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Jeremy Grantham says US market is now in bubble phase

Stocks and Shares ISA , Choosing funds for ISA's, risk factors for funds etc
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Dod101
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Re: Jeremy Grantham says US market is now in bubble phase

#475919

Postby Dod101 » January 25th, 2022, 9:15 am

BT63 wrote:
vand wrote:Grantham's recent interviews across various media outlets were brilliant, and for anyone who think that valuations still matter it's difficult to argue against his stance on the silliness, sentiment and prices in the markets in the last 18 months.

Howeer, just a warning that, like many others, he's called "bubble" on US stocks all the way back around 2012-13.


I think JG is correct; the current bubble began around 2012 and is when the Fed could have gradually ceased QE and worked to gradually normalise rates.
Now the Fed is unable to end QE unable to significantly raise rates because of the probability of popping the large bubbles it has created.


Well any bubble is now gently deflating.

Dod

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Re: Jeremy Grantham says US market is now in bubble phase

#475923

Postby vand » January 25th, 2022, 9:37 am

BT63 wrote:
vand wrote:Grantham's recent interviews across various media outlets were brilliant, and for anyone who think that valuations still matter it's difficult to argue against his stance on the silliness, sentiment and prices in the markets in the last 18 months.

Howeer, just a warning that, like many others, he's called "bubble" on US stocks all the way back around 2012-13.


I think JG is correct; the current bubble began around 2012 and is when the Fed could have gradually ceased QE and worked to gradually normalise rates.
Now the Fed is unable to end QE unable to significantly raise rates because of the probability of popping the large bubbles it has created.


We've arguably been on this course for a very long time, ever since the Greenspan era, not just since 2012.

I think that you have to give the markets their due credit. Back around 2012 there was still a lot of skepticism with the scars of the GFC having barely healed, and many sectors were still in the doldrums. When sentiment is that low then markets do what they usually do and outperform expectation. Now it's swung the other way.

Remember Facebook floated in 2012 and it halved in value over the next few months.. that's not very bubbly.

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Re: Jeremy Grantham says US market is now in bubble phase

#475949

Postby BT63 » January 25th, 2022, 10:36 am

vand wrote:
We've arguably been on this course for a very long time, ever since the Greenspan era, not just since 2012.

I think that you have to give the markets their due credit. Back around 2012 there was still a lot of skepticism with the scars of the GFC having barely healed, and many sectors were still in the doldrums. When sentiment is that low then markets do what they usually do and outperform expectation. Now it's swung the other way.

Remember Facebook floated in 2012 and it halved in value over the next few months.. that's not very bubbly.


Yes, it all began in the mid-1990s and each bubble/crash has never quite been fully allowed to return to normal, so we have the current super-bubble.

In 2012 there was no longer an emergency. The emergency ended around 2010. Once the emergency ended the 'emergency' measures of QE and very low interest rates should have been very slowly unwound.

Unfortunately the emergency measures weren't gently withdrawn and now nothing can function without exponentially increasing quantities of QE, and much of the financial system is severely bent out of shape with borrowers rewarded and lenders are punished by negative interest rates in addition to the risk of loan default.

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Re: Jeremy Grantham says US market is now in bubble phase

#475980

Postby vand » January 25th, 2022, 12:16 pm

I largely agree with Grantham except his idea that commodities are in anything like a half-bubble. It may seem that way having watched oil go from $20 to $80 since the first lockdown, but over a longer term oil and other commoodities have gone absolutely nowhere, and the ratio of commodities to other assets has fallen to all time lows. The bump up in 2021 was a mere blip if you look at something like the CRB/Dow ratio.

I would rather hold some broad commodities than trying to short growth stocks, as the economic factors that cause people to sell growth will be the factors that drive them into real assets.

Commodities aren't a good place to park your money over the long term as they tend to lose purchasing power over time, but they can have runs where they gain hugely. I think a good phrase to describe the current bubble is the "everything but commodities bubble"


Image

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Re: Jeremy Grantham says US market is now in bubble phase

#475990

Postby Spet0789 » January 25th, 2022, 12:40 pm

vand wrote:I largely agree with Grantham except his idea that commodities are in anything like a half-bubble. It may seem that way having watched oil go from $20 to $80 since the first lockdown, but over a longer term oil and other commoodities have gone absolutely nowhere, and the ratio of commodities to other assets has fallen to all time lows. The bump up in 2021 was a mere blip if you look at something like the CRB/Dow ratio.

