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Some great zingers in there. Here's the page with the full quarterly letter (free, no-hassle registration required), which includes Ben Inker describing how the GMOers have changed their methodology for their 7-year outlook. They've broadened the set of data they use to calculate valuation. As a result, the outlook for U.S. stocks is a bit worse, but the real killer is the outlook for EM equities: it's been essentially cut in half.
From the linked article: "My personal guess is that the U.S. market, especially the non-blue chips, will work its way higher, perhaps by 20% to 30% in the next year or, more likely, two years, with the rest of the world including emerging market equities covering even more ground in at least a partial catch-up."
Just prior to this passage, he hedges his optimism: "We have also had a sharp and unexpected uptick in parts of the IPO market in the U.S., so I would think that we are probably in the slow build-up to something interesting – a badly overpriced market and bubble conditions."
As I see it, whether we head higher or lower, Grantham predicted it.
GMO just issued a very pessimistic outlook for the next 7 years. US market is to fall (in average, after inflation) -1.3% yearly, small caps - 4.2%, quality US would grow 2.7% per year, International would grow 1.4%, emerging markets, which they previously expected to grow 6% per year now are expected to grow 3.2% per year.
I guess they expect the market to go higher in short term, and then move down fast.
Comments
Just prior to this passage, he hedges his optimism: "We have also had a sharp and unexpected uptick in parts of the IPO market in the U.S., so I would think that we are probably in the slow build-up to something interesting – a badly overpriced market and bubble conditions."
As I see it, whether we head higher or lower, Grantham predicted it.
Kevin
I guess they expect the market to go higher in short term, and then move down fast.
http://www.bloomberg.com/news/2013-11-18/gmo-s-inker-predicts-losses-for-stocks-over-seven-years.html