Results 151–179 of 179 found.
On the Road to Zero Growth
In a new quarterly letter to institutional clients, GMO chief investment strategist Jeremy Grantham makes the case that, "the U.S. GDP growth rate that we have become accustomed to for over a hundred years -- in excess of 3% a year -- is not just hiding behind temporary setbacks. It is gone forever." He cautions, "investors should be wary of a Fed whose policy is prefaced on the idea that 3% growth for the U.S. is normal."
Reports of the Death of Equities Have Been Greatly Exaggerated: Explaining Equity Returns
Where do equity returns come from? As questions go, it may not be quite as profound as "Why are we here?" or as embarrassingly baffling to most of us as "Why is the sky blue?", but considering the number of people out there who spend their working lives dealing in the financial markets, it is a question asked less often, and usually answered less well, than it should be.
Welcome to Dystopia!
In a new quarterly letter to GMO's institutional clients today, chief investment strategist Jeremy Grantham warns: "We are five years into a severe global food crisis" that in the long term "will threaten global stability and global growth." An accompanying investment commentary by GMO head of asset allocation Ben Inker focuses on risks of eurozone equities, which he describes as "somewhere between fair value and mildly cheap" but not worthy yet of "a table-pounding endorsement."
The Pain in Spain - Is There Time for Hope and Change?
The intertwined problems of sovereign debt, European banking systems, and the euro itsself will continue to be debated despite the measures that came out of Junes meetings in Europe. Yet it is the economic and financial situation in Spain that is driving policy now. The precedents being set because of Spain are in a sense more important than discussions about the euro, for decisions about the euro can be delayed, whereas the pain in Spain is acute and the time for decisions is now.
Profits for the Long Run: Affirming the Case for Quality
Low-risk investing is one of the hot topics in equity investing these days. This is a far cry from the environment that prevailed when we launched the Quality Strategy in early 2004. Back then, low-risk investing was a nascent concept. Arguing that risk was priced backwards was a rarity in our industry (although, oddly, it was more accepted in academia). With the passing of time, the benefits of low-risk investing have become more widely accepted. Today, a wide array of low-risk strategies is now available.
The What-Why-When-How Guide to Owning Emerging Country Debt
As GMO looks forward to its 20th year managing emerging debt portfolios, we offer our perspectives on the frequently-asked questions that have come up over the years, including: What is meant by emerging debt (external, local, corporate)? Why and when to own it: portfolio fit considerations, alpha, and absolute and relative value. How to own it: dedicated external, local, or corporate; blended; or multi asset (including emerging equities).
The Flaws of Finance
Bad Models, or, Why We Need a Hippocratic Oath in Finance. The NRA is well-known for its slogan Guns dont kill people; people kill people. I have often heard fans of financial modelling use a similar line of defence. However, one of my favourite comedians has a rebuttal that I find most compelling. He points out that Guns dont kill people; people kill people, but so do monkeys if you give them guns. This is akin to my view of financial models. Give a monkey a value at risk (VaR) model or the capital asset pricing model (CAPM) and youve got a potential financial disaster on your hands.
My Sister's Pension Assets and Agency Problems
Investment behavior is driven by career risk. In the professional investment business we are all agents, managing other peoples money. The prime directive, as Keynes knew so well, is first and last to keep your job. To do this, he explained that you must never, ever be wrong on your own. To prevent this calamity, professional investors pay ruthless attention to what other investors in general are doing. The great majority go with the flow, either completely or partially. This creates herding, or momentum, which drives prices far above or far below fair price.
What Goes Up Must Come Down!
Whilst we at GMO fret over evidence of the strained nature of profit margins, the ever bullish Wall Street analysts expect profit margins to continue to rise! Witness Exhibit 4. In our search for evidence of a structural break, this simple-minded extrapolation gives us some comfort because the Wall Street consensus has a pretty good record of being completely and utterly wrong.
