Jeremy Grantham (Jan 26, 2022) being asked a lot of tough questions about his super bubble call...

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JBTX
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Re: Jeremy Grantham (Jan 26, 2022) being asked a lot of tough questions about his super bubble call...

Post by JBTX »

Elysium wrote: Sun Feb 06, 2022 10:56 am All that said, let's just say there is a bubble, and it means prices will come down, but how much? no one knows, and in what asset classes? no knows that either. Then the most important questions, for how long? and what is the recovery like? again, no one knows. So, a bubble and it's bursting itself are not events to be concerned too much about for long term investors, it's impact on someone who has been investing for 20-30-40 years, and on someone who is starting out, or someone who is 10-15 years into investing, all are different.

Everyone needs to evaluate their plans and always assume stock market can go down -10% correction almost any random year, a -20% bear market is to be expected almost every other 3 to 5 years, and a -30%, -40% should be expected at any random year every once in a decade or so. Finally, one should always be prepared for a great depression like drop with a long recovery period, or the Japanese stock market drawdown. This is the benchmark for risk according to me, and I invest my capital based on that knowledge, not some random risk assessment questionnaire posted by investment companies asking if stocks drop by X% what would you do, on and on. The risk everyone should be prepared is that stocks drop 80% or more in value and stay down for a long time, even longer than you needing the money.

That is why we invest, because there is that risk there is expected reward. If we can easily spot the bubble like Grantham thinks he can, and get in an out, avoid large losses, and make more gains than those others, then there won't be a risk premium. It would be so easy, we just follow a guru like Grantham and get in and out according to his fair value calculation. There is a reason why his formula based investing is yielding much much less than staying fully invested portfolio. It's called reward for taking the risk. Grantham and his formula based investing is not willing to take the risk, so they get less reward. In fact, they want to take risk only when the reward looks so attractive, such as in March 2009, but we don't get that sort of opportunity every time. They themselves have been waiting out since 2012, we can wait out since the risk is not acceptable to us, or we can accept the risk and get the reward.

Not taking risks may be fine with him and others who value preserving capital more than growing it, but that doesn't make it a good plan for the others, we have a goal to get to and for that invest we must. Sometimes you get there, sometimes you don't and we must make adjustments.
My response was simply to the assertion that we are not in a bubble. Obviously there is no strict definition of bubble so I guess one can make whatever assertion they wish. At least with Grantham he has proposed a fairly clear definition of bubble, and from what I can tell there is some intellectual rigor behind it.

Also I was arguing against the assertion that the US is nothing like Japan late 80s. I hear this over and over again. I find that to be a dismissive point of view. If you look there are some similarities and there are differences. But the point about it’s different because Japan peaked at a much higher PE than now is not a reason to point blank dismiss the comparison. Back it up a couple of years and the PEs start to get more comparable and you are still faced with decades of future near zero returns.

To your latter points and post, identifying a bubble, and coming up with a strategy to exploit it are two different things, and Grantham's generally middling results are evidence of that. It’s the reason why I only use his musings to inform myself, not as a primary driver of strategy. The most useful purpose he serves for me is an indicator of the potential risk, and am I Ok with the result if what he says is true.

Also it’s easy for people to just say to stay the course when we’ve been in a 40 year cycle of falling interest rates and generally rising stock market. While we have had crashes they have generally recovered in a few years. Very few here have experienced a protracted downward or flat market. Only when you are in the middle of such a situation do you know how you will feel and what you may do.
Elysium
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Re: Jeremy Grantham (Jan 26, 2022) being asked a lot of tough questions about his super bubble call...

Post by Elysium »

JBTX wrote: Sun Feb 06, 2022 1:55 pm
My response was simply to the assertion that we are not in a bubble. Obviously there is no strict definition of bubble so I guess one can make whatever assertion they wish. At least with Grantham he has proposed a fairly clear definition of bubble, and from what I can tell there is some intellectual rigor behind it.

Also I was arguing against the assertion that the US is nothing like Japan late 80s. I hear this over and over again. I find that to be a dismissive point of view. If you look there are some similarities and there are differences. But the point about it’s different because Japan peaked at a much higher PE than now is not a reason to point blank dismiss the comparison. Back it up a couple of years and the PEs start to get more comparable and you are still faced with decades of future near zero returns.

To your latter points and post, identifying a bubble, and coming up with a strategy to exploit it are two different things, and Grantham's generally middling results are evidence of that. It’s the reason why I only use his musings to inform myself, not as a primary driver of strategy. The most useful purpose he serves for me is an indicator of the potential risk, and am I Ok with the result if what he says is true.

Also it’s easy for people to just say to stay the course when we’ve been in a 40 year cycle of falling interest rates and generally rising stock market. While we have had crashes they have generally recovered in a few years. Very few here have experienced a protracted downward or flat market. Only when you are in the middle of such a situation do you know how you will feel and what you may do.
These are all fair points. Even without the rigor they use, it's quite possible to eye ball returns from US markets in the last decade, and especially last 3 years to say it's been very above average and therefore something must give in the coming years. But to defend the point of view of staying the course, and the argument that it's difficult to identify bubbles, it always looks like that in a rising market, so much that we would have identified at least 7 or 8 bubbles in last 20 years out of 1 or 2 that really occurred. Someone following that idea would have gotten out of market in 2016, 2017, and 2018, they would not have waited until 2022. They also would have missed a lot of gains in those years, gains they could actually use to get closer to their goals and then reduce the risk by following their glidepath, moving those into safer fixed income. Staying course also means following the plan to reduce risk as you gain more, get closer to your goals, with less years to go. Lastly, it is true no one is prepared to handle a long drawn out downward spiral in both stock and bond market, it's one thing to look at history, to make plans, and another to actually go through it. Knowing all this at least prepares you. I am not dismissive of these low returns forecasts, just that acting on it can be very difficult and often ends up with poor outcomes. Another approach is to take the average of all of them, expect returns will be lower in future, and prepare by staying as balanced as possible.
JBTX
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Re: Jeremy Grantham (Jan 26, 2022) being asked a lot of tough questions about his super bubble call...

Post by JBTX »

Elysium wrote: Sun Feb 06, 2022 2:25 pm
JBTX wrote: Sun Feb 06, 2022 1:55 pm
My response was simply to the assertion that we are not in a bubble. Obviously there is no strict definition of bubble so I guess one can make whatever assertion they wish. At least with Grantham he has proposed a fairly clear definition of bubble, and from what I can tell there is some intellectual rigor behind it.

Also I was arguing against the assertion that the US is nothing like Japan late 80s. I hear this over and over again. I find that to be a dismissive point of view. If you look there are some similarities and there are differences. But the point about it’s different because Japan peaked at a much higher PE than now is not a reason to point blank dismiss the comparison. Back it up a couple of years and the PEs start to get more comparable and you are still faced with decades of future near zero returns.

To your latter points and post, identifying a bubble, and coming up with a strategy to exploit it are two different things, and Grantham's generally middling results are evidence of that. It’s the reason why I only use his musings to inform myself, not as a primary driver of strategy. The most useful purpose he serves for me is an indicator of the potential risk, and am I Ok with the result if what he says is true.

