Jeremy Grantham: Reinvesting when terrified

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What does one do with cash during this time of unprecedented illiquidity? In this article, Jeremy Grantham offers some advice to investors who may be in danger of falling prey to the “terminal paralysis” that often sets in  after a financial crisis. Grantham co-founded Boston-based GMO, an investment house overseeing $126 billion in assets,  in 1977.

“For the record, we now believe the S&P is worth 900 at fair value or 30% above today’s price. Global equities are even cheaper. … our guess is that there is still a 50/50 chance of crossing 600 on the S&P 500,” said Grantham.

” … be aware that the market does not turn when it sees light at the end of the tunnel. It turns when all looks black, but just a subtle shade less black than the day before.”

Click here for the full report.

Source: Jeremy Grantham, GMO, March 10, 2008.

 

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3 comments to Jeremy Grantham: Reinvesting when terrified

  • Yeah, for long term investors (non trader skills), Jeremy’s plan has been dead on. Loved this video from him: Jeremy Grantham – “Stocks reasonably cheap, not spectacularly cheap” – 20% long exposure, no need to rush

  • Frank W

    This guy lives in la-la land. The S&P 500 is fair value at 900! Who’s kidding whom? If one is stupid enough to think that operating earnings are an accurate gauge of company earnings, then maybe this is true. However, operating earnings, also known as infomercials, fantacizing, conning, BS, etc., is what companies claim they are going to make. Reported earnings or GAAP earnings or earnings that they pay income tax on is actual earnings. Therefore, when these money managers tell you that estimated 2009 earnings is around $55, but a reputable accountant tells you its around $15, you can guess that the $55 refers to operating earnings, while the $15 refers to GAAP earnings. With Sedacca telling you that he is worried that the S&P 500 might actually fall thru 400, would you like to jump in now and lose half your money? On the way down, you can also pay fat fees to guys like Grantham for losing your money for you. This guy has had his funds more than 50% invested on the way down and lost oodles. Like to get in with the big boys and rub elbows with him?

  • [...] resistance levels“, “Video-o-rama: Stock markets – turnaround time” and “Jeremy Grantham: Reinvesting when terrified“. (And do make a point of listening to Donald Coxe’s webcast of Friday, which can be [...]

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