Notes From the King of the Contrarians

Jeremy Grantham oversees $85 billion for money-management firm GMO, but he’s attracted a cult following among investors not only for his asset-allocating acumen but also for his pithy prose. Here’s a sampling of Grantham’s writings, from his quarterly letters and other GMO publications:

From Indian antiquities to modern Chinese art; from land in Panama to Mayfair; from forestry, infrastructure, and the junkiest bonds to mundane blue chips; it’s bubble time! (April 2007)

Every bubble has always burst. (April 2007)

In 40 years I believe I have been offered three obvious and extreme opportunities to make or at least save money. Well the third great opportunity is now upon us in my opinion, and that is anti-risk. (July 2007)

I have often been too bearish about the U.S. equity markets in the last 12 years (although bullish on emerging equity markets), but I think it is fair to say that my language has almost never been this dire. The feeling I have today is that of watching a very slow motion train wreck. (July 2007)

Although the economy is likely to kick up in the next 12 months (although far from a near certainty) and be anticipated by the stock market, I believe it is likely that the longer-term health of the economy will be exaggerated. In time—perhaps a year into the recovery—the economy will slow once again and stay disappointingly below the standards to which we have become accustomed over the last several decades. (May 2009)

All in all we should fasten our seat belts. It’s likely to be a bumpy ride. (April 2007)

Expect at least one major bank to fail. (July 2007)

The global financial market seems like a giant suspension bridge with complicated engineering. Thousands of bolts hold it together. Today a few of them have fractures and one or two seem to have failed completely. The bridge, however, with typical redundancy built in, can take a few failed bolts, perhaps quite a few. And only with bad luck will some of them line up in a dangerous enough sequence to bring a major strut down. (July 2007)

Greed and reckless overconfidence on the part of almost everyone caused us to ignore risk to a degree that is probably unparalleled in breadth and depth in American history. (January 2009)

We are deep in the pickle jar, and it seems likely that, in terms of economic pain, 2009 will be the worst year in the lives of the majority of Americans, Brits, and others. So break a leg, everyone! (January 2009)

In the critical financial arena, (Obama) appears to have brought in Rubinesque retreads, “yes men,” or both, none of whom appeared to have seen the most obvious developing bubbles in the history of ?nance. (January 2009)

With masses of help from incompetent leadership, we probably do face a period that will look and feel painfully like seven lean years, and they will indeed be following about seven overstimulated very fat ones. (May 2009)