Jeremy Grantham’s 1Q09 Letter: Fantastic as usual

[davelj]

You might have to register (it’s free) to read this.

As usual, Grantham writes with piercing logic and clarity. One of the best minds in all of finance.

http://www.gmo.com/websitecontent/JGLetter_1Q09.pdf

[jpinpb]

So he predicts a VL recovery.

I agree that he sums up the past two decade bubble, pop, bubble pretty well:

“So we in the U.S. developed almost single-handedly the tech bubble of the late 1990s, and then engineered a U.S. housing bubble and a flood of excess dollars that almost guaranteed that global assets would follow suit.”

I like his analogy:

“Almost everyone has had the thought that if overconsumption and excessive debt have caused our problems in the U.S., then pushing rates so low that they practically beg us to borrow and consume some more seems an odd cure. We acknowledge that a stiff whiskey can get the drunk to stagger to his feet and make it a few blocks, but it doesn’t seem like a probable long-term answer.”

And concur “The widespread acceptance of rational expectations and the efficient market hypothesis has taught us never to underestimate the ability of the economics establishment to get an idea brutally and expensively wrong.”

Interesting analysis of Germany, Japan and U.K.

Pretty accurate, “We are unwilling to take a very sharp economic downturn even if such a downturn makes a quick, healthy recovery more likely. Rather, we seem to be making a desperate attempt to make the setback shallower, perhaps at the expense of a longer recovery period.”

“Month by month we are voting for desperate life support systems – at the tax payers’ expense – for zombie banks and industrial companies that have been technically bankrupted by years of excess and almost criminally bad management.”

Why couldn’t he be Sec. Treas.

“If we had let all the reckless bankers go out of business, we would not have blown up our houses or our factories, or carted off our machine tools to Russia, nor would we have machine gunned any of our educated workforce, even our bankers! When the smoke had cleared, those with money would have bought up the bankrupt assets at cents on the dollar and we would have had a sharp recovery in the economy. Moral hazard would have been crushed, lessons learned for a generation or two, and assets would be in stronger, more efficient hands. Debt is accounting, not reality.”

[jpinpb]

So he predicts a VL recovery.

I agree that he sums up the past two decade bubble, pop, bubble pretty well:

“So we in the U.S. developed almost single-handedly the tech bubble of the late 1990s, and then engineered a U.S. housing bubble and a flood of excess dollars that almost guaranteed that global assets would follow suit.”

I like his analogy:

“Almost everyone has had the thought that if overconsumption and excessive debt have caused our problems in the U.S., then pushing rates so low that they practically beg us to borrow and consume some more seems an odd cure. We acknowledge that a stiff whiskey can get the drunk to stagger to his feet and make it a few blocks, but it doesn’t seem like a probable long-term answer.”

And concur “The widespread acceptance of rational expectations and the efficient market hypothesis has taught us never to underestimate the ability of the economics establishment to get an idea brutally and expensively wrong.”

Interesting analysis of Germany, Japan and U.K.

Pretty accurate, “We are unwilling to take a very sharp economic downturn even if such a downturn makes a quick, healthy recovery more likely. Rather, we seem to be making a desperate attempt to make the setback shallower, perhaps at the expense of a longer recovery period.”

“Month by month we are voting for desperate life support systems – at the tax payers’ expense – for zombie banks and industrial companies that have been technically bankrupted by years of excess and almost criminally bad management.”

Why couldn’t he be Sec. Treas.

“If we had let all the reckless bankers go out of business, we would not have blown up our houses or our factories, or carted off our machine tools to Russia, nor would we have machine gunned any of our educated workforce, even our bankers! When the smoke had cleared, those with money would have bought up the bankrupt assets at cents on the dollar and we would have had a sharp recovery in the economy. Moral hazard would have been crushed, lessons learned for a generation or two, and assets would be in stronger, more efficient hands. Debt is accounting, not reality.”

[jpinpb]

So he predicts a VL recovery.

