With the S&P 500, Nasdaq and Dow reaching record highs this week, I am minded to share this 2011 letter by Jeremy Grantham – titled Pavlov’s Bulls – on asset cycles and bubbles. As a value investor, he raises a couple of points that Grahamites will find interesting.

We shouldn’t ignore bubbles

“I’ve also been pretty irritated by Graham-and-Doddites because they have managed to deduce from a great book of 75 years ago, Security Analysis, that somehow bubbles and busts can be ignored. You don’t have to deal with that kind of thing, they argue, you just keep your nose to the grindstone of stock picking. They feel there is something faintly speculative and undesirable about recognizing bubbles. It is this idea, in particular, that I want to attack today, because I am at the other end of the spectrum: I believe the only things that really matter in investing …