Jeremy Grantham Super Bubble: The Final Act
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- Опубліковано 24 лип 2024
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Jeremy Grantham is a well-respected investor who has long predicted the selloff in markets in 2022. He believes that we are now entering the final stages of a super bubble that spans at least three different asset classes: the housing market, stocks and bonds, and that prices have much further to fall. In this video, I examine his arguments and also look at what this could mean for investors.
Timestamps
00:00 Introduction
00:30 Superbubble
05:07 The Four Stages
09:07 Rapid Bear Market Rally
11:33 The Last Act
13:41 Near-Term Problems
16:14 Permabear?
17:14 Conclusion
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Thanks Ramin. Really insightful. I'm (partly) plagiarising GMO here, but one way one could think about the fundamental value of a bond is: what should the yield be if we were at the long term average base rate, and what if the yield mean reverts to that level over around 7 years? What would the impact be on the expected total return on that bond?
Thank you Ramin for a balanced view - I think Grantham has made a fair point in some areas but time will tell.
Hi Ramin. I love Your video's and always learn a lot. Following you with my Macbook air ( they stopped making the macintosh 😊)
Thanks for sharing @Roeland Veenendaal
At last, some wisdom on youtube, all asset classes considered, Pain cometh. subbed
Great Video. QQ: you often mention your core portfolio that you constantly drip feed, have you made a video that discusses how you constructed your core portfolio?
Hi @Giuseppe Moschella I have made a video about this for pensioncraft.com members here www.pensioncraft.com/patreon-post/update-on-my-core-portfolio/
interesting, another relevant point on the real estate vulnerability issue would be the proportion of houses that are owned outright. Seems Spain and Italy are a little cushioned from your graph at 15:39 compared to the UK and Australia has its issues magnified.
Excellent Analysis, Thank You
You're very welcome @Neil Cook
great video! Ray Dalio is basically giving the same types of warnings.
Hi Ramin, you mention the house price should be aligned by wage lvl. How is that not the case in Turkey or Iran (40* min hh wage)
Vaghean dari iran ro moghayese mikoni??!!!!
Salaam Kamran, as Yes tube says I'm assuming that the market is one in developed markets which is dominated by lender approval which means it's based on a disposable income multiple. But to ensure that people can afford their mortgage their monthly payments shouldn't eat up a huge proportion of their household income and that's universally true. Merci, Ramin.
Thanks again for the video Ramin. Kind comment regarding your new house, videos appear to have some echo..! Have a nice weekend.
Thanks @Rafael F yes hopefully now we have moved more into the room the sound will improve. Ramin
Friend told me to get into stocks b/c the Fed’s QE would push push the market up. So I did. When I learned the Fed was tapering I sold everything. Don’t need a video to tell me where stocks are headed. Just saying.
It is amazing to see what happens when the candy bowl is removed.
Just look at what stocks did starting around 3/20...that's when the candy bowl was first introduced.
Capital allocation since 2009 has been disastrous. Thanks to propping up asset prices using QE. And it’s all about to implode. Btw corporates have been gouging (over half of price rises are due to corporate margin fattening) because the economy is incredibly monopolised - if competition were better they wouldn’t be able to do this.
Interesting, if you removed energy stocks from the SP500 index what the index PE ratio would be?
After adjusting for inflation my USD bond portfolio (corporates, munis, treasuries, tips - mostly short / intermediate duration) has given up all the purchasing power increases that accumulated since 2007. The drawdown in purchasing power is 16.5% as of the end of August When investors realize how much purchasing power they have lost in fixed income they may change their behavior.
Every time a new video is posted, within 30 minutes we get these posts thanking trader [insert random name] for making them LOADSAMONEY and recommended hundreds of times. Reported them whenever I can, but nothing ever happens. What is UA-cam doing about them?
Look, I just want to read comments about the content of the video, not other people boasting how much money they made in a short time. Is that too much to ask?
