Jeremy Grantham, chief investment strategist at GMO, believes the US stock market is 20% overpriced:
"The market is worth only 850 or so, thus, any advance from here will make it again seriously overpriced, although the high-quality component is still relatively cheap"
"This is likely to give us below-average GDP growth over seven years and more than our share of below-average profit margins and price-earnings ratios" Grantham says.
Grantham adds that the american consumer is as badly leveraged as ever:
"Up until the last few months, I was counting on the Fed and the Administration to begin to get the point that low rates held too long promote asset bubbles, which are extremely dangerous to the economy and financial system. Now, however, the penny is dropping, and I realize the Fed is unwittingly willing to risk a third speculative phase, which is supremely dangerous this time because its arsenal now is almost empty."
Jeremy Grantham is the Chairman of the Board of Grantham Mayo Van Otterloo, a Boston based asset management firm well known among institutional investors. Grantham started one of the world's first index funds in the early 1970s. As of early 2009, GMO reported on its web site that it managed more than 85 billion dollars.
Related ETF`s: SPDR SP 500 (ETF) (SPY)
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