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Author: ADrumlinDaisy Two stars, 250 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 461288  
Subject: Grantham Pins a Macroeconomic Tale on a Donkey Date: 2/18/2013 12:38 AM
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To those (my children) who say I never post macroeconomic content, I say, “Pshaw!”

And to prove my point, here (with a great deal of paraphrasing) is a summary of the ideas raised in Legendary Investor Jeremy Grantham’s latest quarterly letter:

1. A lot of smart people agree with Mr. Grantham’s view that the US long-term growth rate will be 1.5% -- lower if you adjust for the effects of increasing resource costs and climate change.

2. But, GDP growth does not directly affect stock returns or corporate profitability. Growth (in companies and countries) sucks up capital, so that GDP growth is not mirrored by earnings growth. In fact, real earnings growth is negatively correlated with GDP growth.

[You should check out the two graphs Mr. Grantham offers in support of this idea – they are kind of shocking. E.g., Canada and Australia are sort of the Sargasso Sea of earnings growth – sorry, guys, do not shoot the messenger!]

3. The above ideas have some connection with the notion of “replacement cost.”

[This whole discussion can safely be skipped by all but the most masochistic of readers. Although I could not figure out what this discussion had to do with anything, I have memorized the following sentence for use at parties:

For there to be a stable equilibrium, assets, including entire corporations in the stock market, must sell at replacement cost. (emphasis in original)

I am pretty sure that I can bring any conversation in the state of West Virginia to a screeching halt by throwing that baby out there. If you decide to try this, I think it would probably be best to say the last two words very loud, and then stalk off in a huff: you will be regarded as an enigmatic genius; and no one will be able to ask you what the heck you are talking about.]

3.5 Value stocks outperform growth stocks, mostly because growth stocks are overpriced.

4. A low risk-free interest rate would seem to result in lower growth, but the risk premium might be unaffected, or might drop only a small amount.

5. Blah blah blah about GMO’s procedure for estimating future GDP growth, with the conclusion that, and this is a definite paraphrase, GMO’s critics have their heads . . . in the sand. Any normal human being will want to skip this long section.

6. Low interest rates will ratchet prices of all sorts of investment assets up for a while until yes, you’ve got it, corporate assets begin to sell way over replacement cost. And then overinvestment and, ultimately, a correction will ensue. This even applies to farmland and timberland, two of Grantham’s favorite types of assets.

7. What does this mean? . . . for us at GMO it means emphasizing care and maintaining a heightened sense of value discipline, not only in stock selection, as the whole world is once again bid up over fair value in a way so typical of the post 1994 era, but also in forestry and farmland.

8. Blah, blah, blah about the Fed, which basically boils down to (i) in the recent past, the Fed had its head . . . in the sand and (ii) at this point, the Fed has its head . . . well, you get the idea.

Mr. Grantham concludes his discussion of the Fed by pinning a tale on a donkey (note there is a pun in this phrase!):

I like the analogy of the Fed beating a donkey (the 1% growing economy) for not being a horse (his 3% growing economy). I assume he keeps beating it until it either turns into a horse or drops dead from too much beating! Fine-tuning economic growth, an impossible job for the Fed anyway, is hardly likely to get any easier by badly overstating trend-line growth. It seems nearly certain, therefore, that the Fed will keep trying to whack the donkey for far too long.

OK, two things.

First, kudos to Grantham for the phrase “whack the donkey,” which hopefully will work its way into the jargon of the dismal science.

Second, any child who was raised in the Catholic faith will undoubtedly join me in remembering, from Mr. Grantham’s donkey reference, our famous, ringing chant of mortification and guilt:

Meus asinus;
Meus asinus;
Meus maximus asinus.


