Uh Oh - If Grantham's Scared ...

After having ventured on the bullish side of things a few days ago with Martin Pring’s upbeat scenario for stock markets (Time To Be Optimistic), we revert to a significantly more sceptical outlook today.

The bearer of the bad tidings is well-respected money manager Jeremy Grantham who has just published the July edition of his quarterly newsletter entitled “Meltdown! The Global Competence Crisis”. Grantham co-founded Boston-based GMO, an investment house overseeing $126 billion in assets, in 1977.

Reflecting on his comments of a year ago and how events have played out, he says: “I thought things would be bad enough but they turned out to be a lot worse. I thought a year ago we were looking at the ‘first truly global bubble’ in asset prices. The credit crisis looked to be so predictably powerful and unstoppable then that I likened the experience to ‘watching a slow-motion train wreck’, and I predicted that ‘one major bank (broadly defined) will fail within 5 years’, for which I got considerable grief as a doomsayer, as the less optimistic strategists usually do. Well, a year later one bank failure looks positively quaint as a prediction.

“Ironically for a ‘perma bear’, I underestimated in almost every way how badly economic and financial fundamentals would turn out. Events must now be disturbing to everyone, and I for one am officially scared!”

In terms of strategy, Grantham summarizes his view in what he believes should be investors’ motto: “Don’t be brave, run away. Live to fight another day.”

Click here for the full report on Grantham’s reasoning for his bearish stance.

Comments

[whidbey:]

GMO has always had a superior view of their own insights, and management skills, look at the alpha they claim. What they have not had is a suggestion, timely or otherwise, as to what to do. In fact, Jeremy has been all over the political road map. He has been a liberals liberal, a scold, and distantly unapproving of anything smacked of managing the national disgraces: SSecurity and health care. What he always secretly wanted was more taxes on the wealthy, and more largess for the less fortunate. He is really an old fashioned, Boston, Idiot. You and find better.

2008 Jul 31 04:32 PM

[lobsterboy:]

Who are these people? It's so funny that when a tide shifts these guys that have been calling a top for years finally stick a flag in the hill and say "see I told you so". What a joke! Where do these nerds get the money.

2008 Jul 31 10:19 PM

[Indexor:]

“Ironically for a ‘perma bear’....No need to read any further.

2008 Aug 01 09:35 AM

[ain't no fo...:]

ahh, denial, too funny, sounds like a few longs are getting their heads (and other things) handed to them... lol, so predictable

2008 Aug 01 12:47 PM

[lobsterboy:]

WPdragon no actually I am neither in fact I do so enjoy mkts like this better to trade. What's predictable is the talking heads that come out of the wood work at the extremes. The only suggestion I would have for anyone is to remain nimble. If you have a core long position sell vol against or hedge it.

2008 Aug 02 12:13 AM