Also it’s easy for people to just say to stay the course when we’ve been in a 40 year cycle of falling interest rates and generally rising stock market. While we have had crashes they have generally recovered in a few years. Very few here have experienced a protracted downward or flat market. Only when you are in the middle of such a situation do you know how you will feel and what you may do.
These are all fair points. Even without the rigor they use, it's quite possible to eye ball returns from US markets in the last decade, and especially last 3 years to say it's been very above average and therefore something must give in the coming years. But to defend the point of view of staying the course, and the argument that it's difficult to identify bubbles, it always looks like that in a rising market, so much that we would have identified at least 7 or 8 bubbles in last 20 years out of 1 or 2 that really occurred. Someone following that idea would have gotten out of market in 2016, 2017, and 2018, they would not have waited until 2022. They also would have missed a lot of gains in those years, gains they could actually use to get closer to their goals and then reduce the risk by following their glidepath, moving those into safer fixed income. Staying course also means following the plan to reduce risk as you gain more, get closer to your goals, with less years to go. Lastly, it is true no one is prepared to handle a long drawn out downward spiral in both stock and bond market, it's one thing to look at history, to make plans, and another to actually go through it. Knowing all this at least prepares you. I am not dismissive of these low returns forecasts, just that acting on it can be very difficult and often ends up with poor outcomes. Another approach is to take the average of all of them, expect returns will be lower in future, and prepare by staying as balanced as possible.
While it is true that Grantham has been underweighted a long time and missed out on a lot of potential returns, by the same token only within the last couple of years has he stated we are in a 3 sigma bubble, a criteria which he articulated many years ago.

I am fully supportive of a stay the course approach, but I react when people get dogmatic about it and dismiss other points of view that may have some merit. Stay the course soon becomes 100% stocks, or 100% US stocks and morphs into points of view that will likely not survive the next big or protracted downturn. For the record I’ve pretty much stayed the course for 30+ years, through 2000, 2008 2020 etc. While I haven’t always followed a strictly Bogleheads approach I’ve pretty consistently stayed with an “age typical” allocation of stocks.
InvestInPasta
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Re: Jeremy Grantham (Jan 26, 2022) being asked a lot of tough questions about his super bubble call...

Post by InvestInPasta »

gmaynardkrebs wrote: Sat Feb 05, 2022 3:00 pmFor those who buy post-bubble, the returns would be good, possibly very good. They'd be paying considerably less for each dollar of earnings.
But how and when do you buy post-bubble?
In March 2020 I didn't buy more stocks, because I though the market would go down even more, but the "bubble" did not eventually pop and now the DOW is worth $35K, in Feb/2020 was around $29K :oops: :(
Last edited by InvestInPasta on Tue Feb 08, 2022 4:31 am, edited 1 time in total.
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asif408
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Re: Jeremy Grantham (Jan 26, 2022) being asked a lot of tough questions about his super bubble call...

Post by asif408 »

JBTX wrote: Sun Feb 06, 2022 2:38 pm I am fully supportive of a stay the course approach, but I react when people get dogmatic about it and dismiss other points of view that may have some merit.
You've pretty much stated one of the signs of a bubble, not only does someone say your investing view is wrong, but they say it with a high level of spite and vindictiveness. You can feel the digital spit hitting your cheeks as they digitally yell at you in anger from their phone keyboard.

We're starting to see that more around here. More of the philosophy that "since a broken clock is right twice a day, it's never right" instead of "a broken clock is right twice a day, so often it's wrong but occasionally it's right and I might want to check the actual time".
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HomerJ
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Re: Jeremy Grantham (Jan 26, 2022) being asked a lot of tough questions about his super bubble call...

Post by HomerJ »

asif408 wrote: Mon Feb 07, 2022 8:59 am
JBTX wrote: Sun Feb 06, 2022 2:38 pm I am fully supportive of a stay the course approach, but I react when people get dogmatic about it and dismiss other points of view that may have some merit.
You've pretty much stated one of the signs of a bubble, not only does someone say your investing view is wrong, but they say it with a high level of spite and vindictiveness. You can feel the digital spit hitting your cheeks as they digitally yell at you in anger from their phone keyboard.
I see it the other way, but I guess I could be mistaken.

I see posters telling us, that the basic Boglehead investing view is wrong. That buy and hold and stay the course are wrong. That market-timing is easy, and we're dumb to not see what is obviously about to happen with stock prices or interest rates, etc.

I, at least, do not say their predictions are wrong. I say they can't be sure they are right. That no one knows.

I don't take the opposite view. When they say "the market is likely to crash soon", I don't say "no it will keep going up". I say we don't know. I say they shouldn't be making large changes because they think they know the future. We have a million examples of experts and people on these boards and on old Internet pages (Like Grantham) who thought they were smarter than the average bear, but ended up wrong.

I say since no one actually knows what is going to happen next, the Boglehead investing view with an appropriate AA is a good long-term plan.

Maybe not the best plan, but certainly a good plan.

If nothing else, it's certainly useful information to let someone know who is listening to an "expert" predict the future how poorly that "expert" has done predicting the future in the past. I can't imagine you are against that. Should we just listen to all "experts" blindly? Any time someone posts a prediction on marketwatch or seekingalpha, etc. we should just accept that the prediction will come true, and make changes to our portfolios?
Last edited by HomerJ on Mon Feb 07, 2022 12:35 pm, edited 1 time in total.
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marcopolo
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Re: Jeremy Grantham (Jan 26, 2022) being asked a lot of tough questions about his super bubble call...

Post by marcopolo »

asif408 wrote: Mon Feb 07, 2022 8:59 am
JBTX wrote: Sun Feb 06, 2022 2:38 pm I am fully supportive of a stay the course approach, but I react when people get dogmatic about it and dismiss other points of view that may have some merit.
You've pretty much stated one of the signs of a bubble, not only does someone say your investing view is wrong, but they say it with a high level of spite and vindictiveness. You can feel the digital spit hitting your cheeks as they digitally yell at you in anger from their phone keyboard.

We're starting to see that more around here. More of the philosophy that "since a broken clock is right twice a day, it's never right" instead of "a broken clock is right twice a day, so often it's wrong but occasionally it's right and I might want to check the actual time".
It seems to me you have it quite backwards.
The people advocating "stay the course", usually are quite open about the fact that they largely do this because they simply do not know what the market is going to do, because it is a very complex system and they are not smart enough to predict its course with any kind of actionable accuracy.
They allow that a crash could happen at anytime, including tomorrow, or not.

It seems the people who claim to see the bubble forming are the ones who say it is obvious and people would have be naive rubes not to see it, and acknowledge their brilliance.
Once in a while you get shown the light, in the strangest of places if you look at it right.
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CraigTester
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Re: Jeremy Grantham (Jan 26, 2022) being asked a lot of tough questions about his super bubble call...

Post by CraigTester »

HomerJ wrote: Mon Feb 07, 2022 9:16 am
asif408 wrote: Mon Feb 07, 2022 8:59 am
JBTX wrote: Sun Feb 06, 2022 2:38 pm I am fully supportive of a stay the course approach, but I react when people get dogmatic about it and dismiss other points of view that may have some merit.
You've pretty much stated one of the signs of a bubble, not only does someone say your investing view is wrong, but they say it with a high level of spite and vindictiveness. You can feel the digital spit hitting your cheeks as they digitally yell at you in anger from their phone keyboard.
I see it the other way, but I guess I could be mistaken.

