Courtesy of Mish.
It is extremely difficult to sit out a party. Do so and you lose both clients and assets. Invest in unloved and undervalued assets and you do even worse.
But what is the alternative? Get drunk like everyone else?
I have to admit (time and time again actually), that this market has gone further, faster, than I thought possible. Bubbles of the current magnitude have never been blown back-to-back in such a short timeframe.
I am not the only one who see things that way. John Hussman has been preaching essentially the same message, and so has Jeremy Grantham.
“Over Next Seven Years, Market Will have Negative Returns”
I strongly encourage you to read an interview of Jeremy Grantham, by Stephen Gandel, senior editor of Fortune: The Fed is Killing the Recovery.
The entire article is well worth a read. But here is one snip that caught my eye.
Fortune: Are you putting your client’s money into the market?
Grantham: No. You asked me where the market is headed from here. But to invest our clients’ money on the basis of speculation being driven by the Fed’s misguided policies doesn’t seem like the best thing to do with our clients’ money. We invest our clients’ money based on our seven-year prediction. And over the next seven years, we think the market will have negative returns. The next bust will be unlike any other, because the Fed and other centrals banks around the world have taken on all this leverage that was out there and put it on their balance sheets. We have never had this before. Assets are overpriced generally. They will be cheap again. That’s how we will pay for this. It’s going to be very painful for investors.
It’s well worth reading the entire interview. But I am biased. It supports my own view about market valuations and the Fed.
Jeremy Grantham 1999
Grantham is one of few who saw things correctly in 1998 and 1999. While others were partying like no tomorrow, Grantham sat things out. In the process, he lost 60% of his asset base simply for not acting like a drunken fool, like nearly everyone else.
Please consider this Forbes Interview of Jeremy Grantham, by Steve Forbes, from 2009. The section of most interest to me pertains to 1999 …
