Jeremy Grantham: Field Marshal Of Finance
It’s not often that I encounter a piece written about legendary investor Jeremy Grantham, so when I do, I’m truly ecstatic. Chris Taylor of the Financial Times (UK) wrote about Jeremy Grantham earlier today, and did an exceptional job reminding readers as to why Grantham is considered one of the investing greats. Grantham, now 69, graduated from the University of Sheffield and began his illustrious career as an economist for Royal Dutch Shell in 1961. Over the years, the founder of GMO with Richard Mayo and Eyk van Otterloo and overseer $152 billion (£77 billion) in assets has made some brilliant calls. Taylor wrote:
He was proved right, but it was far from the first time. Some of Mr Grantham’s “greatest hits” are the technology-stock implosion of 2000; the insane Japanese valuations of the late 1980s; the emerging markets run of the last few years; and the plunging housing market of today.
In retrospect, all obvious. But at the time, before these massive booms and busts, he always seemed to be a lonely voice in the wind.
“I remember when Jeremy made a stand against tech stocks in the late ‘90s, and was in the wilderness for what must have seemed like 50 years,” says Jim Grant, founder and editor of Grant’s Interest Rate Observer. “He lost many clients during that time, but he’s a fighter, and just doesn’t back down from a deeply held conviction. I think the British army lost a talented field general when Jeremy migrated to the States and took up finance.”
Source: The Toy Soldier Shoppe
Grantham has proven to be a consistently-reliable forecaster due to his reliance on empirical data, among other things. Taylor noted:
Mr Grantham prefers to pay attention to hard numbers, instead of the misinformed musings of public officials. He is a quant at heart (a believer in quantative analysis), collecting reams of data and discovering what it all has to tell him - with a few crucial modifications.
And these days, what does the legendary investment manager recommend for individual investors?:
“The mattress is good,” Mr Grantham says, only half-joking. After all, boring cash - the “good, old-fashioned” kind of short-term government instruments - is at least a safe harbour, despite negligible returns.
And other places to consider stashing assets, for more aggressive investors? Half in the “bluest blue chips you can find”, and the other half in solid emerging market equities. Even though emerging markets have enjoyed a multi-year run of outperformance, Mr Grantham still likes them, given the stunning global growth story.
And Grantham’s economic outlook? Not rosy. Taylor wrote:
As for the current market nightmares, do not think they are over quite yet. Indeed last summer Mr Grantham said “In 5 years I expect that at least one major bank [broadly defined] will have failed and that up to half the hedge funds in existence today will simply have ceased to exist.”
Source:
“A general who relishes the heat of the battle”
Chris Taylor
Financial Times (UK), March 24, 2008
