Be Afraid - Be Very Afraid (The Latest Free Commentary from GMO)
With free advice on the internet you usually get what you pay for. If you're looking for the usual 'stocks for the long run' or 'stocks are cheap' or the 'stocks will return 10% long term' investment Kool-Aid then this post is not for you. If you want some hard headed analysis based on decades of economic research then you may want to keep reading.
There is a new free commentary at www.gmo.com from one of my favorites, Jeremy Grantham.
The article is entitled "The Canary in the Coal Mine", and it's free (registration required). If you are thinking about buying real estate or have any investible assets it is well worth reading.
GMO (Grantham's firm) runs billions of dollars for Institutions (college endowments etc) and wealthly individuals (Including John Kerry and Dick Cheney). He's not crazy gold bug, or a 'perma-bear'. Instead his work is based on the idea of mean reversion to long term trends. When asset classes (stocks, houses etc) get way above or way below their long term trend they are likely (indeed inevitably) going to revert back to trend. It's a simple and powerful idea. There are some great charts of house prices divided by median income for specific urban markets.
For those who don't have time to read the full article here's the Executive Summary: US house prices are a bubble, US stocks are still way too high to be good investments and oil is probably a bubble (but it's hard to be sure about oil).
There is a short bonus feature entitled 'Six Kinds of Bull'. The gist here is that investment Kool-Aid isn't good for you - so please, Stop Drinking the Kool-Aid!
-fg
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