Legendary investor Jeremy Grantham warns of a 'superbubble,' predicts stocks will crash, and blames the Fed in a new interview. Here are the 9 best quotes.
Jeremy Granthamwarned of a " superbubble" in marketsand predicted a devastating crash.
GMOcofounder suggested the S&P 500 could plummet 43% to 2,500.
- Grantham said market speculation has waned, and accused the Federal Reserve of fueling the bubble.
Jeremy Grantham rang the alarm on a "superbubble" in financial markets, and warned its collapse could pull the S&P 500 down 43%, in a Bloomberg interview that aired on Wednesday.
The veteran investor and GMO cofounder also asserted that the wild speculation on meme
Here are Grantham's 9 best quotes from the interview, lightly edited for length and clarity:
1. "This has been exactly how the great bubbles have broken. It's almost eerily classic. It's a very rare pattern, and we have been checking off this list all year." (He was commenting on blue-chip stocks rising and more speculative stocks falling in recent days).
2. "Most of the superbubbles go below trend and stay there for quite a while. This time, trend is at most 2,500. It will be hard to prevent the market from declining to that level." (Grantham predicted the S&P 500 could plunge 43% from its current height).
3. "We have a global housing problem that could cause enormous pain. We have a stock-market bubble like 2000. We have overpriced commodities. Oil is $88. And we have the lowest real rates in the history of man." (He was outlining why the superbubble bursting could hammer the economy.)
4. "Everywhere is less overpriced than the US, which is the peak of this bubble as it was in 2000. What it meant then is what it will mean today, and that is the US will decline a whole lot more than the rest."
5. "The peak of crazy behavior is behind us. We're now in the 'buy the dip' mode, which the superbubbles specialize in. You don't have two years of buying frenzy dying overnight."
6. "We have a relatively humble measure of success and that is, if you got out when I said get out, you will be glad. It doesn't mean you won't suffer in the meantime, but at some future date, you will be glad."
7. "The Fed absolutely does not get the pain that's involved with a bubble breaking. You can see that in the history of the last 50 years." (Grantham asserted that previous Federal Reserve chairmen encouraged the dot-com and housing bubbles)
8. "They act as if a low rate is a panacea and comes with no downside. That is clearly nonsense. It's created the biggest evil in our society and that is inequality." (Grantham noted that low interest rates drive up asset prices, disproportionately benefiting wealthier Americans.)
9. "Green investing is an existential necessity. It's part of a global problem of living beyond our means. We use up our resources, we poison the natural environment. Nature is beginning to fail and if we don't fix that, we begin to fail as well."
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