Jeremy Grantham Predicts More Pain

By on June 17, 2008

Jeremy Grantham, world-renowned investor whose firm, GMO, manages $145 billion, said it will take 12-18 months or longer for the effects of the shock from the credit crunch to show up in the economy. He also compared it to the 1929-1930 window. He indicated that the stock market does not reflect the future outlook and does not anticipate the long lag of the depressive economic factors.

Grantham added, “it’s very hard to torture the economics, to think that you can squeeze liquidity, take a hit to your biggest capital asset, housing, mark it down 15 per cent and then maybe another 15 per cent, in an overleveraged society, without having a sustained negative effect that would last two or three years. Which I’m sure it will.”

Grantham finally stated as far as making investment bets, he’d “go long emerging [markets] and long high-quality U.S. stocks, and short the U.S. junky [small-cap] stocks. That can do perfectly fine over the next several years.”

The complete interview can be found at the following link:

http://www.theglobeandmail.com/servlet/story/LAC.20080617.RQUESTIONS17/TPStory/Business

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