Alas, money manager R. Jeremy Grantham was right.
The Wall Street Journal recognized him Friday as one of a small group of market watchers who saw the current economic crisis coming.
Indeed, Grantham, co-founder and chairman of the Boston-based GMO LLC, was predicting “a sensational bust” on its way in 2000.
Post-Sept. 11 financial maneuvering on the government’s part delayed the inevitable, he believes.
But by April 2007, Grantham was predicting the bursting of a bubble that would be “across all countries and all assets.”
He compared watching the impending credit crisis to watching a “slow-motion train wreck.” And he predicted that at least one major bank would fall within five years.
In July 2008, Grantham declared himself “officially scared” and said that his prediction a year earlier of one major bank failure looked “positively quaint.”
Grantham was also not impressed by what government leaders had done by that point in dealing with troubled financial institutions.
“These bailouts permit a shameful lack of accountability for reckless behavior,” Grantham wrote in his newsletter.
More and larger bailouts were to follow, and Grantham remains pessimistic, though he told the Journal that there are quality investments to be made in Coca-Cola, Wal-Mart Stores and Microsoft.
“The super-blue-chips are the most attractive part of the market anywhere in the world,” Grantham told the Journal.
A native of England, Grantham received his M.B.A. from Harvard Business School and joined Royal Dutch Shell as a researcher.
He co-founded Batterymarch Financial Management in 1969.
In 1977, Grantham founded GMO along with Richard A. Mayo and Eyk Van Otterloo, their initials creating the firm’s name. Van Otterloo remains on the company’s board.
Vice President Dick Cheney has been one of the firm’s clients.
Grantham has been a bear throughout his career, seeing danger where other money managers see opportunities.
He correctly predicted the bursting of the tech bubble in 2000, going against the received wisdom of the market.
“He lost many clients during that time, but he’s a fighter,” Jim Grant of Grant’s Interest Rate Observer told The Financial Times in February 2008.
“But he’s a fighter and just doesn’t back down from a deeply held conviction. I think the British army lost a talented field general when Jeremy migrated to the United States and took up finance.”
Grantham and his wife, Hannelore Grantham, have given away millions of dollars on behalf of the environment though their Grantham Foundation for the Protection of the Environment.
In 2005, the Granthams established the Grantham Prize for Excellence in Reporting on the Environment. Each year, $75,000 is given to the best environmental reporting in the U.S. or Canada.
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