I see posters telling us, that the basic Boglehead investing view is wrong. That buy and hold and stay the course are wrong. That market-timing is easy, and we're dumb to not see what is obviously about to happen with stock prices or interest rates, etc.

I, at least, do not say their predictions are wrong. I say they can't be sure they are right. That no one knows.

I don't take the opposite view. When they say "the market is likely to crash soon", I don't say "no it will keep going up". I say we don't know. I say they shouldn't be making large changes because they think they know the future. We have a million examples of experts and people on these boards and on old Internet pages (Like Grantham) who thought they were smarter than the average bear, but ended up wrong.

I say since no one actually knows what is going to happen next, the Boglehead investing view with an appropriate AA is a good long-term plan.

Maybe not the best plan, but certainly a good plan.

If nothing else, it's certainly useful information to let someone know who is listening to an "expert" predict the future how poorly that "expert" has done predicting the future in the past. I can't imagine you are against that. Should we just listen to all "experts" blindly? Any time someone posts a prediction on marketwatch or seekingalpha, etc. we should just accept that the prediction will come true, and make changes to our portfolios?
Warren Buffett, (or was it Graham?) said something like, in the short term the stock market is a voting machine...but in the long term its a weighing machine...

If you believe this statement, it means that the "math" ultimately matters....

But the frustration enters the room, when there are so many participants that don't "respect" the math....they just buy or sell because of something having absolutely nothing to do with whether or not the market is priced correctly....

This I believe is the root of why the stock market forever goes through booms and busts....

It shouldn't have to be this way....And whether you find yourself waiting 20 years for the market to finally return to its last high.... or waiting for the market to become a weighing machine again....There is just far too much waiting for everyone....

And this is what we do while we wait.... After a crash the timers say I told you so to the buy-n-holders....and after a big irrational run up the buy-n-holders say I told you so to the timers....

And this is what makes a market.....
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Re: Jeremy Grantham (Jan 26, 2022) being asked a lot of tough questions about his super bubble call...

Post by JBTX »

From some of the comments above it seems like people really take it personally when a perspective is presented that is perceived to deviate from their core values.
Randolph Mortimer
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Re: Jeremy Grantham (Jan 26, 2022) being asked a lot of tough questions about his super bubble call...

Post by Randolph Mortimer »

JBTX wrote: Mon Feb 07, 2022 1:24 pm From some of the comments above it seems like people really take it personally when a perspective is presented that is perceived to deviate from their core values.
I think people who post "ideas" that are diametrically opposed to boglehead philosophy on the boglehead forum, and subtly imply that that those who adhere to boglehead philosophy are stupid and don't believe in math, should expect to have their "ideas" challenged.

No?
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iceport
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Re: Jeremy Grantham (Jan 26, 2022) being asked a lot of tough questions about his super bubble call...

Post by iceport »

CraigTester wrote: Mon Feb 07, 2022 1:05 pm
HomerJ wrote: Mon Feb 07, 2022 9:16 am
asif408 wrote: Mon Feb 07, 2022 8:59 am
JBTX wrote: Sun Feb 06, 2022 2:38 pm I am fully supportive of a stay the course approach, but I react when people get dogmatic about it and dismiss other points of view that may have some merit.
You've pretty much stated one of the signs of a bubble, not only does someone say your investing view is wrong, but they say it with a high level of spite and vindictiveness. You can feel the digital spit hitting your cheeks as they digitally yell at you in anger from their phone keyboard.
I see it the other way, but I guess I could be mistaken.

I see posters telling us, that the basic Boglehead investing view is wrong. That buy and hold and stay the course are wrong. That market-timing is easy, and we're dumb to not see what is obviously about to happen with stock prices or interest rates, etc.

I, at least, do not say their predictions are wrong. I say they can't be sure they are right. That no one knows.

I don't take the opposite view. When they say "the market is likely to crash soon", I don't say "no it will keep going up". I say we don't know. I say they shouldn't be making large changes because they think they know the future. We have a million examples of experts and people on these boards and on old Internet pages (Like Grantham) who thought they were smarter than the average bear, but ended up wrong.

I say since no one actually knows what is going to happen next, the Boglehead investing view with an appropriate AA is a good long-term plan.

Maybe not the best plan, but certainly a good plan.

If nothing else, it's certainly useful information to let someone know who is listening to an "expert" predict the future how poorly that "expert" has done predicting the future in the past. I can't imagine you are against that. Should we just listen to all "experts" blindly? Any time someone posts a prediction on marketwatch or seekingalpha, etc. we should just accept that the prediction will come true, and make changes to our portfolios?
Warren Buffett, (or was it Graham?) said something like, in the short term the stock market is a voting machine...but in the long term its a weighing machine...

If you believe this statement, it means that the "math" ultimately matters....

But the frustration enters the room, when there are so many participants that don't "respect" the math....they just buy or sell because of something having absolutely nothing to do with whether or not the market is priced correctly....

This I believe is the root of why the stock market forever goes through booms and busts....

It shouldn't have to be this way....And whether you find yourself waiting 20 years for the market to finally return to its last high.... or waiting for the market to become a weighing machine again....There is just far too much waiting for everyone....

And this is what we do while we wait.... After a crash the timers say I told you so to the buy-n-holders....and after a big irrational run up the buy-n-holders say I told you so to the timers....

And this is what makes a market.....
Yes, but it gets especially interesting when both types say "I told you so" at exactly the same time! :shock:

Your comment reminded me of a standing discussion I was having with a small group of friends. Back in the fall of 2019, at one of an occasional get-togethers with former co-workers, some in the group felt afraid that the market was due for a crash. One or two advocated trimming equity holdings significantly in preparation for the inevitable slide. (Nobody advocated getting out of the market entirely, though.) One friend seemed to have adopted an approach of adjusting his stock/bond split according to how high the market is. I didn't get the impression he actually monitors valuation metrics, but he seemed to simply compare current market indexes against recent highs or lows in the last few years.

Fast-forward somewhere in 2020, after the COVID crash and subsequent recovery. I sent out a text to the group marveling at the fact that, despite the fast and deep crash, the market was then up about 10% from where it was the previous fall, when we had discussed preparations for the next crash. I saw this rebound as vindication for the buy-and-hold strategy I had advocated.

To my great surprise, the "tactical asset allocator" fired back the he was right! The market *had* crashed, he said. (Never mind that the crash was for a totally different, unforeseen reason...)

I said, sure, but if you had gotten out last fall, whatever equities you sold would have missed out on the 10% gains we now enjoyed.

The reply was that I would have done even better if I had sold in the fall, then gotten back in before the rebound.

I said, yes, true, but is that what you did?



(That friend has has yet to respond to that question. :wink: )
"Discipline matters more than allocation.” |—| "In finance, if you’re certain of anything, you’re out of your mind." ─William Bernstein
Topic Author
CraigTester
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Re: Jeremy Grantham (Jan 26, 2022) being asked a lot of tough questions about his super bubble call...

