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Jeremy Grantham Releases The Scariest Market Forecast Yet

Tyler Durden's picture


While we will leave readers alone when reading what the GMO head has dubbed the "shortest quarterly letter ever", we want to emphasize one point, namely Grantham's projection of how the market will perform in the next 10 years. The squeamish may want to look away: "No Market for Young Men.” Historians would notice that all major equity bubbles (like those in the U.S. in 1929 and 1965 and in Japan in 1989) broke way below trend line values and stayed there for years. Greenspan, neurotic about slight economic declines while at the same time coasting on Volcker’s good work, introduced an era of effective overstimulation of markets that resulted in 20 years of overpriced markets and abnormally high profit margins. In this, Greenspan has been aided by Bernanke, his acolyte, who has continued his dangerous policy. The first of the two great bubbles that broke on their watch did not reach trend at all in 2002, and the second, in 2009 – known by us as the first truly global bubble – took only three months to recover to trend. This pattern is unique. Now, with wounded balance sheets, perhaps the arsenal is empty and the next bust may well be like the old days. GMO has looked at the 10 biggest bubbles of the pre-2000 era and has calculated that it typically takes 14 years to recover to the old trend. An important point here is that almost no current investors have experienced this more typical 1970’s-type market setback. When one of these old fashioned but typical declines occurs, professional investors, conditioned by our more recent ephemeral bear markets, will have a permanent built-in expectation of an imminent recovery that will not come. For the record, Exhibit 1 shows what the S&P 500 might look like from today if it followed the average fl ight path of the 10 burst bubbles described above. Not very pretty."

And Exhibit 1:

And that is what one calls the pain of a three decade-long divergence from the mean, and its gradual reacquaintance with the trendline.

SAid otherwise, good luck to all buy and hold investors. For those looking for more than luck, here are Grantham's 4 summary investment recommendations:

  • Avoid lower quality U.S. stocks but otherwise have a near normal weight in global equities.
  • Tilt, where possible, to safety.
  • Try to avoid duration risk in bonds. For the long term they are desperately unattractive. Don’t be too proud (or short-term greedy) to have substantial cash reserves. Admittedly, this is the point where we at GMO try to be clever and do a little better than the minus 1% real from real cash – and, so far, with decent success.
  • I like (personally) resources in the ground on a 10-year horizon, but I am nibbling in very slowly because, as per my Quarterly Letter on resources in April 2011, I fear a major short-term decline in commodities based on a combination of less bad weather – which has been bad, but indeed less bad – and economic weakness,  especially in China. Prices have declined, often quite substantially, since that letter. However, I believe chances for further price declines in resources are still better than 50/50 as China and the world slow down for a while, and the weather becomes a bit more stable.

Full note (pdf):



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Mon, 12/05/2011 - 15:29 | 1947713 Mongo
Mongo's picture

A.k.a flatline

Mon, 12/05/2011 - 15:39 | 1947771 idea_hamster
idea_hamster's picture

I like the part of the projection that says:

* assuming 2.5% inflation

LMAO!  Good one!

Mon, 12/05/2011 - 17:14 | 1947778 sqz
sqz's picture

Shocking, but then I noticed the footprint:

* Assuming 2.5% inflation

With unlimited QE, EM growth and inelastic commodities, and inevitable long-term private debt creation policies, good luck with that! At most the foreceast scenario, based on historical real-estate post bubbles, can continue only up to 2014.

Mon, 12/05/2011 - 18:14 | 1948506 Comay Mierda
Comay Mierda's picture

this is what the general shape of the market will look like priced in GOLD! 2.5% inflation my ass, gold is the only true metric of inflation now


Mon, 12/05/2011 - 18:22 | 1948525 Comay Mierda
Comay Mierda's picture

btw, just received an update from

" Treasury Delays Release of Government’s GAAP-Based Financial Statements  Until Christmas Eve "

cant release this shit and cue more USAAA downgrades until after Consumermas

un-fucking-believable how much this government is full of shit


Mon, 12/05/2011 - 15:47 | 1947801 TruthInSunshine
TruthInSunshine's picture


The movie is titled:

No Markets For Carbon Based, Non-Insider Information (Hank Paulson/Timmay tipped off) Fed Very Important Friends of the New York Branch of The Federal Reserve Bank

Also Released as:

The Bernank & Fractional Reserve Banking Alchemists Broke All Markets & Gave The Keys To The Printing Press to The Money Masters


The Bernank stars as Anton Chigurh, going around and shooting each and every market in the head with his air compressor gun.

Mon, 12/05/2011 - 15:51 | 1947823 CIABS
CIABS's picture

tyler: thanks for the downloadable pdf instead of a doc of the execrable scribd sort.

Mon, 12/05/2011 - 16:04 | 1947880 CIABS
CIABS's picture

regarding the content of the letter, i like grantham, but he needs to take a few more steps in the direction he has been going lately.  he ought to get beyond talking about "financial incompetence" and recognize it for what it is, and do the same with regard to the "appearance" we give of having become a plutocracy.

Mon, 12/05/2011 - 16:55 | 1948147 Ned Zeppelin
Ned Zeppelin's picture

OT, but is there a bad Cormac McCarthy novel? Suttree, the Border Trilogy, NCFOM, The Road. . . .  

Mon, 12/05/2011 - 17:02 | 1948185 akak
akak's picture

I have only read "The Road", but after having done so, I have to ask: is there a GOOD one?

My God, that book was one of the very WORST novels I have ever read!

Mon, 12/05/2011 - 17:28 | 1948288 CIABS
CIABS's picture

some think that Blood Meridian is the best.

Mon, 12/05/2011 - 18:17 | 1948517 Mr Lennon Hendrix
Mr Lennon Hendrix's picture


The Road Less Traveled

Mon, 12/05/2011 - 18:31 | 1948577 Hobbleknee
Hobbleknee's picture

You mean, The Road Not Taken.

Mon, 12/05/2011 - 18:34 | 1948589 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

I mean,

The Yellow Brick Road

Mon, 12/05/2011 - 18:55 | 1948684 Al Gorerhythm
Al Gorerhythm's picture

Agreed. Taking the advice of a ZH member, some time ago, I watched the movie. It was the most morbid movie I'd seen and decided if it ever descends to that, I'll take the wife's option.

Mon, 12/05/2011 - 19:06 | 1948721 akak
akak's picture

Aside from the morbidly depressing theme, or even regardless of it, I found the book to be mind-numbingly tedious and achingly painful to read, with no background or explanation for the supposed all-consuming catastrophe that engulfed the world, catatonic characters speaking in monosyllabic babytalk, and highly implausible scenarios of relatively plentiful cannibals, years after the unrevealed disaster, living off of other humans living off of ... what?  The entire book was an insult to the intelligence.  Rarely have I read a book that I was so glad to finally finish --- and yet so disgusted that I had wasted the time to do so.

Tue, 12/06/2011 - 02:04 | 1949960 Heyoka Bianco
Heyoka Bianco's picture

The Road sucked. Easily his worst book, so of course Oprah chose it for her list. We can only hope that some hapless hausfraus picked up Outer Dark or Blood Meridian and are still in catatonic states after the first pages. Maybe one of them even made it as far as the tree of dead babies. Dare to dream, eh? Eh?


All progressions from a higher to a lower order are marked by ruins and mystery and a residue of nameless rage.

Mon, 12/05/2011 - 15:55 | 1947822 vast-dom
vast-dom's picture

It looks pretty optimistic to me! Seriously! And that SP chart needs to be shifted back-- oh wait-- maybe not-- but my 850 calcs said Sept into Oct of this year.........fuck me this looks peachy fucking keen relative to actual as in real world FUNduhMenTaLs.


I'm a buy and hold short investor when it comes to the indices ;)

Mon, 12/05/2011 - 15:31 | 1947731 Stack Trace
Stack Trace's picture

My hair just grayed.

Mon, 12/05/2011 - 18:38 | 1948609 vast-dom
vast-dom's picture

ME balls just swelled.

Mon, 12/05/2011 - 15:31 | 1947732 Golden Boy
Golden Boy's picture

Sorry, not gonna happen. Those cock suckers are gonna print plastic coins if they have to.

Mon, 12/05/2011 - 15:37 | 1947765 pvzh
pvzh's picture

Hopefully, not in trillion-dollar denominations.

Mon, 12/05/2011 - 18:26 | 1948556 bank guy in Brussels
bank guy in Brussels's picture

But Gideon Gono, head of the Zimbabwe Central Bank, printed up notes of 100 trillion Zimbabwe dollars ... they finally gave up and started using foreign currency ... and Gono still has his job. And I saw stories where you still get a trillion old Zim dollars as small change on the bus.

All other Central Bankers have taken note of Gono's career triumph. 'Print for Success'.

Or as Jim Sinclair keeps repeating, 'QE to infinity ... the one tool in the toolbox ..."

Mon, 12/05/2011 - 15:40 | 1947774 SheepDog-One
SheepDog-One's picture

You miss the point, this is NOT about keeping things going however they can, this banking system is over and theyre going to 1 world central bank next, will happen during 2012 first half. 

All this 'Wow no one ever saw this coming' is just cover for the planned collapse of the western world banking system, no question about it at all.

Mon, 12/05/2011 - 15:47 | 1947809 Golden Boy
Golden Boy's picture

And leave the useless boys and girls at Goldman sucking wind? Not gonna happen. Power will remain shared. We will have ww3 before the nwo comes anyway.

Mon, 12/05/2011 - 18:49 | 1948503 Woodyg
Woodyg's picture

Goldman figures to be the last man standing as they say. And you have to admit that they have been quite successful lately placing 2 into positions of power in italy and greece.

So far the score this year seems to be:
Central Banksters 6
democracy 1

Mon, 12/05/2011 - 20:15 | 1948915 SheepDog-One
SheepDog-One's picture

LOL, who do you think is at the center of the world bank?

Mon, 12/05/2011 - 15:48 | 1947813 john39
john39's picture

correct, and they will use the crisis to herd the masses into begging for the new planned system. 

Mon, 12/05/2011 - 15:55 | 1947847 MonsterBox
MonsterBox's picture

SD1, i hope you're wrong. 

i only just reluctantly accepted the "print, print, print" abomination, with the hope they can kick the can for another 4-5 years....

Mon, 12/05/2011 - 16:10 | 1947905 eurusdog
eurusdog's picture

NWO won't happen until the whole shit pile is in flames. To many people with to much money will be fighting to get on top. NWO assumes dispirit parties can agree. AS an example, see the EZ. That seems to be working supremely in Europe right now.

Mon, 12/05/2011 - 16:57 | 1948154 Financial_Guard...
Financial_Guardian_Angel's picture

I agree. No NWO yet. The two asshats in France and Germany can barely agree on what to serve for lunch at their meetings, let alone get all the power hungry dictators and world "leaders" to agree to share power.

NWO comes after this all blows up and there are only a few left standing. They will fight with every last loyal subject they can throw at each other before they share nicely with the other children.

Tue, 12/06/2011 - 02:02 | 1949954 TruthInSunshine
TruthInSunshine's picture

The NWO is already actively planning things, in closed door meetings, which is why no journalists are allowed in.

It's a big, open secret, and it's called Bilderberg.

But that's just crazy, conspiracy-fueled conjecture....I know...(/sarc)

Mon, 12/05/2011 - 17:32 | 1948306 LawsofPhysics
LawsofPhysics's picture

Have you been paying attention?  We have had a one world government since the creation of the Federal Reserve, when all the Americans becames tenants on the property they owned outright.  Debt-slaves to an international banking cartel that has put America's army and tax dollars to work for their own objectives around the world via the U.N., the I.M.F. and N.A.T.O.


Wake up!  The NWO and their offspring have been running things around the world for a solid 100 years. 

Mon, 12/05/2011 - 18:21 | 1948534 Woodyg
Woodyg's picture

It'll be a NWO with the appearance of a democracy led behind the scenes by an all-powerful central banking predator vampire.

Oh s*#t i guess we're already there.

Mon, 12/05/2011 - 20:16 | 1948920 SheepDog-One
SheepDog-One's picture

'Until the whole shit pile is in flames'....which just as likely as any other date may be tomorrow.

Mon, 12/05/2011 - 15:59 | 1947863 Freddie
Freddie's picture

Hope & Change with the muslim and Nancy Pelosi.

Mon, 12/05/2011 - 16:24 | 1947991 Loose-Tools
Loose-Tools's picture

I heard on FOX News that Obama had Gay Sex with an Islamic Terrorist after speaking at a Convention for Unionized Abortionists.

Mon, 12/05/2011 - 16:52 | 1948114 Calmyourself
Calmyourself's picture

An Islamic terrorist you say..  Huh, I heard it was a goat, also heard Bammy was mumbling betwwen grunt something resembling "Oh Reggie, I miss you so much" and "some animals are more equal than others", no?  Anyhow, nice avatar, pic of you in mom's basement I assume?

Mon, 12/05/2011 - 16:59 | 1948174 Loose-Tools
Loose-Tools's picture

No, that's me in the Dial-Up Internet Room at the Asylum. (har, har!) All I have to do is fart and I get the whole room to myself.

Mon, 12/05/2011 - 18:32 | 1948580 Iwanttoknow
Iwanttoknow's picture

How many are posting from Mossad central?

Mon, 12/05/2011 - 18:42 | 1948626 Iwanttoknow
Iwanttoknow's picture

No one is an Obama supporter.Obama is acontinuation of Bush.It is extremely unlikely that Obama is a musliam, not that it matters.He is a fascist and facilitator of the .01%.Where do you get your info,the local southern baptist priest?

Mon, 12/05/2011 - 18:14 | 1948504 Johnny Yuma
Johnny Yuma's picture

Although your comment is hilarious, it won't hold true. Take a look at every country over time that attempted to print their way out of trouble. The best most recent example would be Zimbabwe. Their stock market was going straight up but eventually inflation choked them out. That too would and is happening with the U.S. A lower price target of the 800 area may be opptimistic and we could easily get into the 500's which would test the great bull trend line. 

Mon, 12/05/2011 - 15:55 | 1947742 Mercury
Mercury's picture

Young Man Blues indeed.


But I have news for you Jeremy - every human society that has ever existed on has been a plutocracy, including this one.

And when you start bellyaching about our "mean-spirited" Supreme Court majority and global warming it makes me nervous.  Tell us you don't really believe that experts should rule the world and I'll feel better.

Mon, 12/05/2011 - 15:33 | 1947743 BigMike
BigMike's picture

long HUI

Mon, 12/05/2011 - 15:33 | 1947747 lolmao500
lolmao500's picture

Print print print!

Mon, 12/05/2011 - 15:34 | 1947749 wandstrasse
wandstrasse's picture

nowadays any projection which looks further than 5 minutes in the future is ridiculous.

Mon, 12/05/2011 - 15:41 | 1947781 SheepDog-One
SheepDog-One's picture

Even this chart is ridiculous...its wavers around year after year to end back where we are now in 10 years? Ridiculous, it means nothing.

Mon, 12/05/2011 - 15:35 | 1947755 Sudden Debt
Sudden Debt's picture

I don't really expect rosy forecasts here, only logic once.

Mon, 12/05/2011 - 15:35 | 1947756 Carlyle Groupie
Carlyle Groupie's picture

When ZH comes out with stuff like this, it's a good time to buy the S&P big with both fists.


Mon, 12/05/2011 - 15:38 | 1947769 Everybodys All ...
Everybodys All American's picture

Let me know when it's time to sell then.

Mon, 12/05/2011 - 17:15 | 1948240 topcallingtroll
topcallingtroll's picture

He may be right.

Every single one of us missed the greatest bull market of the last thirty years, the long bond. Thirty year usa treasurys.

However carlyle I bet you miss the biggest bull market of the next thirty years as will the rest of us.

11.5 percent annualized returns. Right under our noses, but bonds were vilified by all.

Mon, 12/05/2011 - 18:20 | 1948530 akak
akak's picture

Keep repeating that egregious lie about 30-year Treasuries, and keep making a bigger fool of yourself.

Mon, 12/05/2011 - 18:32 | 1948581 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

What are you talking about

Mon, 12/05/2011 - 18:39 | 1948615 Captain Kink
Captain Kink's picture

Not everyone missed treasuries... ;-P

Mon, 12/05/2011 - 18:58 | 1948638 Captain Kink
Captain Kink's picture


Mon, 12/05/2011 - 20:19 | 1948933 Real Money Wins
Real Money Wins's picture

You Have better % risk or odds with a 44 magnum wheel gun with one round in the chamber

Mon, 12/05/2011 - 15:40 | 1947776 wandstrasse
wandstrasse's picture

yeah s&p 20.000, cup of coffee-surrogate 40.000

Mon, 12/05/2011 - 15:49 | 1947812 hack3434
hack3434's picture

Mike, never forget that video clips like the follwoing will haunt you for life.

Mon, 12/05/2011 - 16:07 | 1947884 greased up deaf guy
greased up deaf guy's picture

have fun with that... just promise you won't come back later looking to bum cab fare.

Mon, 12/05/2011 - 16:50 | 1948105 11b40
11b40's picture

Well, Carlyle, I hope you bought with both fists this morning at the open.

Mon, 12/05/2011 - 17:44 | 1948369 SillySalesmanQu...
SillySalesmanQuestion's picture

Hopium overdose...treat with doses of gold and silver every 4-6 hours and call Drs. Bernanke & Geither for further assistance...

Mon, 12/05/2011 - 15:39 | 1947757 Theta_Burn
Theta_Burn's picture

But but last week the market had 1 of the bigget rallys ever...

And today another rally...because they finally pulled together and commited to...something. (till Nowotny worthy had to open his big mouth)

I'm confused.....

Mon, 12/05/2011 - 18:38 | 1948612 Cadavre
Cadavre's picture

To be fair - nothing - as yet been codified - Germany's oligarch is still musing the not too faint sounds of pitch forks sharpened by angry dragoons in Lederhosen armor. The HFTs are just gaming each other, keeping in practice - tuning up (for what is not yet clear - however - hope is surely a wonderful thing - like a needle in the vein), over the "prospect" of more USD draining deals being cut (or at least being discussed on some hypno-tube-circuit).

Germany went sovereign rogue before world war II - they left the central European economy - went to a home grown sovereign and barter economics - before WWII germans had the most robust economy on the rock. And that, despite any other noise the history revisionist boyz attempt to dilute the collective temporal with is the only reason Germany got branded (by governments) as our grand parents moment's Emanuel Goldstein / AL KADA d`jour.

