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Grantham: US will return 2% real next 2 decades

Posted: Thu Mar 07, 2019 8:14 pm
by stocknoob4111
Of course nobody can predict the future but this guy says 2% real returns over the next 2 decades and will be painful.

https://www.youtube.com/watch?v=h37hMronhas

He says EM Value can return as much as 8% real. Scary stuff but not quite sure I buy it.

Re: Grantham: US will return 2% real next 2 decades

Posted: Thu Mar 07, 2019 8:22 pm
by stlutz
This guy has pretty much been wrong about everything since 2008.

Example: https://www.mymoneyblog.com/gmo-asset-r ... -2018.html

Re: Grantham: US will return 2% real next 2 decades

Posted: Thu Mar 07, 2019 8:23 pm
by printer86
Not an actionable post.

Re: Grantham: US will return 2% real next 2 decades

Posted: Thu Mar 07, 2019 8:28 pm
by stocknoob4111
stlutz wrote:
Thu Mar 07, 2019 8:22 pm
This guy has pretty much been wrong about everything since 2008.

Example: https://www.mymoneyblog.com/gmo-asset-r ... -2018.html
oh! that's good to know, I heard it on CNBC and it seemed like he was a respected guy so was a bit alarmed at this forecast.

Re: Grantham: US will return 2% real next 2 decades

Posted: Thu Mar 07, 2019 8:38 pm
by nisiprius
GMO (Grantham's) "forecasts" are noise. Ignore them.

These were their forecasts 6/30/11-6/30/18

Image

Here's my chart of how their forecasts compared with the actual results:

Image

The correlation coefficient between the forecasts and the observations 0.05. That is to say, virtually zero. The forecast had virtually no predictive power.

Notice that he didn't even get the relative returns right. Among six asset classes of stocks:

--he forecasted that emerging markets would have the highest return. It had the lowest.
--he forecasted that US small-caps would have the lowest return. It was the third highest, and almost as high as the very highest.

Why do people pay any attention to GMO's forecasts?

Re: Grantham: US will return 2% real next 2 decades

Posted: Thu Mar 07, 2019 8:40 pm
by H-Town
nisiprius wrote:
Thu Mar 07, 2019 8:38 pm
Notice that he didn't even get the relative returns right. Among six asset classes of stocks:

--he forecasted that emerging markets would have the highest return. It had the lowest.
--he forecasted that US small-caps would have the lowest return. It had the highest.

Why do people pay any attention to GMO's forecasts?
Maybe try to do the opposite of his forecast?

Re: Grantham: US will return 2% real next 2 decades

Posted: Thu Mar 07, 2019 9:07 pm
by AlohaJoe
nisiprius wrote:
Thu Mar 07, 2019 8:38 pm
GMO (Grantham's) "forecasts" are noise. Ignore them.
In GMO/Grantham's defense....all his forecasts really are is fairly standard "valuations" and CAPE10 projections -- and not substantially different from the methodology that Bogle used.

If you're someone who talks about valuations and says things like "everything is expensive" or "CAPE10 is near historical highs", then really the onus is on you to explain why your beliefs about expected returns are different/better than Grantham's.
GMO employs a straightforward methodology to project asset class performance, which I’ve described previously. Its forecasts are based on certain key metrics – P/E ratio, profit margin, sales growth and dividend yield – that GMO believes will revert to their mean over a seven-year time horizon. Given that those variables are known today, anticipating future returns is a simple matter of assuming that these measures will revert to their historical means and calculating the implications
For myself, I see Grantham's forecast as the obvious logical conclusion if you're going to make arguments about valuations or mean reversion. Which I take as evidence that talk about valuations & mean reversion is somewhere between misleading & useless -- evidence that there's been some kind of regime change in the past ~20 years that makes it harder to reason about the future by looking at the past.

Re: Grantham: US will return 2% real next 2 decades

Posted: Thu Mar 07, 2019 9:12 pm
by warowits
H-Town wrote:
Thu Mar 07, 2019 8:40 pm
nisiprius wrote:
Thu Mar 07, 2019 8:38 pm
Notice that he didn't even get the relative returns right. Among six asset classes of stocks:

--he forecasted that emerging markets would have the highest return. It had the lowest.
--he forecasted that US small-caps would have the lowest return. It had the highest.

