There’s too much bullish bias and herd mentality among financial advisors who fear losing their jobs when they should be focused on long-term returns, value manager Jeremy Grantham says.

The blunt Grantham, co-founder of asset manager GMO LLC, told advisors at the Morningstar Investment Conference in Chicago Friday that the follow-the-pack mentality is driving up prices of some stocks and corporate bonds beyond fair value and hurting values of other investments. The bulls are wrong, he says because profit margins at U.S. companies are bound to fall in a weak economy.

“Equities are boring and bonds are disgusting,” Grantham says.

Low yields on U.S. Treasury bonds are pushing more investors toward corporate debt, Grantham says, but he stops short of predicting a bubble. “Bonds are horribly overpriced but it is not a bubble,” he says.

So what does he like? He is still a fan of emerging markets. If he buys U.S. stocks, he would only buy growth companies.

Grantham says professional investors can be hampered by common practices, such as benchmarking. He uses as an example a retirement fund he’s managed for his sister since 1968. Grantham has said this fund has actually outperformed the investments of his first institutional client. Grantham started his firm in 1977.

He jokes that his sister won’t fire him as her investment advisor but he uses the example to note the constraints other advisors face.

Advising clients in a bull market is far tougher than directing them through a tough period, Grantham says. Clients become “catatonic” when they see big drops in their investments, he says. Still, “they lose the ability to focus on details,” he adds.

On the other hand, when clients, “fueled by CNBC,” see other investors reaping 30% gains, no one wants to hear bearish recommendations from their financial advisors, he says.

“The biggest career risk is getting out in a bull market,” he says.

Grantham likes to point to his prescient calls as proof that his bearish nature has sometimes been the right mindset. He says he was 2 ½ years ahead of calling the burst of the tech bubble.

As for a current assessment of the market: “I don’t feel like I know much about what is going on right now,” he says. “It’s a very strange time.”

But while being bearish may be bad for business, there should be a healthy amount of skepticism, he says.

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