Is There A Hole In The CAPE?

While some prominent strategists, including Jeremy Grantham and Robert Shiller, have pointed to the 10-year cyclically-adjusted price/earnings ratio (“CAPE”) as evidence that stocks (in particular the S&P 500) are very overvalued, Wharton Professor Jeremy Siegel says there’s a flaw in the metric.  The flaw, Siegel said at a TD Ameritrade Institutional conference, involves the 2008 year, Financial Advisor magazine reports. That year, three S&P members — Citigroup, AIG and Bank of America—lost a total of $450 billion,… 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

The Gurus Dig Deep For Resource Plays

In his latest article for Nasdaq.com, Validea CEO John Reese takes a look at some natural resource-related stocks that look attractive right now.  “With the world population continuing to rise, global economies running for the most part on non-renewable resources, and central banks injecting huge sums of money into the financial system in recent years, some of the world’s most successful investors have been bullish on natural resource-related stocks recently,” writes Reese, listing Jeremy Grantham,… Read More

Grantham Gloomy, But Not Running From Equities

GMO’s Jeremy Grantham sounds quite gloomy in his latest quarterly letter, though he advises a “near normal” allocation to equities and says high-quality U.S. stocks are “relatively cheap”. Grantham says that both debt overhangs and structural problems — such as income inequality, an aging population, deficiencies in infrastructure and education, and the government’s inability to deal with long-term issues — make him continue to believe that his forecast of “seven lean years” (which he made… Read More

Grantham, Doll Offer Different Takes On Margins

Are historically high profit margins for U.S. firms sustainable, or will they come bouncing back to the mean — and throw a wrench into the stock market in the process? Blackrock’s Bob Doll and GMO’s Jeremy Grantham have very different takes, according to Bloomberg. Doll says a weak job market and labor-saving technologies have helped push margins to their current record high levels. And, he doesn’t see either of those trends abating. Sluggish job growth… Read More

Grantham Gloomy, But Finding Value

GMO’s Jeremy Grantham is predicting more gloom for the U.S. economy, but he says stock valuations are “finally” such that investors can build portfolios of equities with potential for solid long-term returns. “If we adjust earnings to normal and apply an average P/E, you can finally build a decent portfolio today of global equities at a respectable long-term return,” Grantham tells MarketWatch, adding that the potential for strong returns is a bit better outside the… Read More

Reese, Grantham, and Resource Stocks

Discussing Jeremy Grantham’s warning on dwindling natural resources, Validea CEO John Reese takes a look at some resources-related stocks that get high marks from his “Guru Strategies” in his latest column for Canada’s Globe and Mail. “Mr. Grantham was one of the few to warn of both the Internet bubble in the late 1990s and the U.S. credit bubble that burst in 2008. Now, he’s issuing another warning, one more long-term in nature, and it has… Read More

Grantham Buying for First Time Since ’09, But Offers Several Warnings

Jeremy Grantham says his firm is now “very modest buyers” of equities for the first time since mid-2009. “At the close on August 8, a slightly cheap equity portfolio could be put together comprised of U.S. high quality, emerging markets, Japan, Italy, and European growth stocks,” Grantham writes in the second half of his quarterly letter, which is available on GMO’s web site. “On our data, the imputed 7-year return of the package today would… Read More

Grantham: Resource Shortages Are Looming — Deal with Them Now

GMO’s Jeremy Grantham continues to warn about global resource shortages, saying in his new quarterly client letter that soil erosion and limited supplies of potash and phosphates “are the real long-term problems we face”. Grantham says we have the means and brain power to live sustainably. “The problem is with us and our focus on short-term growth and profits, which is likely to cause suffering on a vast scale,” he writes. “With foresight and thoughtful… Read More

Grantham Likes Commodities

Commodity prices are headed higher over the long term, Jeremy Grantham says, and investors would be wise to make sure they are exposed to them — though not through futures contracts. “Risks abound, as always, in commodity investing. Despite them, Grantham advises, you should start getting in, ‘but keep a lot of dry powder,’” reports Forbes’ William Baldwin. “If there’s a crash, double up. If there’s no crash, add gradually to your positions over the… Read More