Stocks and Housing Losses Totaling $35 Trillion?

by Wall Street Rebel | James DiGeorgia | 01/21/2022 4:25 PM
Stocks and Housing Losses Totaling $35 Trillion?

A recent Business Insider piece highlights famed investor Jeremy Grantham's forecast that the United States is in an "epic market bubble."  It could burst, resulting in the worst financial disaster in human history, wiping away $35 trillion in value.


Legendary British investor Jeremy Grantham who is also the co-founder and chief investment strategist of Grantham, Mayo, & van Otterloo (GMO), a Boston-based asset management firm, isn't hedging in his warnings that the U.S. stock and real estate markets are on course to suffering the worst crash in human history; as much as $35 Trillion in loses.

His latest note to the clients of GMO included 12 quotes from his perspective as a market historian that every investor should be aware of whether they agree with him or not.

1. "Today in the U.S., we are in the fourth superbubble of the last hundred years." – The others were in stocks in 1929 and 2000 and housing in 2008, Grantham said.

2. "The equity bubble… has now been joined by a bubble in housing and an incipient bubble in commodities."

3. "In a bubble, no one wants to hear the bear case. It is the worst kind of party-pooping. For bubbles, especially superbubbles where we are now, are often the most exhilarating financial experiences of a lifetime."

The stock market may already be starting to implode

4. "The final feature of the great superbubbles has been a sustained narrowing of the market and unique underperformance of speculative stocks, many of which fall as the blue-chip market rises. This occurred in 1929, in 2000, and it is occurring now." - The tech-heavy Nasdaq 100 has fallen 9% year-to-date.

5. "The most important and hardest to define the quality of a late-stage bubble is in the touchy-feely characteristic of crazy investor behavior. But in the last two and a half years, there can surely be no doubt that we have seen crazy investor behavior in spades… especially in meme stocks and in EV-related stocks, in cryptocurrencies, and NFTs."

6. "When pessimism returns to markets, we face the largest potential markdown of perceived wealth in U.S. history." – Grantham said mixing three asset bubbles is extraordinarily dangerous and said the S&P 500 could drop 45%.

7. "If valuations across all of these asset classes return even two-thirds of the way back to historical norms, total wealth losses will be on the order of $35 trillion in the U.S. alone."

Grantham is blaming the U.S. Federal Reserve for putting the U.S. stock and real estate markets in danger

8. "All of the economic and financial dangers that are now building up from multiple major bubbles do not appear to be considered especially dangerous by the Fed or most of its equivalents around the world."

9. "With the clear dangers of an equity bubble revealed in 2000 to 2002, the even greater dangers of a housing bubble in 2006 to 2010, and the extra risk of doing two asset bubbles together in Japan in the late 1980s and in the U.S. in 2007, what has the Fed learned?"

His answer "Absolutely nothing, or so it would appear."

Grantham investing advice based on the rising danger of a $35 Trillion crash

10. "Avoid U.S. equities and emphasize the value stocks of emerging markets and several cheaper developed countries, most notably Japan. Speaking personally, I also like some cash for flexibility, some resources for inflation protection, as well as a little gold and silver."

11. "Cryptocurrencies leave me increasingly feeling like the boy watching the naked emperor passing in procession. So many significant people and institutions admire his incredible coat, which is so technically complicated and superior that normal people can't comprehend it and must take it on trust. I would not."

Read the original article written by Harry Robertson Fri, January 21, 2022, 6:26 AM on Business Insider.



                     U.S. market approaches end of 'superbubble,' says Jeremy Grantham


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