rollover Posted January 22, 2022 Share Posted January 22, 2022 US is approaching the end of a 'superbubble' caused by COVID stimulus and could now endure the largest markdown of wealth in its history, top investor Jeremy Grantham warns. Legendary U.K. investor Jeremy Grantham published a paper claiming the market could lose a total $35 trillion in value should stocks, bonds real estate and commodities return to historical norms in 2022. He said that once rates return to normal and realism returns to an overzealous market, the bubble will pop. Grantham blamed the Federal Reserve and other financial authorities for creating the 'superbubble' during the pandemic by lowering interest rates, influencing mortgage rates and creating a 'judiciously overstated view of our real wealth.' Daily Mail Quote Link to comment Share on other sites More sharing options...
Mikhail Liebenstein Posted January 22, 2022 Share Posted January 22, 2022 (edited) I'm not so sure about that. There have been drops after previous recoveries, and normally you can drop 10-15% before the inevitable upward trend resumes. I think inflation in particular is very good at masking things. The thing is prices and wages eventually go up and the new normal is everything costs more. We may not be relatively better off though!!! Edited January 22, 2022 by Mikhail Liebenstein Quote Link to comment Share on other sites More sharing options...
Dorkins Posted January 22, 2022 Share Posted January 22, 2022 US tech stocks seem crazily overvalued. Problem with the everything bubble is predicting what will survive to the other side of the reset when it comes. At the moment the only asset that doesn't seem overpriced is the future labour built into people's bodies and unless slavery makes a comeback you can't add that to your portfolio. Quote Link to comment Share on other sites More sharing options...
nothernsoul Posted January 22, 2022 Share Posted January 22, 2022 The only asset underpriced is the cost of borrowing money. Quote Link to comment Share on other sites More sharing options...
nothernsoul Posted January 22, 2022 Share Posted January 22, 2022 Grantham is a perma bear. However, he isn't some attention seeker trying to get clicks on the internet, but a very respected investor who gives few interviews. What he says about overpriced assets makes total sense. Quote Link to comment Share on other sites More sharing options...
Dorkins Posted January 22, 2022 Share Posted January 22, 2022 Market cap to GDP (USA): Quote Link to comment Share on other sites More sharing options...
Dorkins Posted January 22, 2022 Share Posted January 22, 2022 13 minutes ago, nothernsoul said: The only asset underpriced is the cost of borrowing money. That's a price, not an asset. Quote Link to comment Share on other sites More sharing options...
Mikhail Liebenstein Posted January 22, 2022 Share Posted January 22, 2022 7 minutes ago, nothernsoul said: Grantham is a perma bear. However, he isn't some attention seeker trying to get clicks on the internet, but a very respected investor who gives few interviews. What he says about overpriced assets makes total sense. Agree, I've been economically aware through enough cycles to know the score. Rising interest rates are rarely forced, and remain under Government/Central Bank control, unless your a tinpot economy. Any sign of trouble and the taps will just come back on. My personal view is we'll get an upto 15% correction, before resuming business as normal. Same thing happened in 2010/11 after the financial crisis, and the other crashes i remember. The only goal is to keep wage inflation under control. Quote Link to comment Share on other sites More sharing options...
nothernsoul Posted January 22, 2022 Share Posted January 22, 2022 True, the cost of borrowing isn't an asset, but the articially low rates, alongside money printing and expectations of money printing, are what are pushing assets up. I like Grantham. He rightly points out that monetary policy has preserved wealth for the better of and prevented others from entering the game. He is also right to highlight the absurd disconnect between the paper economy, and the real economy, which is company profits and wages. Quote Link to comment Share on other sites More sharing options...
longgone Posted January 22, 2022 Share Posted January 22, 2022 It will kick-off with tesla dropping to under 200. Quote Link to comment Share on other sites More sharing options...
lie to bet Posted January 23, 2022 Share Posted January 23, 2022 5 hours ago, Mikhail Liebenstein said: Agree, I've been economically aware through enough cycles to know the score. Rising interest rates are rarely forced, and remain under Government/Central Bank contol........ Does your awarenes remember Lamont being in control of interest rates during the Exchange Rate Mechanism chaos? Quote Link to comment Share on other sites More sharing options...
Flat Bear Posted January 23, 2022 Share Posted January 23, 2022 4 hours ago, longgone said: It will kick-off with tesla dropping to under 200. I think it will "kick off" due to the collapse of the Chinese property market. Don't think it will take much for the whole global system to collapse. There are so many bubbles that the bubbles are in bubbles are in bubbles and each one affecting many others. Quote Link to comment Share on other sites More sharing options...
Freki Posted January 23, 2022 Share Posted January 23, 2022 6 hours ago, Mikhail Liebenstein said: Agree, I've been economically aware through enough cycles to know the score. Rising interest rates are rarely forced, and remain under Government/Central Bank control, unless your a tinpot economy. Any sign of trouble and the taps will just come back on. My personal view is we'll get an upto 15% correction, before resuming business as normal. Same thing happened in 2010/11 after the financial crisis, and the other crashes i remember. The only goal is to keep wage inflation under control. Good point, I can hardly see a "classic" bubble burst outcome. I think with rising inflation, distrust in fiat is at foot. So 2 scenarii: 1) We go back to 2010s with negative interest rates. Buy more stocks 2) Fiat collapse, calamity ensues, buy gold/crypto Quote Link to comment Share on other sites More sharing options...
