Posts filed under “Cycles”
Have a look at the charts above and below. They are from James Montier’s GMO Quarterly Letter, July 2013, titled The Purgatory of Low Returns; you can download the full PDF here (registration may be req’d).
(Note to Josh: This quarter, Ben Inker and Montier filled in for the big dog in the quarterly letter. Even Grantham misses a letter deadline sometimes! )
The chart above is forward 7 year asset class return expectations from 2007. The chart below shows the same forward 7 year asset class return expectations from 2013.
Notice where the potential best returns are: For long term and patient investors, the opportunities for the best return on investment are places that may be somewhat uncomfortable today: Emerging Markets, which have been shellacked and are widely reviled following that collapse; International large and small cap, which means in no small measure Europe. And lastly, US high quality companies — which many people insist are on the verge of rolling over.
Whether you agree with these views or not, you must recognize that Grantham’s methodology is sound and that his long term track record is outstanding. He tends to be early, but that’s no surprise when you think in terms of investment arcs of 7 years.
If you run an asset allocation model (as we do), you should think about increasing your exposure to EM and Europe — but only if you (and/or your clients) are patient investors.
Many people believe they are patient investors, but few actually behave that way.
The Purgatory of Low Returns
GMO Quarterly Letter, July 2013 http://www.gmo.com/websitecontent/GMO_QtlyLetter_ALL_2Q2013.pdf
Click to enlarge Source: NY Magazine Kevin Roose: Inspired by Matt Yglesias, I made the above chart to show how wrong all of these doomsayers have been. As you can see, after the Dodd-Frank Act was signed in July of 2010, the biggest investment banks on Wall Street experienced no real setbacks when it…Read More
Click to enlarge Source: Bloomberg Interesting chart form Dave Wilson showing how elusive the U.S. housing market’s rebound has been for the Homebuilders. Existing single-family homes sold at about the same pace in May as they did in January 2000, according to data compiled by the National Association of Realtors. New home sales…Read More
@TBPInvictus Below I give you two related (and therefore similar) measures of household leverage: Household Debt Service Payments and Household Financial Obligations, each as a Percent of Disposable Personal Income: Each has hit a record or near-record low for the maximum observable period (regrettably only 33 or so years). The question must be asked: Is…Read More
Click to enlarge I do not ever recall seeing all these in one place in one chart: S&P 500, DJIA, Gold, Silver, West Texas Intermediate, Total Debt as a % of GDP and the US 10yr to 1850. Many of these are at or close to all time highs. (Note the exception is the…Read More
Source: Real Time Economics As the chart above shows, this is not an especially impressive recovery in terms of Real Disposable Income. As we have discussed, this is not your typical post-recession recovery — it is a post credit-crisis recovery, and thats why metrics such as GDP, Job creation, wages and even inflation…Read More
Butler|Philbrick|Gordillo and Associates have an interesting post called What the Bull Giveth, the Bear Taketh Away on the duration and magnitude of all bull and bear market periods in U.S. stocks since 1871. For the purpose of the study below, we examined the S&P 500 price series from Shiller’s publicly available database to understand the duration and magnitude of all…Read More
Bubbles and Manias Source: Jean-Paul Rodrigue, Dept. of Global Studies & Geography, Hofstra University Fascinating chart showing the psychological of a longer market cycle via Prof Jean-Paul Rodrigue. Previously: Lagging Psychology at Turning Points Investor Sentiment Wheel Psy Cycle Economic Cycles and Investing