gbadger

Jeremy Grantham: Stocks Still Aren't Cheap

I agree with the comments of the market being more like Vegas. This is an excerpt from something I sent to a friend this weekend, who was looking for investment advice:

I just have serious reservations about publicly trade equities as an investment class - because it really isn't an investment, but speculation between two parties independent of the company - the amount of publicly traded equities you own should equal how much you would be willing to put in slot machines in Vegas. The people running publicly traded companies have no "skin in the game" so they very often make decisions counter to the interest of the person holding the equity in such businesses.

Think of These as Short-Term Troubles

We have a long painful unwinding ahead of us. Your investment advice is based on marketing literature used by the mutual fund industry :) not based on facts - people have said things such as, "buy on the dips" for so long they now believe that that this is an actual immutable rule.

Just like during the dotcom era when companies received billion dollar valuations even if they had no revenue, during this "easy credit" era companies received loans with little assets at incredibly low interests rates (ultimately subsidized by the printing of money and skyrocketing government debt).

Today, the credit market debt is at $54 Trillion and GDP is at $14 trillion (365%), which is a full 100% above the ratio at the beginning of the Great Depression. It was fun while it lasted, but all businesses and consumers must readjust to a more realistic lending standard; unfortunately, the party was so severe and so long the hangover will be quite painful.

This is why I stand against any Federal bailout that involves more of the same way of doing business; we can't continue to grow our debt substantially faster than GDP. Ultimately, the house of cards collapses on itself.

You need to learn to be more skeptical of "rules of investing" based on such a limited number of data points.

When It Rains, It Pours

Jcrash - your attack on dcx is the pedantic arrogance that I am sick and tired of hearing. Your view is that only the politicians in D.C., the geniuses on wall street and the select few (including yourself) understand this problem. While you may not be aware of this, there are many people outside of wall street and D.C. who run "real" businesses and understand the credit crises. So, far your team of geniuses got us into this mess, has continued to be wrong at every step of the way in responding to this problem and now demands that we get onboard because we are too stupid to understand the problem.

Hmmmm - sorry, but not buying your position. At lease dcx's position seems to be working (including the buying up of Lehman's assets). No bailout!