Sadly I think YT just wants to shovel as many ads as they can get away with, and to hell with controlling spam. After all the comment section doesn't generate any revenue, why would they care ?
Amen!
Hi @Andy Yu thank you for you reporting them it really does help. We do try to delete and report them as soon as we can but it's just impossible to keep on top of them as so many get posted. Thanks Ramin
Those are just scripted spam bots. A lot of times you can see misplaced scripting tags getting into the posted text indicating glitchy programming. Not sure if you can completely get rid of them but they're a lot fewer in the comments. So maybe, reporting them is starting to pay off.
@@surfingeagle784 I still see them everywhere on financial videos
10 years is not a little bit too early in terms of warning or prediction, 2 months would be a little too early, maybe 6 months at best. I looked at the article and its hilarious, Grantham said the stock market was overvalued in 2010... if you listened to him and many like him you would miss lifechanging gains, and if you are smart enough to take profits from time to time then his prediction has near-zero value if not negative.
Should add the 5 year bond rate as I believe that is the best performing Bond over the long term
Thank you Ramin for your great efforts.
Thanks for listening @Bassem
Again thank you for an informative discussion. Well presented and understandable.
Glad you enjoyed it @kobus venter
Ramin pls bring your mic closer to your mouth so the audio isn't so echoey.
We pretending $147 oil wasn’t a commodity bubble?
Super analysis as usual. So would you suggest a full De-risk away from equities and bonds into more cash or cash equiv. I get the buy the dip, but as someone who has done investing now and in the drawdown stage of life and looking for stable income generation (pension) all the volatility and the mood music is making me very nervous.
I think he says timing the market is a bad idea.
Market sell offs are a time to buy not sell
He has released some videos (might be patron only) on which markets do better in high inflation.
Ultimately markets go up, so if you buy and don’t sell for a long time, you should win.
Cash in a high inflation period means your losing money that way…
If your event horizon is short (which is sounds like it is) then more of your money in short duration bonds sounds like a fair idea.
Drip feeding doesn't work in an actual permabear scenario, unless we count substantial bear market rallies which tend to happen. Being diversified into very different asset classes, sectors, countries etc helps though, its very very very unlikely literally everything goes down and STAYS down.
Do brokers have any financial interest in predicting future earnings incorrectly, either to the upside or the downside?
Hehe
They certainly have an interest in high volatility.
A treasure of Knowledge. Indepth analysis at its BEST.
Glad you think so @JAGADEESH SAKURU
Not sure prior bubble history works when central bank liquidity has come to dominate asset prices as it has clearly done since the GFC together with the huge increases in global debt both public and private caused by more than a decade of zero interest rate policy. At Jackson Hole, there was discussion of regime change of more inflation, decreased globalization, etc. (see Isabel Schnabel's paper). I tend to agree with that assessment, but most experts are still thinking in terms of the past regime of low inflation, tail winds of globalization and low input costs. Very hard to predict how this will all turn out given the unpredictable nature of how governments and businesses will adapt/react to a new economic regime. We live in interesting times.
Not good
@@Q_QQ_Q Batnick 😊
U r spot on. Ignore the others
The problem is, your TLT buy call was trash because we are in a liquidity crisis and no assets will win.
He may be a permabear, but this time I believe he’s correct. Valuations have been high as a result of QE, low interest rates, etc … and all that artificial liquidity may be coming to an end.
Just look at what the stock market was doing in March 2020...it was plunging, then look at the miraculous comeback it made from late March 2020 to around Jan. 2022...Yeah, it was QE induced I'd say.
With most US high growth stocks down between 60 - 85% I cannot see how the Schiller chart tells one much at all. It is crap in fact.
That Schiller shown was for SNP500 where most stocks are not high growth - you can find Schiller charts for other facts and sectors.
Grantham is still a Permabaer and for sure we will see a crash, but as always we will recover. Grantham missed more opportunities than he was right in his predictions. He is playing in his own dark world.
