Three Longs & Three Shorts

Jeremy Grantham warns of an epic market bubble, bemoans the meme-stock boom, and touts venture capital in a new interview

Jeremy Grantham, the co-founder and chief investment strategist of the iconic fund management firm Grantham, Mayo & van Otterloo (GMO) is in fine form in this interview with CNBC which Markets Insider has so efficiently captured in this concise piece with a dozen quotes. Grantham laments about the irrational exuberance in most asset markets – US stocks, bonds, commodities and real estate whilst in full praise of the venture capital industry:
  • “The bond market is at a 6,000-year high in terms of low interest rates and high bond prices.
  • US house prices are at a higher multiple to family income today than at the peak of the housing bubble in 2006. The multiple is even higher in Australia, Canada, England, Hong Kong, Shanghai, you name it. This is a global housing bubble.
  • You knew last year this bubble was going to be the real McCoy, but you didn’t know if it was gonna break the next Wednesday, or a year later. One by one, we’ve checked off every condition that a glorious bubble needs in terms of crazy behavior. This has been crazier by a substantial margin than 1929 and 2000.”
  • Our forecast is to have a negative return on US stocks over the next seven years. I strongly believe that will be accurate.
  • The meme stocks are just a travesty of serious investing. There was nothing that extreme in 1929, nothing like that in 2000. The dollar valuations were in the hundreds of millions, not tens of billions like the crazy SPACs this time. Not to mention all the bitcoins of the world which are a couple of trillion dollars, all based on confidence that other people will pay for what you have
  • The US is extraordinarily powerful in venture capital. It raises a lot more money, it has a lot more enterprises. The quality of the whole industry is much higher, the society is more attuned to investing in risky enterprises and forgiving people who fail. The US has a death grip on the great research universities, which are critical to venture capital.”
  • Venture capital is far and away the most healthy part of modern capitalism. It really does something useful. It’s in full cry, companies starting everywhere. Really important, promising, green technologies are springing out of the woodwork at all the great universities.”