Jeremy Grantham discussed with FT on a study they did at GMO recently. He warned of financial bubbles and advises on where should one Invest the upcoming "Seven Years of lean ".
Grantham cited a recent study the firm conducted on the financial bubbles happened in history. He thinks identifying and maneuvering around the bubbles is incredibly important for asset managers to safeguard the investors’ assets. Grantham and his team define a bubble as a statistically 40-year event. They identified 34 bubbles and according to Grantham 32 of them reverted to normal growth trend, including the most recent one with the US housing market.
Grantham sees there are two on-going bubbles in the world: UK and Australia house bubbles; and two bubbles being formed: commodity and emerging equity market. Grantham thinks Emerging market is attractive to investors as the developed world is growing 2% and they are growing at 5%, but their equity markets are priced for already rosy predictions.
After the stock market rally since March 2009, Grantham considers Europe stock market to be marginally expensive and US market startling expensive and he advises investor to be prudent and cautious, citing the multitude of overhanging economic problems we are facing.
Looking forward, Grantham thinks the next couple of years will be “seven lean years” for the stock investors, but he does advise investors to invest in high quality US stocks such as Coca-Cola and Johnson & Johnson, which have not joined the rally of the stock market but offer good return in the future.
Watch the FT.com video by clicking on the image:
It appears that Jeremy put money where his mouth is, as of 4Q09, as we reported here, this are his firm’s top holdings: Johnson & Johnson, Microsoft Corp., Oracle Corp., WalMart Stores Inc., Pfizer Inc,The CocaCola Company.
Thanks to Ravi Nagarajan of http://www.rationalwalk.com for the finding.
Grantham cited a recent study the firm conducted on the financial bubbles happened in history. He thinks identifying and maneuvering around the bubbles is incredibly important for asset managers to safeguard the investors’ assets. Grantham and his team define a bubble as a statistically 40-year event. They identified 34 bubbles and according to Grantham 32 of them reverted to normal growth trend, including the most recent one with the US housing market.
Grantham sees there are two on-going bubbles in the world: UK and Australia house bubbles; and two bubbles being formed: commodity and emerging equity market. Grantham thinks Emerging market is attractive to investors as the developed world is growing 2% and they are growing at 5%, but their equity markets are priced for already rosy predictions.
After the stock market rally since March 2009, Grantham considers Europe stock market to be marginally expensive and US market startling expensive and he advises investor to be prudent and cautious, citing the multitude of overhanging economic problems we are facing.
Looking forward, Grantham thinks the next couple of years will be “seven lean years” for the stock investors, but he does advise investors to invest in high quality US stocks such as Coca-Cola and Johnson & Johnson, which have not joined the rally of the stock market but offer good return in the future.
Watch the FT.com video by clicking on the image:
It appears that Jeremy put money where his mouth is, as of 4Q09, as we reported here, this are his firm’s top holdings: Johnson & Johnson, Microsoft Corp., Oracle Corp., WalMart Stores Inc., Pfizer Inc,The CocaCola Company.
Thanks to Ravi Nagarajan of http://www.rationalwalk.com for the finding.
