Grantham's Prediction

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marcharry
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Grantham's Prediction

Post by marcharry »

In yesterday's globe Jeremy Grantham was generally bearish on US stocks . A key point of his rationale was FX...namely that they report in USD and have been given a big lift by the falling US dollar versus other world currencies. Next year however -no free ride as the dollar remains fairly static at its new lower level or it bounces back somewhat.

Having worked in corporations, what he is describing is true and simple.

Do we think that this one factor will have a substantial impact on the S&P?

Weirdly - he then goes on to say he is long "quality" (large cap?) us stocks and short small caps (whom i would think don't have a dominant international business)


http://www.theglobeandmail.com/servlet/ ... alEvents2/
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Post by Taggart »

As per the "What's the simplest way to find beaten up (value) stocks?" thread, it isn't only David Dreman who got dinged recently, but Jeremy Grantham as well. No wonder as they say, the markets can soon make you humble.

------------------------------------------------------

State pension drops GMO fund

Double-whammy compounded losses for Massachusetts

By Beth Healy
Globe Staff / April 9, 2009

Big losses in a cash fund run by one of the state's most venerable money managers set off a ripple effect that cost it a prominent client - the Commonwealth of Massachusetts' giant pension fund.

Grantham, Mayo, Van Otterloo & Co. was fired by the $36 billion state pension fund yesterday over soured investments in asset-backed securities that were battered amid the credit crunch last year. The firm is run by renowned investor Jeremy Grantham, one of Wall Street's most famous bears, who holds his company out as a stalwart of conservative investment principles.
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Post by parvus »

And on Dreman:
The trustees of the $2.2 billion DWS Dreman High Return Equity Fund voted to remove Dreman Value Management LLC on June 1, according to a filing last week with the U.S. Securities and Exchange Commission. The fund’s loss in the past year placed it in the bottom 3 percent of its peers, according to data compiled by Bloomberg.

Dreman, 72, who likes to buy out-of-favor companies that he deems financially sound, put 27 percent of the fund in financial-services stocks as of Aug. 30. Companies such as Citigroup Inc., Bank of America Corp. and Washington Mutual Inc. had declined earlier in 2008 before plunging further in September, triggering a federal bank bailout. The fund trailed the Standard & Poor’s 500 Index in one- and three-year periods.

“We had seen very weak performance for the fund over every major time horizon,” said David Wertheim, product manager for equities at DWS Investments in New York. While Dreman brought in co-Chief Investment Officer E. Clifton Hoover to help him manage the fund in 2006, the change didn’t “lead to a meaningful turnaround in the execution and performance,” Wertheim said.
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George$
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Re: Grantham's Prediction

Post by George$ »

I've been listening to a recent (?) interview of Jeremy Grantham by Forbes

Both interesting and informative. About 38 minutes long
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Re: Grantham's Prediction

Post by Peculiar_Investor »

George$ wrote:I've been listening to a recent (?) interview of Jeremy Grantham by Forbes
I'll second that. Of particular interest to me is the discussion in the first segment of career risk in the investment community and the comment "most widely predicted surprise" and his view of the dysfunctional market near the end. While I don't necessarily agree with his views, they me pause for thought on his points.
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Re: Grantham's Prediction

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More on Grantham at Bloomberg ...
Grantham’s ‘Horrifically Early’ Calls Challenge GMO
“Jeremy has been a great long-term investor,” said Meyer, who ran Harvard’s endowment for 15 years until 2006, when he left the Cambridge, Massachusetts, university, to start Convexity Capital Management LP, a Boston-based fund manager. Grantham was ahead of the pack in the 1990s identifying the value of emerging-market stocks, inflation-adjusted securities and timber, Meyer said in a telephone interview.
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Re: Grantham's Prediction

Post by Peculiar_Investor »

Jeremy Grantham, chief investment strategist at Grantham Mayo Van Otterloo (GMO), talks to Maria Bartiromo about the markets, the economy, and his investment strategy -- see the video Jeremy Grantham Interview - CNBC.com. The video is about 30 minutes long. Interesting viewpoints on government's role in preventing bubbles rather than repairing them after the fact, the importance of asset allocation, and what's happening in emerging markets. There is probably food for thought for all investors in listening and thinking.
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Re: Grantham's Prediction

