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An article from 2015:

For long-term observers of Jeremy Grantham, the chief of GMO LLC and erudite analyst of world investing trends, there’s never a moment when you see Grantham gush about investment trends. There’s a reason why he’s nicknamed the “permabear.”

He’s not a champagne bubbly kind of guy, although he’s warning that if the Federal Reserve keeps rates low, stocks will be in bubble territory at the S&P 2,250 mark, “based on historical price data only.” We’re not quite there yet. (FYI, the S&P is DOUBLE that today!)

In his most recent quarterly report, for example, he’s uncharacteristically sanguine on the upsurge in U.S. stocks. He likes what he sees in lower oil prices, the labor market and consumer prices. He’s not confident that we’ve reached the peak of the current market cycle.

Last night at Chicago’s Morningstar conference, as in past talks in recent years, Grantham was ever the cautionary Cassandra, weaving in dire scenarios about climate change, dwindling resources (the end of cheap oil), food shortages, income inequality and the aging of Western countries.

He’s right about all these trends; they don’t bode well for humanity, although he says we can fix most of them.

In Grantham’s long-term forecasts, though, which stretch out seven years (edit: THAT IS TODAY!!!) , big U.S. stocks will barely eke out a gain while the biggest winners are in emerging markets and timber, which is hard for most investors to buy, except indirectly through exchange-traded funds.

While he’s not optimistic that U.S. stocks will continue their bullish ways of late, he points to the Federal Reserve as being the most powerful arbiter of how long the current love affair will last, although slow growth will be the major theme.

“I believe the market will follow the path of least resistance from the Fed,” Grantham said, “at least until the [U.S. presidential] election.” (That was 5.5 years ago!!)

Well, that’s a pretty safe bet, but what about the Fed’s signals that it will eventually jack up interest rates. Will that end the party?

“In 2004, when rates were raised four times,” Grantham noted, “the market just continued to go up. But there’s always a trigger. In 2008, it was the housing bubble….Then the Fed lowered rates. The Fed drives the world. It’s the ballgame.”

Observing that in the post-Volcker era, bear markets generally last 18 months followed by seven-year bull runs, Grantham doesn’t know when the next trigger will occur, although he says that the run-up in stocks could go on for seven years or so.

When should one pull out of stocks to avoid the fulfillment of Grantham’s fear scenario? He’s not certain, but falls back on safe advice from his favored economist John Maynard Keynes:

“Never be wrong on your own. Make sure you have company. Do what others are doing, but be quicker on the draw.”



Everyone knows the phrase “Don’t fight the Fed,” but it means different things at different times in different situations.

With the Fed about to raise interest rates, it will hamstring those companies that borrow to grow and can dampen (and even drown) the growth trajectory of some companies/stocks.

However, for those companies with large cash cushions, strong cash flows, and strong balance sheets, THIS IS WHERE THEY SEPARATE THEMSELVES FROM THE HERD. That’s why I have put the vast amount of my money into high quality, well capitalized, strong balance sheet stocks with blue chip management and long term growth credentials and prospects.

Even if the Fed raised rates FOUR TIMES in 2022, REAL rates would still be negative in 3% inflation market.

Anyway, I don’t manage billions of dollars, am not quoted in the press and invited to comment on the markets on TV and do I will merely point out that Mr. Grantham’s prognostications steer to the dire alarmist viewpoint, both frequently and loudly. No one says much when he is wrong, but he will be considered a seer if he “calls it” this time!

That’s some brilliant analysis with over half the NASDAQ in bear market territory already, and markets down 10% after a 30% run last year!

Good luck to us all!

So buy in the dip then yeah???

:-/

 

[ChicagoBlue]

So buy in the dip then yeah???

:-/

I have bought AND sold AND bought over the last year or so.

I was 100% cash, other than a small investment in Bitcoin that is a long term flyer, going into this, and have picked up “half positions” in the stocks & ETFs I listed.

I’m not smart enough to know when the algorithms will decide to stop buying and selling, but I do think the stocks I mentioned SEEM like they are “on sale” now for a long term investor interested in owning blue chip companies.

I retire in 7 years with a small annuity from elsewhere, so I’m merely trying to add to my annual income abilities while also looking for long term appreciation…with the small “kickers” like GBTC & ARKK for some added interest.

I’ve not been an advocate of “buy the dip” because I’ve been fully invested THROUGH THOSE BLIPS for quite some time, but coming into 2022, I felt like there were some forces aligning against the market.

Those forces have DESTROYED most stocks under the surface, but the averages had held up fairly well, due to them being market cap weighted averages. I thought those few megacaps might break down, so I not only sold every stock, but I liquidated a large position in MGK.

Once the dip occurred, I waited for there to be some short covering rallies and volatility (Ma & Pa America late to sell, algos more than happy to buy at the bottoms), watched it shake out for a few days, then picked my moments to put on some positions I plan (want) to hold onto at their current “discounts.”