Mikhail Liebenstein Posted January 23, 2022 Share Posted January 23, 2022 4 hours ago, lie to bet said: Does your awarenes remember Lamont being in control of interest rates during the Exchange Rate Mechanism chaos? Yes. But it was very short term that IR swing. Quote Link to comment Share on other sites More sharing options...
spyguy Posted January 23, 2022 Share Posted January 23, 2022 Heres the link, for the many posters who dont believe/click the DM - https://www.gmo.com/europe/research-library/let-the-wild-rumpus-begin/ As of today, the U.S. has seen three great asset bubbles in 25 years, far more than normal. I believe this is far from being a run of bad luck, rather this is a direct outcome of the post-Volcker regime of dovish Fed bosses. It is a good time to ask why on Earth the Fed would not only have allowed these events but should have actually encouraged and facilitated them. The fact is they did not “get” asset bubbles, nor do they appear to today. This avoidance of the issue seemed to us remarkable as long ago as the late 1990s. Alan Greenspan, who I considered then and now to be dangerously incompetent, famously acted as cheerleader in the formation of the then greatest equity bubble by far in U.S. history in the late 1990s and we all paid the price as it deflated.3 Not just me then. Rather than running sane monetary policy, CB are p1ssign around wit the denominator, making some people 'feel' richer', blowing bubbles, not creating anything of value. Look at how the Swiss are coping with the rise in energy - What rise? Unlike the U< they didnt let their currency devalue to make make the asset winner 'feel rich' They also dont print francs to allow 30% of working age to sit around on benefits, or have a bloated public sector. Quote Link to comment Share on other sites More sharing options...
longgone Posted January 23, 2022 Share Posted January 23, 2022 9 hours ago, Flat Bear said: I think it will "kick off" due to the collapse of the Chinese property market. Don't think it will take much for the whole global system to collapse. There are so many bubbles that the bubbles are in bubbles are in bubbles and each one affecting many others. Could be any number of factors, life just feels so out of kilter now any strong gale will push the lot over. China for sure just the outlook of the oppressed younger generations indicates that before any double bubbles. Quote Link to comment Share on other sites More sharing options...
Greater Fool Posted January 23, 2022 Share Posted January 23, 2022 So the value of US Ponzi stocks could crash, don't worry, house prices in the UK will still be insane, there is virtually nothing for sale you see. What is worrying is UK pension funds are heavily invested in S&P trackers nowadays, their own stupid fault chasing the easy money, what's wrong with good old UK companies? Quote Link to comment Share on other sites More sharing options...
dugsbody Posted January 23, 2022 Share Posted January 23, 2022 16 hours ago, Mikhail Liebenstein said: The only goal is to keep wage inflation under control. Whose goal? And why? Quote Link to comment Share on other sites More sharing options...
Mikhail Liebenstein Posted January 23, 2022 Share Posted January 23, 2022 25 minutes ago, dugsbody said: Whose goal? And why? Government and industry. It is good for profits snd attracting business. Quote Link to comment Share on other sites More sharing options...
dugsbody Posted January 23, 2022 Share Posted January 23, 2022 12 minutes ago, Mikhail Liebenstein said: Government and industry. It is good for profits snd attracting business. Ah. Quote Link to comment Share on other sites More sharing options...
24gray24 Posted January 23, 2022 Share Posted January 23, 2022 The scale of the bubble is far bigger than 2008. So the assumption the downturn will be about the same as 2008 seems a bit optimistic. the 2008 downturn was arrested by extraordinary measures. They can't arrest the next one by those measures, they've already shot that bolt. There isn't the international co-operation to repeat it either. So imagine 2008 without government intervention. Multiplied by 2 or 3. That's the rough look for an everything bubble collapse. If it happens. Quote Link to comment Share on other sites More sharing options...
Flat Bear Posted January 23, 2022 Share Posted January 23, 2022 18 minutes ago, 24gray24 said: The scale of the bubble is far bigger than 2008. So the assumption the downturn will be about the same as 2008 seems a bit optimistic. the 2008 downturn was arrested by extraordinary measures. They can't arrest the next one by those measures, they've already shot that bolt. There isn't the international co-operation to repeat it either. So imagine 2008 without government intervention. Multiplied by 2 or 3. That's the rough look for an everything bubble collapse. If it happens. If it happens. It will. When is the big question and how it manifests itself globally. Quote Link to comment Share on other sites More sharing options...
TheCountOfNowhere Posted January 24, 2022 Share Posted January 24, 2022 11 hours ago, Flat Bear said: If it happens. It will. When is the big question and how it manifests itself globally. We'd all be rich if we knew when. It's getting closer by the hour though, that much is sure. Quote Link to comment Share on other sites More sharing options...
shlomo Posted January 24, 2022 Share Posted January 24, 2022 On 1/22/2022 at 7:50 PM, longgone said: It will kick-off with tesla dropping to under 200. https://www.news.com.au/finance/markets/world-markets/elon-musk-loses-34b-while-jeff-bezos-loses-27b-in-horror-week-for-billionaires/news-story/1d70396e677459e4511260f9a25359f3 Elon Musk loses $34b while Jeff Bezos loses $27b in horror week for billionaires The world’s richest man is now $34 billion poorer and other billionaires have also taken a huge hit to their personal wealth in recent days. Quote Link to comment Share on other sites More sharing options...
anonguest Posted January 24, 2022 Share Posted January 24, 2022 On 22/01/2022 at 19:02, nothernsoul said: Grantham is a perma bear. However, he isn't some attention seeker trying to get clicks on the internet, but a very respected investor who gives few interviews. What he says about overpriced assets makes total sense. Well, he didn't accumulate his wealth through being a Bear. He became bearish much later in his career. Quote Link to comment Share on other sites More sharing options...
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