Mr Grantham, who has a long history of identifying market bubbles, warned that the US was "participating in the broadest and most extreme global re
Mr Grantham, who has a long history of identifying market bubbles, warned that the US was “participating in the broadest and most extreme global real estate bubble in history”. Writing in an online post, he explained US house prices were now at the highest multiple of family income ever, and were even ahead of levels during the 2006 housing bubble leading up to the financial crisis. Mr Grantham also hit out at stock markets adding: “The US market today has, in my opinion, the greatest buy-in ever to the idea that stocks only go up, which is surely the real essence of a bubble.” As well as houses and stocks the investor also pointed to bond markets and commodities such as oil and metals for being overpriced.
As evidence of the approaching end to the bubble, Mr Grantham points to the fact major bubbles have previously seen a “blow-off” with stock prices accelerating massively ahead of previous rates before correcting.
As recent examples of this, he gives the “meme stock madness” of GameStop and cinema chain AMC and the rapid rise in dogecoin following comments from Elon Musk.
He also puts forward Hertz as an example of a “meme stock star” after the company saw its share price surge on the announcement it would buy a fleet of Teslas.
In a dire warning over the future direction of markets ahead Mr Grantham concludes: “We are in what I think of as the vampire phase of the bull market, where you throw everything you have at it: you stab it with Covid, you shoot it with the end of QE and the promise of higher rates, and you poison it with unexpected inflation.
“Until, just as you’re beginning to think the thing is completely immortal, it finally, and perhaps a little anticlimactically, keels over and dies.”
According to him, the market has already begun to deflate from its riskiest ends since last February.
In particular he points again to GameStop, AMC and Dogecoin as well as “more than one-third of all NASDAQs stocks” which have fallen 50 percent from their highs.
Further ahead he predicted when “pessimism rules again” wider asset prices would decline further.
Putting this into context he predicts a return of asset classes to even two-thirds of the way back to historical norms would equate to a wealth loss of £25.82tr ($35tr) in the US alone.
Such a decline he said would be compounded by inflation and pose “serious economic problems”.
Mr Grantham has a long track record of identifying bubbles while they unfold.
He previously identified the Japanese asset price bubble in the late Eighties as well as the internet bubble of the Nineties and the housing bubble leading up to the 2007 financial crisis.
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Advising investors he suggested avoiding US stocks, suggesting they should instead look to emerging markets and cheaper developed countries such as Japan.
Meanwhile in a damning verdict on cryptocurrencies he compared the interest in the tokens to the emperor’s clothes.