to occur yet, and suggests that the longer-term forecast is “rather depressing.” Looking back at 2015, Grantham highlights “the big positive” of Federal Reserve support and “the big negative” of “China slowing down,” as well as “the plunging price of oil,” and the decline in profit margins. Looking at 2016, he notes that “uncertainties are above average,” but suggests growth of “2.5% […]
The Boston Globe profiles philanthropy by leading investors. Jeremy Grantham’s foundations, including the $377 million Grantham Foundation for the Protection of the Environment, reflect a movement toward “making big bets on social change philanthropy,” according to Paul Grogan of the Boston Foundation. This is a shift apparent in Grantham’s own remarks: he noted that giving to traditional recipients of philanthropic dollars (such as arts and medical institutions) is “better than nothing. But it isn’t as good as medical research, or more to the point even, critical environmental donations.” Seth Klarman of the Baupost Group is another example of civic and […]
Ben Inker and Jeremy Grantham of Grantham, Mayo, Van Otterloo & Co. issued a quarterly letter suggesting the bull market cannot last much longer. Inker writes that the U.S. has been outperforming for decades but attacks the idea that US stocks are inherently superior even as they grow more expensive. “We cannot completely reject the possibility that those arguments are correct,” he says, “but the evidence seems pretty thin.” Grantham points to the need to address problems, saying: “we are dealing today with important issues, one so important that it may affect the long-term viability of our global society and […]
In a recent Barron’s excerpt of a longer article, Jeremy Grantham, founder of asset management firm GMO, says Americans “have a broad and heavy bias away from unpleasant data” that makes us “ready to be manipulated by vested interests in finance, economics, and climate change, whose interests might be better served by our believing optimistic stuff ‘that just ain’t so.’” He points to a few examples of propositions that are “widely accepted by an educated business audience . . . but totally wrong.” His examples include the widely held business audience assumption about “how incompetent at business the French are […]
One of the keys to successful investing is knowing the difference between long-term trends and short-term disruptions. That’s what Validea CEO John Reese says, and he says investors who can do that can take advantage of some opportunities in food-related stocks right now. While food prices are down globally over the past year, the factors pushing them lower – Russia’s embargo of US products, China’s slowdown, bird flu fears, and the strengthening dollar – are all relatively short-term factors, Reese says in his latest Forbes.com column. Longer-term trends point toward higher food prices, however, he contends. Growing world population, increasing […]
What’s on Jeremy Grantham’s mind? Ten things, and in his second quarter letter, the renowned value investor lays out the lot of them. As usual, Grantham’s areas of interest go far beyond those of most investment managers. Here, from Barron’s, which published his letter, is his list of the 10 things that “really matter”: Pressure on gross domestic product growth in the U.S. and the balance of the developed world The age of plentiful, cheap resources is gone forever Oil Climate problems Global food shortages Income inequality Trying to understand deficiencies in democracy and capitalism Deficiencies in the Federal Reserve Investment […]
In GMO’s fourth-quarter letter, Ben Inker says the firm is finding better opportunities abroad than in the US, and Jeremy Grantham offers his thoughts on what’s going on with oil prices — and where they are headed.
While some have been raising the notion that stocks are in a bubble, top strategist and noted bubble identifier Jeremy Grantham doesn’t seem to be seeing one — though he does think stocks are significantly overvalued.
Given that he was one of the few to warn about both the Internet bubble and the housing and credit bubble before they burst, Jeremy Grantham’s worries and concerns about the economy and stock market carry a lot of weight. So what is GMO’s front man concerned about these days? Resources. In an interview with The Wall Street Journal, Grantham reiterates his concern about what he says are looming shortages in food, fertilizer, and metals. “The investment implications are, of course, own stock in the ground, own great resources, reserves of phosphorous, potash, oil, copper, tin, zinc — you name it,” […]
GMO’s Jeremy Grantham recently sat down for a lengthy interview with Charlie Rose, and offered a number of interesting takes on the economy and stock market. Grantham says that the great U.S. franchise company stocks are a bit expensive, but that the balance of the U.S. market is very expensive. Overseas in emerging markets, the picture is better, he says. He’s currently slightly underweight global equities, and heavily underweight U.S. equities outside of those great franchise companies. Still, he says we’re not in a terrible outlier situation for the market — he just thinks investors should be careful when buying […]