A Brit With Backbone
“I would put a requirement for backbone ï¬rst along with the ability to think for yourself and stand ï¬rm. We have little to lose by taking a different course, and much to gain. “Relevant experience” is difficult to appraise in dealing with a Fed boss, and previous proven excellence has anyway not always been targeted. Greenspan notably had had no success at any previous serious job; in fact, come to think of it he had had no serious job, really. He did, though, have a proven record of almost laughable failure as an economic prognosticator to the stock market back in the 1970s.
So, who meets my description? Brooksley Born, Sheila Bair, and possibly Thomas Hoenig (who voted quite often but always in vain against the Fed’s policies) would catch the flavor of my point. No, not a prayer, I know. Still it’s the thought that counts. And if my suggestions fall flat, how about a Canadian or a Brit or even a German?”
–Jeremy Grantham, “Ignoble Prizes and Appointments”; GMO Quarterly Newsletter (Nov, 2013)
You wonder if the splendidly self-aware, keenly observant Grantham — and a Brit to boot — was describing himself when he ticked off the attributes of the ideal Fed Chairman.
In his long, illustrious career at the helm of GMO, he has been a diligent, careful steward of clients’ money — something like $98 billion of it now — all the while speaking truth to power and unhesitatingly taking to task those who’ve fallen short.
Far short.
Yellen as Bernanke Successor: “Same Ole, Same Ole”
Consider his damning indictment of incoming Fed Chair Janet Yellen:
“Yellen also sounded like early Greenspan in suggesting that bubbles don’t exist, and even if they did, it would not be the Fed’s business to intervene, and even if it were, there would be nothing they could do, and even if there were, the guaranteed pain of intervention would not be worth the possible beneï¬ts.”
Also earning Grantham’s (richly deserved) opprobrium: the Nobel prize in economics and its arbiter, The Bank of Sweden; the efficient markets hypothesis; “Rational Expectations”; practically all modern-day economists; deregulation and non-regulation as practiced by a succession of Administrations; herd-like financial advisors; and — in his view — today’s once-again frothy stock prices.
On that score, Grantham ventures that the only question is not what will happen, but when:
“My personal guess is that the U.S. market, especially the non-blue chips, will work its way higher, perhaps by 20% to 30% in the next year or, more likely, two years, with the rest of the world including emerging market equities covering even more ground in at least a partial catch-up. And then we will have the third in the series of serious market busts since 1999 and presumably Greenspan, Bernanke, Yellen, et al. will rest happy, for surely they must expect something like this outcome given their experience.”
Reading Grantham isn’t just a breath of fresh air — it’s a tonic.
And a wake-up call.