Why do people pay any attention to GMO's forecasts?
Maybe try to do the opposite of his forecast?
I love that he called for such a difference between S&P 500 and Large cap quality, and they were virtually identical. Not only did he not know the magnitude, but he failed to predict their almost perfect correlation. He is clearly just banking on the idea that pessimists sound smart, and eventually there will be a crash that he can say he predicted.


Valuations do seem high, but I also don't think that it is likely that we are going to revert to the mean of about 15 P/E ratio for the S&P 500, and if I wanted to only invest when it is below that mean there were basically just a couple months since 1990 that I could have done so.

A couple of months out of the last 28 years.

Re: Grantham: US will return 2% real next 2 decades

Posted: Thu Mar 07, 2019 9:15 pm
by stlutz
Grantham's writings are always interesting. He's a smart guy.

His forecasts aren't just "going where the numbers take him." In a very qualitative sense, he's a long-term pessimist because he believes we're running out of natural resources on one hand, but on the other hand we aren't running out them them fast enough (climate change). In short, all outcomes lead to ruin.

Perhaps he's right, but he's never going to arrive at an optimistic projection. His dour forecasts back in 2009, 10, 11 etc. (when valuations were rather cheap) are evidence of that.

Re: Grantham: US will return 2% real next 2 decades

Posted: Thu Mar 07, 2019 9:48 pm
by TheTimeLord
stocknoob4111 wrote:
Thu Mar 07, 2019 8:14 pm
Of course nobody can predict the future but this guy says 2% real returns over the next 2 decades and will be painful.

https://www.youtube.com/watch?v=h37hMronhas

He says EM Value can return as much as 8% real. Scary stuff but not quite sure I buy it.
What was the CAGR of the S&P 500 from 1/1/2000?

Re: Grantham: US will return 2% real next 2 decades

Posted: Thu Mar 07, 2019 10:03 pm
by miket29
stlutz wrote:
Thu Mar 07, 2019 9:15 pm
Perhaps he's right, but he's never going to arrive at an optimistic projection. His dour forecasts back in 2009, 10, 11 etc. (when valuations where rather cheap) are evidence of that.
As they say, a stopped clock is right twice a day...

Re: Grantham: US will return 2% real next 2 decades

Posted: Thu Mar 07, 2019 10:05 pm
by frugalecon
TheTimeLord wrote:
Thu Mar 07, 2019 9:48 pm
stocknoob4111 wrote:
Thu Mar 07, 2019 8:14 pm
Of course nobody can predict the future but this guy says 2% real returns over the next 2 decades and will be painful.

https://www.youtube.com/watch?v=h37hMronhas

He says EM Value can return as much as 8% real. Scary stuff but not quite sure I buy it.
What was the CAGR of the S&P 500 from 1/1/2000?
About 3.35% with dividends reinvested. 1.43% without dividends reinvested. (Both real)

Re: Grantham: US will return 2% real next 2 decades

Posted: Thu Mar 07, 2019 10:13 pm
by AlphaLess
stocknoob4111 wrote:
Thu Mar 07, 2019 8:14 pm
Of course nobody can predict the future but this guy says 2% real returns over the next 2 decades and will be painful.

https://www.youtube.com/watch?v=h37hMronhas

He says EM Value can return as much as 8% real. Scary stuff but not quite sure I buy it.
Not unimaginable.

Re: Grantham: US will return 2% real next 2 decades

Posted: Thu Mar 07, 2019 10:18 pm
by yogesh
nisiprius wrote:
Thu Mar 07, 2019 8:38 pm
GMO (Grantham's) "forecasts" are noise. Ignore them.

These were their forecasts 6/30/11-6/30/18

Image

Here's my chart of how their forecasts compared with the actual results:

Image

The correlation coefficient between the forecasts and the observations 0.05. That is to say, virtually zero. The forecast had virtually no predictive power.

Notice that he didn't even get the relative returns right. Among six asset classes of stocks:

--he forecasted that emerging markets would have the highest return. It had the lowest.
--he forecasted that US small-caps would have the lowest return. It was the third highest, and almost as high as the very highest.

