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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Merrill Bonus Scandal Heats Up, Cuomo May Demand Repayment

(Clusterstock.com) New York Attorney General Andrew Cuomo is stepping up the investigation into Merrill's $4 billion bailout-for-bonuses scandal. He is also reportedly considering demanding that the bonuses be paid back:

Susanne Craig, WSJ: New York Attorney General Andrew Cuomo is expanding the scope of his investigation into bonuses paid by Merrill Lynch, with the inquiry now likely to include whether directors and shareholders were misled about giant losses at the Wall Street firm, a person familiar with the situation said.

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Obama Calls Wall Street Bonuses ‘Shameful’

(NY Times) President Obama fired a warning shot at Wall Street on Thursday, branding bankers “shameful” for giving themselves $18.4 billion in bonuses as the economy was spinning out of control and the government was spending billions to bail out many of the nation’s most prominent financial firms.

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Jeremy Grantham's 4th Qtr Letter

Long but very good and worth the read.

Go here to read the letter

NBR interview with Warren Buffett

(www.pbs.org) SUSIE GHARIB, ANCHOR, NIGHTLY BUSINESS REPORT: Are we overly optimistic about what President Obama can do?

WARREN BUFFETT, CHAIRMAN, BERKSHIRE HATHAWAY: Well I think if you think that he can turn things around in a month or three months or six months and there’s going to be some magical transformation since he took office on the 20th that can’t happen and wouldn’t happen. So you don’t want to get into Superman-type expectations. On the other hand, I don’t think there’s anybody better than you could have had; have in the presidency than Barack Obama at this time. He understands economics. He’s a very smart guy. He’s a cool rational-type thinker. He will work with the right kind of people. So you’ve got the right person in the operating room, but it doesn’t mean the patient is going to leave the hospital tomorrow.

SG: Mr. Buffett, I know that you’re close to President Obama, what are you advising him?

WB: Well I’m not advising him really, but if I were I wouldn’t be able to talk about it. I am available any time. But he’s got all kinds of talent right back there with him in Washington. Plus he’s a talent himself so if I never contributed anything for him, fine.

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I Want Some Tarp!

Tarp Song by Bill Zucker

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Ken Lewis, Failure

(Portfolio.com) .....Then in October, Ken Lewis told Lesley Stahl on 60 Minutes that he believed it was his patriotic duty to take the $25 billion in TARP money even though his bank didn't need it. With another $20 billion in cash and a whopping $118 billion in loan guarantees, Lewis must be draping himself with the American flag these days.

The bottom line is that Ken Lewis is a failure. Bank of America has now received more bailout money than the bank is worth. He believed he was doing everyone a favor when he agreed to buy Merrill Lynch with very little due diligence. But now we know he's nothing more than just another bank executive who refuses to read the writing on the wall about just how worthless the junk on the balance sheet really is.

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