James Montier: 'How Do I Get Paid for Owning This Asset?'

Our guest on this week's installment of "The Long View" podcast is James Montier. Montier is a member of the asset-allocation team at Grantham, Mayo, Van Otterloo & Co. Before joining GMO in 2009, he was co-head of global strategy at Societe Generale. A prolific and incisive writer, Montier has authored several books, including Behavioural Investing: A Practitioner's Guide to Applying Behavioural Finance; Value Investing: Tools and Techniques for Intelligent Investment; and The Little Book of Behavioral Investing. He's also a regular contributor to GMO's library of white papers and research studies on topics ranging from productivity, strategic asset allocation, contrarianism, and more. In addition to his duties at GMO, Montier is also a visiting fellow at the University of Durham and a fellow of the Royal Society of Arts.

Background
Grantham, Mayo, Van Otterloo & Co.

Behavioural Investing: A Practitioner's Guide to Applying Behavioural Finance by James Montier

Value Investing: Tools and Techniques for Intelligent Investment by James Montier

The Little Book of Behavioral Investing: How Not to Be Your Own Worst Enemy by James Montier

GMO's research library

Montier's articles in GMO's research library

Montier's Role at GMO
"My role is essentially to be difficult, and it turns out I'm quite good at that." Montier describes his role at GMO and how his contributions to the firm are measured. (1:10-3:11)

• Ben Inker bio

Fostering Debate at GMO
"We have never had a house view." Why debate and constructive devil's advocacy is welcome at GMO. (3:12-4:31)

"Investing is one of those fields where there is almost constant evidence that we are all wrong." How to foster humility and a diversity of views. (4:32-7:38)

Debating Jeremy Grantham on mean reversion: Montier gives an example of an issue the team has debated recently--how long it takes for markets to revert to their long-term averages. (7:39-9:36)

• Jeremy Grantham bio
• "This Time Seems Very, Very Different" by Jeremy Grantham (GMO Quarterly Letter, 1Q 2017)
• "The S&P 500: Just Say No" by Matt Kadnar and James Montier (Aug. 15, 2017)

Forecasting and Portfolio Construction
How the debate over mean reversion informs GMO's asset-class forecasts. (9:37-10:09)

• GMO 7-Year Asset Class Forecast (May 2019)

Corporate concentration and low interest rates: How GMO is reconsidering these variables and their impact on the asset-class forecasts it makes. (10:10-11:38)

"The Idolatry of Interest Rates, Part II: Financial Heresy and Potential Utility in an ERP Framework" by James Montier and Ben Inker (Aug. 11, 2015)

How GMO incorporates its asset-class forecasts into the multi-asset strategies it manages. (11:39-12:37)

• GMO Benchmark-Free Allocation III GBMFX

The appeal of a "robust" forecast that's meant to help portfolios withstand various potential outcomes. (12:38-14:15)

"Our portfolios look a little freakish." Montier explains why GMO is U.S.-stock-phobic and, conversely, why the firm is finding value in alternatives. (14:16-18:04)

• GMO Benchmark-Free Allocation II Fund's asset allocation
• Sir John Templeton: "If you want to have a better performance than the crowd, you must do things differently from the crowd