World heading for bust 'unlike any other', says Jeremy Grantham

Basically contending that there will be a a huge bust of the US stock market and perhaps the financial and economic systems - though I'm not too sure if that is what is meant here. Grantham predicates his view on the massive stimulus policies by central banks around the world and the expansion of debt on their balance sheets in recent years since the global financial crisis.

'Very painful': World heading for bust 'unlike any other', says Jeremy Grantham

Legendary investor Jeremy Grantham says the US Federal Reserve is killing the recovery of the world's biggest economy and the ''next bust will be unlike any other''.

Mr Grantham – the cofounder and chief investment strategist at the $US112 billion ($123 billion) Boston-based fund manager GMO –said he wouldn't invest his clients' money in US stocks for at least the next seven years because of the Fed's ''misguided policies''.

Mr Grantham has an impeccable track record, having called both the internet bubble and then the US housing bubble. In November he said he believed the US sharemarket could rise another 30 per cent, although he believed it was overvalued, before crashing again.

''We invest our clients' money based on our seven-year prediction,'' Mr Grantham told Fortune.

''Over the next seven years we think the market will have negative returns. The next bust will be unlike any other because the Fed and other central banks around the world have taken on all this leverage that was out there and put it on their balance sheets. We have never had this before.

''Assets are overpriced generally. They will become cheap again. That's how we will pay for this. It's going to be very painful for investors''.

Mr Grantham said the Fed's $US85 billion a month bond buying program had failed to stimulate the economy, saying that there was no proof that more debt creates growth.

''It's quite likely that the recovery has been slowed down because of the Fed's actions,'' he said.

''Go back to the 1980s and the US had an aggregate debt level of about 1.3 times GDP. Then we had a massive spike over the next two decades to about 3.3 times debt. And GDP over that time has slowed.''

That is what happens when we live in a world built on deceit. The governments sure are good at covering things up.

reply to post by surrealist


I'm still waiting..... I keep hearing it's going to go bust, cats and dogs are going to rain from the sky but I don't see it happening even though I am ready for it LOL. It makes perfect sense that it's all going to crash, well, at least when everyone looses confidence it the giant ponzi scam called central banking. But one thing you have to remember, if all the central banks raise their money production by 200%, then all the currency values relative to each other remain the same. This seems to be what they are doing. The question is, where is all that newly "printed" money going? It isn't going into the economy or the pockets of anyone I know. It must simply be numbers on a balance sheet for the asshats that are controlling the soon-to-be, devolution of the world.

Cheers - Dave

I used to believe. I don't anymore. All these guys that "called the housing bubble" have been calling for financial meltdown "like has never been seen before" for years.

Logman
I used to believe. I don't anymore. All these guys that "called the housing bubble" have been calling for financial meltdown "like has never been seen before" for years.

It is so simple to see when you look the right way at it. Workers pay is not going up the cost of everything the worker buys to live is. This eventually will hit a point of no return.




If you make under 14 dollars an hour you will not be able to afford food and rent in the next 2 years.....This is my prediction and I bet it comes true. Just look how many service industry workers are demanding higher pay. Add on top of that the 2 million used to be workers waiting for benefits and it equals tipping points.




Full of it you say..........Just look at your grocery bill month to month and see the facts. Inflation is already here and nothing can be done to stop it short of a new currency.......Hmm maybe that was the plan all along.

this is all a big game to some to keep pushing people till they riot if banks are losing billions where is it going oil has gone from $29 to $112 is you're life any better same with housing are you any better off .

the only winners are the bankers they are like bookmakers they always win even when they lose

reply to post by surrealist


Yeah, and by following his simple system, we'll all be rolling in cash and safe while the rest of the world fails.

But you have to be quick and invest now!...

Head towards the doom porn sales counter over there and we'd be happy to take your money.

Well, hopefully a good old cold war skirmish will do the job,

War economy don't fail us now...

Logman
I used to believe. I don't anymore. All these guys that "called the housing bubble" have been calling for financial meltdown "like has never been seen before" for years.

3, 4 or 5 years is nothing in terms of history.
it will happen eventually and it seems sooner rather than later.

