phat cat

Jeremy Grantham: Stocks Still Aren't Cheap

There's a serious flaw in the school of investing. Asset allocation. Asset allocation based on past performance and correlations are bound to prove irrelevant, "black swan" events will make any predictory investment theory laughable. We simply don't have enough data or sample size to intelligently decide which asset class to invest in and how they will perform.

I believe there should be only 2 assets in a portfolio: cash and risky investments. Risky investments include equity, HY, options, commodities, currencies, etc. When we decide how to invest, we should always be mindful that the risk for all these risk assets are equal(if it hasn't proved equally risky yet, it will) and we should be ready to write all of them off.

So are stocks cheap now? Who knows! If you can risk the portion of your asset allocation, take a punt! If not, keep them either in overnight deposit or short dated T-bills.