http://www.financialweek.com/apps/pbcs.dll/article?AID=/20081017/REG/810169971/1036
(Reuters)—Jeremy Grantham, Bill Ackman, Chris Orndorff and Bob Doll are some of the savviest U.S. money managers who are betting that equities have fallen to levels far below their intrinsic value.
After Warren Buffett’s opinion got published, media around the world jumps on bandwagon touting investors to open up their wallets and spend all their money.
Who are these guys? These are big value investors manage a lot of money.
Jeremy Grantham, Chairman of GMO, managing US $ 120 billion.
Bill Ackman, Pershing Square Capital Management LP manages US $ 2.4 billion of fund.
Chris Orndorff, head of equity strategy for Payden & Rygel, a firm which manages over $50 billion.
Bob Doll, he was the ex-Chief Investment Officer at Merill Lynch. He is now the Vice President and CIO for Black Rock. BlackRock’s assets under management totaled $1.357 trillion across fixed income, liquidity, equity, alternative investment and real estate strategies.
I am quite upset to find out some of the writers quoting these guys for the sake of juicing up their stories. This is what Jeremy Grantham said in one of the recent interview published in SmartMoney on Oct 14, 2008: http://www.smartmoney.com/investing/stocks/still-holding-back/?cid=1122
On US market: ….. I threw in the towel three months ago, and wrote a quarterly letter saying I thought I was the bear around this joint.
But this is much worse than I thought. All the fundamentals are turning out worse than I thought they would. All the competencies of the senior people at the Fed, Treasury and [firms like Merrill Lynch and Lehman Brothers] have turned out to be much less than I had expected; that's very disappointing.
And, therefore, how could one's confidence that the senior people would get us through the storm be very high? Prior to three months ago, we were investing in emerging-market equities. Then we battened down the hatches, and I changed my view from avoid all risk except emerging markets to avoid all risk, period.
The terrible thing — after all this pain — is that the U.S. equity market is not even cheap. You would imagine that, given the amount of panic, that it would be. But it started from such a high level in 2000 that it still has not yet worked its way down to trend, although it is getting close. But the really bad news is that great bubbles in history always overcorrected. So although the fair value of the S&P today may be about 1025, typically bubbles overcorrect by quite a bit, possibly by 20%. That is very discouraging.
On outside US market.
Things are getting cheaper. We score the EAFE [the Europe, Australasia and Far East Index] as absolutely cheap, and it's offering a 7% real annual return over seven years. Emerging-market equities are a bit cheaper, and we see a 9.5% annual real return over the same period.
The problem, though, is that we have so much downside momentum, so many financial problems and so many interlocking relationships, that it is hard to imagine this crisis subsiding because stock prices are digging in their heels and approaching fair value.
Chris Orndoff? His firm has terrible returns.
Bob Doll ? Terrible forecast.
I give you the facts and alternate views, you interpret and decide for yourself.
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