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Strategies & Market Trends : Ask DrBob -- Ignore unavailable to you. Want to Upgrade?

To: CookiePuss who wrote (41907)	8/5/2001 2:14:23 PM
From: jpdunwell	Respond to of 100058

Jeremey Grantham... From the lead-in to the interview <<Walking through the offices of Grantham, Mayo, Van Otterloo, a Boston-based money manager to which institutions and individuals have entrusted $22 billion, a visitor is told by one of Jeremy Grantham's colleagues that the firm's founder and chief investment strategist can seem "Delphic" at times. On meeting Grantham, at 62 renowned and revered as one of the philosopher-kings of the investment world, one is struck more by his eloquence, and by his down-to-earth nature. Grantham has spent more than 30 years in the investment business, managing money at Keystone Custodian Funds and co-founding Batterymarch Financial Management along with Dean LeBaron, before launching GMO in 1977 with Dick Mayo and Eyk Van Otterloo. He is best known for his assiduous study of the relative values represented by different asset classes and markets worldwide. >> And here's Richard Russell in his latest comments on the Grantham interview: <<On page 26 of next week's Barron's there's a very intelligent article entitled "After the Deluge," which is an interview with Jeremy Grantham. Barron's calls this money manager "one of the philosopher kings of the investment world." He's been in the business 30 years, which is pretty good although to an old-timer like me he's just a few years beyond a teen-ager. The crux of Grantham's thinking is not too different from mine, at least in the long term . He says, "The peak was March 2000 and the market has come down a lot, but it has a whole lot further to fall. Great bear markets take their time. In 1929, we started a 17-year bear market, succeeded by a 20-year bull market, followed in 1965 by a 27 year bear market, then an 18-year bull. "Now we are going to have a one-year bear market? It doesn't sound very symmetrical. It is going to take years. We think the ten-year return from this point is a negative 50 points (a basis point is one-hundredth of a percentage point) after inflation. We take inflation out to make everything consistent." As for opportunities, he see them "in emerging equities, fixed income and inflation-potected bonds." Grantham also sees a big rally starting sometime soon, but earnings will not move up with the market. When people perceive that (with the S&P at 40 times earnings) "the next leg will be more vicious." Russell Comment: An interesting and very logical scenario. I'm not as confident about the coming big bear market rally, but I certainly would not rule it out. I agree with Grantham on one point ? this isn't going to be a one-year or a two-year bear market. This bear market is going to stretch out for years, much of the stretch-out due to the Fed's machinations. In the end, the public will hate stocks and be very disillusioned about the "long-term benefits of investing and holding equities." Before the bear market is over, the public will be as "down" on stocks as they are now enamored of stocks. Wall Street will be a hated word. It's the way of the world. Better to realize it and act on it now, than to go broke fighting it.>> I think this last part is important, as there seems to me to be a sense of denial about this market and valuations. Not to take a shot, but even DrBob has been talking about a return of the bull and a higher market six to nine months out dating all the way back to late spring of 2000(Nasdaq 6000). Could be, who knows, but I just do not see how a strong case for this based on fundamentals could be made. Will be a looooong time before we see that again, I think. Feel like I was living in a dream world until I finally woke up to reality with a good shake last year. Like everyone else, I hope these guys are wrong about the duration of the bear (I would much prefer a rapid, harsh correction to get it over with), but I am not willing to hope with my money on the line. JP