Jeremy Grantham’s 1Q09 Letter: Fantastic as usual

[scaredyclassic]

I tend to look at performance over the long haul, like from say, 1500 B.C. up to today. gold has done well for something with “no intrinsic value”.

you can’t run your car on cash.

[davelj]

[quote=scaredycat]I tend to look at performance over the long haul, like from say, 1500 B.C. up to today. gold has done well for something with “no intrinsic value”.

you can’t run your car on cash. [/quote]

Over the long haul, gold will keep up with inflation while cash (obviously) will not. But investment in “industry,” generically, will outperform gold because it will provide a real return above inflation, which gold will not. Yes, sometimes gold will command some premium when inflation expectations or risk premia are unusually high, but over the long haul gold is just an inflation hedge.

Personally, I’d rather own businesses, generically, than gold. Even if the cash they throw off depreciates if not reinvested over a period of time. And even if the valuation placed on them declines in times of high inflation and perceived risk. Over the long term, “industry” is a far better inflation hedge than gold.

But to each his own.

[davelj]

[quote=scaredycat]I tend to look at performance over the long haul, like from say, 1500 B.C. up to today. gold has done well for something with “no intrinsic value”.

you can’t run your car on cash. [/quote]

Over the long haul, gold will keep up with inflation while cash (obviously) will not. But investment in “industry,” generically, will outperform gold because it will provide a real return above inflation, which gold will not. Yes, sometimes gold will command some premium when inflation expectations or risk premia are unusually high, but over the long haul gold is just an inflation hedge.

Personally, I’d rather own businesses, generically, than gold. Even if the cash they throw off depreciates if not reinvested over a period of time. And even if the valuation placed on them declines in times of high inflation and perceived risk. Over the long term, “industry” is a far better inflation hedge than gold.

But to each his own.

[davelj]

[quote=scaredycat]I tend to look at performance over the long haul, like from say, 1500 B.C. up to today. gold has done well for something with “no intrinsic value”.

you can’t run your car on cash. [/quote]

Over the long haul, gold will keep up with inflation while cash (obviously) will not. But investment in “industry,” generically, will outperform gold because it will provide a real return above inflation, which gold will not. Yes, sometimes gold will command some premium when inflation expectations or risk premia are unusually high, but over the long haul gold is just an inflation hedge.

Personally, I’d rather own businesses, generically, than gold. Even if the cash they throw off depreciates if not reinvested over a period of time. And even if the valuation placed on them declines in times of high inflation and perceived risk. Over the long term, “industry” is a far better inflation hedge than gold.

But to each his own.

[davelj]

[quote=scaredycat]I tend to look at performance over the long haul, like from say, 1500 B.C. up to today. gold has done well for something with “no intrinsic value”.

you can’t run your car on cash. [/quote]

Over the long haul, gold will keep up with inflation while cash (obviously) will not. But investment in “industry,” generically, will outperform gold because it will provide a real return above inflation, which gold will not. Yes, sometimes gold will command some premium when inflation expectations or risk premia are unusually high, but over the long haul gold is just an inflation hedge.

Personally, I’d rather own businesses, generically, than gold. Even if the cash they throw off depreciates if not reinvested over a period of time. And even if the valuation placed on them declines in times of high inflation and perceived risk. Over the long term, “industry” is a far better inflation hedge than gold.

But to each his own.

[davelj]

[quote=scaredycat]I tend to look at performance over the long haul, like from say, 1500 B.C. up to today. gold has done well for something with “no intrinsic value”.

you can’t run your car on cash. [/quote]

Over the long haul, gold will keep up with inflation while cash (obviously) will not. But investment in “industry,” generically, will outperform gold because it will provide a real return above inflation, which gold will not. Yes, sometimes gold will command some premium when inflation expectations or risk premia are unusually high, but over the long haul gold is just an inflation hedge.

Personally, I’d rather own businesses, generically, than gold. Even if the cash they throw off depreciates if not reinvested over a period of time. And even if the valuation placed on them declines in times of high inflation and perceived risk. Over the long term, “industry” is a far better inflation hedge than gold.

But to each his own.