Post by CraigTester »

iceport wrote: Mon Feb 07, 2022 1:48 pm
CraigTester wrote: Mon Feb 07, 2022 1:05 pm
HomerJ wrote: Mon Feb 07, 2022 9:16 am
asif408 wrote: Mon Feb 07, 2022 8:59 am
JBTX wrote: Sun Feb 06, 2022 2:38 pm I am fully supportive of a stay the course approach, but I react when people get dogmatic about it and dismiss other points of view that may have some merit.
You've pretty much stated one of the signs of a bubble, not only does someone say your investing view is wrong, but they say it with a high level of spite and vindictiveness. You can feel the digital spit hitting your cheeks as they digitally yell at you in anger from their phone keyboard.
I see it the other way, but I guess I could be mistaken.

I see posters telling us, that the basic Boglehead investing view is wrong. That buy and hold and stay the course are wrong. That market-timing is easy, and we're dumb to not see what is obviously about to happen with stock prices or interest rates, etc.

I, at least, do not say their predictions are wrong. I say they can't be sure they are right. That no one knows.

I don't take the opposite view. When they say "the market is likely to crash soon", I don't say "no it will keep going up". I say we don't know. I say they shouldn't be making large changes because they think they know the future. We have a million examples of experts and people on these boards and on old Internet pages (Like Grantham) who thought they were smarter than the average bear, but ended up wrong.

I say since no one actually knows what is going to happen next, the Boglehead investing view with an appropriate AA is a good long-term plan.

Maybe not the best plan, but certainly a good plan.

If nothing else, it's certainly useful information to let someone know who is listening to an "expert" predict the future how poorly that "expert" has done predicting the future in the past. I can't imagine you are against that. Should we just listen to all "experts" blindly? Any time someone posts a prediction on marketwatch or seekingalpha, etc. we should just accept that the prediction will come true, and make changes to our portfolios?
Warren Buffett, (or was it Graham?) said something like, in the short term the stock market is a voting machine...but in the long term its a weighing machine...

If you believe this statement, it means that the "math" ultimately matters....

But the frustration enters the room, when there are so many participants that don't "respect" the math....they just buy or sell because of something having absolutely nothing to do with whether or not the market is priced correctly....

This I believe is the root of why the stock market forever goes through booms and busts....

It shouldn't have to be this way....And whether you find yourself waiting 20 years for the market to finally return to its last high.... or waiting for the market to become a weighing machine again....There is just far too much waiting for everyone....

And this is what we do while we wait.... After a crash the timers say I told you so to the buy-n-holders....and after a big irrational run up the buy-n-holders say I told you so to the timers....

And this is what makes a market.....
Yes, but it gets especially interesting when both types say "I told you so" at exactly the same time! :shock:

Your comment reminded me of a standing discussion I was having with a small group of friends. Back in the fall of 2019, at one of an occasional get-togethers with former co-workers, some in the group felt afraid that the market was due for a crash. One or two advocated trimming equity holdings significantly in preparation for the inevitable slide. (Nobody advocated getting out of the market entirely, though.) One friend seemed to have adopted an approach of adjusting his stock/bond split according to how high the market is. I didn't get the impression he actually monitors valuation metrics, but he seemed to simply compare current market indexes against recent highs or lows in the last few years.

Fast-forward somewhere in 2020, after the COVID crash and subsequent recovery. I sent out a text to the group marveling at the fact that, despite the fast and deep crash, the market was then up about 10% from where it was the previous fall, when we had discussed preparations for the next crash. I saw this rebound as vindication for the buy-and-hold strategy I had advocated.

To my great surprise, the "tactical asset allocator" fired back the he was right! The market *had* crashed, he said. (Never mind that the crash was for a totally different, unforeseen reason...)

I said, sure, but if you had gotten out last fall, whatever equities you sold would have missed out on the 10% gains we now enjoyed.

The reply was that I would have done even better if I had sold in the fall, then gotten back in before the rebound.

I said, yes, true, but is that what you did?



(That friend has has yet to respond to that question. :wink: )
Perhaps he's "waiting" for a better moment to respond.... the fat lady may still sing.... :D
marcopolo
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Re: Jeremy Grantham (Jan 26, 2022) being asked a lot of tough questions about his super bubble call...

Post by marcopolo »

Randolph Mortimer wrote: Mon Feb 07, 2022 1:41 pm
JBTX wrote: Mon Feb 07, 2022 1:24 pm From some of the comments above it seems like people really take it personally when a perspective is presented that is perceived to deviate from their core values.
I think people who post "ideas" that are diametrically opposed to boglehead philosophy on the boglehead forum, and subtly imply that that those who adhere to boglehead philosophy are stupid and don't believe in math, should expect to have their "ideas" challenged.

No?
Some are not even that subtle.
Once in a while you get shown the light, in the strangest of places if you look at it right.
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iceport
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Re: Jeremy Grantham (Jan 26, 2022) being asked a lot of tough questions about his super bubble call...

Post by iceport »

CraigTester wrote: Mon Feb 07, 2022 2:04 pm Perhaps he's "waiting" for a better moment to respond.... the fat lady may still sing.... :D
Ha, ha! Yes, you could very well be correct about that! :beer Only time will tell.

It will be interesting to see how this all pays out. For the record, I don't dismiss out of hand anything someone with the intellect of Jeremy Grantham has to say. He's actually in some very fine company.

I just don't know what to do with his expectations; I don't find them actionable. But that doesn't mean they aren't meaningful. I think the most significant reaction I have to Grantham's warning is that I brace myself anew for the inevitable downturn. It helps to temper my expectations for the performance of my portfolio, if not for the expectations that a buy-and-hold approach will still be an effective strategy over the long term.

I very much enjoyed the interview.
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Re: Jeremy Grantham (Jan 26, 2022) being asked a lot of tough questions about his super bubble call...

Post by JBTX »

Randolph Mortimer wrote: Mon Feb 07, 2022 1:41 pm
JBTX wrote: Mon Feb 07, 2022 1:24 pm From some of the comments above it seems like people really take it personally when a perspective is presented that is perceived to deviate from their core values.
I think people who post "ideas" that are diametrically opposed to boglehead philosophy on the boglehead forum, and subtly imply that that those who adhere to boglehead philosophy are stupid and don't believe in math, should expect to have their "ideas" challenged.



No?

The highlighted text is what makes say what I do. I really don’t see any consistent posters on here advocating market timing, and no one saying or implying those who follow Boglehead principles are stupid. Yet there are multiple posts in here that read it the way you do.

I like reading Grantham. I think he has valuable information. I don’t market time. I certainly don’t think Boglehead principles are stupid.
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Re: Jeremy Grantham (Jan 26, 2022) being asked a lot of tough questions about his super bubble call...

Post by JBTX »

iceport wrote: Mon Feb 07, 2022 2:20 pm
CraigTester wrote: Mon Feb 07, 2022 2:04 pm Perhaps he's "waiting" for a better moment to respond.... the fat lady may still sing.... :D
Ha, ha! Yes, you could very well be correct about that! :beer Only time will tell.

It will be interesting to see how this all pays out. For the record, I don't dismiss out of hand anything someone with the intellect of Jeremy Grantham has to say. He's actually in some very fine company.

