- Jeremy Grantham expects stocks to fall much lower before the market reaches a bottom.
- The GMO cofounder warned the the multiasset bubble in the US is extremely dangerous.
- Grantham panned bitcoin, slammed the Fed, and said Tesla stock hit a "silly price" in January.
Jeremy Grantham rang the alarm on a multiasset bubble in the US, predicted a brutal decline in stocks, and said he would celebrate bitcoin's demise, speaking on a recent episode of the "We Study Billionaires" podcast.
The veteran investor, market historian, and GMO cofounder also tore into the Federal Reserve, cautioned against betting on commodities, and praised Tesla but ridiculed its peak valuation during the interview.
Here are Grantham's 10 best quotes, lightly edited for length and clarity:
1. "There's nothing as quick and spectacular as a bear market rally. With hindsight they signify very little, but at the time they frighten the pants off bears and they give hope that all is over, all is forgotten, and it's back to the races." (Grantham suggested the current rebound in stocks could continue into September.)
2. "In terms of the entire bear market, it would be unusual for it to bottom out anywhere near this high. I would expect that by the low, the S&P would have declined by 50% from the peak in real terms."
3. "I don't include the classic FANGs as being in the super speculator category. I think you could throw Tesla in at its peak, that was super speculative — great company, but a bit of a silly price there." (Elon Musk's electric-vehicle company commanded a market capitalization north of $1.2 trillion in January.)
4. "It's hard in a bull market to get your brain around what happens in a bear market. Amazon, in the 2000 burst, came down 92% with rising sales — a brilliant, successful new idea that went on to own the world and be worth a fortune."
5. "Bitcoin is not a good reserve of value, as we've seen. It's terrible for a currency exchange. It's expensive to transact, but worst of all, it is deadly to the environment. It's incredibly energy intensive to give you a speculative instrument to wager on, that's it. The fact that it takes our precious energy and has a carbon footprint is the worst crime of all, and the sooner it goes away, the better."
6. "As a speculative instrument, it's made a lot of money for a couple hundred people who got in early with a lot. Most of the other people playing it have now lost money, we know that. It's the same old, same old where the rich get richer and the poor get poorer, so any attempt to spin this as an equalizer is just that, it's pure spin." (Also on bitcoin.)
7. "It is dangerous to get involved in a bubble that has more than one asset class — bonds, housing, stocks, and commodities. They give you much greater pressure on recessionary forces, and we are playing with fire this time." (Grantham noted that Japan faced a multiasset bubble in 1989, and its equity and housing markets still haven't recovered.)
8. "I expect the Fed to be behind the curve, to be deep into optimism. It doesn't really have a clue about market bubbles, and the damage they do when they break. If I'd been asked to bet, 'Would the Fed get inflation wrong when inflation came along?' At any time I would have said, 'Of course they'll miss it, they'll be late, their responses will be pretty ill-judged.' The Fed's record is terrible."
9. "The world is much better off with moderately high interest rates. You get money on your savings, people don't speculate as much, they don't leverage as much, the risk in the system declines. You can afford to buy a house at lower prices, and you can afford to buy stocks and build a portfolio."
10. "Value managers have always hated commodities. They're about as unpredictable as anything on the planet. If you go short, you die a thousand deaths, and if you go long, it's pretty much as bad. I certainly don't recommend people to go short metals. If you can go long and throw the key away, I think that will do just fine. It does take nerves of steel, and you better have a good look at your nerves before you do it."