Meh

Look forward to it, none of us are dumb right, this story has been told time and time again in History... It's called corruption, a nation gets wealthy, people in charge rob it blind, the whole thing falls apart and they go elsewhere. It's the "go elsewhere" part that is the good news, sure we will all be broke, but the vipers will leave for new prey, Bush has lockdown in Uruguay... I could make a list, every mega wealthy American has a bail out location ready and foreign accounts that wont tell how much money they have stashed.

If it happens we get to rebuild after the rats scurry, and honestly that's better than how we are living now mostly.

surrealist
Basically contending that there will be a a huge bust of the US stock market and perhaps the financial and economic systems - though I'm not too sure if that is what is meant here. Grantham predicates his view on the massive stimulus policies by central banks around the world and the expansion of debt on their balance sheets in recent years since the global financial crisis.

O.k. let me call this one....

From your Cited article...

Mr Grantham – the cofounder and chief investment strategist at the $US112 billion ($123 billion) Boston-based fund manager GMO –said he wouldn't invest his clients' money in US stocks for at least the next seven years because of the Fed's ''misguided policies''.

This is telling me that Mr Graham is either attempting some concessions from the federal bank or person(s) of importance. He probably floated an idea to aforementioned authority and was beaten down.

So he is using a strategy of media storm fear mongering to sway the market in the direction he wants.

If you like a snow ball effect. A self fulfilling prophesy.

When people with that much money get up themselves and start sprouting doom and gloom you know for sure they would benefit from the outcome somehow.

Do not fall for his fear mongering and be strong enough to stand up and say no to these people!

Peace,

Korg.

999zxcv
this is all a big game to some to keep pushing people till they riot if banks are losing billions where is it going oil has gone from $29 to $112 is you're life any better same with housing are you any better off .

the only winners are the bankers they are like bookmakers they always win even when they lose

"competition is a sin"
how can they say capitalism doesn't work...its never been tried

IMHO
the US has quietly become capable to be a net exporter of oil..its got capped wells all over.
If the market crashes, it will wipe out the inflato bucks world wide..
bringing prices on real value stocks down to firesale prices and burning the USD down to the value of a unit of oil
gold will not be all that special..silver could be coin... and if one is liquid then one will do great in the crash

somewhat like soros buying up most of the argentine when they made it crash or the same as like when he crashed the British pound

This is essentially common sense. He is stating his belief that the market is currently over valued (which for the most part it is), a market cannot remain bullish forever, so naturally a correction will occur at some time..

Interesting he says he wouldn't put any clients cash on the US market, as he believes a massive decrease in value is on the cards. Why isn't he shorting the over valued stock then? Odd...

The sub prime mortgage junk washed a lot of the garbage away, LVRs were reduced and in some cases removed alltogether from margin lending arrangements, which of course made margin calls a huge issue during the GFC, those who didn't survive that would be unlikely to leverage themselves again... Naturally there are still penny stocks and junk bonds floating around of course, however the big difference is that since governments are trying to stimulate economies interest rates are extremely low at the moment. New issue fixed and floating rate notes don't pay extremely high coupon rates these days, so default is less likely for payments at present.

Saying all that, what goes up must come down and vice versa, we will likely see an increase in loan defaults etc when the economy shows signs of recovery & the reserve bank/ governments start to ok increases to interest rates. All the people that borrowed to their max will then be stretched to make payments on the increasing interest & we will see a new cycle of messiness.

Stick to the blue caps and diversify. And never make uneducated decisions and you won't need to crap yourself about financial scaremongers.

reply to post by benrl


The crimean invasion could pull the trick eh,

though the US have only stopped profiting from wars until recently, I might be wrong, the Iraq War might have been profitable for a certain period but running a war for like 8 years is obviously a colossal expense.. I'm not sure how you profit from a war, But I think it basically works this way (random order) things get produced + alot of specific industries grow + employment raises = the economy benefits from that. amirite?

Mr Grantham said the Fed's $US85 billion a month bond buying program had failed to stimulate the economy

OK this is a bunch of crap. The stimulus stopped massive economic doom spiraling and got the country stabilized and producing some jobs.

Now if it can continue, that I can't say, but I don't know how he can say either since he said this has never happened before.

I do agree that the market is way over-valued though, so a market correction would not be surprising.