Please find the latest quarterly update from Jeremy Grantham's GMO. It holds lots of good market data. Inside they make an argument on how U.S. small cap is now incredibly overpriced and poised for a potential pull back.
"U.S. small cap stocks are now as expensive as we have ever seen them. Perhaps more surprising still is the deafening silence about this distinctly frothy group. Although the S&P 500 price index is still some way below its all-time high, U.S. small caps are within spitting distance of theirs: a high that was last reached with a booming global economy, strong employment, and a debt-driven consumption binge in full swing."
Jeremy Grantham has been arguing the virtues of large cap for a couple quarters now so its interesting to see this reiterated here and supported with some data.
Enjoy.
Cms Attachment Download
Saturday, April 30, 2011
Thursday, April 28, 2011
Crispin Odey - Odey Asset Management Q1 Call Notes
Crispin Odey of Odey Asset Management recently had his Q1 conference call. As some of you may now, Crispin is famous for predicting the credit crunch and betting correctly on many a banks demise.
In the Q1 call they interesting talk about the threat of inflation.
"The only question is when you get to a position where the West is competitive, we are not going to continue to see wage growth of 1.8% or 1%, because the fact is we are building up this sense in which we are way behind the line in terms of keeping up the cost of living so we anticipate, whether it is 2012 or whether it is 2013, that we will not see a 1% rise, we will see a 8% rise and if we see a 8% rise, 75% of that will come through straight back into inflation. So our forecast is that inflation, far from being 5% at the end of that, it will be at 11%. Which means at that moment interest rates have to rise because that is the moment that the central banks have got that mandate. If interest rates rise from 0% to 7%, you can be sure that at round about 35% to 40% of that rise will make its way again through to inflation."
The threat of inflation is huge and you have seen Seth Klarman's Baupost Group and some other astute funds position for high inflation going forward via various black swan insurance policies.
Without further delay..enjoy:
Crispin Odey's Transcript Q1-11
In the Q1 call they interesting talk about the threat of inflation.
"The only question is when you get to a position where the West is competitive, we are not going to continue to see wage growth of 1.8% or 1%, because the fact is we are building up this sense in which we are way behind the line in terms of keeping up the cost of living so we anticipate, whether it is 2012 or whether it is 2013, that we will not see a 1% rise, we will see a 8% rise and if we see a 8% rise, 75% of that will come through straight back into inflation. So our forecast is that inflation, far from being 5% at the end of that, it will be at 11%. Which means at that moment interest rates have to rise because that is the moment that the central banks have got that mandate. If interest rates rise from 0% to 7%, you can be sure that at round about 35% to 40% of that rise will make its way again through to inflation."
The threat of inflation is huge and you have seen Seth Klarman's Baupost Group and some other astute funds position for high inflation going forward via various black swan insurance policies.
Without further delay..enjoy:
Crispin Odey's Transcript Q1-11
Monday, April 25, 2011
Jeremy Grantham and GMO Capital's Q1 2011 Letter
Below please find Jeremy Grantham of GMO Capital and his always enjoyable quarterly letter. In the Q1 2011 letter he discusses his view on commodities and the capital markets. One particular idea that was rather interesting:
"Until about 1800, our species had no safety margin and lived, like other animals, up to the limit of the food supply, ebbing and flowing in population. From about 1800 on the use of hydrocarbons allowed for an explosion in energy use, in food supply, and, through the creation of surpluses, a dramatic increase in wealth and scientific progress. Since 1800, the population has surged from 800 million to 7 billion, on its way to an estimated 8 billion, at minimum. The rise in population, the ten-fold increase in wealth in developed countries, and the current explosive growth in developing countries have eaten rapidly into our finite resources of hydrocarbons and metals, fertilizer, available land, and water. Now, despite a massive increase in fertilizer use, the growth in crop yields per acre has declined from 3.5% in the 1960s to 1.2% today. There is little productive new land to bring on and, as people get richer, they eat more grain-intensive meat. Because the population continues to grow at over 1%, there is little safety margin. The problems of compounding growth in the face of finite resources are not easily understood by optimistic, short-term-oriented, and relatively innumerate humans (especially the political variety)."