I don’t think there will be a recovery of the sort after 2008. If they try and do more QE after another collapse in asset prices the public won’t take it politically and central banks will be completely discredited. Further, the government balance sheets are at insane levels. People talked about the Fed put, well we now have the Government debt put; 3 huge dollups: housing/private sector debt from the credit crisis, covid debt and now energy debt. The market is going to realize that it is unsustainable and there can be no more bailouts.
How much is he worth?
I'm glad to see that plant again. Thank you for that view and the research for this video.
So nice of you @bran
Yous lot are pulling out all the stops in trying to talk the market down and get people to sell. Bravo. Sadly, people if you pull out where you putting the cash? Stay put.
I will stay long
Very interesting as usual !
Glad you think so @jeff ocks
We chitraguptha chitranna vanake obavva on line
Very interesting as always. You focus mostly on the US, do your conclusions also apply to EM and Europe? The markets look much cheaper there.
I've got to admit, this is the one thing about this channel I think we do not get much of. We really do need some videos about the FTSE, DAX, Japan, Europe in general, India, Latin America etc...but particularly the FTSE.
Many here are Brits watching a Brit, and in any case the FTSE is not over-valued and is a fascinating place for discussion. Plus many of the subscribers undoubtedly have a fair bit of money in the FTSE.
I hope we get more of this type of content.
Because the EM and Europe are very heterogenous, different parts inside them very different from each other. EM funds included Russia just a year ago, want to invest in that? India on othe other hand looks interesting, if only because political risk seems to be lower unlike China. Also if the USA falls consistently, then so will EM and Europe - at least in general. The way trade is right now its not in fair of emerging markets, they are not the one setting the agenda so to say. maybe that will change someday.
If America sneezes, Europe catches a cold. I don’t waste my time looking at European markets.
@P J The US is not just the largest English speaking UA-cam market... It's also the best performing equity market, wealthiest and most significant global democracy and the most significant part of any global diversified fund. Why wouldn't you focus on the US?
@@richardswatman4011 Best performing over what time period ? The last 15 years, yes, but look back and you see US and international stocks taking turns to outperform each other. 2000-2009 was a "lost decade" for US stocks. Even after the recent falls, the US remains expensive on a CAPE basis, and high CAPE yields tends to lead to lower long-term returns. Putting all your eggs in one basket is not wise, imho. I agree with the OP, I find the relentless focus on the S&P 500 to be bit short-sighted.
Either way, equity markets are overvalued. The real issue is whether valuations continue to be decoupled from fundamentals which they have been for some time with more than a little help from derivatives which is the mother of all bubbles.
Y
US equities, specifically. Not so much UK. Although in a downturn, sentiment gets hit globally.
@@jameswalker366 Yes, agreed, but the real worry with the UK is valuations based on future uncertainty and what I can only describe as excessive battery hen syndrome. I think things will get worse before they have a chance of improving. I am expecting the FTSE to test the Mar 20 lows at some point.
Thanks again for a very informative video. what is your opinion about Gold's performance as an Inflation hedge? inflation is up but gold is going nowhere.. is it time to sell off gold and use it more constructively etc buy better assets esply when the market has bottomed ( another story ). thanks n great weekend to you...
Gold as a hedge is, I believe, not really meant to be a tool to ipso facto recoup when value is lost somewhere else. Instead it provides a steady prevention from loss possible in other asset classes. It is unproductive which is why it works differently than corporate equity, it's not an investment. With gold you pay for eliminating risk, it's not for winning in the market it's for hedging against what you lose or would have lost somewhere else instead. So if you have A LOT of money sitting around with nowhere to invest, that's when you turn to gold. I mean, you start to look into converting some of your cash into gold, not actually become golden. As for your question: it would look like gold will not be going anywhere but sideways (or down somewhat) for some time as larger funds seem to either sell or chose to not buy. As other investment classes, namely crypto, can do the same thing gold does (being mostly useless and attracting very self assured people who are not very good at business math (sorry for the jab)) its market seems to be smaller also and its specific moat breached.
