More by the Same Author
2014-11-18 Bubble Watch Update by Jeremy Grantham of GMO
As you may remember, the January Rule serves as a kind of barometer for the behavior of the market in the coming year. Historically, when January was down, the rest of the year had over twice the declines than one would expect randomly, far more mediocre months, and a very sub average return. But it is far from perfect and it had the unusual problem this year of bumping into the positive signal from the Presidential third year, which started for us on October 1.
2014-11-18 The Beginning of the End of the Fossil Fuel Revolution (From Golden Goose to Cooked Goose) by Jeremy Grantham of GMO
The quality of modern life owes almost everything to the existence of fossil fuels, a massive store of dense energy that for 200 years had become steadily cheaper as a fraction of income. Under that stimulus, the global economy grew ever larger, more complex, more inter-related and, I believe, more fragile. Then around the year 2000 the costs of finding oil start to rise at over 10% a year, and with the global economy growing at only 4% oil starts to fall behind in affordability.
2014-07-18 Summer Essays by Jeremy Grantham of GMO
In a new quarterly letter to GMO's institutional clients, co-head of asset allocation Ben Inker uses the evolving Boston culinary landscape as a backdrop to examine the tendency of investors to pursue a "free lunch," when they should be looking for the "investing equivalent of an inexpensive and tasty food truck meal instead." In his section, chief investment strategist Jeremy Grantham looks back at investing mistakes made over his 47-year career, paying special attention to his formative investing years and the "painful lessons" learned therein.
2014-05-02 Looking for Bubbles Part One: A Statistical Approach by Jeremy Grantham of GMO
It is a sensible expectation that reasonable long-term value investors will endure pain in a bubble. It is almost a rule. The pain will be psychological and will come from looking like an old fuddy-duddy? looking as if you have lost your way in the new golden era where some important things, which you have obviously missed, are different this time. For professionals this psychological pain will also come from loss of client respect, which always hurts, and loss of peer group respect, which can be irritating.
2014-02-06 Year-End Odds and Ends by Jeremy Grantham of GMO
In a new quarterly letter to GMO’s institutional clients, chief investment strategist Jeremy Grantham offers "Year-End Odds and Ends": Fossil Fuels: Is Tesla a Tease or a Triumph?, Fracking and Yet More Technical Stuff on Fracking, Update on Metals, Fertilizers, and Food, Problems in Forecasting Short-term Prices for Resources, Another Look at U.S. GDP Growth, Investment Lessons Learned: Mistakes Made Over 47 Years
2013-11-19 Ignoble Prizes and Appointments by Jeremy Grantham of GMO
Chief investment strategist Jeremy Grantham comments on this year’s Nobel Prize in economics and "the most laughable of all assumption-based theories, the Efficient Market Hypothesis"; candidates to succeed Chairman Bernanke at the Fed; the impact of commodity price rises and the housing bubble in the crash of 2008; and prospects for the U.S. equity market.
2013-04-26 The Race of Our Lives by Jeremy Grantham of GMO
Our global economy, reckless in its use of all resources and natural systems, shows many of the indicators of potential failure that brought down so many civilizations before ours. By sheer luck, though, ours has two features that might just save our bacon: declining fertility rates and progress in alternative energy. Our survival might well depend on doing everything we can to encourage their progress. Vested interests, though, defend the status quo effectively and the majority much prefers optimistic propaganda to uncomfortable truth and wishful thinking rather than tough action.
2013-02-07 Investing in a Low-Growth World by Jeremy Grantham of GMO
This quarter I will review any new data that has come out on the topic of likely lower GDP growth. Then I will consider any investment implications that might come with lower GDP growth: counter intuitively, we find that investment returns are likely to be more or less unchanged a little lower only if lower growth brings with it less instability, hence less risk. Finally I will take a look at the reaction to last quarter's letter, specifically about my outlook for lower GDP growth.
2012-11-20 On the Road to Zero Growth by Jeremy Grantham of GMO
In a new quarterly letter to institutional clients, GMO chief investment strategist Jeremy Grantham makes the case that, "the U.S. GDP growth rate that we have become accustomed to for over a hundred years -- in excess of 3% a year -- is not just hiding behind temporary setbacks. It is gone forever." He cautions, "investors should be wary of a Fed whose policy is prefaced on the idea that 3% growth for the U.S. is normal."
2012-08-01 Welcome to Dystopia! by Jeremy Grantham of GMO
In a new quarterly letter to GMO's institutional clients today, chief investment strategist Jeremy Grantham warns: "We are five years into a severe global food crisis" that in the long term "will threaten global stability and global growth." An accompanying investment commentary by GMO head of asset allocation Ben Inker focuses on risks of eurozone equities, which he describes as "somewhere between fair value and mildly cheap" but not worthy yet of "a table-pounding endorsement."
2012-04-19 My Sister's Pension Assets and Agency Problems by Jeremy Grantham of GMO
Investment behavior is driven by career risk. In the professional investment business we are all agents, managing other peoples money. The prime directive, as Keynes knew so well, is first and last to keep your job. To do this, he explained that you must never, ever be wrong on your own. To prevent this calamity, professional investors pay ruthless attention to what other investors in general are doing. The great majority go with the flow, either completely or partially. This creates herding, or momentum, which drives prices far above or far below fair price.