I would rather hold some broad commodities than trying to short growth stocks, as the economic factors that cause people to sell growth will be the factors that drive them into real assets.

Commodities aren't a good place to park your money over the long term as they tend to lose purchasing power over time, but they can have runs where they gain hugely. I think a good phrase to describe the current bubble is the "everything but commodities bubble"


Image


I would agree with this. A mix of direct exposure to commodities and gold and exposure to producers of commodities and gold makes sense to me. Many oil and mining stocks are currently on a PE of around 15 - not particularly expensive.

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Re: Jeremy Grantham says US market is now in bubble phase

#476021

Postby tjh290633 » January 25th, 2022, 2:09 pm

vand wrote:I largely agree with Grantham except his idea that commodities are in anything like a half-bubble. It may seem that way having watched oil go from $20 to $80 since the first lockdown, but over a longer term oil and other commoodities have gone absolutely nowhere, and the ratio of commodities to other assets has fallen to all time lows. The bump up in 2021 was a mere blip if you look at something like the CRB/Dow ratio.

I would rather hold some broad commodities than trying to short growth stocks, as the economic factors that cause people to sell growth will be the factors that drive them into real assets.

Commodities aren't a good place to park your money over the long term as they tend to lose purchasing power over time, but they can have runs where they gain hugely. I think a good phrase to describe the current bubble is the "everything but commodities bubble"

I have held JP Morgan Natural Resources and it's predecessors since 1970, when it was Ebor Commodity Trust. It has provided several annual subscriptions to my PEP and ISA by taking profit when it had risen to a suitable level. Usually it then sank back to a lower level as the commodity cycle waxed and waned. Originally a substantial dividend payer, they essentially vanished, but have reappeared in recent years.

The approach of holding a fund or trust which is commodity oriented makes sense to me. The major miners and oil producers are easy to hold, but it is the rag bag of other commodities, from Palm oil to uranium, which can be better held via a collective investment. Holding physical commodities other than via a derivative of some sort is for the birds.

TJH

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Re: Jeremy Grantham says US market is now in bubble phase

#480153

Postby hiriskpaul » February 12th, 2022, 11:20 am

Just spotted this, JG being interviewed

https://youtu.be/JlEGU2ypr1Q

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Re: Jeremy Grantham says US market is now in bubble phase

#480160

Postby 77ss » February 12th, 2022, 11:48 am

Spet0789 wrote:......
I would agree with this. A mix of direct exposure to commodities and gold and exposure to producers of commodities and gold makes sense to me. Many oil and mining stocks are currently on a PE of around 15 - not particularly expensive.


I have about 10% in mining. Largely through RIO and BRWM. Crossing my fingers. Nothing directly in commodities.

I don't pay too much attention to PEs, but If Yahoo is to be believed, they are currently on PEs of 6.73 and 3.34 (I doubt the latter figure).

RIO was at about 14 until last year's huge interim dividend increase and special:

https://ycharts.com/companies/RIO/pe_ratio

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Re: Jeremy Grantham says US market is now in bubble phase

#480165

Postby scrumpyjack » February 12th, 2022, 12:00 pm

Similarly I have about 10% in mining (spilt between Rio and BHP). I increased my holdings 3 months ago and they have risen about 25% since then - pure luck, but I think money is being so debased worldwide that I thought it better to run down the cash and increase holding something that was real. JG may be right but what is the alternative? The price of shares can only be viewed in the light of the price of everything else and bonds seem wildly overpriced at the current and prospective level of inflation.

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Re: Jeremy Grantham says US market is now in bubble phase

#480571

Postby DelianLeague » February 14th, 2022, 4:58 pm

He is such a good communicator that he could convince me of almost anything. After watching his interview I was almost panicked.

Think I will stick to watching back episodes of Rainbow and Catweazle and not watch "the News" for a while.

D.L.

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Re: Jeremy Grantham says US market is now in bubble phase

#480638

Postby hiriskpaul » February 14th, 2022, 10:59 pm

DelianLeague wrote:He is such a good communicator that he could convince me of almost anything. After watching his interview I was almost panicked.

Think I will stick to watching back episodes of Rainbow and Catweazle and not watch "the News" for a while.

D.L.

Yes he is very convincing. Thing is though, any investor in equities needs to be prepared to see and sit through an out of the blue 50% peak-trough drop happening at any time. You know its coming, but not when. If your investment horizon is 30+ years it is likely to happen a few times. No doubt JG will be right one day.

