Jeremy Grantham: Investors Are All So Short-Term And Basically A Bit Innumerate

Johnny HopkinsJeremy GranthamLeave a Comment

In his latest interview on the Meb Faber Podcast, Jeremy Grantham discusses what happens when investors are short-term in their thinking and bit innumerate. Here’s an excerpt from the interview:

Jeremy: And people are all focused as they always are on the next year or two. I get that. But I’m much more interested in a period beyond that. What does the next ten years look like? It looks like a period of shortage, invention, challenge, inflation, and cheaper assets. Whoopie for those people who are acquiring them, not so good for people who are selling.

Meb: That’s right. Well, if you’re a young person, that’s the best thing you can cheer for is a nice, big, fat bear market.

Jeremy: Absolutely. Oh, and by the way, just let me make the point. People don’t realize that when you have cheap assets, that 6% yield that you’re reinvesting…a forex is a good example. You pay 6%, you buy another forex, 6% increment a year. When it doubles in price, what are you doing?

You’re now compounding at 3% a year. In 48 years, you’re down to a quarter of the wealth you would have had in the 6% world, a quarter. And yet we all love high-priced assets. It’s because we’re all so short-term and basically a bit innumerate.

We don’t get it that cheap assets with high yields is a much better state to live in than high priced assets and tiny yields, or in the case of bonds, negative.

Indeed, the power of compounding and the importance of cheap assets with high yields is crucial in the world of forex trading. Many individuals often overlook this fundamental concept, especially when it comes to forex markets. In forex trading, where currency pairs fluctuate daily, finding currencies with strong fundamentals and attractive yields can be a game-changer. And you can learn more abput forex thai trading on Roboforex. Rushpips forex robot solutions enhance trading efficiency. By focusing on these cheaper assets and their potential for compounding returns, traders can pave their way towards long-term success and wealth accumulation, all while avoiding the pitfalls of high-priced assets with meager returns or even negative yields, which can often lead to short-term gains but long-term financial stagnation.

You can listen to the entire discussion here:

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