- Jeremy Grantham said the stock and the cryptocurrency markets are in bubbles worse than in 2000.
- “A bust might take a few more months, and, in fact, I hope it does, because it will give us the opportunity to warn more people,” he told Reuters.
- Grantham said the bubble could be burst by either coronavirus or inflation.
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Legendary investor Jeremy Grantham said the stock and the cryptocurrency markets are in bubbles worse than in 2000 – and warned that they may burst as soon as this fall.
Grantham said he received a lot of hate from market bulls following the publication of his investor letter in January, which called bubbles in a number of financial sectors. His opinion has only grown stronger since, however.
“Bubbles are unbelievably easy to see; it’s knowing when the bust will come that is trickier,” Grantham told Reuters. “You see it when the markets are on the front pages instead of the financial pages, when the news is full of stories of people getting cheated, when new coins are being created every month. The scale of these things is so much bigger than in 1929 or in 2000.”
He said that his favorite metric for deciding whether stocks are overvalued is price-to-sales.
“What you find is that even the cheapest parts of the market are way more expensive than in 2000,” he told Reuters.
Grantham, co-founder of investment firm Grantham, Mayo, van Otterloo & Co., has witnessed numerous boom-bust cycles. He is well known for calling for a burst of the 1989 Japanese asset-price bubble, the 2000 tech bubble, and the 2008 real-estate bubble.
The renowned investor said markets may be content now, but issues including interest rates, inflation, labor, and commodity prices are looming on the horizon.
“A bust might take a few more months, and, in fact, I hope it does, because it will give us the opportunity to warn more people,” he told Reuters. “The probabilities are that this will go into the fall: The stimulus, the economic recovery, and vaccinations have all allowed this thing to go on a few months longer than I would have initially guessed.”
He continued: “What pricks the bubble could be a virus problem, it could be an inflation problem, or it could be the most important category of all, which is everything else that is unexpected.”
A bust, he said, will cause an “enormous negative wealth effect” simply because bubbles have formed in so many areas, including interest rates, stocks, housing, and non-energy commodities.
“But this bubble is the real thing, and everyone can see it. It’s as obvious as the nose on your face,” he concluded.
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