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Why Grantham Says the Next Crash Will Rival 1929, 2000
Rambling interview and that's being charitable. He has been a debby downer on the market since 2019 and prior. . . perhaps preparing for his book release "waiting for the last dance"
Using his words ... "if the Fed continues to be favorable" and the U.S. comes out of the Covid and we're past vaccinations this summer. . . Do you really believe the US stock market is going to implode? With all of the pent up demand? Travel, consumer discretionary / spending?
Appreciate the share of the interview. Interesting to see all sides. I'm just not buying the "impending" crash. I didn't buy it in April 2020 or on 1/27/21 and I'm not buying it today. But I don't have a magic 8 ball either.
Unlike Grantham, I feel hopeless at predicting where things will stand in a day, a week, or a quarter. But a little voice keeps reminding me that "buy low, sell high" is what I'm "supposed" to do, and when I look at the current value of my investments I definitely see "high" so I'm taking some of those gains. One thing he says is indisputably true: the higher the price one pays for an investment, the lower its future return.
Excellent interview, didn't find it "rambling" at all. Love the quote near the end about Milton Friedman. Clearly, valuations are stretched. Yet I am not convinced that when the bubble bursts, emerging markets or value in general will necessarily do better. Everything is so interconnected in 2021, it's a tough call. His comments on bitcoin are also really interesting, although again I don't 100% agree.
Despite hoping EM and SC might do better in the future, I have to align myself with @LewisBraham in recognizing that world markets rise and fall together these days. Much rationality has succumbed to trading schemes that I can’t understand or benefit from.
Grantham. Excellent reputation. But my own "cup of meat" is more along the lines of Barry Ritholtz and the ones connected to his firm. I know you cannot just OPINE your way into making things true, the way you want them to be. (Cue the QAnons in this slot, here.) But Ritholtz is refreshingly direct, savvy and with wisdom gained from a lot of experience: • "And in the End . . . How does this spasm of speculation conclude? I have a high degree of confidence in my answer: The same way it always does.
There will be tears, massive losses by some and big gains by others. There will be lives ruined and lessons learned among the claims of a rigged market, insider trading, and fraud. Maybe even people go to jail (maybe not). As Wall Street runs red with proverbial blood, a few clever bastards will notice the “generational buying opportunity” — the fourth such rare entry point over the past 20 years." https://ritholtz.com/
Grantham and GMO usually makes predictions over the next seven years. This is different in that he’s saying the downturn could happen in the coming months, that we are near the top. Also, the extremity of the collapse he’s predicting is new.
GMO should hide in the closet. Their predictions since 2010 are so off the mark. In 12/31/2010, they predicted that US LC would make 2.9%, the SP500 made over 14% in the next 7 years. They said that EM would be better and they trail by a huge margin.(link).
Grantham is a bear for years. It's always "news" calling for a bear market. The 24/7 media machine wants you to read these articles and how they get paid.
But hey, Gundlach predicted the 10 years treasury would be at 6% in 2021. Arnott told us that his massive research works and PAUIX had a terrible performance. Bogle told us regression to the mean must happen, and it didn't.
2010: GMO's Grantham Warns of a Stock Bubble(link) WRONG
2012: “People think the American market is very cheap. We don’t. Grantham is bullish about international stocks. (link) WRONG
2014: Grantham: Big Stock Bubble ‘Will End Badly’ in 2016 (link) WRONG
I never listen to any predictions. As a trader I only pay attention to prices, charts and trends lately and NOW. They tell me in real time what the market is doing. In the last 10 years I was invested at 99+% of my money at 97% of the time. The key for me is to invest all my money all the time and no cash, BUT, when risk is high to be in a high % of cash for days to several weeks.
Wasn't it FD100 who said VXX over 30 get ready, over 35 start selling, over 40 RUN !!
What about on the downside?
I love Grantham's letters and long discussions of what the rational thing to do is. But the market is not rational. If it were all we would need is one index fund.
I thought Henry Blodgett's 1998 call to buy Amazon at $240 was nuts.
I always thought I should run a mutual fund that does the exact opposite of what I do in the Market.
