And he posits those same tendencies permeate the realm of institutional investors; a condition captured by British economist John Maynard Keynes when he wrote: “Worldly wisdom teaches that it is better for reputation to fail conventionally than to succeed unconventionally.”

When it comes to investing, Montier said, in the short term there’s no difference between being early and being wrong. “It’s one of the great tragedies of the investment world,” he said, adding that it causes people to flee strategies before they have a chance to prove they were right. In turn, that causes people to chase momentum and to perpetuate the herd mentality.

Montier said he challenges investors to be different and to recognize that U.S. equities are expensive and that better opportunities exist elsewhere. He pitched emerging markets as a viable alternative; particularly emerging-market value stocks which he said are trading at about 10 times their 10-year average earnings.

“When I look at this in history . . . the only way you lose your money and don’t get it back when you buy a market that’s trading 10 times [earnings] is if that market ceases to exists—i.e., the Russian Revolution."

Now, if all this sounds like someone trying really hard to rationalize why his firm has been wrong—or as Montier would put it, early—on a call that U.S. equities are overpriced and due to tumble, well, perhaps it is. But it’s also a rational argument that brings attention to a very real concern about the fundamentals of U.S. stocks. Timing is everything in investing, and as GMO has experienced in recent years, being early on a potentially correct market bet can be painful. 

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