(loosely translated: “I am a donkey; I am a donkey; I am a gigantic donkey.”)*

9. Mr. Grantham – who, all joshing aside, deserves a careful hearing – concludes with the following advice:

Courtesy of the above Fed policy, all global assets are once again becoming overpriced. . . . emerging markets and, we believe, Japan are only moderately overpriced. European stocks are also only a little expensive, but in today’s world are substantially more risky than normal. The great global franchise companies also seem only moderately overpriced. Forestry and farmland, which is not super-prime Midwestern, is also only moderately overpriced . . . . But much of everything else is once again brutally overpriced. Notably, U.S. stocks (ex “quality”) now sell at a negative seven-year imputed return on our numbers and most global growth stocks are close to zero expected return. As for fixed income – fugetaboutit!

The full letter can and (with appropriate exceptions, noted above) should be read here:

www.gmo.com

Rich

A Drumlin Daisy

*I believe the comedian Dave Barry was the first to report a nonstandard version of the Confiteor.
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Author: rubberthinking Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 416129 of 461288
Subject: Re: Grantham Pins a Macroeconomic Tale on a Donk Date: 2/18/2013 1:03 AM
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Just living to buy another day.....

Dave

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Author: Gingko100 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 416133 of 461288
Subject: Re: Grantham Pins a Macroeconomic Tale on a Donk Date: 2/18/2013 2:13 AM
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Ummmmm.....dude. You should know better than to post anything with advice from a "Grantham" on Sunday nights.

Just sayin'...I was expecting a treatise on how to properly structure the economics of a baronial estate.

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Author: jerryab Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 416165 of 461288
Subject: Re: Grantham Pins a Macroeconomic Tale on a Donk Date: 2/18/2013 4:51 PM
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I was expecting a treatise on how to properly structure the economics of a baronial estate.

From whose point of view?

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Author: Gingko100 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 416166 of 461288
Subject: Re: Grantham Pins a Macroeconomic Tale on a Donk Date: 2/18/2013 5:50 PM
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From whose point of view?
Lord Grantham (as heavily edited by Matthew Crawley, saying - "hey there you are all wrong!")

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Author: namkato Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 416177 of 461288
Subject: Re: Grantham Pins a Macroeconomic Tale on a Donk Date: 2/19/2013 12:54 AM
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If I were an avowed communist with a desire to undermine confidence in our capitalist system, I might use the same strategy that A Drum has been pounding on metar these last few months.

I would trot out the newsletters of a couple of well known critics of current policies and conditions. I would then praise these letter writers as being the wisest of the wise, as pinnacles of economic insight. I would then copy and paste the most inflammatory sections of their letters as incontrovertible proof that, as the last missive boldly stated, We Are All Doomed.

Despite the transparency of this writer's intent, it obviously falls on receptive ears. The writer, just like Matt, knows how to play to his audience.

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Author: ADrumlinDaisy Two stars, 250 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 416198 of 461288
Subject: Re: Grantham Pins a Macroeconomic Tale on a Donk Date: 2/19/2013 12:04 PM
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If I were an avowed communist with a desire to undermine
confidence in our capitalist system, I might use the same strategy
that A Drum has been pounding on metar these last few months.


As I was wandering across tick-infested fields this morning,
I thought, “Say, Daiserino, shouldn’t you respond to the claim
that your posts contain subtle hidden messages?”

And then I thought, “OK, I will.”

So let me assure you, fellow travelers, that I would never put
subtle hidden messages in a post. Why? I respect these boards too
much!

Workers who contribute to these boards strive to the best
of their abilities to communicate clear and direct ideas about
the macroeconomic trends and realities that are present in the
world today. We may have our differences, but one thing can
unite us all: a dedication to clarity and transparency.

Rich

A Drumlin Daisy

Who would never incorporate subtle or hidden messages in a post!

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Author: rubberthinking Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 416201 of 461288
Subject: Re: Grantham Pins a Macroeconomic Tale on a Donk Date: 2/19/2013 12:22 PM
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Workers who contribute to these boards strive to the best
of their abilities to communicate clear and direct ideas about
the macroeconomic trends and realities that are present in the
world today. We may have our differences, but one thing can
unite us all: a dedication to clarity and transparency.

by god...workers? not business leaders?