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From what I understand, it seems that the people who want to keep the dollar high are the Chinese who know that if the U.S. dollar goes down, their currency goes up and people become unemployed, land and real estate prices start dropping and their government looks vulnerable. Their thinking is why upset the present method. The Japanese don't need their currency to go any higher, either. So the people who own the U.S. debt aren't about to change. Perhaps U.S. will be ok in a few years. Once you have a problem at least you know what it is.
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Re: Grantham's Prediction

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An April, 2011 19-page Newsletter from Jeremy Grantham
Time to Wake Up: Days of Abundant Resources and Falling Prices Are Over Forever
Summary of the Summary
The world is using up its natural resources at an alarming rate, and this has caused a permanent shift in their value.
We all need to adjust our behavior to this new environment. It would help if we did it quickly.

Summary

 Until about 1800, our species had no safety margin and lived, like other animals, up to the limit of the food supply,
ebbing and fl owing in population.

 From about 1800 on the use of hydrocarbons allowed for an explosion in energy use, in food supply, and, through
the creation of surpluses, a dramatic increase in wealth and scientifi c progress.

 Since 1800, the population has surged from 800 million to 7 billion, on its way to an estimated 8 billion, at
minimum.

 The rise in population, the ten-fold increase in wealth in developed countries, and the current explosive growth in
developing countries have eaten rapidly into our fi nite resources of hydrocarbons and metals, fertilizer, available
land, and water.

 Now, despite a massive increase in fertilizer use, the growth in crop yields per acre has declined from 3.5% in
the 1960s to 1.2% today. There is little productive new land to bring on and, as people get richer, they eat more
grain-intensive meat. Because the population continues to grow at over 1%, there is little safety margin.

 The problems of compounding growth in the face of fi nite resources are not easily understood by optimistic,
short-term-oriented, and relatively innumerate humans (especially the political variety).

 The fact is that no compound growth is sustainable. If we maintain our desperate focus on growth, we will run
out of everything and crash. We must substitute qualitative growth for quantitative growth.

But Mrs. Market is helping, and right now she is sending us the Mother of all price signals. The prices of all
important commodities except oil declined for 100 years until 2002, by an average of 70%. From 2002 until now,
this entire decline was erased by a bigger price surge than occurred during World War II.

 Statistically, most commodities are now so far away from their former downward trend that it makes it very
probable that the old trend has changed – that there is in fact a Paradigm Shift – perhaps the most important
economic event since the Industrial Revolution.


 Climate change is associated with weather instability, but the last year was exceptionally bad. Near term it will
surely get less bad.

 Excellent long-term investment opportunities in resources and resource effi ciency are compromised by the high
chance of an improvement in weather next year and by the possibility that China may stumble.

 From now on, price pressure and shortages of resources will be a permanent feature of our lives. This will
increasingly slow down the growth rate of the developed and developing world and put a severe burden on poor
countries.

 We all need to develop serious resource plans, particularly energy policies. There is little time to waste.
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Re: Grantham's Prediction

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There is little time to waste.
And most of it will be wasted because the democracies will not make sacrifices until forced to.
Sic transit gloria mundi. Tuesday is usually worse. - Robert A. Heinlein, Starman Jones
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Re: Grantham's Prediction

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Sounds like Grantham is saying that people should climb aboard the commodities express and make a lot of money.
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Re: Grantham's Prediction

Post by ghariton »

Shakespeare wrote:
There is little time to waste.
And most of it will be wasted because the democracies will not make sacrifices until forced to.
Yes. Deeply disappointing, but not surprising. Mind you, I don't think autocracies do much better.

I don't know what the problem is. It's not lack of intelligence -- the average person could understand all this, I'm sure. But there seems to be a reluctance to put in any intellectual effort to understand complex issues. We want simple answers, preferably reducible to a sound bite.

