Grantham Releases Updated 7-Year Asset Class Return Forecasts

Tyler Durden's picture

Jeremy Grantham, who has been rather vocal in his condemnation of the Fed recently, and has been rather lukewarm in his endorsement of equities as an asset class, has released an updated (as of Oct 31) estimate for 7 Year returns by asset class. And it has bad news for pension funds which have a rather high bogey of about 8% per year. If Grantham is correct the 'new normal' (which is really the normal normal but with the cheap credit spigot taken away due to a new deleveraging regime) also means that pension fund actuarial models have to be scrapped as they will likely not be able to attain the kinds of returns needed to keep them solvent based on capital appreciation expectations. Where Grantham sees the best return potential is in international and emerging equities, presumably on the assumption that decoupling will take place. On the other hand, many are increasingly seeing the possibility of a China topping as a major risk factor. While Grantham is bearish on small cap US equities and sees just a modest outperformance of large caps, what he hates the most are all bonds, where in four out of five categories he see a negative 7 year return. Perhaps it is time for a Rosie-Grantham round table.

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jus_lite_reading's picture

that pension fund actuarial models have to be scrapped as they will likely not be able to attain the kinds of returns needed to keep them solvent based on capital appreciation expectations

Bartanist's picture

What the heck is with the "managed timber"? Is that the new tripe he is selling to his clients?

So, growth is out and HFT manipulation of the "US HIgh Quality" names is in?

I am a Man I am Forty's picture

"managed timber", what nonsense, housing down and people using less and less paper but timber is going to go up?  Total speculation.

jus_lite_reading's picture

Shhhhhh! Don't let anyone know the dirty little secret!

ShankyS's picture

If timber will be a top performer, then the other assumptions are out of whack. This makes no sense to me.

Whatta's picture

What the heck is with the "managed timber"?


I think its a euphemism thing. Something to do with Viagra?

High Plains Drifter's picture

Too bad the pension funds didn 't buy gold and lots of it.

tmosley's picture

Yeah, people might actually have been able to retire without eating dogfood.

jus_lite_reading's picture

Aren't social secuirty beneficiaries supposed to be getting a 25% COLA?


glenlloyd's picture

I think it was 25% more dogfood...iirc

the rookie cynic's picture

How 'bout including a forecast for real estate, US dollar, precious metals, soft commodities, and oil? Stock and bonds are not the only games in town after all. These forecast are interesting, but rather meaningless in the overall context of general economic upheaval.

Pladizow's picture

Why exclude gold?

I dont know if John Williams will agree with a 2.5% inflation assumption?

repete's picture

Well there is not enough gold for everyone to invest in, period!

Pladizow's picture

Please further explain your comment.

What is there enough of, for EVERYONE to invest in?

And what asset class does EVERYONE invest in?

repete's picture

If everyone tried to exchange their rapidly devaluing paper for gold that would drive the price way too high for paper holders to feel comfortable with.  i think there may be some of that discomfort going on in silver right now!

bingocat's picture

Answer to the first question is "Themselves". It is, unfortunately, not the answer to the second.

RobotTrader's picture

CPI came in at one of the lowest readings ever.

And crude oil just cratered $5 in a matter of days, so next month's CPI will probably be even lower.

TheProphet's picture

What is this CPI based on? Clearly not gas, milk, and cereal.

ShankyS's picture

CPlie you mean. More BLS BS. Nothing can be trusted.

RobotTrader's picture

A little too late for that report to come out.

Many stocks are already up huge since the 2008 lows.

Once in a lifetime gain in stocks has already happened.

Deep cyclicals like CAT which are already 4-baggers

$20 to $80

6 String's picture

Jim Chanos said something interesting earlier this year when he predicted with his best guess that China's real estate bubble would probably start to unwind in late '10. Something to think about:

"A lot of people are going to be rethinking their entire investment approach when China's credit bubble pops."

He also waxed that "The ultimate defination of a bubble is when the cash flows can't service the debt."  I wonder what the owner's equivalent rent is in mainland China? I'm guessing it's not good, as we are hearing real anecdotal evidence right here on ZH.

Chanos should be put on that round table, while he agrees with Rosie--his bar bell is short commodities being ramped up in the preposterous China growth story and anything Netflix.

If Chanos is right, I also expect to see Gold temporarily punished, along with silver? Thoughts?

goldmiddelfinger's picture

If Jim Chanos is right, the ChiComms won't be letting his investor's money out of the country.

goldmiddelfinger's picture

The immenient emerging market implosion will destroy him and his models. Retirement for you Grantham. You've jumped the shark w Maria and your 15 minutes of celebrity have been brittle indeed.

Superdrol's picture

What about the asset class that takes opposite trades against Nic Lenor and David 'Double Chin' Rosenberg that have been dead wrong about the gloom and doom which will not probably come for another 15 years and 9,999,999 points later ?


That indeed has been the best securitized asset YTD.

HarryWanger's picture

Exactly. Lots of fools lost money listening to those guys. This isn't rocket science. We had our "great recession" that was the disaster they all were looking for. Great. Move on. Why look silly trying to predict another "disaster"?

CrashisOptimistic's picture

Dood, I don't quite know what world you're living in, but it's hard to think in terms of "another" disaster while this one still has S&P levels equal to 1998.  That's 12 years of nothing.  The real question is, with oil priced 4 or 5 times higher than 1998, why in hell do you imagine that NOW, this point in time, is what turns around 12 years of nothing when the lifeblood of civilization is leaking away.

Bay of Pigs's picture

No doubt. And not only that, many refuse to see how stocks have been literally destroyed against gold. Check out the Dow/Gold ratio. Silver is just now catching up, and leading gold. It has a LONG way to go from here. $50 next year wouldn't surprise me as physical shortages and delivery delays hit hard.

paddy0761's picture

I can't see the forest for the trees.

Don Mattingly's picture

This is garbage. Look at his plus minus figures at the bottom. How about I throw some shit on the wall see what sticks and put it on a chart?

ShankyS's picture

LOL, even I could pitch a perfect game with those +/- figures. Hell, at this time anyone forecasting past their nose is a fool.

Thunder Dome's picture

Grantham is a stud.  His record speaks for itself.

jus_lite_reading's picture

David Davidowitz is right on...

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