Jeremy Grantham, “the market is full of major league inefficiencies”

By on June 7, 2009

Joe Nocera at the N. Y. Times, writes an interesting article about the controversy surrounding the Efficient Market Theory (EMT). Jeremy Grantham believes the advent of the EMT has partially led to investors’ herd-like behavior and the formation of bubbles. Burton Malkiel, author of A Random Walk Down Wall Street: The Time-Tested Strategy for Successful Investing (Completely Revised and Updated), thinks Granthams assertions regarding the EMT are ludicrous; but agrees with him that bubbles form, however, you can’t recognize them in advance.

SMA comment: Malkiel’s book is one of the best ever written about investing; but he should probably say although investment bubbles have existed, knowing when they are going to burst is the challenge for investors. Grantham, in my mind, has proven the market has inefficiencies; but they probably have most to do with government and central banker (the Fed) meddling to help out the connected few. Grantham has written extensively on this point.


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