I just don't know what to do with his expectations; I don't find them actionable. But that doesn't mean they aren't meaningful. I think the most significant reaction I have to Grantham's warning is that I brace myself anew for the inevitable downturn. It helps to temper my expectations for the performance of my portfolio, if not for the expectations that a buy-and-hold approach will still be an effective strategy over the long term.

I very much enjoyed the interview.
Exactly.

:sharebeer
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Re: Jeremy Grantham (Jan 26, 2022) being asked a lot of tough questions about his super bubble call...

Post by Randolph Mortimer »

JBTX wrote: Mon Feb 07, 2022 3:20 pmI really don’t see any consistent posters on here advocating market timing, and no one saying or implying those who follow Boglehead principles are stupid.
You don't? Really?
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Re: Jeremy Grantham (Jan 26, 2022) being asked a lot of tough questions about his super bubble call...

Post by JBTX »

Randolph Mortimer wrote: Mon Feb 07, 2022 3:27 pm
JBTX wrote: Mon Feb 07, 2022 3:20 pmI really don’t see any consistent posters on here advocating market timing, and no one saying or implying those who follow Boglehead principles are stupid.
You don't? Really?
No I don’t. I’m not including the occasional thread started, usually by a newcomer , “should i sell everything now bc the market is overvalued “ etc etc.

Also not including the hedgefundies of the world who are few and far between.
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Re: Jeremy Grantham (Jan 26, 2022) being asked a lot of tough questions about his super bubble call...

Post by burritoLover »

JBTX wrote: Mon Feb 07, 2022 3:31 pm
Randolph Mortimer wrote: Mon Feb 07, 2022 3:27 pm
JBTX wrote: Mon Feb 07, 2022 3:20 pmI really don’t see any consistent posters on here advocating market timing, and no one saying or implying those who follow Boglehead principles are stupid.
You don't? Really?
No I don’t. I’m not including the occasional thread started, usually by a newcomer , “should i sell everything now bc the market is overvalued “ etc etc.

Also not including the hedgefundies of the world who are few and far between.
Well, except for the thousand threads about pulling out of ex-US because it's performing poorly, getting into QQQ/ARKK/other tech when they were killing it, adding a certain currency to your portfolio when it could be discussed here, getting into SCV because of the large growth/value spread, suddenly buying TIPS after short-term high inflation, and so on and so on.
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Re: Jeremy Grantham (Jan 26, 2022) being asked a lot of tough questions about his super bubble call...

Post by marcopolo »

JBTX wrote: Mon Feb 07, 2022 3:31 pm
Randolph Mortimer wrote: Mon Feb 07, 2022 3:27 pm
JBTX wrote: Mon Feb 07, 2022 3:20 pmI really don’t see any consistent posters on here advocating market timing, and no one saying or implying those who follow Boglehead principles are stupid.
You don't? Really?
No I don’t. I’m not including the occasional thread started, usually by a newcomer , “should i sell everything now bc the market is overvalued “ etc etc.

Also not including the hedgefundies of the world who are few and far between.
Well, sure, if you excludes all the threads where it occurs (you definitely missed a few), then you are right, it hardly ever occurs :oops:
Once in a while you get shown the light, in the strangest of places if you look at it right.
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Re: Jeremy Grantham (Jan 26, 2022) being asked a lot of tough questions about his super bubble call...

Post by JBTX »

burritoLover wrote: Mon Feb 07, 2022 4:35 pm
JBTX wrote: Mon Feb 07, 2022 3:31 pm
Randolph Mortimer wrote: Mon Feb 07, 2022 3:27 pm
JBTX wrote: Mon Feb 07, 2022 3:20 pmI really don’t see any consistent posters on here advocating market timing, and no one saying or implying those who follow Boglehead principles are stupid.
You don't? Really?
No I don’t. I’m not including the occasional thread started, usually by a newcomer , “should i sell everything now bc the market is overvalued “ etc etc.

Also not including the hedgefundies of the world who are few and far between.
Well, except for the thousand threads about pulling out of ex-US because it's performing poorly, getting into QQQ/ARKK/other tech when they were killing it, adding a certain currency to your portfolio when it could be discussed here, getting into SCV because of the large growth/value spread, suddenly buying TIPS after short-term high inflation, and so on and so on.
The international thing is it’s own deal. I’m with you, I’m all for ex US, but even Bogle himself wasn’t hot on ex US. So I agree it is somewhat a function of market timing, but it is its own philosophical difference.

There are modest degrees of timing, like some who hold tilts. I hold tilts. But I’m never going to say holding a tilt is better, because it isn’t obviously true. Plus I can’t recall anybody here who tilts that has said stay the course 3 fund style Bogleheadism is stupid.

Are there really consistent posters here who are pimping ARK QQQ, etc? While there are always one offs I have not noticed any consistent theme encouraging go go investing.

It is true here like anywhere there is always flavor or the month, like ibonds or TIPS. But I would say those are pretty modest modifications

My perception here is many perhaps most here are not 100% pure 3 fund or equivalent. But also I’d say the vast majority invests in index funds or near equivalent, and does not market time to a significant degree (plus /minus more than 5%, maybe 10%. of their portfolio). That’s my perception but I don’t have data to back it up.
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Re: Jeremy Grantham (Jan 26, 2022) being asked a lot of tough questions about his super bubble call...

Post by 000 »

Stay the course and don't time the market are a reasonable plan if one is on a reasonable course.

Having the preponderance of one's portfolio in risk assets may be unreasonable considering the devastating risks that manifest only infrequently.

Having the preponderance of one's portfolio in what is basically a USD bull play (nominal USD bonds + US equity index) may be a bit underdiversified.
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Re: Jeremy Grantham (Jan 26, 2022) being asked a lot of tough questions about his super bubble call...

Post by Random Musings »

richard.h.gao wrote: Tue Feb 08, 2022 9:00 am Image
I despise the non-log y-axis on pricing.

RM
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Re: Jeremy Grantham (Jan 26, 2022) being asked a lot of tough questions about his super bubble call...

Post by CraigTester »

richard.h.gao wrote: Tue Feb 08, 2022 9:00 am Image
I like the overall concept, but it looks like dividends might have been overlooked....?
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Re: Jeremy Grantham (Jan 26, 2022) being asked a lot of tough questions about his super bubble call...

Post by HomerJ »

Random Musings wrote: Tue Feb 08, 2022 9:08 am
richard.h.gao wrote: Tue Feb 08, 2022 9:00 am Image
I despise the non-log y-axis on pricing.

RM
Plus that chart doesn't include dividends, so it's completely misleading. And yeah, going from 1000 to 2000 is the same as going from 2000 to 4000, not twice as much gain like that chart tries to pretend.
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Re: Jeremy Grantham (Jan 26, 2022) being asked a lot of tough questions about his super bubble call...

Post by Carol88888 »

HomerJ wrote: Mon Feb 07, 2022 9:16 am
asif408 wrote: Mon Feb 07, 2022 8:59 am
JBTX wrote: Sun Feb 06, 2022 2:38 pm I am fully supportive of a stay the course approach, but I react when people get dogmatic about it and dismiss other points of view that may have some merit.
You've pretty much stated one of the signs of a bubble, not only does someone say your investing view is wrong, but they say it with a high level of spite and vindictiveness. You can feel the digital spit hitting your cheeks as they digitally yell at you in anger from their phone keyboard.
I see it the other way, but I guess I could be mistaken.

