Steve Forbes Interviews Jeremy Grantham

Grantham's Big Call(Forbes.com)

Steve Forbes: Well thank you, Jeremy, for joining us today. First, since you have bragging rights in this situation, what made you a bear, [a] great skeptic? Between 1999 until about a couple of months ago, you were saying, "Stay out."

Jeremy Grantham Well, really very simple. Not rocket science. We take a long-term view, which makes life, in our opinion, much easier.

Steve Forbes: Well everyone says it, but you certainly practiced it.

Jeremy Grantham We actually do it. Well, we tried the short-term stuff and it was so hard; we thought we'd better do the long-term. We just assume that at the end, in those days, of 10 years, profit margins will be normal and price-earnings ratios will be normal. And that will create a normal, fair price. And more recently, we've moved to seven years, because we've found in our research that financial series tend to mean revert a little bit faster than 10 years--actually about six-and-a-half years. So we rounded to seven.


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