I’ve referenced Jeremy Grantham in the past. In Q3 ’03, Grantham stated that we are now experiencing “The Greatest Sucker Rally in History.”
Is that overstating the matter? It depends upon your timeline. If you measure your returns in terms of years or decades, then Grantham may very well be right.
Yet while his Macro call is probably correct, the market keeps going higher without him.
What makes the situation so challenging — even perplexing — is that most fund managers are measured on a quarterly basis. If you believe as Grantham does, and make a “Macro call” based upon that belief, then you missed the biggest rally since 1999.
This is the Fund Manager’s Dilemma: whether to be a multi year investor, staying true to your discipline, or to be a quarterly trader when the circumstances (and your own skillset) allows.
2003 brought the Fund Manager’s Dilemma more sharply into focus than ever before. Expect to see pressure form some Fund Families to turn investors into traders. Some managers will leave their present homes — voluntartily or not — to set up their own shop where tey can be truer to their own strategic positions.