I see posters telling us, that the basic Boglehead investing view is wrong. That buy and hold and stay the course are wrong. That market-timing is easy, and we're dumb to not see what is obviously about to happen with stock prices or interest rates, etc.

I, at least, do not say their predictions are wrong. I say they can't be sure they are right. That no one knows.

I don't take the opposite view. When they say "the market is likely to crash soon", I don't say "no it will keep going up". I say we don't know. I say they shouldn't be making large changes because they think they know the future. We have a million examples of experts and people on these boards and on old Internet pages (Like Grantham) who thought they were smarter than the average bear, but ended up wrong.

I say since no one actually knows what is going to happen next, the Boglehead investing view with an appropriate AA is a good long-term plan.

Maybe not the best plan, but certainly a good plan.

If nothing else, it's certainly useful information to let someone know who is listening to an "expert" predict the future how poorly that "expert" has done predicting the future in the past. I can't imagine you are against that. Should we just listen to all "experts" blindly? Any time someone posts a prediction on marketwatch or seekingalpha, etc. we should just accept that the prediction will come true, and make changes to our portfolios?
+1
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Re: Jeremy Grantham (Jan 26, 2022) being asked a lot of tough questions about his super bubble call...

Post by richard.h.gao »

HomerJ wrote: Tue Feb 08, 2022 9:33 amAnd yeah, going from 1000 to 2000 is the same as going from 2000 to 4000, not twice as much gain like that chart tries to pretend.
:oops:

2000 - 1000 = 1000
4000 - 2000 = 2000
2000 = 1000 x 2
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Re: Jeremy Grantham (Jan 26, 2022) being asked a lot of tough questions about his super bubble call...

Post by marcopolo »

richard.h.gao wrote: Tue Feb 08, 2022 10:32 am
HomerJ wrote: Tue Feb 08, 2022 9:33 amAnd yeah, going from 1000 to 2000 is the same as going from 2000 to 4000, not twice as much gain like that chart tries to pretend.
:oops:

2000 - 1000 = 1000
4000 - 2000 = 2000
2000 = 1000 x 2
:oops:
(2000-1000)/1000 = 100%
(4000-2000)/2000 = 100%
100% != 100% x 2
Once in a while you get shown the light, in the strangest of places if you look at it right.
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Re: Jeremy Grantham (Jan 26, 2022) being asked a lot of tough questions about his super bubble call...

Post by richard.h.gao »

marcopolo wrote: Tue Feb 08, 2022 10:55 am
richard.h.gao wrote: Tue Feb 08, 2022 10:32 am
HomerJ wrote: Tue Feb 08, 2022 9:33 amAnd yeah, going from 1000 to 2000 is the same as going from 2000 to 4000, not twice as much gain like that chart tries to pretend.
:oops:

2000 - 1000 = 1000
4000 - 2000 = 2000
2000 = 1000 x 2
:oops:
(2000-1000)/1000 = 100%
(4000-2000)/2000 = 100%
100% != 100% x 2
(2000-1000)/1000 = 100%
(4000-2000)/1000 = 200%
200% != 100%

:oops: :oops:
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Re: Jeremy Grantham (Jan 26, 2022) being asked a lot of tough questions about his super bubble call...

Post by HomerJ »

Afraid you don't understand how the math works when talking about gains.

Stock market gains of 100% over 10 years is the same as stock market gains of 100% over the next 10 years.

That means nothing accelerated, nothing changed, no crazy new Fed policies were implemented that warped stock market gains.

1000 grows to 2000 grows to 4000 grows to 8000.

That's STEADY growth.
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Re: Jeremy Grantham (Jan 26, 2022) being asked a lot of tough questions about his super bubble call...

Post by phxjcc »

arcticpineapplecorp. wrote: Thu Jan 27, 2022 2:21 pm Just read this speech by Michael Crichton:
"Why speculate?"

http://web.archive.org/web/200707142041 ... ulate.html
Thank you for posting this
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Re: Jeremy Grantham (Jan 26, 2022) being asked a lot of tough questions about his super bubble call...

Post by CraigTester »

HomerJ wrote: Tue Feb 08, 2022 11:26 am Afraid you don't understand how the math works when talking about gains.

Stock market gains of 100% over 10 years is the same as stock market gains of 100% over the next 10 years.

That means nothing accelerated, nothing changed, no crazy new Fed policies were implemented that warped stock market gains.

1000 grows to 2000 grows to 4000 grows to 8000.

That's STEADY growth.
If your critiquing the chart with the above comment, I agree that he should put it on a log scale and account for dividends...Very misleading...

However, I hope he gets it updated, because what actually happened from Jan 2020 to Sept 2021 was a bit of an anomaly (that might be fair to attribute to the government/FED response to Covid)

Specifically, Earnings grew at 13.8% CAGR (inflation adjusted) compared to a run rate of 4.3 to 4.7% in the prior decades....

Why does this matter?

Well, I guess the question is why the dramatic change....? Is it sustainable.... and perhaps most interesting, will earnings go "backwards" once stimulus is removed....?

Perhaps this is part of what prompted Jeremy to start talking about super bubbles....?
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Re: Jeremy Grantham (Jan 26, 2022) being asked a lot of tough questions about his super bubble call...

Post by km91 »

CraigTester wrote: Tue Feb 08, 2022 1:16 pm
HomerJ wrote: Tue Feb 08, 2022 11:26 am Afraid you don't understand how the math works when talking about gains.

Stock market gains of 100% over 10 years is the same as stock market gains of 100% over the next 10 years.

That means nothing accelerated, nothing changed, no crazy new Fed policies were implemented that warped stock market gains.

1000 grows to 2000 grows to 4000 grows to 8000.

That's STEADY growth.
Specifically, Earnings grew at 13.8% CAGR (inflation adjusted) compared to a run rate of 4.3 to 4.7% in the prior decades....
What time frames are you referencing here?
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Re: Jeremy Grantham (Jan 26, 2022) being asked a lot of tough questions about his super bubble call...

Post by Beensabu »

richard.h.gao wrote: Tue Feb 08, 2022 9:00 am Image
I feel like this chart is promising us only 6.5 years of 0 returns next time.
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Re: Jeremy Grantham (Jan 26, 2022) being asked a lot of tough questions about his super bubble call...

Post by 000 »

richard.h.gao wrote: Tue Feb 08, 2022 9:00 am Image
Historically dividends were much higher than today and constituted most of the return "anticipated" by stock market participants, so not a particularly useful chart.

Was it specifically chosen to generate the sequence 52, 26, 13 (halving each time)?
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Re: Jeremy Grantham (Jan 26, 2022) being asked a lot of tough questions about his super bubble call...

Post by Kenneth Almquist »

JBTX wrote: Sat Feb 05, 2022 8:50 pm Let’s look at this in a different way. The default has been to compare GMO return to the overall market and come to the conclusion that GMO is worse. But shouldn’t we be looking on a risk adjusted basis?