Why do people pay any attention to GMO's forecasts?
Wow; that's quite intense data mining - Correlation coefficient between the forecasts and the observations 0.05

Re: Grantham: US will return 2% real next 2 decades

Posted: Thu Mar 07, 2019 10:20 pm
by TheTimeLord
frugalecon wrote:
Thu Mar 07, 2019 10:05 pm
TheTimeLord wrote:
Thu Mar 07, 2019 9:48 pm
stocknoob4111 wrote:
Thu Mar 07, 2019 8:14 pm
Of course nobody can predict the future but this guy says 2% real returns over the next 2 decades and will be painful.

https://www.youtube.com/watch?v=h37hMronhas

He says EM Value can return as much as 8% real. Scary stuff but not quite sure I buy it.
What was the CAGR of the S&P 500 from 1/1/2000?
About 3.35% with dividends reinvested. 1.43% without dividends reinvested. (Both real)
Then the beginning of the year rally has made a difference, Money Chimp has it at 2.64% real from 1/1/2000 - 12/31/2018 (latest date they have).
http://www.moneychimp.com/features/market_cagr.htm

Re: Grantham: US will return 2% real next 2 decades

Posted: Thu Mar 07, 2019 10:22 pm
by jbranx
One thing GMO has dropped from its forecast page is timber, which they always showed as the projected highest performing asset class. It wasn't, as witnessed by the fact that Harvard Endowment and many other allegedly wise ones lost their butts on southern pines in the last decade. I do agree with Aloha Joe that Grantham and Ben Inkler do some of the better fundamental work out there on forecasting and have been right a few times. However, they have been so wrong for so long--even failing to get the direction right--that I totally ignore them. Markets change, as Ben Graham discovered in '58 when he said back off the market because stocks now yielded less than bonds. He was wrong too for quite a spell. Valuations are not a good forecasting tool apparently; there being no good ones, I just go fishing and let my allocation take care of things.

Re: Grantham: US will return 2% real next 2 decades

Posted: Thu Mar 07, 2019 10:37 pm
by visualguy
He does have a good point about declining and aging populations in the developed world, and the political and other difficulties with compensating with immigration. Where is the growth going to come from in the developed world?

I think the US is still in somewhat better shape than most others in terms of fertility, acceptance of immigration, and ability to attract relatively high-quality immigration overall.

Re: Grantham: US will return 2% real next 2 decades

Posted: Thu Mar 07, 2019 10:39 pm
by fwellimort
So 2% real return? Well, still higher than TIPS.

Guess Grantham is a chill guy. Love his optimism. :sharebeer
Honestly, as long as I see a profit long term, I'm more than happy. :mrgreen:
I mean where else do you get 2% real return passively? Bonds don't. Cash don't. Real Estate is out of my budget right now.
Still the best risk reward return in the asset classes 8-)

Re: Grantham: US will return 2% real next 2 decades

Posted: Thu Mar 07, 2019 10:42 pm
by visualguy
fwellimort wrote:
Thu Mar 07, 2019 10:39 pm
So 2% real return? Well, still higher than TIPS.

Guess Grantham is a chill guy. Love his optimism. :sharebeer
Honestly, as long as I see a profit long term, I'm more than happy. :mrgreen:
Right, but volatility (and thus the sequence of returns issue) becomes more problematic when you don't have much return under your belt.

Re: Grantham: US will return 2% real next 2 decades

Posted: Thu Mar 07, 2019 10:46 pm
by fwellimort
visualguy wrote:
Thu Mar 07, 2019 10:42 pm
Right, but volatility (and thus the sequence of returns issue) becomes more problematic when you don't have much return under your belt.
Fortunately, unlike some other people here, I'm quite a fresh blood so I got more than 2 decades of investing to go.
I'm sure the older generation here already attained their wealth. Instead of being greedy, doesn't hurt to lock that rate into the bond market.

