“Tell a European you think there’s a housing bubble and you’ll have a reasonable discussion.
“Tell an Australian and you’ll have World War III.
“Been there, done that!” says the commentator Jeremy Grantham in his latest newsletter.
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The bubble-watching investor Jeremy Grantham from US investment fund GMO almost appears to be weakening in his strident characterisation of Australia’s property as the most overvalued bubble in the world. No concession on his past forecasts is offered, but there’s a hint of tired resignation.
The comments are offered in his 10-point investment advice tips where he urges investors to contain their natural optimism.
“Our species is optimistic, and successful people are probably more optimistic than average.
“Some societies are also more optimistic than others: the US and Australia are my two picks.
“I’m sure (but I’m glad I don’t have to prove it) that it has a lot to do with their economic success.
“The US in particular encourages risk-taking: failed entrepreneurs are valued, not shunned,” he writes.
“While 800 internet start-ups in the US rather than Germany’s more modest 80 are likely to lose a lot more money, a few of those 800 turn out to be today’s Amazons and Facebooks.
“You don’t have to be better; the laws of averages will look after it for you.
“But optimism comes with a downside, especially for investors: optimists don’t like to hear bad news,” he adds.
“And in a real stock bubble like that of 2000, bearish news in the US will be greeted like news of the bubonic plague; bearish professionals will be fired just to avoid the dissonance of hearing the bear case, and this is an example where the better the case is made, the more unpleasantness it will elicit.
“Here again it is easier for an individual to stay cool than it is for a professional who is surrounded by hot news all day long (and sometimes irate clients, too). Not easy, but easier.”
His top 10 investment advice slogans are:
1. Believe in history
2. Neither a lender nor a borrower be
3. Don’t put all of your treasure in one boat
4. Be patient and focus on the long term
5. Recognize your advantages over the professionals
6. Try to contain natural optimism
7. But on rare occasions, try hard to be brave
8. Resist the crowd: cherish numbers only
9. In the end it’s quite simple. Really
10. This above all: to thine own self be true
This article first appeared on Property Observer