This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Jeremy Grantham Wants to Save You

BOSTON (TheStreet) -- A day before U.S. stocks posted their second-worst decline in seven months yesterday, Jeremy Grantham said he had plans to pare equities.

Coincidence? Most likely.

The chairman of GMO, an asset-management firm overseeing $107 billion, and one of the most famous stock-market bears told a group of investors at Schwab's (SCHW) Investment Outlook 2011 conference in Boston that his firm was already thinking more conservatively.

Stocks, he said at the gathering not far from GMO's headquarters, are "dangerously overpriced." Still, investors likely would push up the S&P 500 Index to 1,500 before a drop he declined to quantify. The benchmark yesterday fell 1.9% to 1,295. Excluding a decline of 2.1% Feb. 22, the S&P 500 last dropped so much in August. In the January letter, Grantham said the index was "worth about 910."

As Grantham put it in his most recent letter, in January: "We have all been well-trained market dogs, salivating on cue and behaving exactly as we are expected to." As such, "the bulls are living on borrowed time."

"Know you are being manipulated into speculation," he said.

During his talk, Grantham said that as the Obama administration enters its third year, it will surely benefit from the sort of market rally that has accompanied the same mark for all modern presidents.

Traditional administration policies set by what he sarcastically described as the "completely independent Fed" can be counted on to maintain market momentum. He described QE2, the government's bond-buying program, as "year three on steroids."

"It always gets a kicker and this is extra," he said.

Pain in the commodities market factors into Grantham's outlook. "We are running out of everything," he said, and dwindling resources will put "strong, but intermittent, pressure on commodity prices."

Global warming will add to agricultural price pressures as will what he described as the "worst year in history of farming globally," specifically, weather-related disasters like the massive flooding in Pakistan. Overall, the agricultural world is "putting more and more fertilizer and getting a decrease in production."

Grantham said he is still fully analyzing the oil market, in light of the political unrest that has driven up the price per barrel to $105. He sees a larger issue with demand remaining unreasonable given the shrinking and finite supply.

The U.S., as the world's largest oil consumer, is doing nothing to help its own cause. Though many tout conservation, the country remains the "most inefficient" in the world, with poorly designed commercial property burning through oil and what he feels is an unreasonably fearful reluctance to follow the rest of the world in adding a substantial fuel tax.

The British-born Grantham dismissed the current hand-wringing over U.S. debt, describing it as "not real world." What is real, he said, is high unemployment, income discrepancies and stagnant hourly wages. Also of real world concern is the decline of educational standards and a lack of global competitiveness in math and science, he said. Decrying the government's focus and spending on health care for the oldest segment of the population, while slashing education funding for youth, he let out a mock chant: "Death panels ... death panels!"

As for gold, there may be money to be made, but he questions the ultimate importance of a metal that is "used for nothing."

"In a world running out of everything, jewelry is not our problem," he said.

--Written by Joe Mont in Boston.



>To contact the writer of this article, click here: Joe Mont.

>To follow the writer on Twitter, go to http://twitter.com/josephmont.

>To submit a news tip, send an email to: tips@thestreet.com.

Get more stock ideas and investing advice on our sister site, Stockpickr.com.

Readers Also Like:


Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 17,122.01 +15.31 0.09%
S&P 500 2,000.12 +0.10 0.00%
NASDAQ 4,569.6210 -1.0160 -0.02%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs