When you hear a wolf crying in the distance should you worry?
Jeremy Grantham has penned an entertaining and thoughtful note calling the top of the market.
Actually, the Long-Term Investment Strategist & Co-Founder of GMO called for the bursting of a super-bubble.
From such an esteemed successful investor that’s a big statement. Mr Grantham is a very successful wolf.
Let’s take a step back for a moment and reflect on why we are investors in companies and not ‘markets’.
We have all watched in amazement as investors poured billions into crypto currencies, blank check companies, insolvent movie theatres, and antiquated video game stores.
The centrefold picture of the cheering crowds, Elon Musk, just sold $16 billion of his Tesla stock and investors eagerly scooped it up.
It was seen as a gift to others I suppose. Sharing so to speak.
Mr Musk is seen somewhat as a hero.
Changing the world as he litters the skies with satellites launched by rockets spewing all sorts of toxins and cranks out aluminum cars (aluminum is the most energy intensive metal to manufacture and plastic is made from oil) with batteries mined with cooper and lithium, extracted using gas guzzling equipment.
It’s not that I take offence that he encourages people to buy cars with software that runs over people, or that he lies about having finances to take his company private.
If you are a somewhat balanced investor, you likely have watched this wild ride from the sidelines. We certainly have.
I’ve seen my share of bubbles and the bursting of them, and they always have the same outcomes:
Those that stuck to fundamental investing and bought good quality businesses at fair prices did fine, those that invested with too much enthusiasm always shed tears.
Mr Grantham is quite right to call out the seeming conditions for tears soon to be shed.
If you have stuck to quality the ride may be bumpy but the wolves should not present themselves at your door.
Related stories: 12 U.S. Large Cap Stock Ideas From Davis Rea’s John O’Connell