Finance Trends Letter

I know everyone's been looking for the recent 3Q 2010 GMO update from Jeremy Grantham, so I thought I'd post the Scribd doc. version here. Tuck in and enjoy Grantham's macro view of the markets and the economy, from gold and commodities to real estate, stocks, and quantitative easing in, "Night of the Living Fed" . Night of the Living Fed Jeremy Grantham

Marketfolly has put together a nice, detailed post on the recent Ira Sohn Conference and the investing ideas offered up by some leading hedge fund managers and investors at this event. If you haven't heard the chatter about this event, we can tell you that there were some very notable speakers present, including investors David Einhorn (Greenlight Capital), Bill Ackman (Pershing Square Capital), David Tepper (Appaloosa Management), Seth Klarman (Baupost Group), Jeremy Grantham (GMO), and historian Niall Ferguson. Jay has summarized some of the main points and highlights from the speaker presentations, with the help of some Marketfolly readers who were good enough to share their notes from the conference. You'll also find links to additional coverage on Twitter and at Barron's. Update : new Marketfolly posts highlighting David Einhorn's presentation and Steve Eisman's presentation, "Subprime Goes to College" , have been added. Also, if you'd like to...

Some Friday reading (and viewing) for ya. 1. Obama challenges financial industry to join regulatory overhaul - Bloomberg. 2. Marc Faber says China exhibits 'Danger Signals' , symptoms of bubble building (w/ video) - Bloomberg. 3. Jeremy Grantham on bubbles - FT.com. 4. Renegonomics: are deadbeat borrowers fueling consumption ? - Laurence Hunt's Blog. 5. Rail traffic recovery continues - PragCap. 6. John Paulson turns bullish on housing, economy - MarketWatch. 7. View From the Top: Mohamed El-Erian talks to FT about economic recovery, the US dollar, and the state of financial markets - FT.com Thanks for checking in at Finance Trends ; you can keep up with our posts and musings via RSS and Twitter . Have a great weekend, and be excellent to each other.

GMO chief investment strategist, Jeremy Grantham is out with the firm's latest missive to investors; the GMO quarterly letter for 3Q 2009 is available at the GMO website and at Zero Hedge . For a quick preview, here are some excerpts from Business Insider : " The idea behind my forecast six months ago was that regardless of the fundamentals, there would be a sharp rally [to S&P 1000-1100]. After a very large decline and a period of somewhat blind panic, it is simply the nature of the beast. Exhibit 1 shows my favorite example of a last hurrah after the first leg of the 1929 crash… Today there has been so much more varied encouragement for a rally than existed in 1930. The higher prices preceding this crash (that were far above both trend and fair value) had lasted for many years; from 1996 through 2001 and from 2003 through mid-2008. This time, we also saw history’s greatest stimulus program, desperate bailouts, and clear promises of years of low rates. As ...

Have we just seen the end of the 2000s art-market bubble? Bloomberg recently published a two-part article series on the state of the art market in 2008. As their coverage of the year just ended shows, the tenor in the market changed as the spreading financial crisis hit rich art buyers, leading auction sales and prices for contemporary art to stall out. Long-time readers of this blog know that we occassionally delve into the subject of art here, so let's turn to Bloomberg's coverage to learn more about the recent slump in this once-booming market. Excerpt from part one of Bloomberg's series, "How Monet, Freud, Hirst records led art-market bubble to burst" : "Art prices extended a seven-year surge for much of 2008, with a Claude Monet painting of water lilies, Lucian Freud ’s portrait of a civil servant called Sue and a Francis Bacon triptych setting records. A 111.5 million pound ($162 million at current rates) sale of Damien Hirst works in Sept...

Jeremy Grantham recently sat down with Consuelo Mack's WealthTrack program for his first ever television interview . The famed investor and GMO money manager is renowned for his insights, his investing track record, and his steely resolve. During the dot.com boom, Grantham refused to invest in the high-flying internet and tech sectors, a move that led many clients to leave his firm. Grantham was vindicated when the Nasdaq and tech bubble burst in 2000. His emphasis on buying investment quality and value seems to have served his clients well. Now, in the aftermath of the 2003-2007 bull market in shares (a move Grantham once referred to as the "biggest sucker rally in history"), he is once again focusing on areas of value in the stock market. Grantham says there are opportunities in stocks for those who are willing to search for value and take a long-term view of their holdings. In listening to this interview, I found it refreshing to hear an investment manage...

