Debt is Accounting, Not Reality
Barry Ritholtz highlighted a great downloadable PDF from Jeremy Grantham of GMO titled The Last Hurrah and Seven Lean Years
It is well worth a read, but here are a few great highlights from it
- “Debt is accounting, not reality. Real economies are much more resilient than they are given credit for.”
- Attempts at economic stimulation tends to stimulate the stock market more than the economy because it trades off momentum & a multiplier effect.
- “Since 1932, in the third year of the Presidential Cycle, the average S&P 500 return (from October 1 to October 1) is 22 percentage points ahead of the average of years one and two! And this is statistical noise? Year three is the time when, driven by politics, financial stimulus and moral hazard are applied so that the economy – particularly increases in employment – can be a little stronger in the run-up to the election in year four.”