Montier: Was it all just a bad dream? Or, ten lessons not learnt
James Montier, a member of GMO‘s Asset Allocation Team, examines whether we learned anything from the market declines of 2008 and early 2009. In this paper – his first since joining GMO from Société Générale – he outlines ten of the lessons he believes not to have been learned.
Here is the opening paragraph:
“It appears as if the market declines of 2008 and early 2009 are being treated as nothing more than a bad dream, as if the investment industry has gone right back to business as usual. This extreme brevity of financial memory is breathtaking. Surely, we should attempt to look back and learn something from the mistakes that gave rise to the worst period in markets since the Great Depression. In an effort to engage in exactly this kind of learning experience, I have put together my list of the top ten lessons we seem to have failed to learn. So let’s dive in!”
And the ten lessons:
Lesson 1: Markets aren’t efficient.
Lesson 2: Relative performance is a dangerous game.
Lesson 3: The time is never different.
Lesson 4: Valuation matters.
Lesson 5: Wait for the fat pitch.
Lesson 6: Sentiment matters.
Lesson 7: Leverage can’t make a bad investment good, but it can make a good investment bad!
Lesson 8: Over-quantification hides real risk.
Lesson 9: Macro matters.
Lesson 10: Look for sources of cheap insurance.
Click here for the full report. (Click through from the link next to Montier’s picture. Please note that a short registration is required.)
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SocGen's proposed portfolio for a global economic collapse (Blogging Stocks, 11/19/09)
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