In his quartery newsletter: http://www.gmo.com/websitecontent/JGLetter_ALL_2Q08.pdf , Jeremy Grantham writes:
I thought things would be bad enough but they turned out to be a lot worse. ...
The Fed’s primary job is really quite simple: Protect the integrity of the U.S. financial system. In this they have sadly failed. The Fed and the Treasury have moved to bail out large financial corporations under the smoke screen of a liquidity crisis. As is increasingly realized, it was not a liquidity crisis primarily, but a solvency crisis. Marked to market 6 months ago, Bear Stearns and Lehman were bankrupt as are Fannie and Freddie today. The bailouts are really providing what amounts to capital to insolvent firms.......
We have been collectively living beyond the planet’s means by over-consuming finite resources.
We run a serious risk of a meltdown in confidence in leadership totally unlike anything we have seen since World War II.
....the fundamental global outlook is substantially worse than expected. Our advice until now was very simple: take as little risk as possible except for emerging markets. Now it is even simpler: take as little risk as possible.
In the short term, slowing world economic growth combines with credit, currency, and inflation problems to dominate the outlook and offer poor prospects for emerging markets and commodities.
Longer term, the reverse is true and they look like the assets to own.
My Notes: The Author's summary is: There is more pain likely. The bear market is far from over. It may go all the way into 2010 or even 2011.