To: maceng2 who wrote (191287 ) 8/31/2022 6:23:56 PM From: TobagoJack 1 RecommendationRecommended By maceng2
Respond to of 217749 in the meantime we wait for macro house cleaningbloomberg.com Jeremy Grantham Warns ‘Super Bubble’ in Stocks Has Yet to Burst GMO's co-founder says overvalued equities, bonds and housing will collide with high rates and inflation to cause more pain. Claire Ballentine 31 August 2022, 14:40 GMT-7 Famed investor Jeremy Grantham said the “super bubble” he previously warned about has yet to pop, even after this year’s turbulence in the US stock market. The co-founder of Boston asset manager GMO, known for calling market bubbles, said in a note Wednesday that the surge in US equities from mid-June to mid-August fits the pattern of bear market rallies common after an initial sharp decline — and before the economy truly begins to deteriorate. Grantham, 83, sees more trouble ahead because of a “dangerous mix” of overvalued stocks, bonds and housing, combined with a commodity shock and hawkishness from the Federal Reserve. Jeremy Grantham Photographer: Matthew Lloyd/Getty Images Grantham predicted around the start of the year that benchmark stocks would plunge almost 50% in a historic collapse. The S&P 500 at one point in June dropped almost 25% from its January peak, before roaring back in the following two months. Yet US equities are tumbling yet again, falling on Wednesday for the fourth straight session, with prominent strategists like Morgan Stanley’s Mike Wilson among those cautioning investors that the market hasn’t hit bottom. "You had a typical bear market rally the other day and people were saying, ‘Oh, it’s a new bull market,” Grantham said in an interview. “That is nonsense.” Choppy Ride The S&P 500 fell almost 25% through June before rallying Source: Bloomberg To Grantham, the collapse of a super bubble comes in several stages. First, there’s a setback like the one in the first half of the year, then a slight rally follows. Finally, fundamentals break down, and the market reaches its low point. Grantham became famous spotting and profiting from bubbles in Japan in the late 1980s, tech stocks at the turn of the century and in US housing before the 2008 financial crisis. Some of his other bearish predictions over the years have been wrong — or, at least, too early. This time around, he pointed to near-term problems such as the impact of Russia’s invasion of Ukraine on Europe, which is grappling with food and energy crises, along with fiscal tightening and China’s persistent Covid issues. While rising inflation drove declines in the first half of the year, falling corporate profit margins will cause the next round of losses, he said. “My bet is that we're going to have a fairly tough time of it economically and financially before this is washed through the system,’’ Grantham said. “What I don't know is: Does that get out of hand like it did in the ‘30s, is it pretty well contained as it was in 2000 or is it somewhere in the middle?" Calling a Super Bubble: Front Row With Jeremy Grantham— With assistance by Ben Steverman (Updates with market close in third paragraph.)