The author has been described by News Ltd as an "iconoclast", "Svengali", a pollie's "economist muse", and "pungently accurate". Fairfax says he is a "Renaissance man" and "one of Australia’s most respected analysts." Stephen Koukoulas concludes that he is "85% right", and "would make a great Opposition leader." Terry McCrann claims the author thinks "‘nuance’ is a trendy village in the south of France", but can be "scintillating" when he thinks "clearly". The ACTU reckons he’s "an enigma wrapped in a Bloomberg terminal, wrapped in some apparently well-honed abs."

Monday, November 15, 2010

GMO's Jeremy Grantham reaches out...

So the plot thickens. In an amazing turn of events, it transpires that GMO's Jeremy Grantham just happens to be extremely close friends with a member of my extended family. So I received a call from this individual the other day telling me that Jeremy Grantham had emailed him personally asking about Rismark.

Separately (but presumably on a closely related note), GMO have written to me directly asking for a copy of our dwelling price-to-income ratio data. I have, of course, supplied it to them, and independent analysis that arrives at the same conclusions from the RBA and Westpac (I could have also given them Goldman, UBS, ANZ, and CBA analysis, but did not bother).

I am guessing that GMO is getting a little bit nervous about being held to account on their 7.5x dwelling price-to-income ratio claims, which is way above the RBA's estimate of a tad under 4.5x, which in turn coincides with Rismark's finding of 4.6x (see middle panel of chart below).

Nevertheless, I am sure that GMO carried out very detailed analysis before making their extraordinarily strong statements about the Australian housing market being the mother-of-all-bubbles and 42% overvalued based on their dwelling price-to-income ratio. This hopefully means that they will still be prepared to put their money where their mouths have frequently been, and back the predictions they have communicated to the global investment community; that is, I trust that they are happy to short our national house price index to the tune of $100 million over the next three years.