I agree that he sums up the past two decade bubble, pop, bubble pretty well:

“So we in the U.S. developed almost single-handedly the tech bubble of the late 1990s, and then engineered a U.S. housing bubble and a flood of excess dollars that almost guaranteed that global assets would follow suit.”

I like his analogy:

“Almost everyone has had the thought that if overconsumption and excessive debt have caused our problems in the U.S., then pushing rates so low that they practically beg us to borrow and consume some more seems an odd cure. We acknowledge that a stiff whiskey can get the drunk to stagger to his feet and make it a few blocks, but it doesn’t seem like a probable long-term answer.”

And concur “The widespread acceptance of rational expectations and the efficient market hypothesis has taught us never to underestimate the ability of the economics establishment to get an idea brutally and expensively wrong.”

Interesting analysis of Germany, Japan and U.K.

Pretty accurate, “We are unwilling to take a very sharp economic downturn even if such a downturn makes a quick, healthy recovery more likely. Rather, we seem to be making a desperate attempt to make the setback shallower, perhaps at the expense of a longer recovery period.”

“Month by month we are voting for desperate life support systems – at the tax payers’ expense – for zombie banks and industrial companies that have been technically bankrupted by years of excess and almost criminally bad management.”

Why couldn’t he be Sec. Treas.

“If we had let all the reckless bankers go out of business, we would not have blown up our houses or our factories, or carted off our machine tools to Russia, nor would we have machine gunned any of our educated workforce, even our bankers! When the smoke had cleared, those with money would have bought up the bankrupt assets at cents on the dollar and we would have had a sharp recovery in the economy. Moral hazard would have been crushed, lessons learned for a generation or two, and assets would be in stronger, more efficient hands. Debt is accounting, not reality.”

[jpinpb]

So he predicts a VL recovery.

I agree that he sums up the past two decade bubble, pop, bubble pretty well:

“So we in the U.S. developed almost single-handedly the tech bubble of the late 1990s, and then engineered a U.S. housing bubble and a flood of excess dollars that almost guaranteed that global assets would follow suit.”

I like his analogy:

“Almost everyone has had the thought that if overconsumption and excessive debt have caused our problems in the U.S., then pushing rates so low that they practically beg us to borrow and consume some more seems an odd cure. We acknowledge that a stiff whiskey can get the drunk to stagger to his feet and make it a few blocks, but it doesn’t seem like a probable long-term answer.”

And concur “The widespread acceptance of rational expectations and the efficient market hypothesis has taught us never to underestimate the ability of the economics establishment to get an idea brutally and expensively wrong.”

Interesting analysis of Germany, Japan and U.K.

Pretty accurate, “We are unwilling to take a very sharp economic downturn even if such a downturn makes a quick, healthy recovery more likely. Rather, we seem to be making a desperate attempt to make the setback shallower, perhaps at the expense of a longer recovery period.”

“Month by month we are voting for desperate life support systems – at the tax payers’ expense – for zombie banks and industrial companies that have been technically bankrupted by years of excess and almost criminally bad management.”

Why couldn’t he be Sec. Treas.

“If we had let all the reckless bankers go out of business, we would not have blown up our houses or our factories, or carted off our machine tools to Russia, nor would we have machine gunned any of our educated workforce, even our bankers! When the smoke had cleared, those with money would have bought up the bankrupt assets at cents on the dollar and we would have had a sharp recovery in the economy. Moral hazard would have been crushed, lessons learned for a generation or two, and assets would be in stronger, more efficient hands. Debt is accounting, not reality.”

[jpinpb]

So he predicts a VL recovery.

I agree that he sums up the past two decade bubble, pop, bubble pretty well:

“So we in the U.S. developed almost single-handedly the tech bubble of the late 1990s, and then engineered a U.S. housing bubble and a flood of excess dollars that almost guaranteed that global assets would follow suit.”

