Jeremy Grantham Warns Fed Can’t Keep ‘Epic Bubble’ From Bursting

Legendary investor Jeremy Grantham believes the stock market bubble he has warned about will burst despite efforts by the Federal Reserve to keep it inflated — and it will probably go down as one of the greatest in financial history.

“这种泡沫将在适当的时候爆发，无论美联储的尝试如何支持它，由于对经济和投资组合的损害影响，”投资公司转基因投资公司的联合创始人Grantham表示in a paper Tuesday. “Make no mistake – for the majority of investors today, this could very well be the most important event of your investing lives.”

Grantham, who is long retired from portfolio management but has continued to share他对市场的看法, said it is “highly probable” that the U.S. is in a major bubble event typically seen every several decades. He compared it to the South Sea bubble and events of 1929 and 2000.

“Speaking as an old student and historian of markets, it is intellectually exciting and terrifying at the same time,” Grantham said. “These great bubbles are where fortunes are made and lost – and where investors truly prove their mettle.”

[IIDeep Dive:GMO有计划从增长股票泡沫中获利]

正如格兰德姆看到它，尽管“受伤经济”在Covid-19大流行中，但今天牛市的“最奇怪的功能”是它的持久性。

“The market is much higher today than it was last fall when the economy looked fine and unemployment was at a historic low,” he said. “More than in any previous bubble, investors are relying on accommodative monetary conditions and zero real rates extrapolated indefinitely.”

That has the similar effect of assuming endless peak economic performance, he said, though perfect economic and financial conditions don’t last forever.

All bubbles end with nearly everyone believing they won’t, including in 2000 when Alan Greenspan’s Fed was predicting an “enduring improvement in productivity and was pledging its loyalty (or moral hazard) to the stock market,” according to Grantham.

“The mantra of late 2020 was that engineered low rates can prevent a decline in asset prices. Forever!” he wrote in his paper. “But of course, it was a fallacy in 2000 and it is a fallacy now.”

在他看来，成功的熊市电话是not precisely predictingwhen good times will end.

“It is simply that sooner or later there will come a time when an investor is pleased to have been out of the market,” he said, as the investor “will have saved money by being out, and also have reduced risk or volatility on the round trip.”

For example, “GMO got entirely out of Japan in 1987” on concern the market was extremely overvalued, according to the paper. Although Grantham deemed it a prudent exit at the time, he said the firm was three years too early calling the Japan bubble and painfully underperformed as the Japanese market kept inflating to more than 60 percent of the benchmark EAFE index.

“But we also stayed completely out for three years after the top and ultimately made good money on the round trip,” said Grantham.

By contrast, the GMO co-founder said he came “fairly close” to calling the peak bull market in 2008, and “nailed” the bear market low in early 2009. “That’s far more luck than I could hope for even over a 50-year career,” he said. Grantham also profited from the bursting of the 2000 bubble, though not before watching “in horror” as the market continued to soar after GMO had “rapidly sold down” its discretionary U.S. equity positions in early 1997, according to his paper. The firm lost half its asset allocation book of business, he said, but “more than made up our losses” in the ensuing decline.

“Believe me,I knowthese are old stories,” said Grantham. “But they are directly relevant.”

在历史中，市场的最可靠迹象是一个巨大泡沫的晚期阶段是“真正疯狂的投资者行为，特别是在个人的一部分，”他说。虽然这个最长的牛市的第一个十年缺乏这样的“狂野的猜测”，但Mania现已以记录方式出现，而且特斯拉站出来了in the “fully-fledged epic bubble,” according to the paper.