Welcome to our new readers, many of whom are joining us this week via links from Investment Postcards and The Kirk Report . If you would like to view our most recent posts, please visit our home page . You can also browse through our "Favorite Posts" section to get a taste for our site, or try our custom search bar to find more articles and posts on your favorite topics. Thanks for visiting Finance Trends Matter . Enjoy the posts! As we mentioned yesterday in, "Are we too bearish?" , today's post focuses on areas of investment that are starting to look attractive to seasoned investors. Some of the well-regarded market veterans you'll hear from on this topic are: Julian Robertson , Jeremy Grantham , Jim Rogers , and John Paulson . Whether you're currently bullish or bearish on stocks and other asset markets, we think you'll find some interesting points of views expressed here. Let's jump right in... A Tiger's Eye View of the Marke...

I've noticed a definite trend while looking over our last few "Features of the week" posts, and that is a recent preponderance of bad news. Whether we're talking about the direction of global financial markets (mostly down this year) or the fate of the global economy, it seems that most of the news we are talking about here is of the "gloomy" variety. In a way, this makes sense. When we look at the news related to the markets and the economy in recent months, we see that most of it is bad. In fact, one of the defining features of this recent downturn, or "economic crisis", is its ability to continually surprise to the downside. In fact, I think it's safe to say that most people have been caught off guard by how quickly and how far certain problems could spread throughout our well-linked global financial system. Yes, there's been an avalanche of news regarding falling markets and never-ending bailouts over the past several months, an...

$100 million dollars just doesn't go as far as it used to. It seems today you can't even buy a modern masterpiece for that price without bumming an extra $20 mil or so from your friends... Details from Bloomberg : "An Andy Warhol portrait of Mao Zedong may fetch an artist record of $120 million in a private sale in Hong Kong, Christie's International said. Christie's is shipping Warhol's ``Mao,'' a silkscreen-on- canvas portrait more than 14-feet (4.3 meters) tall, to Hong Kong in late May for display at the city's main convention center, to allow potential buyers to view the work, said Ken Yeh , Christie's deputy chairman in Asia. ``That is a huge price to pay for a painting,'' said Elaine Holt, a Hong Kong-based curator at Opera Gallery , which specializes in Western artworks. ``Considering how well-known Warhol is in China and how wealthy some Chinese are, I wouldn't be surprised if a mainland collector bought the pa...

Nassim Taleb, Kevin Phillips, Warren Buffett, and Jeremy Grantham. These are just some of the subjects (and authors) of today's wrap-up of recent news, articles, and interview features. There's a lot of great stuff here that I couldn't fit into last Friday's "Features" post, and some very recent posts and news items found in the last 24 hours (including news of the Berkshire Hathaway-financed Mars-Wrigley deal). We'll provide a quick summary of each item; the rest is up to you! 1. Mars, Buffett to buy Wrigley for $23 billion . Berkshire Hathaway will help finance Mars' buyout of Wm. Wrigley Jr. Co. at $80 per Wrigley share. Excerpt from the MarketWatch piece: "Wrigley will become a stand-alone, separate Mars subsidiary, in which Buffett's Berkshire Hathaway (BRKA) (BRKB) will make a minority investment, Mars said. Specifically, Berkshire Hathaway will make a $2.1 billion equity purchase in Wrigley. It will be bought at a discount to the ...

What could take the stock market higher from here? I think this is a question that's had a few investors thinking lately. I know that I've been wondering the same thing, especially after hearing some of my favorite investment minds mulling this question over in recent days. You may be bullish on the market, bearish, or indifferent, but it's still a rather interesting puzzle to look over. So I'm sitting here wondering, where do we go from here? Recently, I looked at the cards in front of us and said, "Yeah, it's a bear market" . No sooner had I uttered that, than others began looking for a rally , albeit one within the context of a longer-term (secular) bear market. This was something we had to take seriously. After all, no market goes straight down without a fight. We are bound to get some rallies along the way, even if they don't take us back above previous highs. But even if we re-enter a period where the Dow Jones Industrial Average is bui...

If you've already checked in on Monday's post, you probably noticed our mention of investor Jeremy Grantham's recent interview in Barron's . Well, today we have two Grantham profiles for you: a link to his recent Barron's interview , and a profile of the famed Boston investor in today's Financial Times. Grantham, a founding member of the Boston-based investment management firm GMO, is known for his ability to take an unpopular stance on the markets and stick to his guns, in spite of doubters and detractors. An excerpt from the FT piece illustrates this point: "I remember when Jeremy made a stand against tech stocks in the late '90s, and was in the wilderness for what must have seemed like 50 years," says Jim Grant, founder and editor of Grant's Interest Rate Observer, who has known Mr Grantham for 15 years. "He lost many clients during that time, but he's a fighter, and just doesn't back down from a deeply held conviction. ...

US stock markets are closed today due to the Presidents' Day holiday . Nevertheless, the rest of the world's markets are open for business, and that being the case, I had some interesting links and stories to share with you. First off, I'm reminded, by the comments in our recent, "Features of the week" post, of two noteworthy weekly roundup posts that you may want to check out. Kent at The Financial Philosopher offers up the latest edition of his "Weekend Wisdom" series, while Prieur du Plessis at Investment Postcards weighs in with a week-in-review of the financial markets in, "Words from the (investment) wise..." . You'll find a lot of market data and investment analysis here; be sure to check out that Jeremy Grantham interview in Barron's that Prieur has linked to in his post. And now, on to the stories of the day. We've got a few articles for you which will offer a view of what's happening in the global financial mar...

