Jeremy Grantham Releases The Scariest Market Forecast Yet
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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A.k.a flatline
I like the part of the projection that says:
LMAO! Good one!
Shocking, but then I noticed the footprint:
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.
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
btw, just received an update from www.shadowstats.com
" 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
The movie is titled:
Also Released as:
The Bernank stars as Anton Chigurh, going around and shooting each and every market in the head with his air compressor gun.
tyler: thanks for the downloadable pdf instead of a doc of the execrable scribd sort.
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.
OT, but is there a bad Cormac McCarthy novel? Suttree, the Border Trilogy, NCFOM, The Road. . . .
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!
some think that Blood Meridian is the best.
Yes
The Road Less Traveled
You mean, The Road Not Taken.
I mean,
The Yellow Brick Road
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.
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.
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.
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 ;)
My hair just grayed.
ME balls just swelled.
Sorry, not gonna happen. Those cock suckers are gonna print plastic coins if they have to.
Hopefully, not in trillion-dollar denominations.
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 ..."
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.
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.
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
LOL, who do you think is at the center of the world bank?
correct, and they will use the crisis to herd the masses into begging for the new planned system.
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....
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.
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.
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)
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.
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.
'Until the whole shit pile is in flames'....which just as likely as any other date may be tomorrow.
Hope & Change with the muslim and Nancy Pelosi.
I heard on FOX News that Obama had Gay Sex with an Islamic Terrorist after speaking at a Convention for Unionized Abortionists.
http://some-knuckleheads-will-believe-anything.com/FOXNews
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?
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.
How many are posting from Mossad central?
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?
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.
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.
long HUI
Print print print!
nowadays any projection which looks further than 5 minutes in the future is ridiculous.
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.
I don't really expect rosy forecasts here, only logic once.
When ZH comes out with stuff like this, it's a good time to buy the S&P big with both fists.
Go!
Let me know when it's time to sell then.
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.
Keep repeating that egregious lie about 30-year Treasuries, and keep making a bigger fool of yourself.
What are you talking about
Not everyone missed treasuries... ;-P
dupe
You Have better % risk or odds with a 44 magnum wheel gun with one round in the chamber
yeah s&p 20.000, cup of coffee-surrogate 40.000
Mike, never forget that video clips like the follwoing will haunt you for life. http://www.youtube.com/watch?v=yoZV5jt9puc&feature=player_embedded
have fun with that... just promise you won't come back later looking to bum cab fare.
Well, Carlyle, I hope you bought with both fists this morning at the open.
Hopium overdose...treat with doses of gold and silver every 4-6 hours and call Drs. Bernanke & Geither for further assistance...
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.....
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?
There was no box cutter.
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).
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.
(applause)
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.
Over 44% of the "greatest generation" voted for the muslim. Illegals get endless freebie that granny cannot get.
How is that cat food?
May Allah bless you and your herd of goats. And may you continue to prosper in the Sacred Hills of Appalachia.
Hehe We have another socialist here.
Apparently obama supporters still think it is ok to vilify and stereotype one group, white rural southerners.
correction : if I read him right, goat owners.
Keep the goats away from Bernanke. He is getting desperate for a sacrifice, and he may just need a goat.
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!!!!!!!
Obama/Newt 2012
*
10 YEARS ?
How about 10 minutes .... lol !
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
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.
http://finance.yahoo.com/q/bc?s=^DJI&t=my&l=off&z=l&q=l&c=
"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.
Read his quarterley on resources - then you will know...
The Second Lost Decade.
I think I'm turning Japanese
I think I'm turning Japanese
I really think so !
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.
Same replies to every topic.....why bother to post>>>just cut and paste!
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.
+1
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.
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:
http://goo.gl/YK5hC
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.
See: http://crawlingroad.com/blog/2008/12/18/the-permanent-portfolio-allocation/
Yes, i was thinking about that for the last month...it would have worked even in the midst of all this craziness...
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.
I totally agree with you.