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December 06, 2011 at 09:24 AM
Jeremy Grantham’s latest letter to clients is spectacularly, and relentlessly, depressing; but his oversight of $100 billion-plus in assets under management—on which he has bested the market by a significantly large premium—entitles the doomsaying hedge fund manager to a very respectful hearing.
Investors, Grantham (left) says, might want some valium—or travel visas—handy as they consider that the troubles plaguing the eurozone are “terrifying”; that economic recovery in the debt-plagued U.S., and the indeed the world, is unlikely any time soon; that developed world growth has “permanently” slowed because of long-term slowing population growth, aging and “an overcommitment to the old.”
But all that is just preliminary for the principal of Grantham Mayo Van Otterloo (GMO), who says the U.S. has become fundamentally uncompetitive because of “depleted infrastructure,” ineffective education and ineffective governance when it comes to tackling long-term issues.
Once investors can recognize there is a problem, Grantham stops mincing words: “We have gone from having been notably upwardly mobile during the Eisenhower era to having fallen behind other developed countries today, even the U.K.!” That was his first exclamation point. He reserves his second for “the most important and the most dangerous issues: depleting resources, development of a comprehensive energy policy, and, yes, global warming. Wake up dudes!”
But even environmental skeptics will want to pay close attention to Grantham’s market analysis, which helped his GMO Quality fund beat the S&P 500 by a whopping 9.1% in the first 11 months of the year in a relatively flat market while his balanced fund bested its benchmark by an impressive 4.2%.
