Stock Markets Have Long Tails and Tiny Brains

This is a time when only a dinosaur analogy will do. Equity markets around the world are suddenly moving to price in the alarm about slowing global growth that has been evident in bond markets for many months. Why? Jeremy Grantham, the founder of Boston-based GMO, likened the stock market to a dinosaur with a tiny brain:

This comment beautifully encapsulates what is now happening. What is alarming is that Grantham didn’t say that this week or even this year. He made this remark way back in July 2007 at a point when we now know the financial world was about to tip into crisis. Of many people I spoke to at the time for a piece you can find here, he proved to have by far the greatest foresight.