Investment manager

Scale of the US stock bubble larger than 1929 and 2000

Stock market skeptic Jeremy Grantham is known for calling bubbles and predicting their burst, so everyone listens when he says the markets are now in a worse bubble than the ones before the Great Depression of 1929 and the Dot-bubble. Com of 2000.

The chairman of famed Boston-based investment management firm Grantham, Mayo, Van Otterloo & Co. (GMO), Grantham predicted the bull market peak of 2008 and the bear market trough of 2009. Now he has said stocks around the world are overvalued by all indicators. and the valuations of US equities have reached a worrying level.

“The bubbles are incredibly easy to see; it is knowing when the bust will come that is the most delicate. You see it when the markets are in the headlines instead of the financial pages, when the news is full of cheated-on stories, when new coins are created every month, ”Grantham told Reuters in an interview.

“The scale of these things is so much bigger than in 1929 or 2000,” Grantham said. “Looking at most of the measurements, the market is more expensive than in 2000, which was more expensive than anything that came before it.”

In January, Grantham predicted that the stock bubble would burst as early as spring or early summer with the wide rollout of the coronavirus vaccine.

In a letter to investors titled “Waiting for the Last Dance”, he said the current bubble “may well be the most important event of your life as an investor.”

There has “never been a big bull market that ended with this kind of bubble that hasn’t gone down by at least 50%,” Grantham told CNBC’s “Squawk Box Asia”.

The letter received “a lot of reluctance” from investors who viewed Grantham’s bearish outlook as too bleak. GMO has defended this view against social media frustrated by the negative outlook for the company.

The company said it expects negative returns on an inflation-adjusted basis over the next seven years for 10 of the 11 asset classes it monitors. He expects a negative return of 8% for US large cap stocks and 8.5% for US small cap stocks.

Image credit: Petrovich9 / istock, https://www.istockphoto.com/portfolio/Petrovich9?mediatype=photography

Listen to GHOGH with Jamarlin Martin | Episode 74: Jamarlin Martin Jamarlin returns for a new season of the GHOGH podcast to discuss Bitcoin, bubbles and Biden. He talks about the risk factors for Bitcoin as an investment asset, including origin risk, speculative market structure, regulation, and environment. Are the financial markets at large in a massive speculative bubble?


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