For trading and/or investment gold is not suited, this is what gives it its special value. It has virtually no fundamentals nor does it ever have a fair price.
@@richteffekt Gold from what I've seen at least is in a deflationary trend.
The gold bugs have always touted it as an inflation hedge also as a protection against global chaos but it's not holding up to that ruse...in today's economy cash is king...not gold.
@@jc4evur661 And tomorrow where is no cash what is king?
Hi @S C Huang going nowhere has been a good thing for this year e.g. gold is down -9% since the beginning of the year, the S&P 500 is down -18% & the Nasdaq 100 is down -27% (this is up to mid-September). But cash would have been better (down 0% in nominal terms)! Thanks, Ramin.
Thanks. I don't feel so bad now... since everyone is suffering everywhere...
Interesting
The real bubble is in the US Dollar $$$$$. In the SP500 chart at 7:20 it shows the most recent low is higher than the June bottom.
Yet in a downward trending market I'd rather have cash than stocks
Agree with grant ham being a permabear, but even broken clock is right twice a day. The data is starting to move his way.
Grantham's definition of a super-bubble is when one asset class reaches extreme levels (3-sigma deviation from trend). It's not more than one asset class bubbling at the same time. In 2000, US stocks were in a super-bubble, but bonds and REIT's were cheap. In the mid-2000's, US house prices were in a super-bubble, while stocks were overpriced, but not in a bubble.
Spot on.
This time debt is higher than it was back then, and we're heading into lower growth + QT.
So we won't need a 3-sigma bubble to trigger a crash.
Hey Romen. I am really leaning toward trying some Brazil short term bonds. 3-month for 13%, is that what it looks like? They will give me 13% on principal in 3 months? If I just keep doing that, it's 52% a year, how can that be??
If it looks too good....
@@jackiechan8840 I think I figured it out. With the inflation disparity, the Real is forecast to lose 18-20% over the next few quarters. So that's the game you are chasing with foreign bonds, it's basically just Forex isn't it, and they are still the same shitty yields IF you are lucky.
Peace
What books do you recommend to start trading?
-Trading in the Zone
-Controlled Trading
Bot ?
None. Don’t trade, invest for the long term.
All...it is 4 months free if you buy 2 years. 😀 just sayin'
Supper?
Thank you @Peter Farmer it’s fixed now!
That's when you have all these great leftovers, and somebody took out some meat from the freezer, and then mom gets hiome with a bunch of groceries, and you find yourself with all these awesome choices for dinner, but of course you can't eat it all... omg! what to do.? Get it right, because tomorrow, everything you didn't choose will be gone or frozen! and you will have no choice but to be eating rice and peas.
The supper bubble;)
You forgot crypto
Add crypto and precious metals.
👍
If Grantham truly believes what he's spouting why hasn't he sold all of his stock? Why are GMO still buying? He has however predicted 25 of the last 2 crashes.
I just posted a comment essentially saying the same, GMO Quality investment Fund has dropped 18% since January, is he an expert fortune teller but a bad stock picker? Knowing when a bubble is happening and a market crash is due, but being unable to avoid almost matching the market in its fall proves that market timing is useless.
This incorrect. I've watched a lot of his videos and you are misrepresenting him on two counts there.
1 he has not predicted 25 crashes. He has said for a number of years that the market was "over-valued." Technically he was correct, but that is NOT predicting a crash. Only for the last few years this time has he suggested that we are in crash territory (and we did have one in 2020 and are likely about to have one now due to the sort of unforseen trigger events he mentions). No one can exactly predict the day or month of a crash. However Grantham has been pretty accurate at predicting top and bottoms of markets - much more often than anyone else you could mention.
