He’s a longtime believer that equity prices eventually will revert to the mean, but his recent comments suggest that the inevitable wait for that event might strain his value brethren’s patience. For many of them, it already has.
Back in the 1990s, Grantham, Jean-Marie Eveillard and others saw the technology stock boom for what it was—a bubble. They willingly watched the public withdraw their assets from their funds as investors found other managers happy to chase returns. In recent years, GMO and other active management shops, particularly those with a value tilt, have seen another exodus of assets. GMO’s assets are down about 34% to $77 billion since 2014, and last month it disbanded one of its investment teams that specialized in international active strategies.
A Cold-Blooded, Bureaucratic Anti-Bubble
So why is this time really so different, as Grantham argues? “This is not a bubble” as it is completely lacking in “all the psychological stuff you saw in 1999, 1929 and the 2007 housing market,” he says.
To Grantham, today’s equity market feels cold-blooded and bureaucratic. “Almost everything is going up in a boring way,” he explains. “It’s not the nature of a bubble; it’s almost an anti-bubble.”
The current bull market has been called the most hated in history. In September 2009, Schwab chief investment strategist Liz Ann Sonders told advisors at the firm’s annual IMPACT conference that she considered stocks cheap and attractive, but she quickly added that she had never encountered such an angry response from positive forecasts in her career.
Eight years later, the hate may have dissipated, but it’s hard to find any love. Grantham sees no euphoria or craziness. Walk into a restaurant in Boston for lunch and everyone is watching “Red Sox replays,” not CNBC.
“This market has been characterized by nervous investors” and virtually no public interest, he says. “In June, stocks hit two new highs in one week and it didn’t make the paper.”