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GMO’s Jeremy Grantham: "Bracing Yourself For A Possible Near-Term Melt-Up"
“... it was clearer than crystal to the lords of the State preserves of loaves and fishes, that things in general were settled for ever.” (Dickens)
I’ve pretty much stopped reading / listening to most market commentary. And I’d have a hard time advising a young person just starting out investing today to throw money at this thing. It’s human tendency to expect whatever the current trend is to continue into the future indefinitely (be it up or down in the markets). So the euphoria is understandable. Now, if you think we can keep paying little old widows 1-2% on their savings while we “geniuses” rake in in 15-25% equity gains year after year - I’ve got a bridge I’ll sell.
@PBKCM - I did catch your point recently regarding inflation and think there’s a lot of truth to that. But at these levels, except for gold and real assets, I’m baffled. Maybe valuations are more reasonable outside U.S.
Wow - Just waded through Grantham’s dissertation. Kudos to him and those who understand all these charts and comparisons to historical (hysterical?) bubbles. Do my fund managers at Oakmark, Dodge & Cox or TRP engage in this type of micro analysis? I rather hope not. And this type of analysis seems far removed from the kind of common sense horse wisdom voiced by the likes of Munger and Buffett over the years.
Remember the OJ trial? “If the glove doesn’t fit, you must acquit.” When pieces of a puzzle no longer fit together it’s time to take a second look and exercise some caution. That’s all I’m getting to. When you’ve got prolonged 2 - 2.5% returns on “safe money” alongside double-digit returns on most everything else, it’s time to take a second look at the big picture. Two more parts of the puzzle - In our part of Michigan there’s “Help Wanted” signs everywhere. Yet wages and wage inflation remain very low. And during the normally slow winter construction season if you want a granite countertop professionally delivered and installed you’re looking at a 2-3 month wait after placing an order because they can’t keep up with demand. Trying to obtain decent skilled labor for renovation work during the hot summer months nearly impossible nowdays, with entire city blocks packed end-to-end with construction vehicles.
Despite the indications of a sizzling economy and years of stock market gains, interest rates at both the short and longer end (AA+) remain stubbornly stuck in the 2-2.5% range and wage inflation low. Couple the low wages with various entitlement curtailments (everything from public education to medical care) and the “average Joe” is worse off today than a decade ago. So, IMHO many pieces of the broader puzzle appear out of whack. I don’t recommend panic selling of investments. I do suggest a bit more caution be exercised, be it through raising cash, diversifying risk assets more broadly, concentrating more on funds known to have weathered financial storms well in the past, paying off debt, or just investing some of the recent gains in your own “infrastructure” (home, transportation, etc.).
Comments
I’ve pretty much stopped reading / listening to most market commentary. And I’d have a hard time advising a young person just starting out investing today to throw money at this thing. It’s human tendency to expect whatever the current trend is to continue into the future indefinitely (be it up or down in the markets). So the euphoria is understandable. Now, if you think we can keep paying little old widows 1-2% on their savings while we “geniuses” rake in in 15-25% equity gains year after year - I’ve got a bridge I’ll sell.
@PBKCM - I did catch your point recently regarding inflation and think there’s a lot of truth to that. But at these levels, except for gold and real assets, I’m baffled. Maybe valuations are more reasonable outside U.S.
Remember the OJ trial? “If the glove doesn’t fit, you must acquit.” When pieces of a puzzle no longer fit together it’s time to take a second look and exercise some caution. That’s all I’m getting to. When you’ve got prolonged 2 - 2.5% returns on “safe money” alongside double-digit returns on most everything else, it’s time to take a second look at the big picture. Two more parts of the puzzle - In our part of Michigan there’s “Help Wanted” signs everywhere. Yet wages and wage inflation remain very low. And during the normally slow winter construction season if you want a granite countertop professionally delivered and installed you’re looking at a 2-3 month wait after placing an order because they can’t keep up with demand. Trying to obtain decent skilled labor for renovation work during the hot summer months nearly impossible nowdays, with entire city blocks packed end-to-end with construction vehicles.
Despite the indications of a sizzling economy and years of stock market gains, interest rates at both the short and longer end (AA+) remain stubbornly stuck in the 2-2.5% range and wage inflation low. Couple the low wages with various entitlement curtailments (everything from public education to medical care) and the “average Joe” is worse off today than a decade ago. So, IMHO many pieces of the broader puzzle appear out of whack. I don’t recommend panic selling of investments. I do suggest a bit more caution be exercised, be it through raising cash, diversifying risk assets more broadly, concentrating more on funds known to have weathered financial storms well in the past, paying off debt, or just investing some of the recent gains in your own “infrastructure” (home, transportation, etc.).
I am not a financial advisor.