Long-time readers of Outside the Box are familiar with the name of James Montier, who is now with GMO in their London office. Today, James, with his usual acerbic wit, takes on the notion of the "New Normal" and offers us a defense of the "Old Always." James is a value investor and sees mean reversion as still alive and kicking, where some proponents of the New Normal think we should throw out all of the old aphorisms. While I am in the New Normal camp, I also agree with James. This makes for some quick and thought–provoking reading.
James Montier is a member of GMO's asset allocation team. Prior to that, he was the Co-Head of Global Strategy at Société Générale and has been the top-rated strategist in the annual Thomson Extel survey for most of the last decade. Montier is the author of four market-leading books, including the recent The Little Book of Behavioral Investing: How not to be your own worst enemy (Little Book, Big Profits), for which I wrote the forward.
It is good to be back in the swing of things, and this looks to be an exceptionally full year for your humble analyst, but one that offers us both opportunity and some times for enjoyment with friends. I am nearly always optimistic at this time of year, and it seems even more so this year. My annual forecast issue, to be published next Friday, will reflect some of that optimism. The future is showing some bright spots here and there. Now let's enjoy some wisdom from James.
Your putting his sunglasses on analyst,
John Mauldin, Editor
Outside the Box
In Defense of the Old Always
The concept of the “new normal” abounds in markets these days. It seems I can’t open the Financial Times without at least one headline proclaiming the importance of the new normal. But what does it mean for the way we invest?
Part of the difficulty in answering that question is the plethora of meanings that have become associated with the term “new normal.” For…