As for your second post...watch his videos. First, he isn't in charge of GMOs funds now. Second, they are still investing yes....but a. with less percentage of money than before and b. much of that it is going into Green Venture Capital, which he explains will be up and down like a yo-yo for several years, before ultimately both making lots of money and backing a series of climate postive initiatives.
@@davidseddon2690 nice work!
Grantham has great forecasting record but you sound like an investor who wants to learn the hard way.Grantham was calling Japanese stock market a bubble in 1988 as its P/E ratio went from 30 to 70 now 34 years later it’s the index is still 30% lower(reasonable value now)& did the same with 2000 tech bubble & the 2008 GFC not to mention he also called the bottom when march 2009 said it was time to grit your teeth & start buying & if that does not impress you his first highly sighted news paper article was saying at the bottom of the double dip recession in 1982 was predicting both a long boom in the stock market & bond market emphasising it would be multi cycle boom where both interests rates p/e would keep increasing or putting it another way this would be multi decade low for p/e & high for interest rates
@@jasonwhiteley3612 No, because I don't slavishly follow any one person. I take what Grantham says very seriously. I also take what Munger, Dalio and one or two others say very seriously. Some of the muppets on CNBC I pay no attention to at all. Nor do I listen to those who say "buy the dip" at every opportunity.
I am still in the market and have been gaining (so far) over the last 18 months. I am not daft enough to think that will always be the case. I know I can have bad months and years. Right now I am heavily in defensive areas and Bonds and a little in Gold/Silver, commodities, India, Latin America. I am holding cash.
I am still in the market, so what you said about missing out is not true. However, I am equally sure that Grantham is talking a huge amount of sense - the market will slip heavily. It's when not if. So I am being largely defensive, whilst also being aggressive in energy and things that bring dividends.
It's all very good, so we should assume GMO funds are performing great as they knew before January that there would be a crash?
do you do any research before you post? he does not manage gmo funds any more mate.
@@rickfool1452
Took 2 seconds to click on GMOs website to see he does: "Mr. Grantham co-founded GMO in 1977 and is a member of GMO’s Asset Allocation team, serving as the firm’s long-term investment strategist. He is a member of the GMO Board of Directors".
He is one of the people who sets asset allocations and is on the Board of Directors. Role of the board of directors from investopedia:
"In general, the board sets broad policies and makes important decisions as a fiduciary on behalf of the company and its shareholders."
It’s not really a bubble when the values of the currency have all fallen. It’s more like super inflation era.
@John Gaynor no John, what you're saying makes no sense. You're contradicting yourself in the same comment.
And will they do, is that a printing press starting up I can hear.
Bring Jeremy Grantham on for an interview👍🏻🤝👏🏻
Hi @St Louis IX id love to have him on for an interview but I doubt he's say yes. Thanks
You won't know whether he would till you've tried. The worse response you can get is a No. ... and a deflated EGO...
How is it a bubble when in real terms these assets have been going up with inflation (money supply) or less. If they print more money assets are not worth more, your money is worth less.
Everyone “knows” gasoline prices have fallen due to government intervention ahead of the mid terms in the USA.
Cynical? Perhaps. Accurate? To be determined.
Would we here in the USA be surprised that after Nov 6 gasoline prices/energy costs rise?
“You might say that. I couldn’t possibly” (F.U. House of Cards)
Dripping is obviously a good idea but I had a lump sum and put nearly all in in one go recently because if Sterling collapses against the Dollar would be very costly to invest at a later date in The USA , remember the impact of the exchange rate not just falling value, also cash gets eaten by inflation if you leave it uninvested for very long. Lots of dilemmas at present.
Many options to use currency hedged funds so you don’t take currency risk.