And if for the next 2 decades the stock market really does struggle and there's no crazy scenario going on, that's even better for me. Cause when you pull the rubber band long enough, when it is released, the momentum could be unimaginable due to the compounded inflation all those years.
If I'm able to buy at such low prices for 2 decades even better. :sharebeer
If the stock market fails me, oh well, at least I was saving for retirement unlike most people. 8-)
My new philosophy has become: Optimism in the equity market regardless of the outcome will probably be far more beneficial for my health.
I have no thoughts of losing my retirement years over some 'depressed return' in the stock market for long periods of time. It's just not worth wasting my energy on. Energy I could better spend laughing at others prophesying future returns. Life is too short to worry something as trivial as this. :mrgreen:
I found it funny when my co-workers were panic-ing over the market drop in december 2018. I stared at the number and thought, "that's it?". It just looks like a number at end of day. What's so worrying about it?

Re: Grantham: US will return 2% real next 2 decades

Posted: Thu Mar 07, 2019 10:51 pm
by H-Town
printer86 wrote:
Thu Mar 07, 2019 8:23 pm
Not an actionable post.
I think it does. There are plenty of fair warning signs that U.S. stocks might lay an egg for a decade. If you own 100% U.S. equity, now is the time to have at least 40% foreign equity.

Diversify, re-balance, rinse & repeat.

Don't be that guy and buy international when they will be at all time high.

Re: Grantham: US will return 2% real next 2 decades

Posted: Thu Mar 07, 2019 10:57 pm
by fwellimort
H-Town wrote:
Thu Mar 07, 2019 10:51 pm
I think it does. There are plenty of fair warning signs that U.S. stocks might lay an egg for a decade. If you own 100% U.S. equity, now is the time to have at least 40% foreign equity.
I wonder if the stock market's "reversal to the mean" is just human nature of trading in action.
Index Cap A is far outperforming Index Cap B. There seems to be mathematical models that state Index Cap A is overvalued.
1. Large institutional professionals expect reversal to the mean.
2. Those professionals and financial advisors recommend investing in Index Cap B.
3. New money flows into Index Cap B. Index Cap B starts to rise due to simple demand. Meanwhile, companies in Index Cap B also benefit leading to better results (leading to even more money circulation to the Cap B).
4. Investors notice the rise in Index Cap B and massively pours money in B until the companies in B can no longer produce noticeable results aka until the cap seems overvalued.
5. Index Cap A suddenly feels far more attractive.
6. Repeat with Cap A as B and Cap B as previous A.
At the end of day, the stock market is priced by all the traders. And if enough people believe in 'reversal to the mean', it is bound to probably happen.
:happy
Maybe that's also why value and growth kept swapping its places over time.

Re: Grantham: US will return 2% real next 2 decades

Posted: Thu Mar 07, 2019 11:03 pm
by dh
I watched the video. I think Grantham makes some interesting arguments (especially regarding global warming and population growth statistics). So for that, I thank the OP for sharing the link.

However, Grantham's investing advise (no US and pile into EM) "smells" like speculation to me. Maybe he is right and EM will do great and the US stock market will be horrific. But maybe he is wrong. Thus, I rebalance to 50% US and 50% International (yes, that international has a good dose of EM) every year.

Maybe US will do better, maybe International will do better. I don't know. But what I do know is that Grantham doesn't know either. So I take what the entire global stock market gives me and I diversify as broadly as I can, so I can sleep soundly at night sans speculation (or concern).

Re: Grantham: US will return 2% real next 2 decades

Posted: Thu Mar 07, 2019 11:03 pm
by HomerJ
AlohaJoe wrote:
Thu Mar 07, 2019 9:07 pm
nisiprius wrote:
Thu Mar 07, 2019 8:38 pm
GMO (Grantham's) "forecasts" are noise. Ignore them.
In GMO/Grantham's defense....all his forecasts really are is fairly standard "valuations" and CAPE10 projections -- and not substantially different from the methodology that Bogle used.
Yes, and people STILL, to this day, claim that CAPE is a good predictive tool.

Stocks may indeed have low returns going forward, but it's a little bit crazy to believe that CAPE is a good predictive tool after 27 years of it being terrible at predicting. I mean, the results are right there in front of you.

Almost as soon as CAPE was invented from back-testing the past, it stopped working going forward.

Again, I'm not saying the next 10-20 years won't be bad. They might be.

I'm saying no one knows. Including me.
If you're someone who talks about valuations and says things like "everything is expensive" or "CAPE10 is near historical highs", then really the onus is on you to explain why your beliefs about expected returns are different/better than Grantham's.
This.