None of that suggests I’m right, and 2022 could be a sideways or down year, which is why I’m still holding a large cash position to average DOWN if markets fall, or look for other “bargains” if the “Fed effect” takes out any other good looking opportunities.

That’s all I’ve got for ya. In an environment where even 12 months from now a bank will only be paying 1% on deposits, what else can one do, especially if inflation is shaving 3-5% off your cash while the bank is only reducing that loss by a fraction???

 

[doots]

I have bought AND sold AND bought over the last year or so.

I was 100% cash, other than a small (£40K) investment in Bitcoin that is a long term flyer, going into this, and have picked up “half positions” in the stocks & ETFs I listed.

I’m not smart enough to know when the algorithms will decide to stop buying and selling, but I do think the stocks I mentioned SEEM like they are “on sale” now for a long term investor interested in owning blue chip companies.

I retire in 7 years with a ~£50,000 annuity from elsewhere, so I’m merely trying to add to my annual income abilities while also looking for long term appreciation…with the small “kickers” like GBTC & ARKK for some added interest.

I’ve not been an advocate of “buy the dip” because I’ve been fully invested THROUGH THOSE BLIPS for quite some time, but coming into 2022, I felt like there were some forces aligning against the market.

Those forces have DESTROYED most stocks under the surface, but the averages had held up fairly well, due to them being market cap weighted averages. I thought those few megacaps might break down, so I not only sold every stock, but I liquidated a large position in MGK.

Once the dip occurred, I waited for there to be some short covering rallies and volatility (Ma & Pa America late to sell, algos more than happy to buy at the bottoms), watched it shake out for a few days, then picked my moments to put on some positions I plan (want) to hold onto at their current “discounts.”

None of that suggests I’m right, and 2022 could be a sideways or down year, which is why I’m still holding a large cash position to average DOWN if markets fall, or look for other “bargains” if the “Fed effect” takes out any other good looking opportunities.

That’s all I’ve got for ya. In an environment where even 12 months from now a bank will only be paying 1% on deposits, what else can one do, especially if inflation is shaving 3-5% off your cash while the bank is only reducing that loss by a fraction???

Gotcha,i think,ta.
Now before you retire, how about sorting that upgrade to first class please, MCR -ORD return?
Much obliged!

 

[ChicagoBlue]

Gotcha,i think,ta.
Now before you retire, how about sorting that upgrade to first class please, MCR -ORD return?
Much obliged!

If I could do that for myself, I’d do it constantly!

Alas…there is not only not a direct flight, but I don’t get upgrades unless I pay for them OR go standby and roll the dice that no big ticket Frequent Fliers have swallowed up all the upgrades.

Not like it used to be. In fact, if I want to BUY a ticket, I only get a 20% discount on the full fare ticket for sale, and even that’s only for my direct line (Mum & Dad, both deceased, or wife & kids…until the kids are 26!)

Not the way it used to be, but if you have flexibility on where you want to go and when you want to go there, you can do some good traveling. Most people don’t fly that way, as they like to book a place to stay and a rental car for when they’re there!

Soz, mate!

 

[zerox]

That’s all I’ve got for ya. In an environment where even 12 months from now a bank will only be paying 1% on deposits, what else can one do, especially if inflation is shaving 3-5% off your cash

do you really think inflation is only 5%?

 

[Gareth Barry Conlon]

With the Fed about to raise interest rates, it will hamstring those companies that borrow to grow and can dampen (and even drown) the growth trajectory of some companies/stocks.

However, for those companies with large cash cushions, strong cash flows, and strong balance sheets, THIS IS WHERE THEY SEPARATE THEMSELVES FROM THE HERD. That’s why I have put the vast amount of my money into high quality, well capitalized, strong balance sheet stocks with blue chip management and long term growth credentials and prospects.


Good luck to us all!

I'd agree that when times get tough the flight to quality happens and getting in there first is a good strategy. Holding stocks of very cash possitive businesses right now is a good place to be, established tech like apple would good, cash negative start ups bad (even if they make electric cars). Also big banks benefit from higher rates, so Bank stocks could be good as long as any recession and losses on credit risk dont offset the increased interest income.

 

[zerox]

you definately would not want shares in cash rich company if inflation takes off, the companys with debt will slaughter them in the stock market

 

[ChicagoBlue]

do you really think inflation is only 5%?

I think the extrapolation of CURRENT inflation to a 7% annual inflation rate from 2022 to 2023 is overdone…as does the Fed and most everyone else.

I think long term inflation is going to settle out with a 3 handle, as soon at the supply chain picks up.

You?

 

[ChicagoBlue]

you definately would not want shares in cash rich company if inflation takes off, the companys with debt will slaughter them in the stock market

I’ll mention that to Warren Buffett and Tim Cook next time I see them!

