Avatar Posted by Thybergfutard 308 days ago (http://wealth-ed.com)
Category: Lifestyle | Tags: finance investment money wealth
I have written before about the high quality of opinion in Jeremy Granthams shop, GMO. Now besides Mr. Grantham, I found another analyst with a similar sensible point of view, Ben Inker. In Mr. Inkers April post on the GMO website, he writes of the long term success of common stock equity investments and their tendency to revert to the mean. This concept is one of which I am very fond and have written often. It is well proven in investing literature over a very long period of time. However, even those as illustrious as Mohamed El-Erian and the PIMCO shop have made recent claims that "this time its different", in respect to the credit crisis and subsequent recovery. Every time I see those words, I know that we are at a point of transition. We heard that refrain often in the late 1990s with equity prices rocketing ever higher and price multiples of earnings going stratospheric, beyond 100 in many cases. But the purveyors of investment advice reassured us: "dont worry, this time it is different", and that we should expect never to see again a multiple of 10 on the market or even on individual stocks. Economic management had flattened the business cycle and therefore stocks had become riskless, justifying the extreme multiples, so the logic went.
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