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A Noteworthy Message for the School of Doom and Gloom
Old 07-30-2008, 05:18 PM   #1
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A Noteworthy Message for the School of Doom and Gloom

Well, Mr. Grantham has published his quarterly newsletter - and he doesn't mince words. For those forecasting doom and gloom, you might want to skip this - it'll only make you feel worse. Anyway, his advice is as follows:

Quote:
Our advice until now was very simple: take as little risk as possible except for emerging markets. Now it is even simpler: take as little risk as possible.

./.

But for those who can keep some of their powder dry, there are likely to be much better investment opportunities in a year or two (or three) than we have seen for 20 years. Our motto should be:
Donít be brave, run away.
Live to fight another day.
You can find the newsletter here - free, registration required. It's titled: Meltdown! The Global Competence Crisis

https://www.gmo.com/America/Research/


Michael
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Old 07-30-2008, 06:40 PM   #2
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Well, Mr. Grantham has published his quarterly newsletter - and he doesn't mince words. For those forecasting doom and gloom, you might want to skip this - it'll only make you feel worse.
Michael
Right or wrong, 'ol Jeremey sounds like Cotton Mather on a Sunday morning. This is my favorite:

Didnít we all expect at least modest competence from most of our financial companies? I always thought it was the Bear Stearns of the world who knew what was going on, and that when the music stopped, the financial junk would be safely (from our point of view) in the hands of, say, Taiwanese banks. How did the guys who put some dead rats in the pot end up eating some of their own stew? (To be charitable, perhaps the head chefs did not realize that the kitchen staff was throwing in the odd rat to increase their Christmas bonus!)

Ha
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Old 07-30-2008, 07:55 PM   #3
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Forgive my ignorance, but he's just another investment advisor. Why should one pay attention to this particular guy?
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Old 07-30-2008, 08:30 PM   #4
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Forgive my ignorance, but he's just another investment advisor. Why should one pay attention to this particular guy?
That was my thought also, but this was interesting. From wiki, of course:

Quote:
Jeremy Grantham is the Chairman of the Board of Grantham Mayo Van Otterloo an American investor well known among institutional investors but relatively unknown to retail investors.


He is regarded as a highly knowledgeable investor in various stock bond and commodity markets. Grantham started one of the world's first index funds in the early 1970s and currently manages approximately $150 billion US.


Grantham's quantitative research has revealed reversion to the mean in all bubbles in all commodity, stock and bond markets studied excluding timber.


Grantham is famously quoted as saying: "In five years, I expect that at least one major bank (broadly defined) will have failed and that up to half the hedge funds and a substantial percentage of the private equity firms in existence today will have simply ceased to exist." [1]

  1. ^ Fortune Magazine, 2007
If he's right, this is a nice little bone to be thrown:

Quote:
there are likely to be much better investment opportunities in a year or two (or three) than we have seen for 20 years.
Since I did benefit from the great bull of the 90's, it would be nice to get a taste of that again - I can wait 2 or three years (I hope!).

-ERD50
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Old 07-30-2008, 08:47 PM   #5
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Now this is the type of doom and gloom forecast which is actually worth reading.

Pretty thought provoking, I have no idea if he is cheating on his 10 year forecast from 1998 to 2008, but pretty impressive if he predicted a S&P return of -1.3% vs the actual flat return and good call on emerging market equities being the top performers.
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Old 07-30-2008, 09:07 PM   #6
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gmo@6url.com password 'qqqqqq' if you arent interested in the registration stuff.
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Old 07-30-2008, 09:11 PM   #7
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Forgive my ignorance, but he's just another investment advisor. Why should one pay attention to this particular guy?
Because he's the 800-pound grizzly of permabears, and I'm sure that he's dancing with glee at finally being pronounced correct...

Of course his clients are paying him in gold bullion, MREs, and shotgun shells.
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Old 07-30-2008, 09:29 PM   #8
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As we all know, thought is useless, and all mangers are useless phonies whose good records are only luck.

Market timing is useless and stock selection is "a fool's game".

Stocks are always on sale and always a bargain because they always return more than fixed income or cash.

So get on down to the trough, chow's being served.

By the way I have read Grantham for a long time and respect his thinking, but have no inkling whether he is right on this call or not.

Ha
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Old 07-30-2008, 09:35 PM   #9
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Old 07-30-2008, 09:37 PM   #10
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Whatcha drinking tonight, ha?
I'm assuming it's Gin and Juice
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Old 07-30-2008, 09:43 PM   #11
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By the way I have read Grantham for a long time and respect his thinking, but have no inkling whether he is right on this call or not.
The way I'm reading it, if he's right then whatever you invest in (real estate, equities, anything having to do with any financial institution, etc) will bomb. Defensively you could go into cash, get nothing for interest, have your money eaten alive by the massive expected inflation, and then lose all your cash when the bank goes belly up and the FDIC runs out of money.