While reading Paul Kedrosky's blog, Infectious Greed, the other day, I came across an interesting gallery article from Fortune magazine called, "Crisis Counsel" . Fortune surveyed some of the most respected investors around for their opinions on the recent subprime "meltdown" and the resulting market turmoil. Will the recent crisis send markets into free fall mode? Read on for reactions from Warren Buffett, Wilbur Ross, Jim Chanos, Jim Rogers, and Jeremy Grantham, to name a few.

We talked on Monday about the current level of liquidity in the markets . Today we will take a look at the difference between market liquidity and liquidity in the form of available money and credit. When we talk about market liquidity , we generally refer to the ease with which assets and investments can be sold for cash. How liquid is the market for "x" - when we ask this question we are basically talking about how quickly we can turn item "x" (be it real estate, stocks, or bonds) into cash. If we can readily exchange our investment for money and suffer no significant downward price movement in the process, then the asset or investment is liquid. If the market for an asset or investment is shallow, or inactive, with high bid/ask spreads and volatility, that market is said to be illiquid. Illiquid assets and investments are often hard to sell, and oftentimes their sale can have a significant effect on prices in the market. This is one of the main issues in the ong...

We spoke yesterday about worsening conditions in the credit markets , as fears from the subprime mortgage bond market had spread to the corporate and high yield debt markets. Today we see more evidence of a contagion of fear, as credit fears join with worries over higher oil prices and the state of the U.S. housing market. The result: a reversal to yesterday's gains in the leading U.S. stock indexes, as U.S. stocks declined sharply in morning trading. The fallout in stocks was not limited to U.S. markets. European and Asian shares also suffered from fears of a slowdown in the takeover market due to higher borrowing costs. More on that from Reuters : U.S. stocks tumbled on Thursday on signs of further deterioration in the U.S. housing market, a jump in oil prices and a worsening climate for financing corporate takeovers . The broad Standard & Poor's 500 stock index fell 2 percent at one point, and the steep decline led the New York Stock Exchange to impose trading curbs whic...

Here's a fun piece from Bloomberg columnist Mark Gilbert which takes its cue from Jeremy Grantham's recent remarks about the world's "first truly global bubble" . In, "Champagne Cheaper Than Vinegar = Bubble" , Gilbert lists his seven signs that the world has gone bubblicious and completely off its rocker. The world of contemporary art provides us with one prime example: Skullduggery? Take a life-sized platinum skull that looks eerily like Hedge-Fund Guy. Stud it with 8,601 diamonds weighing 1,106.18 carats. Give it a snappy title such as ``For the Love of God'' and, as long as your name is Damien Hirst, you have a recipe for turning $20 million of materials into a $100 million windfall. ``You have to get the price right, or it will come back into the market,'' Hirst told Bloomberg News reporter Linda Sandler. ``A lot of people buy things and flip them.'' You know there's a bubble when artists are trying to set their prices s...

Jeremy Grantham's latest commentary to investors at GMO seems to stress the bubble-like atmosphere that's enveloped asset markets across the globe; at least that's what we hear from a number of sources, including John Mauldin and Barry Ritholtz (who might have actually read the thing ). Meanwhile, I can't help but notice that Grantham's observations sound a lot like what we heard from Marc Faber earlier in the year, and as far back as 2006. Let's compare. Here's Mauldin quoting Grantham : Grantham says we are now seeing the first worldwide bubble in history covering all asset classes. "'Everything is in bubble territory,' he says. 'Everything. The bursting of this bubble will be across all countries and all assets.' "'From Indian antiquities to modern Chinese art,' he wrote in a letter to clients this week following a six-week world tour, 'from land in Panama to Mayfair; from forestry, infrastructure and the ju...

I'm always happy to see an interview with Jeremy Grantham and his appearance in the most recent issue of Barron's (Feb 6) was no exception. Grantham spent part of the interview, for those who haven't read it, discussing the housing market and its current role in our national economy. Wary of the overall trend in housing prices, he notes that a downturn could lead to a noticeable slowdown in consumer spending (which currently makes up 70% of GDP). Mr. Grantham feels that a drop in home prices could be the largest negative impact on consumption, outweighing even high oil prices. As he puts it: "Housing has been the easy way to get money". Lofty home values have renewed the "wealth effect" for Americans in recent years, but much of the money extracted from home equity loans has already been spent or put into savings. Grantham's comments echo the sentiments expressed recently by Richard Russell of the Dow Theory Letter .