What happened to this board?

Dave...the only one not retired yet.....

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Author: flyerboys Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 416203 of 461288
Subject: Re: Grantham Pins a Macroeconomic Tale on a Donk Date: 2/19/2013 12:38 PM
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Hidden messages and trap doors and BEARs oh my.

LOL. Don't mess with the daisys.

david fb

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Author: tim443 Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 416206 of 461288
Subject: Re: Grantham Pins a Macroeconomic Tale on a Donk Date: 2/19/2013 12:45 PM
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Sounds like namkato is still at it?

Remember when he apologized for his bad behavior then went right back to it?


Any <once a troll..., he is still in the ploink bin> mouse

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Author: namkato Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 416226 of 461288
Subject: Re: Grantham Pins a Macroeconomic Tale on a Donk Date: 2/19/2013 9:35 PM
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So let me assure you, fellow travelers, that I would never put
subtle hidden messages in a post. Why? I respect these boards too
much!
============================================

The quotation "The lady doth protest too much, methinks." comes from Shakespeare's Hamlet, Act III, scene II, where it is spoken by Queen Gertrude, Hamlet's mother. The phrase has come to mean that one can "insist so passionately about something not being true that people suspect the opposite of what one is saying."

https://en.wikipedia.org/wiki/The_lady_doth_protest_too_much...

https://en.wikipedia.org/wiki/Fellow_traveler

A fellow traveler (US English) or fellow traveller (Commonwealth English) is a person who sympathizes with the beliefs of an organization or cooperates in its activities without maintaining formal membership in that particular group. In the early Soviet Union the approximate term was used without negative connotation to describe writers and artists sympathetic to the goals of the Russian Revolution who declined to join the Communist Party.[citation needed] The English-language phrase came into vogue in the United States during the 1940s and 1950s as a pejorative term for a sympathizer of Communism or particular Communist states, who was nonetheless not a "card-carrying member" of a Communist party.

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Author: rubberthinking Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 416235 of 461288
Subject: Re: Grantham Pins a Macroeconomic Tale on a Donk Date: 2/20/2013 12:03 AM
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The quotation "The lady doth protest too much, methinks." comes from Shakespeare's Hamlet, Act III, scene II, where it is spoken by Queen Gertrude, Hamlet's mother. The phrase has come to mean that one can "insist so passionately about something not being true that people suspect the opposite of what one is saying."


yeah well this is much ado about nothing.

Dave

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Author: RoomWitAView Three stars, 500 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 416237 of 461288
Subject: Re: Grantham Pins a Macroeconomic Tale on a Donk Date: 2/20/2013 1:51 AM
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Daisy writes “So let me assure you, fellow travelers . . . “

Fellow Traveler: poputchiki - One who sympathizes with or supports the tenets and program of an organized group, such as the Communist Party, without being a member.

Since Daisy is obviously taunting the readers with a subtle hidden Communist message inside his missive claiming there are no such hidden messages, I thought it my duty to take a closer look to see if there are other subtle messages hiding in there. I could hardly believe the obvious trickery that unfolded:

As I was wandering [ Standard Biblical reference ]
a cross tick [ reference to an angry parasite ]
-infested fields this morning, [ Morning Fields, a Stage in Tekken 2, infested, no less ]
“Say, Daiserino [ a Dean Martin reference of Mafia Connection ]
shouldn’t you respond to the claim that your posts [ Lawyer talk for “intent to file a counter-claim” ]
contain subtle hidden messages” [ well, now that's damn obvious! ]
“And then I thought, [ reactive ]
OK, I will.” [ Obvious reference to Will (Rogers) of Oklahoma, who claimed: “I am not a member of any organized political party. I am a Democrat” - therefore obviously a disorganized Socialist ]
So let me assure you [ The Supreme Political Leading Lie ]
I would never put subtle hidden messages in a post [ Deny while hiding in plain sight ]
Why? [ The Battle Cry of Every Nonconformist ]
I respect these boards too much! [ Oh, the sly “trust me, I respect you” ]
Workers who contribute [ Half of a Communist Axiom ]
to these boards strive to the best of their abilities [ solid planks: policies in a political party's program ]
to communicate [ propaganda ]
clear [ remove entirely ]
and direct ideas [ manipulate mental impressions ]
about the macroeconomic trends [ Where's all our money going? ]
and realities that are present in the world today. [ obvious reference to “Brave New World” Chapter 14 “into the present, back into reality: the appalling present, the awful reality...” ]
We may have our differences [ pointing out “you're different” is typical bigotry ]
but one thing can unite us all [ A thinly veiled reference to The U.N.'s Agenda 21 ]
a dedication to clarity and transparency [ A Ritual of the NGO Transparency International: “We're Watching You” ]