Remember - we live in a country - so they say - populated by a people suffering an extreme fear of box cutters. So extreme, in fact, that they will comply with the demands of any skinny brown guy wielding one on a plane and calmly spend the last 20 minutes of their box cutter fearing life allowing the skinny guy with a box cutter to crash and fireball the plane (along with them and their children) into a building just so they won't have to worry about tetanus from the dreaded box cutter scratch. Those things hurt man - i heard that sometimes people even have to get stitches - terrible. Will the horror ever end?

Mon, 12/05/2011 - 19:37 | 1948821 Terminus C
Terminus C's picture

There was no box cutter.

Tue, 12/06/2011 - 00:02 | 1949698 Cadavre
Cadavre's picture

No brown skinny guys either - just them Boeing Nav Star remote and automated flight control systems (similar to UAV drone flight management systems) courtesy the neocon wizards at Dov "New Pearl Habor" Zacheim's / Systems Planning Inc's factory on the grounds of Saruman's Black Tower. They been in "heavy" air craft three decades. Boeing just upgraded security holes in that particular black box cause they was too easy to hack (read intentionally designed to be hacked).



Mon, 12/05/2011 - 15:48 | 1947766 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

So what about the bond market looks respectful?  What about FX looks investable?

The Fiat Ponzi is a'comin' crashin' down, bitchez, and there ain't no where to hide unless you can hold onto your assets.

No market for young men?  What happens if bonds get sold off and yields start climbing?  The Greatest Generation, which is already without savings and living on fixed incoem, would not be eating cat food like they are now, they would not be eating at all.

They would be forced to sell their Buicks, their homes, everything, and move in with their kids; their kids who are unemployed and living in homes not paying mortgages, living off their kids college savings, or even their kids college loans; and those kids, unemployed, are living at home.

America is becoming a Third World State in respect to others like Mexico.  Look at how there is one family of three generations under one roof. 

So how many houses are needed now?  With 15 million on shadow inventory, how many do we need if three generations are living under one roof?  This is why the housing market will lose half of its value over the next few years.  No one needs there own private mansion.  You need a bedroom, and a shared bathroom/kitchen/living room.  America now gets to learn how to share.

Eh, but equities will pull back!  So the bond market stays strong!  While inflation runs at a 10% clip.  Prices increase, and everyone is screwed.  Sure, how long will this last before all assets are sold.  Yet what does economic policie dictate?  Bernanke will continue to kill the dollar to stabolize prices, goods, and assets.  So the dollar is set to fail, and that is the end point.

What Granthem doesn't say is that this plan squeezes the middle class into the lower class, keeps the top decent until the great collapse, but since the rich do own some gold, then they will be ok, for a few weeks anyway.

Mon, 12/05/2011 - 15:55 | 1947851 centerline
centerline's picture


The writing is on the wall for sure. Uncle Sam is not going to make good on taking care of anyone. Unfunded liabilities make the current stated debts look like pocket change. And, any sort of peaceful reset appears to be out of the question... why? Because it still fails to address population and resource constraints. The only question is how long the "topping" process takes.

Mon, 12/05/2011 - 16:01 | 1947870 Freddie
Freddie's picture

Over 44% of the "greatest generation" voted for the muslim.   Illegals get endless freebie that granny cannot get.

How is that cat food?

Mon, 12/05/2011 - 16:37 | 1948013 Loose-Tools
Loose-Tools's picture

May Allah bless you and your herd of goats. And may you continue to prosper in the Sacred Hills of Appalachia.

Mon, 12/05/2011 - 16:56 | 1948141 topcallingtroll
topcallingtroll's picture

Hehe We have another socialist here.

Apparently obama supporters still think it is ok to vilify and stereotype one group, white rural southerners.

Mon, 12/05/2011 - 17:49 | 1948403 falak pema
falak pema's picture

correction : if I read him right, goat owners.

Mon, 12/05/2011 - 18:19 | 1948524 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

Keep the goats away from Bernanke.  He is getting desperate for a sacrifice, and he may just need a goat.

Mon, 12/05/2011 - 18:14 | 1948505 kito
kito's picture

stop falling for the divide and conquer tactics of the repubicrats. your hate for one side is exactly what the other side wants. youre a puppet for believing anything else. mccain wouldve put us right where we are now as well, except the war with iran wouldve started already. VOTE OBAMAROMNEY 2012!!!!!!!

Mon, 12/05/2011 - 18:20 | 1948510 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

Obama/Newt 2012

Mon, 12/05/2011 - 18:18 | 1948521 Chappaquiddick
Chappaquiddick's picture


Mon, 12/05/2011 - 15:38 | 1947768 DollarDive
DollarDive's picture

10 YEARS ?   


How about 10 minutes ....  lol !

Mon, 12/05/2011 - 16:01 | 1947867 slewie the pi-rat
slewie the pi-rat's picture

hey, double-D!

i read one of b.bonner's reckonings a while back

similar line of reasoning, similar conclusions as to the time needed, if i recall correctly

Mon, 12/05/2011 - 16:40 | 1948065 css1971
css1971's picture

10 years can be easier to predict than 10 minutes. Damn near perfect exponential curve till it slams into a limit about 11k probably related to pulling large amounts of capex forward to deal with y2k.^DJI&t=my&l=off&z=l&q=l&c=


Mon, 12/05/2011 - 15:41 | 1947772 -273
-273's picture

"the weather becomes a bit more stable." ahahah, is he joking? Investment advice based on a prediction of more stable weather? That's pretty funny.

Mon, 12/05/2011 - 15:54 | 1947843 Nemo01
Nemo01's picture

Read his quarterley on resources - then you will know...

Mon, 12/05/2011 - 15:41 | 1947779 Jumbotron
Jumbotron's picture

The Second Lost Decade.

I think I'm turning Japanese

I think I'm turning Japanese

I really think so !

Mon, 12/05/2011 - 15:41 | 1947780 Greater Fool
Greater Fool's picture

Demographics alone make a 10-15 year sideways / down market look like a reasonable forecast.