2012-02-24 Investment Advice from Your Uncle Polonius by Jeremy Grantham of GMO
Believe in history. In investing Santayana is right: history repeats and repeats, and forget it at your peril. All bubbles break, all investment frenzies pass away. You absolutely must ignore the vested interests of the industry and the inevitable cheerleaders who will assure you that this time its a new high plateau or a permanently higher level of productivity. The market is gloriously inefficient and wanders far from fair price but eventually, after breaking your heart and your patience, it will go back to fair value. Your task is to survive until that happens. Heres how.
2011-12-05 The Shortest Quarterly Letter Ever by Jeremy Grantham of GMO
Sadly, I feel increasingly vindicated by my seven lean years forecast of 2 years ago. The U.S., and to some extent the world, will not easily recover from the current level of debt overhang, the loss of perceived asset values, and the gross ?nancial incompetence on a scale hitherto undreamed of. Separate from the seven lean years syndrome, the U.S. and the developed world have permanently slowed in their GDP growth. This is mostly the result of slowing population growth, an aging pro?le, and an overcommitment to the old, which leaves inadequate resources for growth.
2011-08-10 Danger: Children at Play by Jeremy Grantham of GMO
I am not an expert in euro ?nance by a wide margin. But I know one thing. Forget the debt for a second: the current uncompetitiveness of Greece, Ireland, Portugal, Spain, and Italy did not occur quickly. It took 10 long and obvious years. They had to work at it. The cure was always going to cause a lot of pain and threaten the well-being of the euro. So why didnt the bosses attempt to ? x it early on when it would have been so much easier? Today these problems have become much tougher, but still the decisions are only half made and the cans get kicked and kicked again.
2011-07-22 Resource Limitations 2: Separating the Dangerous from the Merely Serious by Jeremy Grantham of GMO
Last quarter I tried to make the case that the inevitable mismatch between ?nite resources and exponential population growth had ?nally shown its true face after many false alarms. This was made manifest through a remarkably bubble-like explosion of prices for raw materials. Importantly, prices surged twice in four years, which is a most unbubble-like event in our history book. The data suggested to us that rarest of rare birds; a new paradigm. And a very uncomfortable one at that.
2011-05-11 Time To Be Serious (and probably too early) Once Again by Jeremy Grantham of GMO
Lighten up on risk-taking now and don't wait for October 1. But, if you listen to my advice, be prepared to be early! A word on being too early in investing: if you are a value manager, you buy cheap assets. If you are very ?experienced,? a euphemism for having suffered many setbacks, you try hard to reserve your big bets for when assets are very cheap. But even then, unless you are incredibly lucky, you will run into extraordinarily cheap, even bizarrely cheap, assets from time to time, and when that happens you will have owned them for quite a while already and will be dripping in red ink.
2011-04-25 Time to Wake Up: Days of Abundant Resources and Falling Prices Are Over Forever by Jeremy Grantham of GMO
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.
2011-01-26 Pavlov?s Bulls by Jeremy Grantham of GMO
About 100 years ago, the Russian physiologist Ivan Pavlov noticed that when the feeding bell was rung, his dogs would salivate before they saw the actual food. They had been ?conditioned.? And so it was with ?The Great Stimulus? of 2008-09.
2011-01-18 I Like Ike: A Powerful Warning Ignored, January 17, 1961 by Jeremy Grantham of GMO
Fifty years have gone by in a flash since President Eisenhower, three days from the end of his eight years in office, pushed to give an atypical end-of-term address to the people. It was not the most memorable speech given by an American President, but it was probably the most unusual and the most unexpected. Eisenhower?s speech, in contrast to most great speeches, appeared at the time to have come out of left field, and 50 years later it seems even more remarkable, unusual, and relevant. The speech gives us an opportunity to see how President Eisenhower might have graded us.
2010-10-28 Night of the Living Fed by Jeremy Grantham of GMO
This is a summary of Grantham Mayo Von Otterloo chairman Jeremy Grantham's 3Q 2010 newsletter. Grantham notes that in the third year of a presidential cycle, risky, highly volatile stocks have outperformed low-risk stocks by an average of 18 percent per year since 1964. Levels of 1400 or 1500 on the S&P 500 one year from now are about a 50/50 bet. The biggest threats to this possibility are that Congress will initiate a new trade war, or that the Federal Reserve will start a currency dispute with quantitative easing.
2010-07-20 Summer Essays by Jeremy Grantham of GMO
This is a summary of Jeremy Grantham's 2Q 2020 newsletter. Grantham says that weak a weak economy and declining or flat prices are likely for the immediate future. A global equity portfolio with annual returns of 6 percent plus inflation is still possible, however, by overweighting high quality U.S. stocks and underweighting other U.S. stocks. Grantham also comments on the financial reform bill, fear and speculation in the stock market, global warming, the 'seven lean years' hypothesis, aging populations and health care costs.
2010-04-25 Playing With Fire (A Possible Race to the Old Highs) by Jeremy Grantham of GMO
Is there a new bubble on the horizon in the US? Having shot through GMO?s fair value estimate of 875, Jeremy Grantham's first quarter letter asks whether current policies and conditions are pushing the S&P to approach its old highs. Included in the letter is a link to a video of an interview about investment bubbles, done with Jeremy by the Financial Times on April 19. The Letters to the Investment Committee XVI is part one of a speech given by Jeremy discussing the Potential Disadvantages of Graham & Dodd-type Investing.
2010-01-26 Stop the Presses! by Jeremy Grantham of GMO
Grantham?s commentary begins with his reflections on the proposed financial reform, the ?Volcker Plan,? and the recent Supreme Court ruling on corporate campaign contributions. He continues with a fo