That does a great job explaining why the long-term trend for agriculture and related assets is very bullish over the near term. I am particularly interested in CVR Partners (UAN) which is a nitrogen fertilizer facility that is structured as an MLP. Haven't dug deep yet but it has decent potential.
Without further delay. Enjoy:
GMO - 4-25-11
"Until about 1800, our species had no safety margin and lived, like other animals, up to the limit of the food supply, ebbing and flowing in population. From about 1800 on the use of hydrocarbons allowed for an explosion in energy use, in food supply, and, through the creation of surpluses, a dramatic increase in wealth and scientific progress. Since 1800, the population has surged from 800 million to 7 billion, on its way to an estimated 8 billion, at minimum. The rise in population, the ten-fold increase in wealth in developed countries, and the current explosive growth in developing countries have eaten rapidly into our finite resources of hydrocarbons and metals, fertilizer, available land, and water. Now, despite a massive increase in fertilizer use, the growth in crop yields per acre has declined from 3.5% in the 1960s to 1.2% today. There is little productive new land to bring on and, as people get richer, they eat more grain-intensive meat. Because the population continues to grow at over 1%, there is little safety margin. The problems of compounding growth in the face of finite resources are not easily understood by optimistic, short-term-oriented, and relatively innumerate humans (especially the political variety)."
That does a great job explaining why the long-term trend for agriculture and related assets is very bullish over the near term. I am particularly interested in CVR Partners (UAN) which is a nitrogen fertilizer facility that is structured as an MLP. Haven't dug deep yet but it has decent potential.
Without further delay. Enjoy:
GMO - 4-25-11
Howard Marks - The Most Important Thing
As you may or may not know, Howard Marks of Oaktree is coming out with a new Book next week. The book is titled The Most Important Thing: Uncommon Sense for the Thoughtful Investor
I am a huge fan of Howard Marks' letter and am quite excited to read this upcoming book. The Innoculated Investor was lucky enough to obtain an advanced copy of the book and posted a detailed review. I enjoyed the review and it got me even more excited to read the book once its released. The Innoclulated Investor's review can be found below:
Book Review- The Most Important Thing by Howard Marks
I am a huge fan of Howard Marks' letter and am quite excited to read this upcoming book. The Innoculated Investor was lucky enough to obtain an advanced copy of the book and posted a detailed review. I enjoyed the review and it got me even more excited to read the book once its released. The Innoclulated Investor's review can be found below:
Book Review- The Most Important Thing by Howard Marks
Thursday, April 21, 2011
Longleaf Partners - Mason Hawkins Q1 2011 Letter
Below please find Mason Hawkins' Longleaf Partners Q1 2011 letter. Longleaf is a well run mutual fund that has a fantastic long-term record. In the letter they discuss how their insurance holdings illustrate one of their major advantages in generating superior long-term returns, how rising energy prices are affecting certain key holdings, and why they’re finding more opportunities today outside the U.S. than in it.
Enjoy.
Southeastern - Q1'11
Enjoy.
Southeastern - Q1'11
Wednesday, April 20, 2011
Bill Browder of Hermitage Capital speech at Stanford
Below please find a Bill Browder's (of Hermitage Capital) speech at Stanford in 2009. While the video is a touch dated it is very interesting. For those who are not familiar with Bill Browder and Hermitage capital his story is truly fascinating. He at one point ran the largest hedge fund in Russia and really minted money using a flavor of activism. His fund has truly outstanding performance. I don't want to ruin the story but let me reiterate that if you are not familiar with him it is worth watching.
Monday, April 18, 2011
Jim Grant on Wealthtrack
Below please find Jim Grant of Grant's Interest Rate Observer (which I am a huge fan of) recent interview on Consuelo Mack's Wealthtrack. James Grant explains why he believes the Federal Reserve’s easy money policies will wreak havoc on the economy and markets. The dangers of inflation creep and how to protect yourself against it. It is quite enjoyable.
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