Re: Grantham: US will return 2% real next 2 decades

Posted: Thu Mar 07, 2019 11:08 pm
by HomerJ
H-Town wrote:
Thu Mar 07, 2019 10:51 pm
printer86 wrote:
Thu Mar 07, 2019 8:23 pm
Not an actionable post.
I think it does. There are plenty of fair warning signs that U.S. stocks might lay an egg for a decade. If you own 100% U.S. equity, now is the time to have at least 40% foreign equity.
This was stated in 2011.

No one knows the future.

Re: Grantham: US will return 2% real next 2 decades

Posted: Thu Mar 07, 2019 11:20 pm
by DrGoogle2017
I’m glad to know he’s not been right. Why does CNBC keep bringing these people? He does sound smart, I almos believed him and go all in on EM, but the market was closed, so I missed my chance.

Re: Grantham: US will return 2% real next 2 decades

Posted: Thu Mar 07, 2019 11:27 pm
by visualguy
H-Town wrote:
Thu Mar 07, 2019 10:51 pm
There are plenty of fair warning signs that U.S. stocks might lay an egg for a decade. If you own 100% U.S. equity, now is the time to have at least 40% foreign equity.
Unfortunately, most of ex-US is Europe and Japan, and they are in worse shape than the US, and prospects look worse there.

Re: Grantham: US will return 2% real next 2 decades

Posted: Thu Mar 07, 2019 11:27 pm
by EnjoyIt
stocknoob4111 wrote:
Thu Mar 07, 2019 8:14 pm
Of course nobody can predict the future but this guy says 2% real returns over the next 2 decades and will be painful.

https://www.youtube.com/watch?v=h37hMronhas

He says EM Value can return as much as 8% real. Scary stuff but not quite sure I buy it.
Dave Ramsey predicts 12%. I just don't know who to believe.

:roll eyes:

Re: Grantham: US will return 2% real next 2 decades

Posted: Thu Mar 07, 2019 11:30 pm
by drk
stlutz wrote:
Thu Mar 07, 2019 9:15 pm
Grantham's writings are always interesting. He's a smart guy.

[...] he's a long-term pessimist [...]

Perhaps he's right, but he's never going to arrive at an optimistic projection.
This brings to mind Matt Ridley’s book The Rational Optimist. We humans tend to overrate the intelligence of pessimistic people. If the guy’s almost always wrong, at some point we should believe his record.

Re: Grantham: US will return 2% real next 2 decades

Posted: Thu Mar 07, 2019 11:34 pm
by stlutz
EnjoyIt wrote:
Thu Mar 07, 2019 11:27 pm

Dave Ramsey predicts 12%. I just don't know who to believe.

:roll eyes:
In fairness, that's only if you invest in a "good growth mutual fund." :D

Re: Grantham: US will return 2% real next 2 decades

Posted: Thu Mar 07, 2019 11:50 pm
by EnjoyIt
stlutz wrote:
Thu Mar 07, 2019 11:34 pm
EnjoyIt wrote:
Thu Mar 07, 2019 11:27 pm

Dave Ramsey predicts 12%. I just don't know who to believe.

:roll eyes:
In fairness, that's only if you invest in a "good growth mutual fund." :D
That's the problem, OP is investing in "poor growth mutual funds" that will return only 2%.

I'm going for index funds and hoping for 4-5% over the next 50 years. Wish me luck.

Re: Grantham: US will return 2% real next 2 decades

Posted: Thu Mar 07, 2019 11:52 pm
by fennewaldaj
visualguy wrote:
Thu Mar 07, 2019 11:27 pm
H-Town wrote:
Thu Mar 07, 2019 10:51 pm
There are plenty of fair warning signs that U.S. stocks might lay an egg for a decade. If you own 100% U.S. equity, now is the time to have at least 40% foreign equity.
Unfortunately, most of ex-US is Europe and Japan, and they are in worse shape than the US, and prospects look worse there.
Sure but valuations are lower (by CAPE, trailing PE, forward PE, P/B, ect) . So that is baked into the price at this point. If I were to guess I would they don't really look much better than US stocks due to what you suggested (that is they are ~75% as expensive now but there are good reasons to expect lower eps growth). Emerging markets do look attractively priced but there are of course other issues there. Luckily I own US, developed ex US, and EM.

