(GuruFocus, October 27, 2009) Jeremy Grantham published his 3Q09 Quarterly Letter entitled “Just Desserts and Markets Being Silly Again”. It is a must read. GMO now requires everyone wanting reading the document register, sorry for that. Few people offer as much free stuff as GuruFocus does.
Grantham has been cynical lately. After ridiculing everyone from the Nobel-prize winning president to the” holders of the stocks of ridiculously overleveraged and wounded corporations”, from Bernanke to, especially, Greenspan, he got down to business and made the following points on equity investing:
1. Economically, the next seven years (he calls them “Lean Years” after Joseph in the Book of Genesis) will see the developed economies to grow moderately less fat at about 2.25%.
2. The fair value of the S&P 500 is around 860, and or about 25% below its current value.
3. The overprice would move his normal forecast for market growth of 5.7% in the next seven years down by more than 3% a yeas.
4. Market will certainly surpass 1100, but the price does matter eventually and the market will be stopped.
5. Grantham hopes the market will drop painfully from the current level by 15%, but he guesses that US market will drop below fair value which is a 22% decline.
6. One of the bright spot in the US stock market is the quality issues, the blue chips that is, in case you forget what I am talking about. Jeremy Grantham forecasts the blue chips may outperform the S&P 500 by 7% or 9% over the "balance ex-quality".
Grantham made many tradable points, I recommend you read the The original Quarterly Letter
Grantham has been cynical lately. After ridiculing everyone from the Nobel-prize winning president to the” holders of the stocks of ridiculously overleveraged and wounded corporations”, from Bernanke to, especially, Greenspan, he got down to business and made the following points on equity investing:
1. Economically, the next seven years (he calls them “Lean Years” after Joseph in the Book of Genesis) will see the developed economies to grow moderately less fat at about 2.25%.
2. The fair value of the S&P 500 is around 860, and or about 25% below its current value.
3. The overprice would move his normal forecast for market growth of 5.7% in the next seven years down by more than 3% a yeas.
4. Market will certainly surpass 1100, but the price does matter eventually and the market will be stopped.
5. Grantham hopes the market will drop painfully from the current level by 15%, but he guesses that US market will drop below fair value which is a 22% decline.
6. One of the bright spot in the US stock market is the quality issues, the blue chips that is, in case you forget what I am talking about. Jeremy Grantham forecasts the blue chips may outperform the S&P 500 by 7% or 9% over the "balance ex-quality".
Grantham made many tradable points, I recommend you read the The original Quarterly Letter
