Famed Investor Says Stocks Heading Down 50%

 I've been around the investment business since 1987.  I had just passed my securities license within a few weeks of Black Monday of October 1987.  I remember well the DOT.COM crash of 2000 and certainly remember the Great Recession of 2008 when Dow headed down to 6300 before starting on it's current Bull Run to close yesterday at about 35,000.

I receive emails daily from investment firms telling me what their experts are saying.  I noticed a long, long time ago that while one Harvard MBA Financial Analyst was calling for the markets to be heading up there was another equally smart analyst saying they were soon going to crash.  In the end you realize that none of these folks have a crystal ball.  It's easy to say that "markets will go up and markets will go down."  It's impossible to say WHEN these events will happen.

While watching what has gone on over the past 14 years since the collapse of 2008-2009, I have concluded that the financial markets have detached from logic and I personally believe that God himself is holding everything together because of His perfect timing.

That being said, here is a headline from a very famous 83 yr old investor who is kind of famous in investment circles for calling "bubbles" in financial markets.  Remember, bubbles are super fun while they are inflating but not so fun when they eventually pop.  This latest massive bubble is being caused by the Fed creating a massive amount of money out of thin air.  If you think about like a 5th grader you will realize that if stocks were trading at X when the money supply was one, by doubling the money supply to two then stocks have to eventually move to X(2).  There is simply MORE money chasing same amount of stocks.  

Jeremy Grantham, the famed investor who for decades has been calling market bubbles, said the historic collapse in stocks he predicted a year ago is underway and even intervention by the Federal Reserve can’t prevent an eventual plunge of almost 50%.

In a note posted Thursday, Grantham, the co-founder of Boston asset manager GMO, describes U.S. stocks as being in a “super-bubble,” only the fourth of the past century. And just as they did in the crash of 1929, the dot-com bust of 2000 and the financial crisis of 2008, he’s certain this bubble will burst, sending indexes back to statistical norms and possibly further.

That, he said, involves the S&P 500 dropping some 45% from Wednesday’s close—and 48% from its Jan. 4 peak—to a level of 2500. The Nasdaq Composite, already down 8.3% this month, may sustain an even bigger correction.

“I wasn’t quite as certain about this bubble a year ago as I had been about the tech bubble of 2000, or as I had been in Japan, or as I had been in the housing bubble of 2007,” Grantham said in a Bloomberg “Front Row” interview. “I felt highly likely, but perhaps not nearly certain. Today, I feel it is just about nearly certain.”

In Grantham’s analysis, the evidence is abundant. The first sign of trouble he points to came last February, when dozens of the most speculative stocks began falling. One proxy, Cathie Wood’s Ark Innovation ETF, has since tumbled by 52%. Next, the Russell 2000, an index of mid-cap equities that typically outperforms in a bull market, trailed the S&P 500 in 2021.

Finally, there was what Grantham calls the kind of “crazy investor behavior” indicative of a late-stage bubble: meme stocks, a buying frenzy in electric-vehicle names, the rise of nonsensical cryptocurrencies such a dogecoin and multimillion-dollar prices for non-fungible tokens, or NFTs.“This checklist for a super-bubble running through its phases is now complete and the wild rumpus can begin at any time,” Grantham, 83, writes in his note. “When pessimism returns to markets, we face the largest potential markdown of perceived wealth in U.S. history.”

It could, he said, rival the impact of the dual collapse of Japanese stocks and real estate in the late 1980s. Not only are equities in a super-bubble, according to Grantham there’s also a bubble in bonds, “the broadest and most extreme” bubble ever in global real estate and an “incipient bubble” in commodity prices. Even without a full reversion back to statistical trends, he calculates that losses in the U.S. alone may reach $35 trillion.

Here;  Jeremy Grantham Doubles Down On Crash Call, Says Selloff Has Started (fa-mag.com)

On top of all the other crazy stuff happening right now, Russia, Covid, China, lawlessness, political divide, families divided, earthquakes, volcanoes, empty shelves, etc...  One wonders how our already skittish and fearful citizens would deal with watching their 401(k) falling from $400,000 back down to $200,000 and sitting there for a very long time?  It may cause many to get even more fearful, more angry and more willing to look for a scapegoat to blame.  

Maybe something like this?  "If those anti-vaxers hadn't screwed up this entire economy by prolonging this pandemic, we wouldn't be in this financial mess right now!"