Re: Grantham: US will return 2% real next 2 decades

Posted: Fri Mar 08, 2019 1:18 am
by TravelGeek
Should I know who he or she (or they) is? :shock: :D

Re: Grantham: US will return 2% real next 2 decades

Posted: Fri Mar 08, 2019 7:31 am
by rkhusky
H-Town wrote:
Thu Mar 07, 2019 8:40 pm
nisiprius wrote:
Thu Mar 07, 2019 8:38 pm
Notice that he didn't even get the relative returns right. Among six asset classes of stocks:

--he forecasted that emerging markets would have the highest return. It had the lowest.
--he forecasted that US small-caps would have the lowest return. It had the highest.

Why do people pay any attention to GMO's forecasts?
Maybe try to do the opposite of his forecast?
Because the correlation coefficient isn't -1, but close to zero.

Re: Grantham: US will return 2% real next 2 decades

Posted: Fri Mar 08, 2019 9:19 am
by ruralavalon
Predictions are not worth my time to listen to.

Re: Grantham: US will return 2% real next 2 decades

Posted: Fri Mar 08, 2019 9:36 am
by Valuethinker
stlutz wrote:
Thu Mar 07, 2019 9:15 pm
Grantham's writings are always interesting. He's a smart guy.

His forecasts aren't just "going where the numbers take him." In a very qualitative sense, he's a long-term pessimist because he believes we're running out of natural resources on one hand, but on the other hand we aren't running out them them fast enough (climate change). In short, all outcomes lead to ruin.
That's equating copper, say, to oil & gas. The one we can extract all that we can get our hands on, the latter it's the physical limit to our effluent that is of concern.

Or agricultural production to oil & gas extraction.

What is clear in the rise of fracking is that we are unlikely to run out of oil & gas -- it will always be there at a price. We are also not going to run out of coal on a planet-wide basis*. In both cases, within the time frame that our effluent dumped into the atmosphere gives us. If we could burn these without effluent then of course theoretically we could "run out" but in actual fact the price would rise and new substitutes would emerge.

Grantham's ruminations are more about running out of key materials/ exceeding our capacity to produce food. On the former we have always found substitutes. On the latter we are very inefficient in how we produce and consume food, so even on a planet of 10-12 billion there will be enough food production even if climate-disrupted -- however the environmental damage might in the long run be unsustainable.
Perhaps he's right, but he's never going to arrive at an optimistic projection. His dour forecasts back in 2009, 10, 11 etc. (when valuations were rather cheap) are evidence of that.
* coking coal (metallurgical coal used in steel making) is an interesting one - I am not sure that one's been solved.

Phosphorus is the life critical material that we could potentially run out of - depending on what you think happens after our population peaks. Natural sources of mineral phosphorus are actually fairly few (Morocco mostly). However we could extract it from sewage, and we could at least in theory extract it from seawater.

Re: Grantham: US will return 2% real next 2 decades

Posted: Fri Mar 08, 2019 9:40 am
by Valuethinker
TravelGeek wrote:
Fri Mar 08, 2019 1:18 am
Should I know who he or she (or they) is? :shock: :D
Jeremy Grantham is a very well-written Englishman, resident in Boston since I think the 1960s, who built up Grantham Mayo van Oterloo into a respected fund manager.

He had a very good record for calling markets. William Bernstein produced some stats and GMO was way out in front (this was in the early 2000s).

They are value managers and have recruited some very talented but unusual hires-- value maven James Montier (his books are worth a read), financial crash writer Edward Chancellor.

I would imagine they have had an absolute torrid time the last few years and lost clients. I am reminded of the late Tony Dye, who was fired by UBS Philips & Drew Asset Management (as it was then) on the very day that the market peaked before the dot com crash. UBS PDFM had avoided tech-telecom stocks and been heavy into Inflation Linked Gilts (TIPS in effect) which were then paying 3.0% real rates. They lost huge amounts of client money as the market rose in the Tech Media Telecom crescendo - Vodafone was 15% of the London index at one point.

In his day Barton Biggs of Morgan Stanley was a similar provocative read, from a different viewpoint. His books were also good reads.

