📖Jeremy Grantham
Long-Term Forecasting
Seven-year forecasts based on valuations work.
Seven-year forecasts based on valuations are remarkably accurate. Short-term is noise.
🏠 Everyday Analogy
📖 Core Interpretation
In Long-Term Forecasting, Jeremy Grantham focuses on the gap between price and value. Returns come from paying less than what a business is worth, not from guessing short-term market moves.
💎 Key Insight：GMO publishes 7-year asset class return forecasts based purely on current valuations and mean reversion assumptions. These forecasts have proven highly accurate over time. The 7-year window smooths out short-term noise while being long enough for fundamentals to matter. This approach allows disciplined rebalancing between expensive and cheap asset classes.
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❓ Why It Matters
Ignoring valuation turns even good companies into poor investments. Overpaying compresses future returns and leaves little margin when assumptions are wrong.
🎯 How to Practice
Estimate intrinsic value with conservative assumptions, set clear buy ranges, and act only when price offers a meaningful discount with acceptable downside.
🎙️ Master's Voice
Career risk causes professional investors to hug benchmarks rather than seek value.
Grantham criticizes institutional investors who prioritize career safety over performance. Benchmarking creates herd behavior.
⚔️ Practical Guide
✅ Decision Checklist
- Am I hugging benchmarks?
- Am I thinking independently?
- Is career risk affecting me?
📋 Action Steps
- Think independently
- Accept tracking error
- Seek value over benchmarks
🚨 Warning Signs
- Benchmark hugging
- Career risk focus
- Herd behavior
⚠️ Common Pitfalls
Confusing a low price with true cheapness
Using one metric without business context
Overly optimistic assumptions that erase margin of safety
📚 Case Studies
1
Dot-Com Bubble Warning (2000)
Grantham publicly warned that tech stocks were in a classic bubble and reduced exposure to overpriced U.S. growth shares.
✨ Outcome：The bubble burst; portfolios positioned per his advice avoided the worst losses and outperformed over the following decade.
2
Pre‑Crisis Housing and Credit Bubble (2007)
Grantham highlighted extreme overvaluation in housing, credit, and equities, cutting risk assets and raising quality and cash.
✨ Outcome：The 2008–2009 crash validated his forecast; defensive positioning preserved capital and enabled cheaper re‑entry afterward.
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