This is public equities, of course. Meanwhile most professional money is in the private market, investing via channels not available to mere mortals. Public equity markets, where the lion's share of middle-class Americans have their money, have become the domain of predatory algos while real investing has moved elsewhere.

Coincidence, surely.

Mon, 12/05/2011 - 15:42 | 1947785 Logiclee03
Logiclee03's picture

Same replies to every topic.....why bother to post>>>just cut and paste!

Mon, 12/05/2011 - 15:45 | 1947794 SheepDog-One
SheepDog-One's picture

None of these people saw any of this coming as far back as 2007....but can with certainly draw us a 10 year projection chart? Unreal. Let this guy give me a 5 day chart that ends up being anywhere near correct and I'll eat my felt fedora.

Mon, 12/05/2011 - 15:47 | 1947806 Theta_Burn
Theta_Burn's picture


Mon, 12/05/2011 - 17:48 | 1948395 NeverEnuf81
NeverEnuf81's picture

I've had real good luck getting net-short as we get to the resistance line formed by the July ES highs and gently longing squeezes set off by the little rallies (a lot of my swing and daytrades are on stocktwits...basically, treating daily charts like weekly or monthly charts and trading the same areas you normally would has worked out fine, just in fast forward with a little bit of overshot here and there).

That trend line got me in the last selloff at 1270 w/o any real stressful days I wanted to cover...the gap hurt my shorts a bit, but I had some black friday gamble calls and was able to close many of my short positions Mon/Tue. The speed is the real psychout here. 

Mon, 12/05/2011 - 15:46 | 1947795 bilbao
bilbao's picture


In 1970, if you put all your money into a Harry Browne Permanent Portfolio, consisting of

25% Gold (Physical)

25% Cash (T-Bills)

25% Long Treasuries

25% S&P 500

...and rebalanced using 15/35 rebalancing bands, you would have had very steady returns with very little volatility:

Each asset represents one of the four possible economic conditions: Inflation (Gold), Deflation (Long Bonds), Prosperity (Stocks), and Recession (Cash). No matter what, one of those conditions will take hold and you'll always own one of the winners without having to predict the future. It's the perfect replacement for your Money Market Fund.



Mon, 12/05/2011 - 15:57 | 1947860 Sir Edge
Sir Edge's picture

Yes, i was thinking about that for the last would have worked even in the midst of all this craziness...

Mon, 12/05/2011 - 16:48 | 1948077 akak
akak's picture

Except that holding the long bonds has been and will be pointless, as deflation is NEVER going to happen under any fiat currency system --- in that one respect, this system is flawed and foolish. 

There has only been one relatively brief period in the last 40 years during which long-dated bonds paid a real return greater than the true rate of inflation, and it is mathematically impossible that such a circumstance is going to repeat under the current monetary regime, and with the federal government's extreme (and rapidly rising) debt load.

Mon, 12/05/2011 - 16:59 | 1948172 quebecgold
quebecgold's picture

I totally agree with you.

Mon, 12/05/2011 - 17:04 | 1948200 topcallingtroll
topcallingtroll's picture

Then you are both wrong. The long bond has beat every asset class over the last thirty years. 11.5 percent annualized.

See how hard it is to find a bull market and ride it to the top?

Mon, 12/05/2011 - 17:35 | 1948255 akak
akak's picture

You certainly are either in error, or are lying --- there is NO WAY that the average annual return can be 11.5%, when the 30-year bond was yielding well below 10% for almost all of the last 30 years, and only yielded 12% or more for a total of around two years.   Go recheck your figures.

Mon, 12/05/2011 - 17:02 | 1948189 topcallingtroll
topcallingtroll's picture

Over the last thirty years the long usa treasury bond has outperformed every asset class, all of them, with an 11.5 percent annual return since 1981.

Most bull markets are never noticed by the masses, having vilified bonds for years.

Look it up. We all missed it. I suspect we will miss the next thirty year bull market too. It cant be gold that is too easy.

Mon, 12/05/2011 - 17:08 | 1948217 topcallingtroll
topcallingtroll's picture

It is funny how the truth annoys some people.

Richard russell says bull markets move in a way that most people miss it and no one rides it to the top.

Who would have ever kept dollar cost averaging into thirty year treasurys over the last thirty years? Only a true genius and a true contrarian.

Mon, 12/05/2011 - 20:18 | 1948925 SheepDog-One
SheepDog-One's picture

And a true hindsight trading expert, which is everyone.

Mon, 12/05/2011 - 17:33 | 1948250 akak
akak's picture

I question that 11.5% average annual figure.

Yes, they were up in the 10-14% range for a few years in the early 1980s, but have not exceeded 10% outside of those years, only exceeded 12% for a total of around two years, and have been well below 10% for most of them --- so how can the average annual return be 11.5%?^TYX&t=my&q=l&l=on&z=l&p=s&a=v&p=s&lang=en-US&region=US

Mon, 12/05/2011 - 18:02 | 1948470 FMR Bankster
FMR Bankster's picture

He's not referring to placing new bets (investments) every year but buying and holding from 1981 until now including price appreciation. The problem for most of us is we need to invest money each year and that produces lower returns. I bought 20 plus year 0% coupons in 2004 (this was before strips, they were called Tigrs or Cats then) for 7.25 cents on the dollar. Nice return, far better than stocks or gold. Would't buy strips with YOUR money today. But I think his figures are correct for 30 year buy and hold.

Mon, 12/05/2011 - 18:37 | 1948544 akak
akak's picture

He's not referring to placing new bets (investments) every year but buying and holding from 1981 until now including price appreciation.

Thank you for that clarification.

I did not realize that he was trying to make that disingenuous, and irrelevant, an argument.  It was an outright lie for him to claim that we have had a "thirty-year bull market in US Treasuries"; it is more accurate to say that those lucky few who bought long-dated Treasuries at exactly the right time (the early 1980s) have done well --- and all those who have bought since then (the last 25+ years) have either held steady (at best) or, more likely, have lost money in real terms.  Some bull market!

Mon, 12/05/2011 - 17:24 | 1948267 Sean7k
Sean7k's picture

5.8% since 2001. You're cherry picking, including a time frame with very high interest rates. After dollar inflation, the net is probably close to zero. Nice try...

