Sjuggerud: The ‘Bubble Guru’ called the last market peak… What’s next?
From Dr. Steve Sjuggerud, Editor, True Wealth:
Where is the market going next?
When will it peak?
And when will the “bubble” burst?
I’m sure you’re asking these questions… But who are you looking to for answers?
Today, we’ll look to the guy who actually called the last major stock market top and bottom, with amazing accuracy…
Jeremy Grantham is a 78-year-old Englishman best known for studying stock market bubbles more thoroughly than anyone, ever. He’s the co-founder of GMO, an investment-management firm in Boston.
In 2000, Grantham called the stock market peak – with incredible detail…
That year, he gave an interview in Outstanding Investor Digest titled “Bubbles have always given back everything. There have been no exceptions – NONE.” In it, Grantham delivered a dissertation on exactly why, and exactly how, the stock market crash would unfold. He got it EXACTLY right.
At the time, nobody wanted to believe him. He was labeled a “perma bear” – someone who always looks for the negative in the markets. But he was just calling it like he saw it.
In late 2008 – near the bottom of one of the worst nine-year runs in stock market history – Grantham became incredibly optimistic. That time, he was the lone “bull” among “bears.” He wrote:
For an unparalleled 20 years, [stocks] have been overpriced. Now, finally, they are cheap and likely to get cheaper. Likely, I believe, to set up a once-in-a-lifetime investing opportunity (or maybe twice in a long career).
Finally, stocks appeared to hit bottom in Grantham’s mind…
In March 2009 – within days of the stock market bottom – Grantham said “buy.“ He wrote a letter to his customers saying that stocks were worth “30% above today’s price.”
Again, he got it exactly right.
I love reading Grantham’s thoughts (even when I disagree with them) because he is an original thinker. He is willing to go against what everyone else is saying.
So what does Grantham – the “bubble guru” – say about the likelihood of a stock market bubble today?
You might think the guy known for spotting bubbles would be looking for one today. Since March 2009, the stock market has gone up – practically uninterrupted – for eight years. We’ve got to be hitting “bubble” proportions – right?
Not so fast. Grantham gave the Wall Street Journal his opinion last week – and what he said surprised me.
Here’s what he told the Journal about the U.S. stock market today:
It doesn’t have the characteristics of a bubble… Remember the style from 2000, or Japan in ’89, or the U.S. housing market… or 1929 in the old days was a classic. We have almost none of that euphoria. We also have very imperfect fundamentals.
[I don’t see] mad desire to invest in the stock market.
I agree with him, 100%.
We are not seeing the classic signs of a bubble, yet. We don’t see “mad desire” to invest in stocks, yet.
Investors know that stocks have gone up for eight years. So they think they have to come down.
They will come down, eventually… But we are not at that point yet.
Jeremy Grantham – the guru of bubbles – says that we’re not in a bubble today. Who would know better?
I agree with him. We are not in a stock market bubble – yet. Don’t let ’em tell ya any different.
P.S. I actually believe stocks have a lot of upside – right now. At the end of a great bull market in any asset class, we often see what I call the “Melt Up” – a moment of euphoria where the maximum gains happen – before the “Melt Down.” This Melt Up phase is starting now. I’ve written up a special report on how to profit from this rare opportunity… Read everything here.