“You can not get blood out of a stone,” says Jeremy Grantham, a value investor in US shares. “At these prices… the US market will deliver 2% or 3% real over a long horizon –like 20 years –versus 6% on average over the last century or so, he says to CNBC.
“When we’re right, it’s going to break a lot of hearts.” Grantham, who founded antagonistic asset manager GMO, is much more keen on emerging markets, where he calculates that “you may be able to do 7 percent or 8 percent over the same time scale if you tilt value.”
China is “massively out-producing the US in the number of engineers and scientists,” making it “hard for them not to take the lead in science” and in a few years to surpass the size of the US economy. India, meanwhile, is growing at 6% a year. But, more importantly, emerging markets are “much cheaper than normal” right now, says Grantham. He cites the Big Mac Index of The
Economist, which compares the cost of a hamburger in various countries. “Buying a Big Mac in an emerging country has always been 25 percent cheaper, but now it’s half price. Grantham–who is a climate activist–is driving a Tesla, but as a value investor, it’s “not his kind of stock.”
However, he sees huge opportunities in tackling environmental charges for entrepreneurs–but only if the US government changes its tax approach. “Once you tax CO2, it’ll be fabulous the ingenuity that will spring from the VC industry……. there’s plenty of hope that you can release the entrepreneurial and inventive spirit.