There are some good you tube videos suggesting lump sum investing is statistically better than dollar averaging in circa 70% situations, assuming you’re leaving the investment for the longer term, Good Luck
@@neilcook1652 Statistics wise it is better throwing a lump sum in however most UA-cam videos look at the mean return however you'll much more likely to get the mode return. It's still that lump sum is technically better but by not as much as UA-cam would claim. The other side is with DCA you can have some simple rules to increase/decrease monthly investment over a year that takes lump sum better in 55% of the time - basically a coin toss that is slightly in lump sum's favour.
Who is GMO?
Get Me Outta here 😂
genetically modified oligarchs
er google search.What does GMO investments stand for?
Grantham, Mayo, & van Otterloo
Robert Jeremy Goltho Grantham CBE (born 6 October 1938) is a British investor and co-founder and chief investment strategist of Grantham, Mayo, & van Otterloo (GMO), a Boston-based asset management firm.
@@robweinberg9396 thank you very much
Grantham is a bull comparing to Michael Burry lol
Burry sees another 50% down for S&P500
Burry sold ALL of his stock holdings back in June I believe...what does that tell you?
"China is another fairly reliable source of crises" - 🤣
Nice video annoying ad.
Thanks for the view @Unkt
@@Pensioncraft Always! Your content is really great!
Grantham predicted 69 crises of the last 3 right. What a genius!
Not fair. He was early but bubbles always go further than people imagine. In the end his advice made people money and protected capital
@@nole74 and what about the opportunity costs? Markettiming does not work! The literature is very clear on that.
@@a.g.9056 Opportunity cost of what? If you pulled out of tech in 1998 and bought value or bonds where does opportunity cost factor in?
What a comment based on ideas not facts. Grantham is not a predictor. It is an investor. He can think/estimate something. That is only a forecast. None can estimate the behavior of everything and even the fed actions. What is clear is that we are in bubble or superbubble or whatever. If you think he is wrong, go and spend all your cash buy Netflix or whatever in one shot. I believe it is time to understand that things will go down so it may be reasonable to start DCA in the big indexes...
@@nole74 „if“ is the right term. Nobody can time factors, markets or whatever. If you bet on bitcoin in 2009 you would be billionaire. But you haven’t.
Housing market won't crash - no supply, too much demand. Equity, yeah will crash. Bonds, ehh not so much
yep, interesting combo in the housing market....
Can u please comment on the effect that a declining global population will have on the world markets?
Nothing is pointing towards declining global population in this century though.
Wasn't the Global Financial Crisis 2008 and not 2006?
It crashed in 2008 but it was formed in 2006 with selling subprime mortgages all over
Most of these folk with macro views are wrong 99% of the time! No idea why people bother listening to them!
I guess people find the illusion of knowledge comforting
So true. Various long-run studies of "experts" have shown their predictions are no better than a coin flip. Sadly I think most of them are more like 50/50, if anyone was wrong 99% of the time you could at least make a profit by doing the opposite (although the existence of Jim Cramer does make me wonder...)
This may be true but Grantham is definitely an outlier.
Jeremy Grantham is an old fart who is constantly calling for a crash like a Super Bubble, and when it doesn't happen he will just change it to Super Duper bubble, and then Extra Super Duper bubble, and like a clock one day he might get the time right... he's yesterdays news
What I suspect will happen over the next couple months: this week until Wednesday might get a small bounce, then plunge and we will retest the 6/16 low, forming a double bottom. This double bottom will trick investors to come back in and in October we will rally ahead of the elections. However, the rally ends right back at the 3900 level for S&P 500 (the diagonal trend line at the top), once it hits this 3900 resistance line, we will roll over and plunge far beyond the June lows starting in November and into 2023.
Remember guys, the market maker's goal is to take as much money from everyone as possible so yes we will be rallying in October back up to the 3900 resistance level, only to plunge to new depths starting in November
Crystal ball, sure ... so *cringe*
you dont count with the probability of changing situation in europe and in china... and dont forget the insanely strong dollar which soon will change...
I see an W&P-500 price, today, of 3900 as compared to a low in June of 3650. Your graph is out of date.