Jeremy Grantham: S&P is Worth 900 at Fair Value

Jeremy Grantham, one of my favorite investors, often puts out fantastic (and free) articles and editorials about the markets.  Grantham has been extremely bearish since 2000, and has been particularly bearish in 2000 and 2007, which were not bad times to be cautious at all.

I enjoy his analysis because it is extremely pragmatic - he keeps a cool head about him, and is bearish on assets when they are expensive and in a bubble type of mode, and bullish on things that are cheap.

He's got a new article out, where he mentions that he believes the S&P is worth 900 at fair value.

Remember that you will never catch the low. Sensible value-based investors will always sell too early in bubbles and buy too early in busts. But in return, you may make some important extra money on the roundtrip as well as lowering the average risk exposure.

And this analogy is my favorite:

Every decline will enhance the beauty of cash until, as some of us experienced in 1974, ‘terminal paralysis’ sets in. Those who were over invested will be catatonic and just sit and pray. Those few who look brilliant, oozing cash, will not want to easily give up their brilliance. So almost everyone is watching and waiting with their inertia beginning to set like concrete. Typically, those with a lot of cash will miss a very large chunk of the market recovery.

What do you think - is it time to start deploying some cash into stocks now, under the belief that it's always darkest before dawn?

Or - would you wait until you see a clear sign that a new bull market has begun - such as a major publication throwing in the towel on stocks (a la this famous BusinessWeek headline)?