Re: Grantham: US will return 2% real next 2 decades

Posted: Fri Mar 08, 2019 12:24 pm
by Sconie
jbranx wrote:
Thu Mar 07, 2019 10:22 pm
One thing GMO has dropped from its forecast page is timber, which they always showed as the projected highest performing asset class. It wasn't, as witnessed by the fact that Harvard Endowment and many other allegedly wise ones lost their butts on southern pines in the last decade. I do agree with Aloha Joe that Grantham and Ben Inkler do some of the better fundamental work out there on forecasting and have been right a few times. However, they have been so wrong for so long--even failing to get the direction right--that I totally ignore them. Markets change, as Ben Graham discovered in '58 when he said back off the market because stocks now yielded less than bonds. He was wrong too for quite a spell. Valuations are not a good forecasting tool apparently; there being no good ones, I just go fishing and let my allocation take care of things.
Further to GMO dropping its high-return forecast for timber, it is also of interest to note that a little over a year ago---and without much fanfare----GMO sold-off just about all of its timber holdings:

https://www.businesswire.com/news/home/ ... -Resources

:wink:

Re: Grantham: US will return 2% real next 2 decades

Posted: Fri Mar 08, 2019 12:44 pm
by DB2
People are ripping him, but Vanguard and Morningstar are predicting notably higher returns with international vs. U.S. over the next 10 years.

Re: Grantham: US will return 2% real next 2 decades

Posted: Fri Mar 08, 2019 12:55 pm
by Wiggums
Come into the pool, Mr Grantham. The water is warm.

Re: Grantham: US will return 2% real next 2 decades

Posted: Fri Mar 08, 2019 1:24 pm
by 2015
DB2 wrote:
Fri Mar 08, 2019 12:44 pm
People are ripping him, but Vanguard and Morningstar are predicting notably higher returns with international vs. U.S. over the next 10 years.
I don't pay any mind to VG or M* either. Marketing disguised as "information" is always diametrically opposed to my own interests.

Re: Grantham: US will return 2% real next 2 decades

Posted: Fri Mar 08, 2019 1:25 pm
by megabad
stocknoob4111 wrote:
Thu Mar 07, 2019 8:14 pm
Of course nobody can predict the future but this guy says 2% real returns over the next 2 decades and will be painful.

https://www.youtube.com/watch?v=h37hMronhas

He says EM Value can return as much as 8% real. Scary stuff but not quite sure I buy it.
Seems to be close to the consensus projection in my view (and my planning uses close to this). I don't find any of it scary since Bogle and others have spouted projections like this before. I just invest and stay the course, who knows if any of these people will be right (at least some of them are guaranteed to be wrong). The stuff about EM Value is an "it depends" projection to me. I mean there are a lot of different "emerging" markets. Then there's small value, large value, etc.

Re: Grantham: US will return 2% real next 2 decades

Posted: Fri Mar 08, 2019 1:33 pm
by DesertDiva
stocknoob4111 wrote:
Thu Mar 07, 2019 8:14 pm
Of course nobody can predict the future but...
... someone just came along and tried to do it anyway :?

Re: Grantham: US will return 2% real next 2 decades

Posted: Fri Mar 08, 2019 1:33 pm
by Grt2bOutdoors
2%??!! Whew! That means somewhere between 4-5% nominal (isn’t that what Jack was implying not too long ago), much better than my worse case scenario. Plan for the worst, if the returns are better accept them gracefully. In a way, this is good news as a low return world implies lower inflation and those who think they can raise prices ad infinitum (higher education and a few others) are going to find themselves going the way of the dodo bird.

On the other hand, those who make promises are going to find they will not be able to keep them.

Re: Grantham: US will return 2% real next 2 decades

Posted: Fri Mar 08, 2019 1:35 pm
by 3funder
I agree that it's not actionable, although I do expect somewhat subdued returns. Will this happen over the next 5 years? 10 years? 15 years? Longer? I don't know.