Did I effectively capture everything?

I suppose when faced with a "death by all options" scenario, I'll take going out on my feet instead of my knees.

Not that theres anything wrong with that whole knees thing.

Eh...and before anyone asks, a little glass of cabernet.
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Old 07-30-2008, 09:49 PM   #12
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Because he's the 800-pound grizzly of permabears, and I'm sure that he's dancing with glee at finally being pronounced correct...

Of course his clients are paying him in gold bullion, MREs, and shotgun shells.
I didn't realize he was that important.

Speaking of MREs, I saw at costco, a 50 lb box of emergency food rations. (It was all vegetarian ugh). I was thinking that instead of /addition to shotgun shells MREs would be handy thing to have to prepare for doom and gloom.

Other than buying them from Ebay anybody no where I could buy a big quantity 10-12 cases?
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Old 07-30-2008, 10:39 PM   #13
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Whatcha drinking tonight, ha?
Rebel Yell. But that has nothing whatsoever to do with my expression of opinion.
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Old 07-30-2008, 11:04 PM   #14
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I didn't realize he was that important.
I don't know if it's importance as much as he publishes a widely-read newsletter (Granthamoom & gloom :: Bill Gross:bonds) and he's so grumpy that he makes Scott Burns look like Little Miss Sunshine.

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Other than buying them from Ebay anybody no where I could buy a big quantity 10-12 cases?
Dude, since you asked!: http://www.militaryhq.com/scripts/pr...idCategory=455

They're down on Sand Island Access Road. You might want to dress in crappy inconspicuous clothes, have a three-day beard or more, not flash too much cash, drive a beat-up car, and file a flight plan with an estimate of when you'd like the armed-response security force to follow up.

But they're really nice guys. My spouse and I felt right at home...
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Old 07-30-2008, 11:10 PM   #15
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Rebel Yell. But that has nothing whatsoever to do with my expression of opinion.
I haven't tasted Rebel Yell since I used to steal it from my dad's liquor cabinet when I was in high school. That's some fine whiskey.

On the topic of Grantham, I don't see why his predictions should be given any greater weight than the other 12 Fortune contributors or the other various newsletter writers, CNBC pundits, or investment managers. Nobody knows what the future holds, period.

His 10 year return chart is a useful advertisement for the benefits of diversification though.
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Old 07-30-2008, 11:16 PM   #16
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On the topic of Grantham, I don't see why his predictions should be given any greater weight than the other 12 Fortune contributors or the other various newsletter writers, CNBC pundits, or investment managers. Nobody knows what the future holds, period.
When I look at the rank order of his 1998 predictions, and the rank order of the look-back results, I see a lot more than randomness operating.

But disagreement is what makes markets.

Ha
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Old 07-30-2008, 11:22 PM   #17
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I'm assuming it's Gin and Juice
Just hope he ain't rollin' down the street smokin' Indo...
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Old 07-30-2008, 11:23 PM   #18
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When I look at the rank order of his 1998 predictions, and the rank order of the look-back results, I see a lot more than randomness operating.

But disagreement is what makes markets.

Ha
Word.

Ha you need to quit with the persuasion, I just kicked the testosterone stock picking habit a year ago, I'm itchin' bad!
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Old 07-30-2008, 11:55 PM   #19
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Did I effectively capture everything?
He also suggests a mix of the highest quality U.S. blue chips and emerging markets if you insist of having equities.
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Old 07-31-2008, 12:55 AM   #20
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When I look at the rank order of his 1998 predictions, and the rank order of the look-back results, I see a lot more than randomness operating.
I'd feel better if he did it a second or third time in a row, or another 10,000 people (about the order of random monkeys with typewriters) also got it right.

Frankly, I'd have thought 50,000 pundits might have guessed in 1998 when most equities were balookas ridiculously priced that there might be a bit of a crash and a good long time to recover from it, for the average stock.

But as you've wisely pointed out, amidst the fallen chunks of crap there are bits of cheap goodness. Right?

In the meanwhile, the other 49,997 guys back in '98 were calling for Dow 30,000, the change of the world order, and all new paradigms. It was all about the eyeballs and getting the customer at any cost or being gone, right? And Enron and Worldcom were super blue chip stocks worth owning at any price, yes?

I enjoyed reading that last line in the 1999 issues of a bunch of finance rags in my doctors office in 2002. Really sank it home.
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