Add to that the great reluctance to defer gratification. In the jargon, people have a "hyperbolic" discount function -- they know that they would get more pleasure by saving that extra slice of cake for later, but they eat it now anyway.

Very depressing.

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Re: Grantham's Prediction

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Deeply disappointing, but not surprising
Reminds one of the run-up to WWII, where the democracies would not rearm until it was very clear they had to.
Mind you, I don't think autocracies do much better
Stalin's Red Army purges significantly weakened the Red Army leadership, and quite probably helped with the early success of Barbarossa.
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Re: Grantham's Prediction

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Sounds like Grantham is saying that people should climb aboard the commodities express and make a lot of money.
Actually, that's not quite what he is saying. He says there is a probability that good weather and a correction to the Chinese bubble will cause a crash in commodities in the near term. When the sector has been hammered down, only then back up the truck. Like buying TCK.B at 5 bucks.
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Re: Grantham's Prediction

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A recent (August 2011) Grantham (GMO) commentary
At the close on August 8, a slightly cheap equity portfolio could be put together comprised of U.S. high quality,
emerging markets, Japan, Italy, and European growth stocks. On our data, the imputed 7-year return of the package
today would be about 6.5% real!* Quality stocks, especially in the U.S. but almost everywhere, continue to
handsomely outperform. Regrettably, this means that they have declined very considerably less than the indices. In
its asset allocation accounts, GMO is modestly underweight equities, partly because of the desperately unattractive
yields on fi xed income. We are now very modest buyers for the fi rst time since mid 2009.
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Re: Grantham's Prediction

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Lengthy profile in this Sunday's NT Times Magazine: Can Jeremy Grantham Profit From Ecological Mayhem?
Sedulously eschew obfuscatory hyperverbosity and prolixity.
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Re: Grantham's Prediction

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GMO's latest - February 2012
The Longest Quarterly Letter Ever - 15 pages - with the headlines -
Investment Advice from Your Uncle Polonius - Your Grandchildren Have No Value (And Other Deficiencies of Capitalism)- Market Review

I try to read most of his newsletters - which I find informative and thoughtful.
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Re: Grantham's Prediction

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GMO abandons bond market
GMO, the Boston-based asset manager, says it has “given up” on the bond market, deciding to ditch long-dated sovereign debt as investors continue to pour billions into government bonds, including US Treasuries.

Ben Inker, co-head of asset allocation for the $104bn group, told the Financial Times it is holding large, high-quality companies in the US but that its main bet is to keep money on the sidelines while it waits for better times.

If GMO is right and prices of government debt fall, its decision to offload bonds could prove to be a coup to rival its refusal to buy dotcom stocks well before the peak of the internet bubble in 2000.

Back then, it suffered three years of investor outflows before eventually being proved right. Its approach to the bond market now is similar.
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Re: Grantham's Prediction

Post by Shine »

Michael Sabia says the same in the G&M today

http://www.theglobeandmail.com/globe-in ... le5734784/
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Re: Grantham's Prediction

Post by George$ »

Jeremy Grantham is on Charlie Rose for 54 minutes today - well worth hearing - lots of thought food
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Re: Grantham's Prediction

Post by like_to_retire »

George$ wrote:Jeremy Grantham is on Charlie Rose for 54 minutes today - well worth hearing - lots of thought food
Thanks - Great interview - well worth watching.

ltr
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Re: Grantham's Prediction

Post by poedin »

like_to_retire wrote:
George$ wrote:Jeremy Grantham is on Charlie Rose for 54 minutes today - well worth hearing - lots of thought food
Thanks - Great interview - well worth watching.

ltr
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Re: Grantham's Prediction

Post by scomac »

poedin wrote:
like_to_retire wrote:
George$ wrote:Jeremy Grantham is on Charlie Rose for 54 minutes today - well worth hearing - lots of thought food
Thanks - Great interview - well worth watching.

ltr
+1
+2
"On what principle is it, that when we see nothing but improvement behind us, we are to expect nothing but deterioration before us?"
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Re: Grantham's Prediction

Post by ig17 »

Whenever I read Grantham or listen to him, I want to sell everything and go hide under the bed. Is this normal?
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