Grantham: Lessons Learned in the Decade

I always enjoy reading Jeremy Grantham’s missives, and his most recent comments do not disappoint. They are packed with great tidbits and insight.

My favorite part was this list of “Lessons Learned in the Decade” — the full list is available at

Here is an abbreviated version:

• The Fed wields even more financial influence than we thought.

• Low rates have a more powerful effect on driving financial assets than on driving the economy.

• The Fed is capable of being extremely out of touch with the real world and more doctrinaire than anyone could have imagined.

• Congress is nearly dysfunctional, primarily controlled by large corporations;

• Government administrations can be incompetent for long periods.

• The leadership of major corporations can be very lacking in insight and competence on a fairly routine basis.

• The two time-tested investment tools, value (P/E ratios and P/B ratios) and price momentum, are now much more heavily used and not so reliable as they once
were, say from 1977 to 1997.

• Asset classes really are more inefficiently priced than individual stocks on average, and therefore offer greater opportunities for adding value and reducing risk.

• The Fed learns no lessons!

Fascinating stuff from Jeremy Grantham of GMO.


What A Decade!
Jeremy Grantham
GMO, 1/25/2010

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