Another bear (Jeremy Grantham) turns a little bit bullish

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I quoted the warnings of veteran money manager Jeremy Grantham a couple of times in the lead-up to the current financial mess. My favorite came in July 2007 when Grantham described the minor jitters that had hit markets several times already that year:

Rather like a brontosaurus that has been bitten on the tail and most of the body hasn’t noticed it yet, the signal is working its way up the vertebrae.

Anyway, Grantham’s latest quarterly letter to investors is out (pdf!), and while most of it consists of a trenchant analysis of what went wrong, there’s also this:

On October 10th we can say that, with the S&P at 900, stocks are cheap in the U.S. and cheaper still overseas. We will therefore be steady buyers at these prices. Not necessarily rapid buyers, in fact probably not, but steady buyers. But we have no illusions. Timing is difficult and is apparently not usually our skill set, although we got desperately and atypically lucky moving rapidly to underweight in emerging equities three months ago. That aside, we play the numbers. And we recognize the real possibilities of severe and typical overruns. We also recognize that the current crisis comes with possibly unique dangers of a global meltdown. We recognize, in short, that we are very probably buying too soon. Caveat emptor.

As Grantham points out elsewhere in the letter, he was also extremely bullish from 1973 to 1986–and it was only in the last four years of that 13-year stretch that the market turned bullish too.