Let’s compare GMO global allocation III which goes back to 1996 and vanguard life strategy moderate growth which goes back to 1994.

https://www.morningstar.com/funds/xnas/gmwax/quote

https://www.morningstar.com/funds/xnas/vsmgx/quote

The cumulative returns are about the same. The standard deviations are about the same, and the GMO fund seems to do slightly better in terms of the biggest dips in value.

Why is this important? Why go with gmo when you can get the same performance with a moderate risk life strategy? If you were of the mind that currently bonds are an unattractive investment, but don’t want to increase risk, a GMO fund may get you better results.

It’s a hypothetical because you have to have $1million is something like that to invest. I think Wells Fargo has one of the funds with lower limits but has a ridiculously high expense ratio.

Given where we are and the risk (as perceived by me) in the market and poor prospects for bonds, if I had access to a GMO fund, at a reasonable price I’d probably buy into one. The goal would not be to outperform the market, but more to get a safer level of future returns without the need for a big allocation of poor returning bonds.
I don't know how to do historical comparisons using the Morningstar site, but using monthly data from Yahoo, which goes back to Nov 1, 1996 (presumably when GMWAX started), the annual return numbers I calculate are:

Code: Select all

GMWAX 4.51%
VBINX 7.74%
VSMGX 6.88%
VBINX is Vanguard's balanced index fund. VSMGX has lower performance, but both significantly outperformed GMWAX.

What about volatility, though? There are a variety of ways to measure this, but here is what I get for the standard deviation of monthly returns:

Code: Select all

GMWAX 3.62%
VBINX 2.88%
VSMGX 3.05%
GMWAX looks bad on this measure as well. What about the standard deviation of (overlapping) twelve month returns?

Code: Select all

GMWAX 11.24%
VBINX 10.32%
VSMGX 11.31%
GMWAX does better by this measure, coming in slightly ahead of VXMGX, but it still does badly when you take its lower returns into account.
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Re: Jeremy Grantham (Jan 26, 2022) being asked a lot of tough questions about his super bubble call...

Post by CraigTester »

km91 wrote: Tue Feb 08, 2022 2:41 pm
CraigTester wrote: Tue Feb 08, 2022 1:16 pm
HomerJ wrote: Tue Feb 08, 2022 11:26 am Afraid you don't understand how the math works when talking about gains.

Stock market gains of 100% over 10 years is the same as stock market gains of 100% over the next 10 years.

That means nothing accelerated, nothing changed, no crazy new Fed policies were implemented that warped stock market gains.

1000 grows to 2000 grows to 4000 grows to 8000.

That's STEADY growth.
Specifically, Earnings grew at 13.8% CAGR (inflation adjusted) compared to a run rate of 4.3 to 4.7% in the prior decades....
What time frames are you referencing here?
The timeframe is explained in the portion of my message you "truncated" in your response ... All data is from Shilller's website..., inflation adjusted....
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Re: Jeremy Grantham (Jan 26, 2022) being asked a lot of tough questions about his super bubble call...

Post by Toth »

phxjcc wrote: Tue Feb 08, 2022 11:42 am
arcticpineapplecorp. wrote: Thu Jan 27, 2022 2:21 pm Just read this speech by Michael Crichton:
"Why speculate?"

http://web.archive.org/web/200707142041 ... ulate.html
Thank you for posting this
+1 (thanks from me as well)
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Re: Jeremy Grantham (Jan 26, 2022) being asked a lot of tough questions about his super bubble call...

Post by Stinky »

Grantham is the guest on the latest episode of “The Long View”, from Morningstar.

The episode came into my feed tonight, so I haven’t listened. But I have a pretty good idea what he will say.

https://the-long-view.simplecast.com/ep ... e-9AtzjjTM
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Re: Jeremy Grantham (Jan 26, 2022) being asked a lot of tough questions about his super bubble call...

Post by Random Musings »

Beensabu wrote: Tue Feb 08, 2022 3:35 pm
richard.h.gao wrote: Tue Feb 08, 2022 9:00 am Image
I feel like this chart is promising us only 6.5 years of 0 returns next time.
The classic geometric sequence. However, perhaps 13 years is the low point in some sinusoidal wave cycle that will be discovered after the fact far in the future. Then, we're back to 26 years with no returns (ex-dividend).

Paging William Hamilton......

RM
I figure the odds be fifty-fifty I just might have something to say. FZ
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Re: Jeremy Grantham (Jan 26, 2022) being asked a lot of tough questions about his super bubble call...

Post by JBTX »

Kenneth Almquist wrote: Tue Feb 08, 2022 7:24 pm
JBTX wrote: Sat Feb 05, 2022 8:50 pm Let’s look at this in a different way. The default has been to compare GMO return to the overall market and come to the conclusion that GMO is worse. But shouldn’t we be looking on a risk adjusted basis?

Let’s compare GMO global allocation III which goes back to 1996 and vanguard life strategy moderate growth which goes back to 1994.

https://www.morningstar.com/funds/xnas/gmwax/quote

https://www.morningstar.com/funds/xnas/vsmgx/quote

The cumulative returns are about the same. The standard deviations are about the same, and the GMO fund seems to do slightly better in terms of the biggest dips in value.

Why is this important? Why go with gmo when you can get the same performance with a moderate risk life strategy? If you were of the mind that currently bonds are an unattractive investment, but don’t want to increase risk, a GMO fund may get you better results.

It’s a hypothetical because you have to have $1million is something like that to invest. I think Wells Fargo has one of the funds with lower limits but has a ridiculously high expense ratio.

Given where we are and the risk (as perceived by me) in the market and poor prospects for bonds, if I had access to a GMO fund, at a reasonable price I’d probably buy into one. The goal would not be to outperform the market, but more to get a safer level of future returns without the need for a big allocation of poor returning bonds.
I don't know how to do historical comparisons using the Morningstar site, but using monthly data from Yahoo, which goes back to Nov 1, 1996 (presumably when GMWAX started), the annual return numbers I calculate are:

Code: Select all

GMWAX 4.51%
VBINX 7.74%
VSMGX 6.88%
VBINX is Vanguard's balanced index fund. VSMGX has lower performance, but both significantly outperformed GMWAX.

What about volatility, though? There are a variety of ways to measure this, but here is what I get for the standard deviation of monthly returns:

Code: Select all

GMWAX 3.62%
VBINX 2.88%
VSMGX 3.05%
GMWAX looks bad on this measure as well. What about the standard deviation of (overlapping) twelve month returns?

Code: Select all

GMWAX 11.24%
VBINX 10.32%
VSMGX 11.31%
GMWAX does better by this measure, coming in slightly ahead of VXMGX, but it still does badly when you take its lower returns into account.
I tried going to yahoo site but I don’t know how to create historical numbers there. This used to be a trivial comparison on morningstar but they changed the format.

Basically going to the interactive charts on morningstar the Gmo fund starts in 10/1996 at $10k and appreciates to $56k today or a factor or 5.6. The life strategy goes from $13,800 in 10/96 to $78k today, a factor of 5.7. Thus the returns over that period were almost exactly the same.

