GMO: Investor Strategies are Solving the “Wrong Problem”

A recent GMO client letter urges investors to “stop obsessing over their portfolios and pay more attention to factors beyond their holdings that are more difficult to measure” or risk missing their goals. This according to an article in Institutional Investor. The letter–written by the firm’s head of asset allocation, Ben Inker–suggests that investors tend to overlook assets and liabilities outside of their portfolios because they lack “quantitatively well-estimated characteristics” they can use to measure… Read More

GMO: Don’t Bail on Hedge Funds

The fall in rates since the financial crisis has benefited stocks and other long-duration assets while hurting short-duration assets such as hedge funds, says GMO’s Ben Inker. “The characteristics that made hedge funds disappoint,” he says, “may well prove a blessing if discount rates start to rise.” Inker argues that today’s high returns and advanced U.S. equity valuations are not sustainable because they “represent an increase in the present value of an asset without any… Read More

A Bearish View from GMO’s Grantham

Ben Inker and Jeremy Grantham of Grantham, Mayo, Van Otterloo & Co. issued a quarterly letter suggesting the bull market cannot last much longer. Inker writes that the U.S. has been outperforming for decades but attacks the idea that US stocks are inherently superior even as they grow more expensive. “We cannot completely reject the possibility that those arguments are correct,” he says, “but the evidence seems pretty thin.” Grantham points to the need to… Read More

GMO: Death of Equities “Greatly Exaggerated”

Bill Gross’ claim that the cult of equities is “dead” has generated a lot of response recently, and now Jeremy Grantham’s GMO has entered the fray, countering many of Gross’ key points. “Disappointing returns from equity markets over a period of time should not be viewed as a signal of the ‘death of equities,’” Ben Inker writes in a white paper on GMO’s web site. “Such losses are necessary for overpriced equity markets to revert… Read More

Grantham on Incredibly Irrational Markets

In his latest quarterly letter, GMO’s Jeremy Grantham offers some very interesting data on the disconnect between the stock market on one hand, and the economy and “fair value” of the stock market on the other. “This difference is massive — two-thirds of the time annual GDP growth and annual change in the fair value of the market is within plus or minus a tiny 1% of its long-term trend,” Grantham writes in the letter,… Read More

Grantham’s GMO Not As Gloomy On Stocks As You Think

While Jeremy Grantham’s GMO has been gloomy about the outlook on stocks, the firm’s head of asset allocation says there are also good opportunities in the market right now. “We think there is money to be made,” Ben Inker tells The Boston Globe. “There’s plenty of stuff to be worried about. [But] there’s actually a fair number of stocks worth owning. For us, that’s exciting.” Inker tells the Globe that it’s a bad time to… Read More

Arnott, Inker: Tough Finding Values in Stocks — or Bonds

With a variety of assets — from stocks to bonds to gold — up significantly this year, two top asset allocation strategists are urging a conservative approach heading into 2010. “There isn’t that much to be excited about,” GMO’s Ben Inker tells the Associated Press. “It’s going to be tougher in 2010, because we’ve had this big flow into risky assets. They were all cheap last winter, but they’ve all gone up 60 percent-plus.” Inker… Read More

They Got It Right in March; What Do They Say Now?

A few weeks ago, we highlighted how Jeremy Grantham — who quite presciently had advised investors to “reinvest when terrified” back in March — is now sounding much more cautious. And, according to The Wall Street Journal, Grantham isn’t the only strategist who correctly called the market’s upturn but is now feeling less optimistic. “In March, analysts who picked the bottom were a lonely lot,” writes the Journal’s Mark Gongloff. Now, he says, several of… Read More

“Fair Value”: The GMO Perspective

The big question on many investors’ minds lately has been whether the recent market plunge has caused stocks to be undervalued — and, if so, how much more undervalued they might become. One obvious question involved in that debate: What goes into figuring the fair value of the market? In a white paper recently posted on the website of GMO — Jeremy Grantham’s firm — Ben Inker takes a shot at answering that question, and… Read More