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Monday, October 27, 2008

S&P Bottom Out 600-800? – Jeremy Grantham

Jeremy Grantham, GMO, just issued Part 2 of 3Q2008 Letter to clients, titled Silver Linings and Lessons Learned.

Key points of interest to me:

  1. World faces unavoidable declines in economic activity and profit margins
  2. Downturn likely to rival 1982 or worse in US, almost everywhere it is likely to be much longer downturn than normal
  3. Assets are cheap, likely to get cheaper
  4. History says a 50% + overrun on downside is norm after equity bubbles
    S&P 500 likely to bottom out 600-800 range within next 2 years

Will we see S&P 500 at those levels in the next few weeks, if replay of 1929 Stock Market Crash occurs?

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