Mon, 12/05/2011 - 18:31 | 1948575 Chappaquiddick
Chappaquiddick's picture

Its an inflation hedge. 9-10% per annum.

Mon, 12/05/2011 - 15:46 | 1947799 centerline
centerline's picture

Can we get that chart adjusted for past and projected dollar valuation?


The reality is that the chart is useless, except for anyone playing the game right up till the moment the "holiday" occurs and accounts go into perpetual limbo. The current fiat experiment is at an end.

Mon, 12/05/2011 - 15:46 | 1947803 Jena
Jena's picture

OT: Obama's progressive solution to the current economic paralysis and the new slogan for the 2012 campaign: "the vision of an America where everyone engages in fair play, does their fair share and gets a fair shot,” Josh Earnest, Obama’s (aptly named) principal deputy press secretary, said...

Mon, 12/05/2011 - 15:46 | 1947804 SheepDog-One
SheepDog-One's picture

So in 2021, the S&P will be right where it is now.....OH OK!

Mon, 12/05/2011 - 18:25 | 1948555 bigdumbnugly
bigdumbnugly's picture

maybe.  i sense obama is trying for that too.

Mon, 12/05/2011 - 15:51 | 1947827 slewie the pi-rat
slewie the pi-rat's picture

if better weather = the dreaded u-shape

what would things lQQk like if we make the bequerel adjustments to the weather data? 

actually, just take a picture!

it's a beauteeeful day to celebrate simplicity in complex ways, BiCheZ!

Mon, 12/05/2011 - 15:52 | 1947833 SheepDog-One
SheepDog-One's picture

So far just today we've had 3 promises of money printing to keep equities afloat, and also 3 promises they wont print. Ever get the feeling theyre at the bottom of the barrel in finding ways to bullshit their way thru the day?

Mon, 12/05/2011 - 15:54 | 1947842 Freegold
Freegold's picture

There will not be enough recources, especially not cheap energy to even pull this gloomy trend off. We will have to adopt to a new economy. Economy as in consuming less. The era of growth is over. Prosperity needs a new definition

Mon, 12/05/2011 - 15:55 | 1947850 falak pema
falak pema's picture

what's so scary about that? Do charts scare our ghosts through the time line.

Who will die and who will survive?

Mon, 12/05/2011 - 15:56 | 1947858 Lucius Corneliu...
Lucius Cornelius Sulla's picture

I think Gratham is being optimistic.  It looks more like a giant head and shoulders that will retrace back to around 1990.

Money printing won't help because debt destruction will neutralize it.  By the time we go Zimbabwe anybody with a net worth over $3M will have left the country (if they have any common sense).

Mon, 12/05/2011 - 18:13 | 1948498 LooseLee
LooseLee's picture

Or a double-top...

Tue, 12/06/2011 - 01:13 | 1949866 caerus
caerus's picture

i suspect that this is how the large h&s pattern will unfold although i'm not sure about the time frame...if the ES plunges to 800 i doubt that it will find support there...600 or lower imo considering the prior lower low and the fact that markets tend to overshoot

Mon, 12/05/2011 - 16:05 | 1947883 djsmps
djsmps's picture
US Just Might Be Able to Survive a Recession in Europe

Mon, 12/05/2011 - 16:07 | 1947889 virgilcaine
virgilcaine's picture

Short the SP here with intraday high as stop..I sense a red close today and trend change.

Mon, 12/05/2011 - 16:11 | 1947915 constitutionalist
constitutionalist's picture

people love to blame the president. but i think its congress, senate, and corporations, the sheep wont beg when its all said and done, look at history, people will revolt, the sheep will become wolves...


Mon, 12/05/2011 - 16:14 | 1947926 seanindundee
seanindundee's picture

Way over optimistic.  Refer to

Or refer to elliot wave at dow 400. Not sure where that puts the S&P.

Stagnation at the previous lows is the best case scenario and very unimaginative indeed to not see it breaking below 2009 lows.

New financial crisis worse than the last, plus war and depression can only bring new lows.

Mon, 12/05/2011 - 18:19 | 1948527 LooseLee
LooseLee's picture

The common folk will not stand for money printing to overcome the outrageous debt that needs to be extinguished. Deflation will rule in the intermediate term. Leaders will be executed if the Bernak is allowed free reign. First deflation and then inflation. I can envision no other outcome. And yes, I own as much physical gold and silver as I can afford and am long good quality PM miners and energy...

Mon, 12/05/2011 - 16:17 | 1947949 Zola
Zola's picture

I beg to differ - 1970s market will have SPX reacquaint with gravity and kiss 500 

Mon, 12/05/2011 - 16:26 | 1948001 Lord Koos
Lord Koos's picture

It's actually "no market for old men" -- younger people have time to wait until things turn around to see investments pay off.. old folks are S.O.L. with a bear market and crashing home values.

Mon, 12/05/2011 - 16:35 | 1948044 AndrewCostello
AndrewCostello's picture

The entire world has gone insane.  Anyone who thinks things are going to get better really doesn't understand the situation.



Mon, 12/05/2011 - 16:58 | 1948168 twotraps
twotraps's picture

AndrewCostello, thank you.  I am seriously wondering if I am nuts or just drunk.  I walk myself through some scenarios...factoring in that I don't have all the information and that surprise rule changes are skewing normal expectations-------and I still come up total destruction of what we currently know as 'value'.   The Fed and the Euro Currency are political constructs, so I expect continued political sollutions from them, right or wrong.  However, I feel we are experiencing the cumulative effect of political decisions over the years, made without consideration of any negative consequences.  So, at this point, how can NOTHING happen on balance as a result of unprecedented intervention???  Forgive all the bad debt?  What, like its a silly game and we are the laughing stock of the world?  Finally, has anyone forgot about the Flash Crash potential of the mkt?  Anyone read here a few months ago about the NYSE trimming the parameters for Limit Down??  


Mon, 12/05/2011 - 16:38 | 1948057 virgilcaine
virgilcaine's picture

silver is signalling.. credit problems ahead.. credit crisis II.

Mon, 12/05/2011 - 18:23 | 1948541 LooseLee
LooseLee's picture

I use silver as a leading indicator of the market in general. And I am short silver currently, paper-wise (SLV), although I own sufficient amounts of the physical....