Yes the balanced fund looks better because it is a US only fund. I intentionally used a global benchmark.
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Re: Jeremy Grantham (Jan 26, 2022) being asked a lot of tough questions about his super bubble call...

Post by HomerJ »

JBTX wrote: Tue Feb 08, 2022 11:58 pm
Kenneth Almquist wrote: Tue Feb 08, 2022 7:24 pm
JBTX wrote: Sat Feb 05, 2022 8:50 pm Let’s look at this in a different way. The default has been to compare GMO return to the overall market and come to the conclusion that GMO is worse. But shouldn’t we be looking on a risk adjusted basis?

Let’s compare GMO global allocation III which goes back to 1996 and vanguard life strategy moderate growth which goes back to 1994.

https://www.morningstar.com/funds/xnas/gmwax/quote

https://www.morningstar.com/funds/xnas/vsmgx/quote

The cumulative returns are about the same. The standard deviations are about the same, and the GMO fund seems to do slightly better in terms of the biggest dips in value.

Why is this important? Why go with gmo when you can get the same performance with a moderate risk life strategy? If you were of the mind that currently bonds are an unattractive investment, but don’t want to increase risk, a GMO fund may get you better results.

It’s a hypothetical because you have to have $1million is something like that to invest. I think Wells Fargo has one of the funds with lower limits but has a ridiculously high expense ratio.

Given where we are and the risk (as perceived by me) in the market and poor prospects for bonds, if I had access to a GMO fund, at a reasonable price I’d probably buy into one. The goal would not be to outperform the market, but more to get a safer level of future returns without the need for a big allocation of poor returning bonds.
I don't know how to do historical comparisons using the Morningstar site, but using monthly data from Yahoo, which goes back to Nov 1, 1996 (presumably when GMWAX started), the annual return numbers I calculate are:

Code: Select all

GMWAX 4.51%
VBINX 7.74%
VSMGX 6.88%
VBINX is Vanguard's balanced index fund. VSMGX has lower performance, but both significantly outperformed GMWAX.

What about volatility, though? There are a variety of ways to measure this, but here is what I get for the standard deviation of monthly returns:

Code: Select all

GMWAX 3.62%
VBINX 2.88%
VSMGX 3.05%
GMWAX looks bad on this measure as well. What about the standard deviation of (overlapping) twelve month returns?

Code: Select all

GMWAX 11.24%
VBINX 10.32%
VSMGX 11.31%
GMWAX does better by this measure, coming in slightly ahead of VXMGX, but it still does badly when you take its lower returns into account.
I tried going to yahoo site but I don’t know how to create historical numbers there. This used to be a trivial comparison on morningstar but they changed the format.

Basically going to the interactive charts on morningstar the Gmo fund starts in 10/1996 at $10k and appreciates to $56k today or a factor or 5.6. The life strategy goes from $13,800 in 10/96 to $78k today, a factor of 5.7. Thus the returns over that period were almost exactly the same.

Yes the balanced fund looks better because it is a US only fund. I intentionally used a global benchmark.
Never use Yahoo. It only shows price charts and excludes dividends. Morningstar is far better showing total growth (including dividends) on $10,000
"The best tools available to us are shovels, not scalpels. Don't get carried away." - vanBogle59
AlohaBill
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Location: California

Re: Jeremy Grantham (Jan 26, 2022) being asked a lot of tough questions about his super bubble call...

Post by AlohaBill »

CraigTestor
I just have one question to ask. I am not trying to be offensive. Are you trolling here on the Bogleheads ?
Sorry, I have two questions: what is your asset allocation?
Topic Author
CraigTester
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Re: Jeremy Grantham (Jan 26, 2022) being asked a lot of tough questions about his super bubble call...

Post by CraigTester »

AlohaBill wrote: Wed Feb 09, 2022 10:34 am CraigTestor
I just have one question to ask. I am not trying to be offensive. Are you trolling here on the Bogleheads ?
Sorry, I have two questions: what is your asset allocation?
AlohaBill.
What an odd question. Why would you ask me what I do perceive to be an offensive question?
averagedude
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Re: Jeremy Grantham (Jan 26, 2022) being asked a lot of tough questions about his super bubble call...

Post by averagedude »

I like the fact that Jeremy is a contrarian, but I would never take action on his advice because he is a known permabear. Over the entire course of history in the United States, being overly pessimistic on ownership of business or real estate has been a losing trade. To be a successful investor, I believe you have to take a leap of faith and have a strong conviction that owners will benefit more than loaners. I did however like the interview on
" The Long View" and I would never question this guy's intelligence.
marcopolo
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Re: Jeremy Grantham (Jan 26, 2022) being asked a lot of tough questions about his super bubble call...

Post by marcopolo »

averagedude wrote: Wed Feb 09, 2022 12:52 pm I like the fact that Jeremy is a contrarian, but I would never take action on his advice because he is a known permabear. Over the entire course of history in the United States, being overly pessimistic on ownership of business or real estate has been a losing trade. To be a successful investor, I believe you have to take a leap of faith and have a strong conviction that owners will benefit more than loaners. I did however like the interview on
" The Long View" and I would never question this guy's intelligence.
Can you be both a contrarian and a permabear?
Once in a while you get shown the light, in the strangest of places if you look at it right.
averagedude
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Joined: Sun May 13, 2018 3:41 pm

Re: Jeremy Grantham (Jan 26, 2022) being asked a lot of tough questions about his super bubble call...

Post by averagedude »

marcopolo wrote: Wed Feb 09, 2022 1:04 pm
averagedude wrote: Wed Feb 09, 2022 12:52 pm I like the fact that Jeremy is a contrarian, but I would never take action on his advice because he is a known permabear. Over the entire course of history in the United States, being overly pessimistic on ownership of business or real estate has been a losing trade. To be a successful investor, I believe you have to take a leap of faith and have a strong conviction that owners will benefit more than loaners. I did however like the interview on
" The Long View" and I would never question this guy's intelligence.
Can you be both a contrarian and a permabear?
Absolutely! I was a contrarian on March 23,2020 when I sold some bonds and purchased stocks.
Ramjet
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Re: Jeremy Grantham (Jan 26, 2022) being asked a lot of tough questions about his super bubble call...

Post by Ramjet »

The GMO fund GBMFX's benchmark is this:

"The Fund seeks annualized excess returns of 5% (net of fees) above the Consumer Price Index, with annualized volatility of 5‐10%, over a complete market cycle"

Comparisons to the S&P 500, Life Strategy Funds, or similar are apples to oranges. For example, GBMFX is heavy in alternatives
Topic Author
CraigTester
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Joined: Wed Aug 08, 2018 6:34 am

Re: Jeremy Grantham (Jan 26, 2022) being asked a lot of tough questions about his super bubble call...

Post by CraigTester »

Stinky wrote: Tue Feb 08, 2022 9:43 pm Grantham is the guest on the latest episode of “The Long View”, from Morningstar.

The episode came into my feed tonight, so I haven’t listened. But I have a pretty good idea what he will say.

https://the-long-view.simplecast.com/ep ... e-9AtzjjTM
Thanks for posting this.... Enjoyed....

P.S. Jeremy reminds me of an insightful comment from my driver's ed teacher that still sticks with me..., "you can be dead right, but you're still dead...."
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