One of us is a HUGE Jeremy Grantham http://tinyurl.com/dh39ke fan and aims to read his every word. The passages excerpted below are from his most recent Jan. 2009 GMO Quarterly Letter.
"Never underestimate the power of a dominant
academic idea to choke off competing ideas, and never
underestimate the unwillingness of academics to change
their views in the face of evidence. They have decades
of their research and their academic standing to defend.
The incredibly inaccurate efficient market theory was
believed in totality by many of our financial leaders, and
believed in part by almost all. It left our economic and
governmental establishment sitting by confidently, even
as a lethally dangerous combination of asset bubbles, lax
controls, pernicious incentives, and wickedly complicated
instruments led to our current plight. “Surely none of this
could happen in a rational, efficient world,” they seemed
to be thinking."
"Heavy buy-and-hold equity positions are fine for long-lived
computers, but for impatient humans – given as we are to
waves of overconfidence and abject fear – they are simply
dangerous and unsuitable."
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