- Jeremy Grantham expects stocks to fall much lower before the market bottoms out.
- The GMO co-founder warned that the multi-asset bubble in the United States is extremely dangerous.
- Grantham slammed bitcoin, slammed the Fed and said Tesla stock hit a “silly price” in January.
Jeremy Grantham sounded the alarm over a multi-asset bubble in the US, predicted a sharp drop in stocks and said he would celebrate bitcoin’s demise, speaking on a recent episode of the ‘We Study Billionaires’ podcast. “.
The veteran investor, market historian and co-founder of GMO also ripped the Federal Reserve, warned against commodity bets and praised Tesla, but ridiculed its peak valuation during the interview.
Here are Grantham’s 10 best quotes, slightly edited for length and clarity:
1. “There’s nothing as quick and dramatic as a bearish rally. In hindsight they mean very little, but in the moment they scare the bears off and they give hope that it’s all over, all is forgotten, and it’s back to the races.” (Grantham suggested that the current rebound in equities could continue into September.)
2. “As far as the overall bear market is concerned, it would be unusual for it to bottom near this high. I would expect the S&P to be down 50% from the high in real terms. “
3. “I’m not including classic FANGs in the super speculative category. I think you could throw Tesla at its peak, it was super speculative – great business, but a bit of a silly price point there.” (Elon Musk’s electric vehicle company had a market capitalization north of $1.2 trillion in January.)
4. “In a bull market, it’s hard to understand what happens in a bear market. Amazon, in the 2000 boom, fell 92% with increased sales – a brilliant and successful new idea that then owned the world and will be worth a fortune.”
5. “Bitcoin is not a good store of value, as we have seen. It is terrible for a currency exchange. It is expensive to transact, but worst of all, it is deadly for the environment. It’s incredibly energy-intensive to give you a speculative instrument to bet on, that’s all. The fact that it takes our precious energy and has a carbon footprint is the worst crime, and more the sooner it disappears, the better.
6. “As a speculative instrument it has made a lot of money for a few hundred people who started early with a lot. Most of the other people who play it have now lost money, we know that. C It’s the same old, same old where the rich get richer and the poor get poorer, so any attempt to turn that into an equalizer is just that, it’s pure pirouette.” (Also on bitcoin.)
7. “It’s dangerous to get involved in a bubble that has more than one asset class – bonds, housing, stocks and commodities. They give you much greater pressure on recessionary forces, and we’re playing with it. fire this time.” (Grantham noted that Japan faced a multi-asset bubble in 1989 and its stock and property markets have still not recovered.)
8. “I expect the Fed to be behind the curve, deeply optimistic. They don’t really have a clue about market bubbles and the damage they cause when they burst. asked to bet, ‘Would the Fed be wrong about inflation when inflation comes?’ At any time, I would have said, ‘Of course they’re going to miss this, they’ll be late, their answers will be judged quite badly.’ The Fed’s record is terrible.”
9. “The world is much better off with moderately high interest rates. You get money out of your savings, people don’t speculate as much, they don’t use leverage as much, the risk in the system goes down. You can afford to buy a house at lower prices, and you can afford to buy stocks and build a portfolio.”
10. “Value managers have always hated commodities. They’re about as unpredictable as anything on the planet. If you’re short, you die a thousand deaths, and if you’re long, it’s to about as bad. I certainly don’t recommend people to run out of metals. If you can go far and throw the key away, I think you’ll be fine. It takes nerves of steel, and you better watch your nerves before you do it.
Read more: The chief investment officer of BMO Capital Markets says the more Wall Street worries, the more bullish it becomes. Here’s why he doesn’t think a recession is happening — plus 30 of his team’s best investment ideas.