Investment Advice from Your Uncle Polonius
Believe in history. In investing Santayana is right: history repeats and repeats, and forget it at your peril. All bubbles break, all investment frenzies pass away. You absolutely must ignore the vested interests of the industry and the inevitable cheerleaders who will assure you that this time its a new high plateau or a permanently higher level of productivity. The market is gloriously inefficient and wanders far from fair price but eventually, after breaking your heart and your patience, it will go back to fair value. Your task is to survive until that happens. Heres how.
Emerging Consumers Drive Gold Prices: Who Knew?
Conventional wisdom has it wrong. The prevailing view is that the rapid rise of gold prices over the past 10 years has been caused by monetary authorities in the developed world debasing their currencies. By this logic, investors in the developed world have hedged debasement risk by pouring money into gold, both in the form of direct purchases and via ETFs. We believe that gold is an emerging markets asset as much as it is a bet against the Fed and that much of the rise in gold prices has been driven by purchases by emerging consumers, who are driven primarily by financial repression.
Capturing Domestic Demand in Emerging Markets Neither Small Caps Nor Multinationals Are a Good Proxy
As domestic demand play gains momentum, we hear increasingly that the best way to capture this theme is to buy small cap emerging stocks. We believe, however, that this is a mistake and that focusing on companies that speci?cally serve domestic demand is a more effective way to exploit the opportunity. Besides, why buy a proxy when you can buy the real thing?
You Can Bank on It: European Banks Need Tons of Money
The global economy has been one victim of the recent crisis of European sovereign debt, but Europes banking sector and the investors who have financed it will be the next. A great deal of pushing and shoving has forced European authorities to accept that there is a problem in their banking sector. Some are working hard to understand the problems and others see themselves as immune, though they probably are not; but all have been tempted to let political factors influence decisions that need to be based on sound economic and regulatory footings.
The Shortest Quarterly Letter Ever
Sadly, I feel increasingly vindicated by my seven lean years forecast of 2 years ago. The U.S., and to some extent the world, will not easily recover from the current level of debt overhang, the loss of perceived asset values, and the gross ?nancial incompetence on a scale hitherto undreamed of. Separate from the seven lean years syndrome, the U.S. and the developed world have permanently slowed in their GDP growth. This is mostly the result of slowing population growth, an aging pro?le, and an overcommitment to the old, which leaves inadequate resources for growth.
What the Beta Puzzle Tells Us about Investing
One anomaly that has generated considerable discussion recently in both academic and practitioner circles is what one might call the 'beta puzzle': portfolios of low beta stocks have historically matched or beaten broader equity market returns, and have done so with significantly lower volatility. At the same time, high beta stocks have significantly underperformed, exhibiting lower returns while appearing to take much more risk.
Et tu, Berlusconi? The Daunting (But Not Always Insuperable) Arithmetic of Sovereign Debt
This paper sets itself two tasks. The first is to construct a simple model that would arithmeticize the dynamics of sovereign debt so as not to get hung up with all of the acronyms and programs designed to save the world. The second is to put this into the context of the European sovereign debt problem and hazard some opinions as to which options can work, and which cannot. Grand solutions may yet come, but they probably will not come soon enough. Now is the time to separate the daunting from the insuperable, and to fix both sets of nations.
Danger: Children at Play
I am not an expert in euro ?nance by a wide margin. But I know one thing. Forget the debt for a second: the current uncompetitiveness of Greece, Ireland, Portugal, Spain, and Italy did not occur quickly. It took 10 long and obvious years. They had to work at it. The cure was always going to cause a lot of pain and threaten the well-being of the euro. So why didnt the bosses attempt to ? x it early on when it would have been so much easier? Today these problems have become much tougher, but still the decisions are only half made and the cans get kicked and kicked again.
Resource Limitations 2: Separating the Dangerous from the Merely Serious
Last quarter I tried to make the case that the inevitable mismatch between ?nite resources and exponential population growth had ?nally shown its true face after many false alarms. This was made manifest through a remarkably bubble-like explosion of prices for raw materials. Importantly, prices surged twice in four years, which is a most unbubble-like event in our history book. The data suggested to us that rarest of rare birds; a new paradigm. And a very uncomfortable one at that.
