What’s Jeremy Grantham up to? Selling. More thoughts below, courtesy of Edward Harrison at Credit Writedowns
Excerpt:
Overall, Grantham’s view is the same as mine. The Fed should get out of trying to use monetary policy to do fiscal policy. It doesn’t work; it creates bubbles that are destabilising. The Fed should be moving against bubbles instead of creating them. Fiscal policy is the way to go to deal with a large output gap. Bernanke knows this too. Think of how a 21st century unemployment insurance program targeted on infrastructure spending could reduce unemployment in the less skilled segment of the population (more on that here and here). Of course, because of the move to austerity in the US, this is never going to happen. So, Bernanke is going QE – which, by the way, doesn’t endear the US to anyone.
Note that the emerging markets are up over 3 times as much as the S&P 500 since 2000. Do we really need more money pumped into those economies? As an aside, Grantham is a macro-oriented investor. Grantham uses the EM example to point out that asset allocation is more powerful than picking individual stocks. If a whole sector is moving up that much, do you really think you can call individual picks within it to make significantly more?
Read the Edward’s full article here >
Please also see CNBC’s piece on the interview: Have Cash, Wait for Stocks to Fall: Jeremy Grantham