[davelj]

[quote=scaredycat]
you can’t run your car on cash. [/quote]

I was unaware that cars could run on gold. But, more importantly, if we get to the point where folks are unwilling to trade gasoline for cash, I’m pretty sure that whatever physical gold you have is likely to be forcibly taken from you.

[davelj]

[quote=scaredycat]
you can’t run your car on cash. [/quote]

I was unaware that cars could run on gold. But, more importantly, if we get to the point where folks are unwilling to trade gasoline for cash, I’m pretty sure that whatever physical gold you have is likely to be forcibly taken from you.

[davelj]

[quote=scaredycat]
you can’t run your car on cash. [/quote]

I was unaware that cars could run on gold. But, more importantly, if we get to the point where folks are unwilling to trade gasoline for cash, I’m pretty sure that whatever physical gold you have is likely to be forcibly taken from you.

[davelj]

[quote=scaredycat]
you can’t run your car on cash. [/quote]

I was unaware that cars could run on gold. But, more importantly, if we get to the point where folks are unwilling to trade gasoline for cash, I’m pretty sure that whatever physical gold you have is likely to be forcibly taken from you.

[davelj]

[quote=scaredycat]
you can’t run your car on cash. [/quote]

I was unaware that cars could run on gold. But, more importantly, if we get to the point where folks are unwilling to trade gasoline for cash, I’m pretty sure that whatever physical gold you have is likely to be forcibly taken from you.

[patientrenter]

scaredycat, I think you show evidence of having been abused at an impressionable age – by the financial markets.

Certainly hard assets can play a useful role in an investment strategy. But it is also true that assets used to provide goods and services for others usually produce income, whereas commodities can only hope to preserve their value.

Would you rather own an apartment building worth $1 mill, or gold bars worth $1 mill? Obviously, if you buy either at peaks, you could get your clock cleaned. But if you buy in a disciplined way, not chasing returns, and spreading your purchases over a variety of assets, then it’s reasonable to expect that investing in some income-producing businesses would help out a portfolio.

If you are rich enough, or frugal enough, then you can just stuff everything in gold and hope for the best. Most of us are not that rich, or abstemious.

[patientrenter]

scaredycat, I think you show evidence of having been abused at an impressionable age – by the financial markets.

Certainly hard assets can play a useful role in an investment strategy. But it is also true that assets used to provide goods and services for others usually produce income, whereas commodities can only hope to preserve their value.

Would you rather own an apartment building worth $1 mill, or gold bars worth $1 mill? Obviously, if you buy either at peaks, you could get your clock cleaned. But if you buy in a disciplined way, not chasing returns, and spreading your purchases over a variety of assets, then it’s reasonable to expect that investing in some income-producing businesses would help out a portfolio.

If you are rich enough, or frugal enough, then you can just stuff everything in gold and hope for the best. Most of us are not that rich, or abstemious.

[patientrenter]

scaredycat, I think you show evidence of having been abused at an impressionable age – by the financial markets.

Certainly hard assets can play a useful role in an investment strategy. But it is also true that assets used to provide goods and services for others usually produce income, whereas commodities can only hope to preserve their value.

Would you rather own an apartment building worth $1 mill, or gold bars worth $1 mill? Obviously, if you buy either at peaks, you could get your clock cleaned. But if you buy in a disciplined way, not chasing returns, and spreading your purchases over a variety of assets, then it’s reasonable to expect that investing in some income-producing businesses would help out a portfolio.

If you are rich enough, or frugal enough, then you can just stuff everything in gold and hope for the best. Most of us are not that rich, or abstemious.

[patientrenter]

scaredycat, I think you show evidence of having been abused at an impressionable age – by the financial markets.

Certainly hard assets can play a useful role in an investment strategy. But it is also true that assets used to provide goods and services for others usually produce income, whereas commodities can only hope to preserve their value.

Would you rather own an apartment building worth $1 mill, or gold bars worth $1 mill? Obviously, if you buy either at peaks, you could get your clock cleaned. But if you buy in a disciplined way, not chasing returns, and spreading your purchases over a variety of assets, then it’s reasonable to expect that investing in some income-producing businesses would help out a portfolio.

If you are rich enough, or frugal enough, then you can just stuff everything in gold and hope for the best. Most of us are not that rich, or abstemious.

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