Monday, February 1, 2010

Asset Class Performance: It's Been All E.M.

Jeremy Grantham details asset class performance over the past decade in his latest missive What a Decade (bold mine):

The efficient market people, who apparently will take their faith with them to the grave, will say we were lucky (GMO closely predicted the order of the below asset class returns), in spite of the one in several hundred thousand odds of being correct. “Preposterous. How can the risky asset underperform cash for 10 years?” you can hear them say. But we would say it was just the normal grinding of regression to the mean. It’s an awfully normal world we inhabit, in the long term. It’s only the short-term zigs and zags that drive us all crazy, and right now we should brace ourselves for some very odd and unpredictable short-term market effects brought on by the recent crisis and the massive governmental response. But the bigger danger is that once again the Fed is playing with fire!

Source: GMO

1 comment:

  1. I'm suprised they would leave gold off that chart.

    Let's see, claims a 12/31/99 gold price of 279.91. Yahoo claims a GLD 12/31/09 close of 107.31 (which we'd need to multiply by 10 for ounces).

    Google says:
    (1073.10 / 279.91) ^ 1/10 = 1.14383183

    So, over 14% annualized return from gold over that same period. You could have beat any asset class they discussed, handily, by buying lumps of metal.