An Argument Against Passive Investing

As clients move dollars to passively managed funds, investment management firm Grantham Mayo van Otterloo has “remained bearish as markets have lifted valuations,” according to an article in Barron’s. But James Montier, a member of the firm’s asset-allocation committee who was interviewed for the article, “often challenges the assumptions of his boss [Jeremy Grantham] and others around him.” Following are some of Montier’s comments from the interview: Passive investing: “You cannot describe yourself as an… Read More

GMO’s James Montier on Fed-Induced Bubbles, Alpha, and More

James Montier of Grantham Mayo van Otterloo’s (GMO’s) Asset Allocation team spoke with Advisor Perspectives recently about interest rates, behavioral biases, and other key factors affecting markets. He said that unlike the longest-serving Fed governor William McChesney Martin, who said the central bank’s job is to “take the punch bowl away just when the party was getting interesting,” recently the Fed governors “are more like teenagers at prom night . . . spiking the punch… Read More

Montier Not Finding Much Safety

James Montier and GMO are known for their conservative, cautious approach — a mindset that has helped the firm often recognize market and economic problems well ahead of others. So, what scares Montier right now? The lack of assets offering a “margin of safety”. “I just can’t find any assets that have a particularly high margin of safety,” Montier tells Advisor Perspectives. “There is nothing that reaches out and screams, ‘Hey, I’m really undervalued.’ Therefore,… Read More

The “Seven Immutable Laws of Investing”

In a recent white paper, GMO’s James Montier takes an interesting look at what he says are “The Seven Immutable Laws of Investing”. The first rule, on which Montier spends the most time, invokes the late, great Benjamin Graham: “Always Insist on a Margin of Safety”. Montier writes: “Valuation is the closest thing to the law of gravity that we have in finance. It is the primary determinant of long-term returns. However, the objective of… Read More

Montier: Don’t Believe the New Normal Hype

The “New Normal” concept has gotten a ton of attention in the financial and investment worlds in the past couple years. But in a new paper, GMO’s James Montier says not to believe the hype. In a paper posted on GMO’s web site, Montier says that for some economic indicators, there may indeed be a New Normal. For others, however, there isn’t. And, he adds, “what concerns me more than this are some of the… Read More

Top Strategists Talk “Buy-and-Hold”

The Financial Times recently interviewed several top strategists about the viability of “buy-and-hold” investing, and found that some are espousing more of a “buy-cheap-and-hold” approach. “In a challenge to the received wisdom of holding stock market investments for 20 years or more, to smooth out short-term volatility, some suggest that measures of cheapness can be used to make buying decisions and enhance performance,” writes the Times‘ David Stevenson. Here’s a sampling of what some of… Read More

Is This Crisis Really a “White Swan”?

In a recent article for the CFA Institute Conference Proceedings Quarterly, James Montier, Societe Generale Cross Asset Research’s global strategist, argues that the recent economic crisis and market plunge were not, as many have said, an unprecedented, unpredictable “black swan” event. Instead, he says the events have the characteristics of what psychologists call a “predictable surprise” — a “white swan”. “Volatility has indeed been higher historically, so today’s situation is not unprecedented,” Montier writes. “Furthermore,… Read More