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November 20, 2012 at 09:37 AM
If it is true that great minds think alike, and therefore might like one another, hedge fund star Jeremy Grantham should meet Christopher Brightman of investment management firm Research Affilliates.
Grantham’s investment letters are highly anticipated for their deep analysis of economic trends, and his latest missive closely matches Brightman’s earlier published client newsletter, about which AdvisorOne has previously written.
The Boston-based founder of Grantham Mayo Van Otterloo, like Brightman, his like-minded colleague in Newport Beach, Calif., argues that the 3%-plus annual GDP growth that Americans have long taken for granted is a thing of the past – “gone forever,” as he puts it. Similarly, Grantham (left) argues that GDP growth will now hover at about 1% per year in the coming decades; (Grantham says “about 0.9%,” Brightman says 1%).
Both analysts make a point of stating that their analysis is based on quite reliable data: “Unusually for things economic, these estimates are much more likely than the typical estimates to be quite accurate, for much is derived from the existing population profile and social trends, which, like birth rates, change very slowly,” as Grantham puts it.
Brightman calls the data “highly reliable,” citing as an example that we can closely estimate the number 65-year-olds next year based on this year’s number of 64-year-olds.
Both also lament that the decline now in progress is not “fully appreciated yet by the business and investment community,” as Grantham puts it, citing the Federal Reserve’s assumption that we will revert to previous growth rates, while Brightman cites the rosy scenarios proffered by both the administration and Congressional Budget Office.
