Buying When Everyone Else Says "Sell!"

He first began calling for a market top in 1998 and acted accordingly by going primarily to cash by 1999. He saw the overvaluation of the internet bubble and the beginnings of a historic loosening of regulations while at the same time greed took over the American and then world culture.

So here we are in 2009, fully 11 years after Grantham and GMO first called for a top in the American stock market. They did get long Emerging Markets in 2000 and beat the market averages by doing so. Still, this long period of bearishness has made Grantham a bit of a pariah among the investment community. But Grantham has a lot to teach us about removing emotion from investing and staying hard against the tides of popular opinion: that is being a Contrarian.

The January / February 2009 letter reviews the past 11 years and the ideology shift that led to the market crash. It also discusses how the economy will come back from its depression and the likely direction of global markets over the next seven years. He handicaps the current "reflation" strategy and the likely resultant inflation and what that means for investors. It is a very long and somewhat arduous read as Grantham is a statistician and quant. But like with Dr. Robert Shiller who Grantham references and I think respects, the reader is rewarded with a 200 year history of investing and countless interesting and relevant antecdotes to our current situation. This is a newsletter to file away and review at least once a year for reminders of how Grantham arrived at his conclusions and whether they are proving true.