Although Daisy cleverly scrambled a few inserts here and there, it could not be more obvious what he is implying with his subtle hidden message, right?

Do I have to spell it out?

Okay, the simplest version:

“Fellow Comrades,

The U.N., through Agenda 21, and in concert with The Transparency International Overseer, is setting the Stage for A Brave New World Order of Reality, using multiple Solid Planks of Propaganda.

We Assure you that We Respect you, that We can be Trusted, as We are working within Standard Biblical Axioms; therefore, you should not be Reactive nor Nonconforming so as to ever ask Us “Why?”

The Mafia, in conjunction with the Lawyers, Communists, Socialists, Bigots, and all other Angry Parasitic Infestations hiding among you in Plain Sight, will Remove All of your Money by Manipulating your Mental Impressions.”


Also, I think the Central Scrutinizer is located in Oklahoma in the basement of The Socialist Will Rogers' Memorial Museum, but that part of Daisy's agenda is a little vague.

Apologies to the Purists if I irreverently mixed up some of the Ideologies, they all kinda Smell the same to me.

Kat o' Nam - Tong o' Cheek


And in case it's not obvious to the reader, it's not in Daisy's direction that I am poking fun . . .

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Author: rubberthinking Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 416239 of 461288
Subject: Re: Grantham Pins a Macroeconomic Tale on a Donk Date: 2/20/2013 1:58 AM
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Namkato has us surrounded, but we have Namkato outnumbered.....

Communism is a slippery slope. I used to worry about Jerry Garcia. Could you really trust him?

Dave

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Author: namkato Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 416374 of 461288
Subject: Re: Grantham Pins a Macroeconomic Tale on a Donk Date: 2/21/2013 1:39 AM
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Since Daisy is obviously taunting the readers with a subtle hidden Communist message inside his missive claiming there are no such hidden messages,

================================================================

That's correct, his messages are not subtle or hidden, he invents heroic communist characters regularly, here is one:

http://boards.fool.com/a-tad-ot-leeches-pumas-grantham-capit...

I climbed up on the rock and checked – and saw that it was my middle daughter, the Last American Communist, who was spending the summer studying wildlife high up in the Rockies.

“No! I am ON TOP OF GOTHIC MOUNTAIN -- 12,600 feet high! I hiked up this morning, and believe it or not, I am calling you on my cell phone from the summit!”

“Oh, yes . . . and guess what, Dad! Yesterday morning, as I was hiking out to my observation post around 5:00 AM, I came around a rock and there on the path, maybe 20 feet away, was a huge mountain lion . . . .

“. . . . He seemed pretty interested in me – I think maybe he was stalking me. But I made myself big like they teach us . . .”

<<You made yourself big? 115 pounds is not big! Do you realize that a mountain lion can leap 40 feet – that it has the strength of many men in its powerful front legs – that it can kill a full-grown deer in seconds . . . .?>>

“. . . . and pretty soon he just melted away into the bushes. It was awesome; he was unbelievable!”

=====================================================

and to make sure you get the point, he puts a slimy, disgusting capitalist character into the story for the sake of comparison, so no, it's not subtle or hidden in the least

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