I like his analogy:

“Almost everyone has had the thought that if overconsumption and excessive debt have caused our problems in the U.S., then pushing rates so low that they practically beg us to borrow and consume some more seems an odd cure. We acknowledge that a stiff whiskey can get the drunk to stagger to his feet and make it a few blocks, but it doesn’t seem like a probable long-term answer.”

And concur “The widespread acceptance of rational expectations and the efficient market hypothesis has taught us never to underestimate the ability of the economics establishment to get an idea brutally and expensively wrong.”

Interesting analysis of Germany, Japan and U.K.

Pretty accurate, “We are unwilling to take a very sharp economic downturn even if such a downturn makes a quick, healthy recovery more likely. Rather, we seem to be making a desperate attempt to make the setback shallower, perhaps at the expense of a longer recovery period.”

“Month by month we are voting for desperate life support systems – at the tax payers’ expense – for zombie banks and industrial companies that have been technically bankrupted by years of excess and almost criminally bad management.”

Why couldn’t he be Sec. Treas.

“If we had let all the reckless bankers go out of business, we would not have blown up our houses or our factories, or carted off our machine tools to Russia, nor would we have machine gunned any of our educated workforce, even our bankers! When the smoke had cleared, those with money would have bought up the bankrupt assets at cents on the dollar and we would have had a sharp recovery in the economy. Moral hazard would have been crushed, lessons learned for a generation or two, and assets would be in stronger, more efficient hands. Debt is accounting, not reality.”

[patientrenter]

Good stuff. Worth reading. I cannot find anything I disagree with. He expresses eloquently what is a mere blob in the back of my mind.

[patientrenter]

Good stuff. Worth reading. I cannot find anything I disagree with. He expresses eloquently what is a mere blob in the back of my mind.

[patientrenter]

Good stuff. Worth reading. I cannot find anything I disagree with. He expresses eloquently what is a mere blob in the back of my mind.

[patientrenter]

Good stuff. Worth reading. I cannot find anything I disagree with. He expresses eloquently what is a mere blob in the back of my mind.

[patientrenter]

Good stuff. Worth reading. I cannot find anything I disagree with. He expresses eloquently what is a mere blob in the back of my mind.

[temeculaguy]

I like that guy, dude’s got game and balance, nice read. Here’s what I didn’t like, he presented an extremely well thought out and well researched argument. It reinforces the fact, that I screwed up and missed the bottom in the stock market during the first week of march. I actually already felt I did but was kinda thinking I’d get a second chance sometime in the next 12 months. 56% probablility and rapidly decling was the aggregate prediction at the end but the narrative wasn’t as optimistic, sometimes the one picture you don’t want to look at is a mirror.

[temeculaguy]

I like that guy, dude’s got game and balance, nice read. Here’s what I didn’t like, he presented an extremely well thought out and well researched argument. It reinforces the fact, that I screwed up and missed the bottom in the stock market during the first week of march. I actually already felt I did but was kinda thinking I’d get a second chance sometime in the next 12 months. 56% probablility and rapidly decling was the aggregate prediction at the end but the narrative wasn’t as optimistic, sometimes the one picture you don’t want to look at is a mirror.

[temeculaguy]

I like that guy, dude’s got game and balance, nice read. Here’s what I didn’t like, he presented an extremely well thought out and well researched argument. It reinforces the fact, that I screwed up and missed the bottom in the stock market during the first week of march. I actually already felt I did but was kinda thinking I’d get a second chance sometime in the next 12 months. 56% probablility and rapidly decling was the aggregate prediction at the end but the narrative wasn’t as optimistic, sometimes the one picture you don’t want to look at is a mirror.

[temeculaguy]

I like that guy, dude’s got game and balance, nice read. Here’s what I didn’t like, he presented an extremely well thought out and well researched argument. It reinforces the fact, that I screwed up and missed the bottom in the stock market during the first week of march. I actually already felt I did but was kinda thinking I’d get a second chance sometime in the next 12 months. 56% probablility and rapidly decling was the aggregate prediction at the end but the narrative wasn’t as optimistic, sometimes the one picture you don’t want to look at is a mirror.

[Author]

Posts