The Wall Street Journal’s Brett Arends wrote a piece yesterday in which he offered ten reasons why not to sell your stocks. Reason number six had to do with legendary investment adviser Jeremy Grantham, chairman of privately-held global investment firm GMO. Grantham’s track record in forecasting the financial markets is pretty impressive:

• In 1982, said the U.S. stock market was ripe for a “major rally.” That year was the beginning of the longest bull run ever.
• In 1989, called the top of the Japanese bubble economy.
• In 1991, predicted the resurgence of U.S. large cap stocks.
• In 2000, correctly called the rallies in U.S. small cap and value stocks.
• In January 2000, warned of an impending crash in technology stocks, which took place two months later.

To giver you an idea of just how well-respected the British money manager’s opinions are, his past clients have included U.S. Vice President Dick Cheney and 2004 U.S. presidential candidate John Kerry.

Arends wrote Thursday:

But if you are panicking and getting ready to sell everything and hide under a rock, here are ten reasons why you shouldn’t…

6. Even one of the most notorious bears is starting to concede some shares are reasonably valued. I’m speaking about fund manager Jeremy Grantham, of Grantham Mayo Van Otterloo & Co. I should add the caveat that Mr. Grantham, who has been predicting financial disaster for several years, remains deeply gloomy overall. Nonetheless he now calculates that shares have fallen so far that if you buy a basket of “high quality” U.S. stocks today and hold them for about seven years, you’ll probably end up making about a 50% profit – after inflation. Stocks that even Jeremy Grantham likes come pretty well recommended even in a financial crisis. His top “high quality” picks are Microsoft, Johnson & Johnson, Pfizer, Wal-Mart, Exxon Mobil, Coca-Cola, PepsiCo, Chevron, UnitedHealth Group, Procter & Gamble, QUALCOMM, Oracle, Merck, Home Depot, and Cisco Systems. (It sort of looks like a typical “Large Cap” fund without the financial stocks.) If you are really nervous, maybe you should just sell your other shares and buy these.

Source:

“Ten Reasons Not to Sell Your Stocks”
Brett Arends
Wall Street Journal, September 18, 2008

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