 

[Corky]

I think the extrapolation of CURRENT inflation to a 7% annual inflation rate from 2022 to 2023 is overdone…as does the Fed and most everyone else.

I think long term inflation is going to settle out with a 3 handle, as soon at the supply chain picks up.

You?

It will peak at 6% mid year according to some Gov statistician yesterday, who was basing it on a balance of forecasters and their usual success. But that was is for the month rather than rolling year.

Interest rates to go up at least 0.5% by then also.

 

[117 M34]

you definately would not want shares in cash rich company if inflation takes off, the companys with debt will slaughter them in the stock market

The glazers like this

 

[ChicagoBlue]

It will peak at 6% mid year according to some Gov statistician yesterday, who was basing it on a balance of forecasters and their usual success. But that was is for the month rather than rolling year.

Interest rates to go up at least 0.5% by then also.

I don’t have heartburn with any of that, but when people (here) talk about inflation, it is often as a bludgeon with which to beat Biden, which is a joke.

The problem is an economy that is basically strong, and into which the Fed should have ALREADY been raiding rates, but couldn’t because of the liquidity they have been creating to help maintain full employment against the backdrop of the pandemic!

As the pandemic subsides, and the supply chain inflation abates, I think we will settle into a 2023 consensus inflation rate of about 2.5-3.5%. Whether the Fed can live with that, on the high side of their desired rate, I don’t know, but feel like they won’t have a choice!

Once they start raising, they will start paring their balance sheet, which will take significantly longer to unwind than it took to grow.

Accordingly, they may (have to) overshoot on rates a little, in order to have something to take back if the economy finally splutters down the road.

It’s a tightrope walk that many have said has taken too much time to get moving, but all things considered, I think Powell has done a masterful job of creating little to no surprise over Fed policy or movement so as not to spook the markets.

My target is “3 in 3,” after an early-mid 2022 peak annualized rate of 7% gives way to 5% by Q3 and the 3s by 2023.

That’s worth what you paid for it!

 

[M18CTID]

Well my pension fund is now over 40% down on where it was 12 month ago - think I'll be retiring in my 90s at this rate, assuming I live that long ha ha! Everything I'm invested in has taken a hit. My biggest faller is NIO and I'm balls deep in that one so just got to ride it out

 

[DenisLawBackHeel74]

Well my pension fund is now over 40% down on where it was 12 month ago - think I'll be retiring in my 90s at this rate, assuming I live that long ha ha! Everything I'm invested in has taken a hit. My biggest faller is NIO and I'm balls deep in that one so just got to ride it out

It will bounce back.

Nio was $65 a share briefly this time last year.....

 

[mscenterh750]

Well my pension fund is now over 40% down on where it was 12 month ago - think I'll be retiring in my 90s at this rate, assuming I live that long ha ha! Everything I'm invested in has taken a hit. My biggest faller is NIO and I'm balls deep in that one so just got to ride it out

Buy the dip and reap the rewards later.

 

[mscenterh750]

My bailie gifford fund is currently -31.5% but I’m not worried and it means the money I invest each month buys me more shares. I have shares in Vodafone, Airtel Africa, Greencoat and an FTSE 100 fund that are performing pretty well at the min. Ride the storm and all will be fine.

 

[M18CTID]

It will bounce back.

Nio was $65 a share briefly this time last year.....

Yeah, it's not like I can draw on my pension yet so not point in worrying. I've become largely desensitised to the constant daily drops in all my investments.
My average buying price for NIO is just under $43 a share. I got in late after the big rises in 2020, and I guess it was a little overvalued for a while but it appears to have a very bright future

 

[hampshireblue]

Well my pension fund is now over 40% down on where it was 12 month ago - think I'll be retiring in my 90s at this rate, assuming I live that long ha ha! Everything I'm invested in has taken a hit. My biggest faller is NIO and I'm balls deep in that one so just got to ride it out

It will come back,but if you've lost that much it sounds as if you're not properly diversified or you're so far from taking it that you're confident you've got time for it to recover. As a data point I'm down around 5%.

 

[M18CTID]

It will come back,but if you've lost that much it sounds as if you're not properly diversified or you're so far from taking it that you're confident you've got time for it to recover. As a data point I'm down around 5%.

Yeah, you're right. I'm probably not diversified enough in all fairness. I'm about 8-10 years off taking it but depends on how it performs in the meantime. If NIO truly took off, it could be less. On the flip side, it could be more!

 

[hampshireblue]

Yeah, you're right. I'm probably not diversified enough in all fairness. I'm about 8-10 years off taking it but depends on how it performs in the meantime. If NIO truly took off, it could be less. On the flip side, it could be more!

No criticism from me as I'm no expert. I have the likes of NIO in my ISA and is only money I can afford to write off for a few years. My SIPP is totally invested in funds though..and managed by a fellow blue!