Re: Grantham: US will return 2% real next 2 decades

Posted: Fri Mar 08, 2019 1:37 pm
by HomerJ
Here's what Shiller wrote back in 2015

http://www.nytimes.com/2015/08/30/upsho ... riced.html

Over the five trading days between Aug. 17 and Aug. 24, [2015] the United States stock market dropped 10 percent — the official definition of a correction, with similar or greater drops in other countries.
It is entirely plausible that the shaking of investor complacency in recent days will, despite intermittent rebounds, take the market down significantly and within a year or two restore CAPE ratios to historical averages. This would put the S.&P. closer to 1,300 from around 1,900 on Wednesday, and the Dow at 11,000 from around 16,000. They could also fall further; the historical average is not a floor.
So Shiller himself was talking about the S&P 500 dropping from 1900 to 1300 within a year or two in 2015. S&P 500 is instead at 2700.

How many times does a prediction have to be horribly wrong... not just a little wrong, but horribly wrong, before we understand that "nobody knows enough" to predict anything?

The very last line of the article, it appears Shiller himself knows he can't predict the future.
Or maybe this could be another 1998. We have no statistical proof. We are in a rare and anxious “just don’t know” situation, where the stock market is inherently risky because of unstable investor psychology.
If Shiller himself says "We have no statistical proof", then maybe his followers should listen.

I also submit that we are ALWAYS in a "anxious "just don’t know” situation, where the stock market is inherently risky because of unstable investor psychology." Shiller calls it rare... I say that's the standard.

Re: Grantham: US will return 2% real next 2 decades

Posted: Fri Mar 08, 2019 1:42 pm
by Grt2bOutdoors
stlutz wrote:
Thu Mar 07, 2019 11:34 pm
EnjoyIt wrote:
Thu Mar 07, 2019 11:27 pm

Dave Ramsey predicts 12%. I just don't know who to believe.

:roll eyes:
In fairness, that's only if you invest in a "good growth mutual fund." :D
Actually you have to slice the investment dollars 4 ways: Aggressive Growth, Growth, Growth & Income and International. But just the other day I heard him say he’s getting returns of 15-20% on his capital invested in real estate. Timing is key, he bought a ton of real estate when it hit the skids in 2008+. Having ready cash is instrumental in acting upon opportunities.

Re: Grantham: US will return 2% real next 2 decades

Posted: Fri Mar 08, 2019 1:44 pm
by DB2
2015 wrote:
Fri Mar 08, 2019 1:24 pm
DB2 wrote:
Fri Mar 08, 2019 12:44 pm
People are ripping him, but Vanguard and Morningstar are predicting notably higher returns with international vs. U.S. over the next 10 years.
I don't pay any mind to VG or M* either. Marketing disguised as "information" is always diametrically opposed to my own interests.
So, do you think the U.S. will continue to outperform?

Re: Grantham: US will return 2% real next 2 decades

Posted: Fri Mar 08, 2019 1:47 pm
by TheTimeLord
DB2 wrote:
Fri Mar 08, 2019 1:44 pm
2015 wrote:
Fri Mar 08, 2019 1:24 pm
DB2 wrote:
Fri Mar 08, 2019 12:44 pm
People are ripping him, but Vanguard and Morningstar are predicting notably higher returns with international vs. U.S. over the next 10 years.
I don't pay any mind to VG or M* either. Marketing disguised as "information" is always diametrically opposed to my own interests.
So, do you think the U.S. will continue to outperform?
I think I am amazed how many people here seem to believe all countries markets should have the same PE regardless of the country's growth rate, tax laws or financial regulations.

Re: Grantham: US will return 2% real next 2 decades

Posted: Fri Mar 08, 2019 1:54 pm
by 2015
DB2 wrote:
Fri Mar 08, 2019 1:44 pm
2015 wrote:
Fri Mar 08, 2019 1:24 pm
DB2 wrote:
Fri Mar 08, 2019 12:44 pm
People are ripping him, but Vanguard and Morningstar are predicting notably higher returns with international vs. U.S. over the next 10 years.
I don't pay any mind to VG or M* either. Marketing disguised as "information" is always diametrically opposed to my own interests.
So, do you think the U.S. will continue to outperform?
I have no idea. I only vaguely knew it was "outperforming" based on fire hose of "financial" discussions here. I have intentionally positioned my investments, personal finances, and microeconomics so as to remain indolent in these areas. As a long term investor taking advantage of the miracle of compounding, my decisions are never driven by greed, fear, or ego.