Grantham: Biggest Mistake Will Be Buying Too Soon

GMO's Jeremy Grantham foresaw the current mess, making his interview in Barron's a good read. He's not beating his chest. In fact, he says the current crisis is much worse than he expected. And Grantham freely admits the next mistake will be buying too soon -- and then selling too soon. (An affliction many value seekers have.)

About his current allocation:

In a nutshell, we are as conservative as we can possibly get. One bet that has been very successful for us, touch wood, has been long high-quality, blue-chip stocks, particularly in the U.S., and short risky companies. We have been screaming against risk-taking for a long time, and in recent weeks, it has paid off enormously.

About commodities:

Commodities have a great long-term future, now that the long-term trend has shifted from falling commodity prices to rising commodity prices. Having said that, the next couple of years will be quite different. We are in a global slowdown, which I think will be worse than expected even today, and it will be longer than expected -- so this is not a healthy environment for commodities. Over a shorter horizon, I would be getting out of the way of commodities or I would be short commodities. I'm personally short oil; the firm is short copper.

And where we're headed:

I want to emphasize how little I understand all of the intricate workings of the global financial system. I hope that someone else gets it, because I don't. And I have no idea, really, how this will work out. I certainly wish it hadn't happened. It is just so intricate that all I can conclude, by instinct and by reading the history books, is that it will be longer, harder and more complicated than we expect.

I don't know if he's right. But it feels like he may well be. We'll see.

Comments

[xout]

fear fear fear... when even experienced so called "value" guys shudder, thats when the true investors buy. is there really such a thing as buying too soon for an undervalued company?. stock prices aside, buy when the margin of safety is right. double up when it turns into an even better bargain.

[John]

xout: Buying too soon would be destructive if you wound up having to hold on for so long that it wasn't worth it in the end. But I get your point, and even agree with it.