Jeremy Grantham is about to go bankrupt Reuters

By christelle

NEW YORK (Reuters)-In this frenetic era filled with fascinating stocks, cryptocurrencies and real estate bidding wars, studying the history of financial markets seems a bit boring and outdated.

Except for Jeremy Grantham.

The chairman of the board of the well-known asset management company GMO is a certified bubble expert and is fascinated by how and why bubbles appear. Grantham studied classic works like 1929, but-now he is more than eighty years old-he has also experienced (and called it) many modern booms and busts, including the Internet bubble in 2000 and the Internet bubble in 2008. The peak of the bull market and the low of the 2008 bear market. Year 2009.

If you don’t know where this is heading: He said we are in a bubble now.

In January, Grantham wrote an investor letter, “Waiting for the last dance,” about an inflated bubble, “probably the most important event in your investment career.”

Six months later, some cracks began to appear in the stock market. Grantham spoke to Reuters about this historical moment in the market.

Question: After your warning letter was issued, how did you react?

A: I met a lot of resistance. Waves of monsters attacked me in every possible way. They said that my ears are too big and I need to be locked in a nursing home.

Q: So if we were already in a bubble, what is the situation now?

A: Bubbles are incredibly easy to see; the trickier thing is knowing when the depression will come. When the market appears on the front page instead of the financial version, when the news is full of stories of people being scammed, when new coins are created every month, you will see it. The scale of these events is much larger than in 1929 or 2000.

Q: What is your view on stock valuation now?

Answer: From most indicators, the market is more expensive than in 2000, and in 2000 more expensive than anything before.

My favorite metric is the sales price ratio: you find that even the cheapest part of the market is much more expensive than in 2000.

Question: What might end this bubble?

A: When you are as happy as possible, the market will reach its peak, and it can be inferred that a near-perfect economy will continue into the indefinite future. But what is imminent are serious issues such as interest rates, inflation, labor and commodity prices. All of this is starting to look less optimistic than it was a week or two ago.

Question: How often will the bust appear?

A: The depression may still take several months. In fact, I hope so, because it will give us the opportunity to warn more people. It is very likely that this will continue into the fall: stimulus measures, economic recovery and vaccination have all made this matter a few months longer than I initially guessed.

Bursting the bubble may be a virus issue, it may be an inflation issue, or it may be the most important category. Everything else is unexpected. One of the 20 different things you didn’t even think would come out of the woodwork, and you didn’t even know it was there.

Q: What does the bust look like?

Answer: Compared with the bursting of any other bubble in the past, it will have an unprecedented huge negative wealth effect. This is the first time we have seen bubbles in so many different areas-interest rates, stocks, housing, non-energy commodities. In the process of rising, it brings a positive wealth effect to all of us, and in the process of falling, it will retract painfully.

Q: Are there any more attractive asset classes?

Answer: You can always hold cash, or you can do what the institution does, which is to buy the worst asset class in bulk. The least overvalued are value stocks and emerging markets. These are two arbitrages. With value and emerging, you should get some positive returns in the next 10 years.

Q: It’s hard to bearish now?

A: Not suitable for me, because I no longer have professional risks. But every big company has a lot of risks: they fuel the bubble until it bursts, and then they will change their attitude as soon as possible and make money under adverse circumstances.

But this bubble is real and everyone can see it. It is as obvious as the nose on your face.