Archive for November 3, 2008

Jeremy Grantham on Housing Bubbles (2005)

November 3, 2008 @ 12:29 am · Filed under Economics, Stock-Market

Paul Kedrosky often talks about Jeremy Grantham, and I recently got hold of GMO’s Quarterly Letter dated April 200, The Canary in the Coal Mine II (courtesy PD).

It’s almost prophetic to hear Jeremy look at the housing data and predict that it’s a bubble, and a rather scary one at that.

Even better is his take on the bull market (6 Kinds of Bull) reproduced here for your benefit –

 Sloppy and therefore dangerous bull market approaches can, I believe, be divided into six types:

  1. Dow 36,000: the purely ‘PR’ driven nonsense
  2. Jeremy Siegel: price doesn’t matter, 7% real returns by divine right
  3. Sloppy or no earnings adjustments to market P/E
  4. Sloppy growth forecasts
  5. The Abby Cohen and Alan Greenspan Show: the economy is great and therefore the market will do fine
  6. The ‘Fed Model Effect’: yes P/E ratios are quite high but the market is still cheap because interest rates are so low.

Simply priceless.

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