Posted By Prieur du Plessis On July 31, 2008 @ 11:49 am
After having ventured on the bullish side of things a few days ago with Martin Pring’s upbeat scenario for stock markets ( Time to be Optimistic), we revert to a significantly more sceptical outlook today.
The bearer of the bad tidings is well-respected money manager Jeremy Grantham who has just published the July edition of his quarterly newsletter entitled “Meltdown! The Global Competence Crisis”. Grantham co-founded Boston-based  GMO, an investment house overseeing $126 billion in assets, in 1977.
Reflecting on his comments of a year ago and how events have played out, he says: “I thought things would be bad enough but they turned out to be a lot worse. I thought a year ago we were looking at the ‘first truly global bubble’ in asset prices. The credit crisis looked to be so predictably powerful and unstoppable then that I likened the experience to ‘watching a slow-motion train wreck’, and I predicted that ‘one major bank (broadly defined) will fail within 5 years’, for which I got considerable grief as a doomsayer, as the less optimistic strategists usually do. Well, a year later one bank failure looks positively quaint as a prediction.
“Ironically for a ‘perma bear’, I underestimated in almost every way how badly economic and financial fundamentals would turn out. Events must now be disturbing to everyone, and I for one am officially scared!”
In terms of strategy, Grantham summarizes his view in what he believes should be investors’ motto: “Don’t be brave, run away. Live to fight another day.”
Click  here for the full report on Grantham’s reasoning for his bearish stance.
Source: Jeremy Grantham,  GMO, July 30, 2008.