Jeremy Grantham at GMO has out Part II of his "Reaping the Whirlwind" two-part series on the credit crisis’ aftermath(s). Among other things, he argues that there are benefits to the crisis, including increasing personal savings, an end to the hedge fund era, a reminder that government officials are not to be trusted, and an opportunity for a cleantech Marshall Plan, among others. (Fair enough, but at the price I’d rather we had some better lessons.)
Getting from here to there still won’t be fun, he argues, Despite fair value for the S&P 500 being in the 975 territory, we are likely to see profit margins for the S&P 500 overshoot on the way back to normalcy -– and they’re still 21% above normal. If they do that, you could see trough levels as low as 60% of fair value, Grantham posits, or 585 on the S&P 500 (versus today’s 877).
More here.
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Full of sianlet points. Don\’t stop believing or writing!