Jeremy Grantham: Careful Buying is Justified

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20-oct-2.jpgIn July this year perennial bear Jeremy Grantham, chairman of Boston-based GMO, said: “Events must now be disturbing to everyone, and I for one am officially scared!” In terms of strategy, he summarized his view with what he believed should be investors’ motto: “Don’t be brave, run away. Live to fight another day.”

Although his warnings go back a number of years, Grantham was eventually right. It was therefore with keen interest that I have been awaiting his latest quarterly newsletter entitled “Reaping the Whirlwind”. The following paragraphs are a summary of his investment recommendations from this report:

 

“At under 1,000 on the S&P 500, US stocks are very reasonable buys for brave value managers willing to be early. The same applies to EAFE and emerging equities at October 10 prices, but even more so. History warns, though, that new lows are more likely than not.

“Fixed income has wide areas of very attractive, aberrant pricing.

“The dollar and the yen look okay for now, but the pound does not.

“Don’t worry at all about inflation. We can all save up our worries there for a couple of years from now and then really worry!

“Commodities may have big rallies, but the fundamentals of the next 18 months should wear them down to new two-year lows.

“As for us in asset allocation, we have made our choice: hesitant and careful buying at these prices and lower. Good luck with your decisions.”

Click here for the full report on Grantham’s views on the fallout from the financial crisis and what investment opportunities he sees. (Grantham will be publishing a second part to this report, entitled “Silver Linings” in two weeks’ time. This article will also be posted on Investment Postcards.)

Source: Jeremy Grantham, GMO, October 2008.

 


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3 comments to Jeremy Grantham: Careful Buying is Justified

  • Another outstanding article. Your economic insight is greatly appreacited by myself, and many other smaller investors.

  • The Ace Chase

    I agree completely with the comment above. You have saved me countless hours of worry, as well as providing the insight to benefit my personal portfolio. Many, many thanks.

  • bacaloui

    downtrend still live, hedge funds end of month reporting. need a base to start a short covering rally, last time equities were up 2 days in a row sept 25/26, my call starts wednesday as term lending reductions should see the vix fall as prices bounce to former volume breakdown levels, reversal need to have weekly closes above last weeks highs. look to see profit mode fixed income-equities-currencies (US$) as we enter month end.

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