There is little accountability for stock market predictions. Wrong predictions from individuals or firms are often forgotten in the future. Here's a little context. Link1 Link2
“Nearly everyone interested in common stocks wants to be told by someone else what he thinks the market is going to do. The demand being there, it must be supplied.”
I never listen to any predictions. As a trader I only pay attention to prices, charts and trends lately and NOW. They tell me in real time what the market is doing. In the last 10 years I was invested at 99+% of my money at 97% of the time. The key for me is to invest all my money all the time and no cash, BUT, when risk is high to be in a high % of cash for days to several weeks.
FD! Out of curiosity, you say you are invested 97% of the time - but not always in stocks, right? When you say the “market” it’s any and all markets, isn’t it? I’m not judging, just looking for clarity.
There is little accountability for stock market predictions. Wrong predictions from individuals or firms are often forgotten in the future. Here's a little context. Link1 Link2 “Nearly everyone interested in common stocks wants to be told by someone else what he thinks the market is going to do. The demand being there, it must be supplied.” -Benjamin Graham
Thanks for posting this, Observant1 - the first link, especially, is a thorough study of faulty predictions both positive and negative. As they say - nobody knows.
Comments
Using his words ... "if the Fed continues to be favorable" and the U.S. comes out of the Covid and we're past vaccinations this summer. . . Do you really believe the US stock market is going to implode? With all of the pent up demand? Travel, consumer discretionary / spending?
Appreciate the share of the interview. Interesting to see all sides. I'm just not buying the "impending" crash. I didn't buy it in April 2020 or on 1/27/21 and I'm not buying it today. But I don't have a magic 8 ball either.
• "And in the End . . . How does this spasm of speculation conclude? I have a high degree of confidence in my answer: The same way it always does.
There will be tears, massive losses by some and big gains by others. There will be lives ruined and lessons learned among the claims of a rigged market, insider trading, and fraud. Maybe even people go to jail (maybe not). As Wall Street runs red with proverbial blood, a few clever bastards will notice the “generational buying opportunity” — the fourth such rare entry point over the past 20 years."
https://ritholtz.com/
https://en.wikipedia.org/wiki/Benjamin_Graham
https://ttmygh.podbean.com/e/sthh_0109/
And here too:
https://financialpost.com/investing/david-rosenberg-life-is-not-going-back-to-normal-even-if-the-market-doesnt-see-it-yet
“ Of the 10 million who have still not found a job after being laid off this past year, we estimate that only three million will come back to the workforce. That leaves seven million unemployed long term on top of the four million who have already exited the labour market.
Life is not going back to normal even if the market doesn’t yet see it and the consensus builds that we are heading to the Roaring Twenties.”
And on Twitter:
https://twitter.com/econguyrosie/status/1355187715919257604?s=21
Grantham is a bear for years. It's always "news" calling for a bear market. The 24/7 media machine wants you to read these articles and how they get paid.
But hey, Gundlach predicted the 10 years treasury would be at 6% in 2021. Arnott told us that his massive research works and PAUIX had a terrible performance. Bogle told us regression to the mean must happen, and it didn't.
2010: GMO's Grantham Warns of a Stock Bubble(link) WRONG
2012: “People think the American market is very cheap. We don’t. Grantham is bullish about international stocks. (link) WRONG
2014: Grantham: Big Stock Bubble ‘Will End Badly’ in 2016 (link) WRONG
I never listen to any predictions. As a trader I only pay attention to prices, charts and trends lately and NOW. They tell me in real time what the market is doing. In the last 10 years I was invested at 99+% of my money at 97% of the time. The key for me is to invest all my money all the time and no cash, BUT, when risk is high to be in a high % of cash for days to several weeks.
What about on the downside?
I love Grantham's letters and long discussions of what the rational thing to do is. But the market is not rational. If it were all we would need is one index fund.
I thought Henry Blodgett's 1998 call to buy Amazon at $240 was nuts.
I always thought I should run a mutual fund that does the exact opposite of what I do in the Market.
Wrong predictions from individuals or firms are often forgotten in the future.
Here's a little context.
Link1
Link2
“Nearly everyone interested in common stocks wants to be told by someone else what he thinks the market is going to do. The demand being there, it must be supplied.”
-Benjamin Graham
@sma3 - Oh how I know the feeling. Thanks for the laugh.