January 23, 2009
– Comments (5) |
RELATED TICKERS: ABB
Jeremy Grantham's new GMO letter. Read it and awaken.
-1 rec. I actually can't give you one, but i post that i would if i could. you should highlight, summarize, or pick out at least a quote and comment on it. just a link doesn't do anything to add to the discourse
He doesn't mention SI in there at all, does he..?
Great link! Demon, if you'd read the article/newsletter linked, I think you'd find it difficult to summarize a seven page, single-spaced document in any meaningful way.
A quote, commented on, would hardly capture even the hint of the whole of the content. I'll make a comment Kirk might have made: "A cogent analysis of how we got into the pickle we are in, what we can look forward to for the next seven years, and steps we might take to get out of the mess".
I read it but don't have it in front of me. Most interesting and relevant to me was Grantham's analysis of U.S. private debt-to-asset ratios. As I recall, he calcuated the ratio at ~50% at bubble beak and, depending on how you calculate asset marketdowns, we're getting close to 100% at present. The upshot, according to Grantham, is that we need to spend about 1.5 times GDP to get back to they healthier 50% ratio--or find some other valuation growth catalyst to get us there, i.e. another bubble appreciation in asset prices, or some economice growth engine. The good news is that we're in better shape than Japan was 10 years ago or Europe is now.
Grantham focuses more on the diagnosis of our problems (greed, bubble economy, incompetence) and less on solutions. But, as always, he provides a good sense of where the economy is at presently. As many of you know, Grantham pegged equities as trading a fair value when the S&P was at 950. Given the other ills in the economy and the tendency to overcorrect, he sees S&P 600ish a real possible.
As my new favorite quote goes, it will get worse before it gets worse.
No I didn't summarize, mainly because I think anybody who is a real investor would take the time to read something from a guy like Grantham. He's on my short list of must read quarterly letters.
Bruce Berkowitz at Fairholme, all of the Pimco letters (not because they are always brilliant or impartial- they clearly talk their book sometimes, but because they are so hooked up), Buffett's annual letter, Mike Avery or Will Danoff notes, and some others I'm sure I'll put up here when they have a really good one.