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Re: Jeremy Grantham says US market is now in bubble phase

#481748

Postby GeoffF100 » February 20th, 2022, 7:05 pm


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Re: Jeremy Grantham says US market is now in bubble phase

#501499

Postby hiriskpaul » May 19th, 2022, 10:48 am

Is Grantham going to be vindicated?

Prices of Vanguard's US listed ETFs at the start of this thread in January 2021 and yesterday.

ETF             31/12/20  18/05/22  Change
S&P 500 343.93 360.34 4.8%
S&P 500 Value 123.75 139.15 12.4%
S&P 500 Growth 230.23 223.84 -2.8%


This excludes dividends and is in dollars. UK investors will have done better due to the fall in the pound against the dollar.

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Re: Jeremy Grantham says US market is now in bubble phase

#501500

Postby vand » May 19th, 2022, 10:54 am

I would say that 2022 has so far played out almost exactly as he envisaged

Crypto getting smashed
speculative/growth/tech/smallcaps all getting smashed
value holding up
ex-US seeming to do better
60/40 "totally useless"
Cash has done "fine"
Inflation cannot be disregarded in your investment strategy

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Re: Jeremy Grantham says US market is now in bubble phase

#501504

Postby hiriskpaul » May 19th, 2022, 11:29 am

vand wrote:I would say that 2022 has so far played out almost exactly as he envisaged

Crypto getting smashed
speculative/growth/tech/smallcaps all getting smashed
value holding up
ex-US seeming to do better
60/40 "totally useless"
Cash has done "fine"
Inflation cannot be disregarded in your investment strategy

Actually small caps have done slightly better than large caps, non-US worse than US:

ETF                 31/12/20  18/05/22  change
S&P 500 Small Caps 167.82 177.75 5.9%
FTSE All-World ex-US 58.47 52.10 -10.9%
FTSE Developed ex-US 47.36 43.39 -8.4%
FTSE AW ex-US Sm-Cap 122.04 109.77 -10.1%


It did take a major war and inflation taking off to get us into this of course, which is not something he predicted!

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Re: Jeremy Grantham says US market is now in bubble phase

#501513

Postby NotSure » May 19th, 2022, 12:00 pm

Stopped clocks and all that:

...Yet Grantham has been issuing similar warnings for years, during which time markets have soared.

The founder of investment company GMO said in November 2010 that he thought the Fed was creating a bubble and that stocks could "crack" in 2011 or 2012. Since then, S&P 500 has risen more than 260%.

He said in January 2018 that "we are currently showing signs of entering the blow-off." The S&P 500 has since rallied 60%.....


https://markets.businessinsider.com/news/stocks/jeremy-grantham-gmo-crash-bubble-prediction-us-stocks-warning-wrong-2022-1

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Re: Jeremy Grantham says US market is now in bubble phase

#560004

Postby hiriskpaul » January 8th, 2023, 12:23 pm

JG was right, eventually. Although the US market is still up on where it was 2 years ago. Even more so for UK investors of course due to the fall in the pound, so I am pleased I didn't react to his comments back then.

Has anyone seen any recent articles or interviews?

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Re: Jeremy Grantham says US market is now in bubble phase

#560417

Postby vand » January 10th, 2023, 7:04 am

I am personally cautiously optimistic about market prospects for 2023. Sure, the market is still not cheap, but it is not so expensive now that it is flashing contrarian warning signs that you be dramatically lowering your exposure.

Of course there are warning signs that the economy may get worse, but the economy and the stock market are only loosely linked over the short term. In fact, I think that separating the economy from the stock market over everything but the very long term is one of the hardest skills for most investors to learn, and it can take many years to do so.

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Re: Jeremy Grantham says US market is now in bubble phase

#560420

Postby Dod101 » January 10th, 2023, 7:18 am

I intensely dislike these long long threads. This one started almost exactly two years ago and the headline is now well out of date.

The outcome would also suggest that my view about most commentators is about right. Occasionally they will be correct but to use them for any long term guidance is not very sensible.

BTW, I wonder where RVF is nowadays? He stuck by his word and has not reappeared, at least not in his old guise.

Dod

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Re: Jeremy Grantham says US market is now in bubble phase

#560424

Postby GeoffF100 » January 10th, 2023, 8:26 am

hiriskpaul wrote:JG was right, eventually. Although the US market is still up on where it was 2 years ago. Even more so for UK investors of course due to the fall in the pound, so I am pleased I didn't react to his comments back then.

Has anyone seen any recent articles or interviews?

Here is a recent article:

https://www.yahoo.com/now/legendary-inv ... 00549.html

JG believes that there is worse to come.


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