Mon, 12/05/2011 - 16:42 | 1948073 Stuck on Zero
Stuck on Zero's picture

Projecting the future by looking at the past is plain dumb.  It has never worked and never will.  You cannot tell where a pitcher will place his next pitch based upon his past pitches.  Unless you know the underlying dynamics and the initial conditions you are doomed to failure.  Even then, stochastic behavior will often undo your model.  Today we have all the U.S. market dynamics controlled by a group of despots in Washington and Wall Street.  Only psychoanalysts of the criminally insane will have any clue where things are going.

Mon, 12/05/2011 - 16:43 | 1948075 Uber Vandal
Uber Vandal's picture

Looking at the trend line on the S&P chart in the newsletter, isn't there a good probability of the downward trend line to hit sub 600 if you were to draw a line connecting the downward spikes?

Mon, 12/05/2011 - 16:46 | 1948086 I am a Man I am...
I am a Man I am Forty's picture

Whoaa, take away sharp objects from Jeremy, that newsletter was not positive, buy him a unicorn and some skittles quick!

Mon, 12/05/2011 - 16:46 | 1948088 YesWeKahn
YesWeKahn's picture

This guy simply forgot that Bernanke will be very mad and will be madly printing because he will be retired on his 401K.

Mon, 12/05/2011 - 16:51 | 1948115 earleflorida
earleflorida's picture

the weather can't get much worse - right.

Australia, Vietnam, Thailand, China & Russian peripheries, not to forget the changing weather patterns in our own USA {[Texas/ Oklahoma 20's dust-bowl][NE-tornadoes/hurricanes]} etc., etc., etc.,... 

*keep cutting down the rain forest and the polar bears might be migrating to the Mediterranean via Norway

Mon, 12/05/2011 - 17:01 | 1948184 augmister
augmister's picture

Bashes the Republican majority of SCOTUS and no precious metals... totaly fucktarded.   800 on the S&P is being kind.

Mon, 12/05/2011 - 17:11 | 1948212 yt75
yt75's picture

"I despair that this country and its government have failed to take at  all seriously the most important and the mostdangerous issues: depleting resources, development of a comprehensive energy policy, and, yes, global warming."



Interesting point, I bet the vast majority of Americans do not even know that they've passed their oil production peak in 1970 (10 millions barrel a day then around 5 now), and that it is a done deal, the fundamental reason of current crisis being that we are at global peak, much more than market bubbles and such, and the mountains of debts are just the side effect of the belief in eternal growth, belief which, even if still existing cannot materialize in anyway with the end of cheap and easy energy.

Mon, 12/05/2011 - 17:12 | 1948230 JR
JR's picture

A planned economy in the hands of banks, says economist Michael Hudson, tends to destroy the economy.

IOW, we’re dealing with such huge numbers and such corrupted government statistics and players that this isn’t something that’s going to drag on for 10 years, it’s either going to smooth out with somebody taking the bull by the horns and doing the right thing or it’s going to break. IMO, it’s going to break. The political aspect to this, the people who are at fault and causing this economic disaster, i.e., the banks, are going to get the blame and America will drop the Federal Reserve – the center of the crisis. They created it, they profited by it; and they refuse to talk.

In a long piece on CounterPunch entitled Hammurabi Knew Better: Debt Slavery – Why It Destroyed Rome, Why It Will Destroy Us Unless It’s Stopped, Dr. Hudson shows why Bernanke’s manipulative hands on the controls of the money supply could be a deal breaker for the American economy.

"The banks’ planning privilege of credit creation and allocation,” says Dr. Hudson, “turns out to be even more centralized than that of elected public officials. And to make matters worse, the financial time frame is short-term hit-and-run, ending up as asset stripping. By seeking their own gains, the banks tend to destroy the economy. The surplus ends up being consumed by interest and other financial charges, leaving no revenue for new capital.

“This is why relinquishing policy control to a creditor class rarely has gone together with economic growth and rising living standards. The tendency for debts to grow faster than the population’s ability to pay has been a basic constant throughout all recorded history. Debts mount up exponentially, absorbing the surplus and reducing much of the population to the equivalent of debt peonage.”

According to Hudson: “Neither banks nor public authorities (or mainstream academics, for that matter) calculated the economy’s realistic ability to pay – that is, to pay without shrinking the economy.

To put matters bluntly,” he says, “the result has been junk economics. Its aim is to disable public checks and balances, shifting planning power into the hands of high finance on the claim that this is more efficient than public regulation.”

When oligarchies dictate rather than democracies, Hudson explains, “Governments are told to pay bailout debts taken on not to defend countries in military warfare as in times past, but to benefit the wealthiest layer of the population by shifting its losses onto taxpayers.

“The failure to take the wishes of voters into consideration leaves the resulting national debts on shaky ground politically and even legally. Debts imposed by fiat, by governments or foreign financial agencies in the face of strong popular opposition may be as tenuous as those of the Habsburgs and other despots in past epochs. Lacking popular validation, they may die with the regime that contracted them. New governments may act democratically to subordinate the banking and financial sector to serve the economy, not the other way around.”

Mon, 12/05/2011 - 17:38 | 1948349 farmerjohn2112
farmerjohn2112's picture

Good read, thanks.

Mon, 12/05/2011 - 17:17 | 1948245 MrBoompi
MrBoompi's picture

Yes, if you're going to be bearish on the stock market you have to be bearish on commodities because the cartel has successfully synchronized these markets.

You're no longer clairvoyant when you predict market synchronicity, you're being a realist.



Mon, 12/05/2011 - 18:25 | 1948551 LooseLee
LooseLee's picture

and deflation will rule the day....followed by a massive inflationary explosion.....

Mon, 12/05/2011 - 17:53 | 1948413 Flakmeister
Flakmeister's picture

Consistent with Jeremy's statement in this report, here is some red meat for all you AGW deniers out there...

An independent study using very different methodology....

Paging all Koch-suckers!!

Edit: Even the Arabs that sell fossil fuels are on board

Mon, 12/05/2011 - 18:42 | 1948625 bank guy in Brussels
bank guy in Brussels's picture

At the very least, it's just too controversial with all the scandals, the e-mails essentially admitting it was a scam at that well-funded Global Warming Scientific Institute University.

