Jeremy Grantham's Q4 'Longest Quarterly Letter Ever'

Kenster1_GlobalValue

http://www.gurufocus.com/news_print.php?id=163788

Part I: Investment Advice from Your Uncle Polonius1
For individual investors setting out on dangerous investment voyages.

1. Believe in history. In investing Santayana is right: history repeats and repeats, and forget it at your peril. All bubbles break, all investment frenzies pass away. You absolutely must ignore the vested interests of the industry and the inevitable cheerleaders who will assure you that this time it’s a new high plateau or a permanently higher level of productivity, even if that view comes from the Federal Reserve itself. No. Make that, especially if it comes from there. The market is gloriously inefficient and wanders far from fair price but eventually, after breaking your heart and your patience (and, for professionals, those of their clients too), it will go back to fair value. Your task is to survive until that happens. Here’s how.

{...}

Part II: Your Grandchildren Have No Value (And Other Deficiencies of Capitalism)

{...}

Part III: Investment Observations for the New Year
Looking Backwards and Forwards (2011 and 2012)

catch22

Hi Kenster,

Thank you for placing the story link. Will have to dig through this a few more times again this weekend.

---6. Try to contain natural optimism. Optimism has probably been a positive survival characteristic. Our species is optimistic, and successful people are probably more optimistic than average. You don't have to be better; the laws of averages will look after it for you. But optimism comes with a downside, especially for investors: optimists don't like to hear bad news. And in a real stock bubble like that of 2000, bearish news in the U.S. will be greeted like news of the bubonic plague; bearish professionals will be fired just to avoid the dissonance of hearing the bear case, and this is an example where the better the case is made, the more unpleasantness it will elicit. Here again it is easier for an individual to stay cool than it is for a professional who is surrounded by hot news all day long (and sometimes irate clients too). Not easy, but easier.


Regards,
Catch

kevindow

Hi Kenster,

Thanks for the link and for all of your contributions at MFO. You are truly an asset at MFO and M*.

I agree with Jeremy Grantham's advice, but I do not like that GMO has removed the Asset Class Forecasts prior to 4Q 2009 from its library. Without this data, how are we able to check the accuracy of his forecasts ? I will express my concern in an email to GMO.

Kevin

scott

"The industry so much prefers bullishness. It is much, much better for business. So, in general, does the press."

Very true.

WallStreetRanter

Reply to @kevindow: Would be interested in any response you receive from GMO.

Investor

"Total remuneration in the U.S. for senior officers, unopposed by typical boards, rose as a percentage of the average worker’s pay from 40 times in Eisenhower’s era to over 600 times today, with no indication of any general improvement in talent. Few rewards were carefully related to long-term results. Pretax income inequality rose in most countries and was offset by tax adjustments in very few. In the U.S., oddly, the tax changes accentuated the shift. Such an increase in inequality was caused by all of the benefits of the substantial productivity flowing to a few, while the average hour’s pay stayed unprecedentedly unchanged for 40 years! This risks making economic progress both slower and bumpier as the stressed average worker reaches for debt and then, in a crisis, is forced to retrench."

Yet, there is an attempt to even cut the benefits of the middle class while we cannot increase the taxes of very rich relatively modestly even in an era of large deficits. The middle class is still being sold the fairy tale of "if only we cut the taxes of the rich, we will be better off and it will trickle down"

Sven

Reply to @Investor: Gotta love that "trickle down" theory, only if that works at all for the middle class. There is an informative interview with David Stockman (former budget director of Ronald Reagan) who shared his view on this matter. I believe it was with Bill Moyer.

David_Snowball

Reply to @kevindow: This site claims to have the annual projections back to 2000, in case that helps. http://norbertc1.wordpress.com/gmo-model-simulation/
David

kevindow

Reply to @David_Snowball:
Thanks David for the link. GMO used to keep an archive of their past forecasts, but now they don't. I'm not sure why, but I intend to find out.

Kevin