A Value Investor?s Perspective on Tail Risk Protection: An Ode to the Joy of Cash
The range of tail risk protection products seems to be exploding. Investment banks are offering ?solutions? to investors and fund management companies are launching ?black swan? funds. There can be little doubt that tail risk protection is certainly an investment topic du jour. The very popularity of this alone should spell caution to investors. Effectively, you should seek to buy insurance when nobody wants it. An alternative way of phrasing this is to say that insurance (and that is exactly what tail risk protection is) is as much of a value proposition as any other element of investing.
Time To Be Serious (and probably too early) Once Again
Lighten up on risk-taking now and don't wait for October 1. But, if you listen to my advice, be prepared to be early! A word on being too early in investing: if you are a value manager, you buy cheap assets. If you are very ?experienced,? a euphemism for having suffered many setbacks, you try hard to reserve your big bets for when assets are very cheap. But even then, unless you are incredibly lucky, you will run into extraordinarily cheap, even bizarrely cheap, assets from time to time, and when that happens you will have owned them for quite a while already and will be dripping in red ink.
Time to Wake Up: Days of Abundant Resources and Falling Prices Are Over Forever
The world is using up its natural resources at an alarming rate, and this has caused a permanent shift in their value. We all need to adjust our behavior to this new environment. It would help if we did it quickly.
The Seven Immutable Laws of Investing
This dearth of assets offering a margin of safety raises a conundrum for the asset allocation professional: what does one do when nothing is cheap? Personally, I?d seek to raise cash. This is obvious not for its uninspiring near-zero yield, but because it acts as dry powder ? a store of value to deploy when the opportunity set offered by Mr. Market becomes more appealing. And this is likely, as long as the emotional pendulum of investors oscillates between the depths of despair and irrational exuberance as it always has done. Of course, the timing of these swings remains as nebulous as ever.
I Like Ike: A Powerful Warning Ignored, January 17, 1961
Fifty years have gone by in a flash since President Eisenhower, three days from the end of his eight years in office, pushed to give an atypical end-of-term address to the people. It was not the most memorable speech given by an American President, but it was probably the most unusual and the most unexpected. Eisenhower?s speech, in contrast to most great speeches, appeared at the time to have come out of left field, and 50 years later it seems even more remarkable, unusual, and relevant. The speech gives us an opportunity to see how President Eisenhower might have graded us.
Night of the Living Fed
This is a summary of Grantham Mayo Von Otterloo chairman Jeremy Grantham's 3Q 2010 newsletter. Grantham notes that in the third year of a presidential cycle, risky, highly volatile stocks have outperformed low-risk stocks by an average of 18 percent per year since 1964. Levels of 1400 or 1500 on the S&P 500 one year from now are about a 50/50 bet. The biggest threats to this possibility are that Congress will initiate a new trade war, or that the Federal Reserve will start a currency dispute with quantitative easing.
This is a summary of Jeremy Grantham's 2Q 2020 newsletter. Grantham says that weak a weak economy and declining or flat prices are likely for the immediate future. A global equity portfolio with annual returns of 6 percent plus inflation is still possible, however, by overweighting high quality U.S. stocks and underweighting other U.S. stocks. Grantham also comments on the financial reform bill, fear and speculation in the stock market, global warming, the 'seven lean years' hypothesis, aging populations and health care costs.
Playing With Fire (A Possible Race to the Old Highs)
Is there a new bubble on the horizon in the US? Having shot through GMO?s fair value estimate of 875, Jeremy Grantham's first quarter letter asks whether current policies and conditions are pushing the S&P to approach its old highs. Included in the letter is a link to a video of an interview about investment bubbles, done with Jeremy by the Financial Times on April 19. The Letters to the Investment Committee XVI is part one of a speech given by Jeremy discussing the Potential Disadvantages of Graham & Dodd-type Investing.
Was It All Just A Bad Dream? Or, Ten Lessons Not Learnt
Montier reflects on ten lessons the investment industry did not learn during the market declines of 2008 and 2009. He says that it is time to abandon the efficient market hypothesis and acknowledge the role the housing bubble played in the financial crisis. In addition, he notes that the principles of value investing still hold true: Buy when assets are cheap, and sell when they are expensive.
Results 151–179 of 179 found.