There is too much pressure to destroy the deniers of global warming, there is too much money in the global warming business. Something stinks. Al Gore personally profited from the stuff he was selling.

Re the sources you cite, CNN is a corrupt, CIA-tied, American-government media company, always spreading whopping lies about stuff. They even give us a 'softer' CNN here in Europe because we laugh out loud too much if we see the American version. They are a worthless source. CNN = CIA (or Corporate) News Network.

The 'scientists' of Scientific American get much of their funding from the US Pentagon.

Jeremy Grantham and GMO lost some credibility by mentioning global warming, even if he privately believes it, he should see how dodgy it all looks.

Sunspots. Historical warming and cooling periods over the centuries, more extreme even than today.

And it is getting colder here in Belgium these last few years.

Mon, 12/05/2011 - 18:53 | 1948674 Flakmeister
Flakmeister's picture

   Wow, so Global Warming is a hoax in your opinion because of the following:

And it is getting colder here in Belgium these last few years.

So we should be relying on the objective analysis of outfits like the Heartland Institute... After all they only get substantial funding from fossil fuel interests...

Better strap that tin-foil hat on tighter buddy...


Mon, 12/05/2011 - 17:57 | 1948448 falak pema
falak pema's picture

My portfolio for future :

One hundred  bottles of Pouligny Montrachet

One hundred bottles of Vosne-Romanée conti (alas impossible to find)

One bottles of Cheval Blanc St Emilion

One hundred bottles of veuve cliquot Ponsardin

That covers all possibilities.

Mon, 12/05/2011 - 18:04 | 1948469 ZeroPower
ZeroPower's picture

Nice list. I visited the Puligny Montrachet region last year and tasted some amazing stuff. Nothing like wine from the Rhones though!


Mon, 12/05/2011 - 18:39 | 1948604 falak pema
falak pema's picture

Chateau neuf du Pape, Côte Rotie /Hermitage and Gigondas. Many new regions now making good wines : Rosé from Var and reds from Languedoc are becoming appreciated. The variety is just incredible. Viognier from Gard/Ardeche is a white with body that is appreciated but I find less attractive than chardonnay, the best whites.

Mon, 12/05/2011 - 18:00 | 1948459 ZeroPower
ZeroPower's picture

I agree with most of his thesis, but its totally unrealistic to assume a 100pt S&P range for the next 5-6 years. We literally get 50pt moves in a single session so.... no, i dont see this volatility supression as likely.

Mon, 12/05/2011 - 18:09 | 1948486 JW n FL
JW n FL's picture



I believe chances for further price declines in resources are still better than 50/50 as China and the world slow down for a while, and the weather becomes a bit more stable.

China is only going to build 12 Cities a Year instead of 15 Cities a year?

Weather? are you fucking stoned?

I could go on but why?


Mon, 12/05/2011 - 18:15 | 1948509 kito
kito's picture

i dont see whats so scary about granthams forecast. hes calling for slow growth. not exactly run for the bunkers stuff..............

Mon, 12/05/2011 - 18:16 | 1948515 reader2010
reader2010's picture

Here are some sage words from Rumi,

"Sell your cleverness and buy bewilderment.
Cleverness is mere opinion, bewilderment intuition."


Mon, 12/05/2011 - 18:28 | 1948564 americanspirit
americanspirit's picture

Operative phrase -  if it followed the average fl ight path of the 10 burst bubbles.

This isn't going to be an average flight path. "Uncontrolled flight into terrain" is, I believe, the correct aviation metaphor.

I doubt that you can average the last 10 burst bubbles and compare them in any way to what's coming, given the setup. Unique setup - unique 'flight path'.

Mon, 12/05/2011 - 18:36 | 1948601 High Plains Drifter
High Plains Drifter's picture

none of them talk about the debt, a debt that cannot be paid.........what about the damn debt, mr letter writer? we will not go back to the way it was. we are at the end of the road..............end of story..........

Mon, 12/05/2011 - 18:37 | 1948607 Captain Kink
Captain Kink's picture

NOt everyone missed Treasuries...  ;-p

Mon, 12/05/2011 - 18:48 | 1948654 bank guy in Brussels
bank guy in Brussels's picture

Did you get the yield topper, the 1981 30-year US Treasury bond at 15.25% yield? When people shied away from the bond deal of the century, thinking it was going to go Zimbabwe on them back then? - The critics had the philosophy right, once again it was just timing. Three decades plus too early.

Though after this long bond bull run, it really seems time to turn. It's a big Jim Sinclair point to say the top in the long bond is a major transition event, arriving imminently.

Mon, 12/05/2011 - 18:47 | 1948647 Snakeeyes
Snakeeyes's picture
Let's see how the EU's Real GDP posts at 5am this morning. Last quarter it was ... 0.2%. Makes the US look like gangbusters! S&P Lowers Ratings Of 15 Of 17 Euro-zone Nations – They Need Harry Potter To Conjure Up More Than The E1 Trillion Bailout Fund

Mon, 12/05/2011 - 18:47 | 1948648 PulauHantu29
PulauHantu29's picture

Buyer Beware: Short Sale Fraud Proliferating:

Short sales are now a hefty part of the real estate market.  Short sales are the process of selling a home for less than the stated mortgage balance.  The process unfortunately has allowed a tremendous amount of fraud to occur and with more purchases going through the short sale route, this is simply another concern potential buyers must be aware of.  One of the most blatant methods of fraud is through a process known as flopping. 


The agent will not submit the highest bid and at times, these homes suddenly turn into pending sales almost on the same time.  The big losers here are potential buyers, sellers eating a larger loss, and the lender holding the note.  Part of the shadow inventory is being slowly cleared out with lenders approving short sales and some are combating against the fraud that has been going on in this growing segment of housing sales.


Mon, 12/05/2011 - 18:53 | 1948675 PulauHantu29
PulauHantu29's picture

In the end, the finance and housing industry are still running on the same standards that created this incredible housing bubble.  An industry that forged documents, lied to investors, and gorged itself at the public’s expense is back at it although on a much smaller yet equally blatant extent.  And with many homes bought for cash and at times with investor groups, it is easy to tell where the advantage is today.


In the end short sale fraud harms potential buyers by inflating prices, hurts lenders, and ultimately is another bill the taxpayer needs to pay in this endless game of bailouts.

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