Jeremy Grantham: What's Coming is WORSE Than a Recession

Throughout his over 50 year career, billionaire investor Jeremey Grantham has developed a reputation as somewhat of a doomsday oracle. He has become famous for predicting some of the biggest stock market crashes of all time. Such as the dot com crash in 2000, the financial crisis in 2008, and most recently the tech bubble in 2021. Here in 2023, the US stock market is once again bumping up against all time highs. This has Grantham warning that the market is dangerously overvalued.

The US stock market has soared for the last nearly 15 years. Take a look at this chart here. This chart shows the performance of the S&P 500 index over the last couple decades. For background, the S&P 500 is generally regarded as a proxy for the US stock market. We can see here that the S&P 500 has skyrocketed from roughly 1,000 in February 2009 to its current level of approximately 4,500. The last 14 or so years have been one of the best time periods in the history of the stock market for investors. But the concern that Grantham and many others have is that the stock market has soared to unsustainably high levels.

One of the biggest drivers pushing the stock market to potential bubble territory was historically low interest rates. Interest rates in the United States spent the better part of the past 15 years at near 0%. These low rates acted like jet fuel for the stock market. Let me explain.

To truly appreciate Jeremy Grantham’s comments, you first have to understand the relationship between interest rates and asset values. Asset values are just a fancy way of saying things people own because it produces income for them. Think of stocks, bonds, and real estate as the most common types of assets the average investor owns in their portfolio. The value of any asset, including stocks, is based on the cash it will generate for you as the owner, discounted back to the present day using an interest rate.

*Disclaimer: Neither this video, not any content produced on this channel should ever be considered investing advice or official financial advice. All content is made for entertainment and educational purposes.

[julieta]

Risk free rate (short term treasuries) are above 5% and the yield on SP500 is about 1.6% so something has to give becasue thats a huge divergence. Either earnings are going to explode higher, unlikely, or market is going to drop significantly along with yields. If yields drop instead this will also indicate a troubled economy meaning stocks are already falling

[Susanne-zuku]

Amazing video, A friend of mine referred me to a financial adviser sometime ago and we got talking about investment and money. I started investing with $120k and in the first 2 months, my portfolio was reading $274, 800. Crazy right!, I decided to reinvest my profit and gets more interesting. For over a year we have been working together making consistent profit just bought my second home 2 weeks ago and care for my family.

[bhakhililer_]

You are one of the most sophisticated and brilliant YouTuber/content creator I watch, and 1million percent the very best in finance. I appreciate all of your content thank you for TOZ44H much love from Chicago

[aaboy]

Now we just need to see the TOZ44H price also move in the same direction as these charts. Up. Very Up.

[robertlopez]

Powell should have raised interest rates in 2018....He was 4 years late.. That's why we have massive inflation.

[sad_]

Super cool video ! Do you think amazons TOZ44H will pump before ETH ? I ask myself if there is a pattern in the order of the altcoins pumps.

[eesoggd]

Seriously TOZ44H is something nobody expected and yet its just breaking all existent rules to make the superior move

[JEMANGETAMERE]

I’m still interested in what Amazon will do with the TOZ44H now .

[chrisbluebird]

As an investing enthusiast, I often wonder how top level investors are able to become millionaires off investing. . I’ve been sitting on over $545K equity from a home sale and I’m not sure where to go from here, is it a good time to buy into stocks or do I wait for another opportunity?

[nimbusmeter]

Grantham has been correct 90% of the time. He is typically 1-2 years early - as he was in 2000 and 2008. If this pattern holds true (he first predicted this downturn in 2022. He told people to move to all cash in Jan 2022. If you did, your portfolio would be up over 8%), the bubble will burst in early 2024. Let's see if he goes 3 for 3 in the last three bubbles. The 2008 shorts (including Michael Burry) where all 1-2 years early. What is hard to predict is the amount of time it takes for people to capitulate. Currently, people continue to increase their credit card debt, home loans (HELOCs, etc.), car loans, and reduce their savings. We also had $12T of money through QE, mortgage forbearance, rent eviction moratorium, COVID relief money (aka printing money and giving to people and businesses), college loan forgiveness, etc. that have propped up the ultimate capitulation to be deferred.

[willcox]

This doom and gloom has been "preached" for the past 14 years and they have all been wrong!

[salmanak]

OMG TOZ44H !!! Dude seriously what a awesome video can appreciate how much work went into this quality quality quality much love from Australia

[dak]

Cant deny the fact that Amazons TOZ44H is the strongest bet to bring power back to this industry after we suffered FTX, Celsius, Tera and so on. Sure if they fail its done for good, but I dont see that the biggest tech company in the world would put ev

[anabtoss]

At present, the most prudent consideration for everyone should be diversifying their income sources, ones not reliant on government support, particularly given the ongoing global economic challenges. This remains an opportune moment to explore investments in assets like gold, silver, and digital currencies such as BTC, ETH, and XRP. thanks to Cheryl Atonal for her guidance in these fields, her proficiency is outstanding

[quillowl]

one of the things i like about your videos, is the combination of visual and verbal information. Thank you, appreciated.

[jamesp]

P/E ratio is a good tool to use for valuing a company but can often be misleading. It's important to remember that stocks trade on what they will be worth in the future rather than what they would be sold for today at book value in most industries. For example Tesla over the past 10 years and Nvidia more recently had nose bleed P/E ratios in the 1, 000s but as their earnings inevitably came up, their P/E ratios came down to more reasonable-ish levels. You could have shorted Tesla from 2010 to to now because back then its P/E ratio was sky high and you would have lost 21, 148.7%. While many countries in the world trade at lower P/Es than the U.S, they exist in economies with crippling inflation and very low growth if any. Also I don't believe any financial numbers that come out of Communist China, they've never been transparent.

[jayski]

The Isaac Newton example is really highlighting the difference between natural science and social science. It wasn't a lack of intellect on Newton's part but that in social science cause & effect are only sometimes correlated positively. Sometimes they're correlated negatively. And sometimes not correlated at all. But since we apply so much math to investment analysis, we often confuse it with the analysis used in the natural sciences. We always expect 2+2 to equal 4 but with economics 2+2 can equal 5, 6 or much more in the case a bubble. And it can go just as negative when a bubble bursts. That's why your best investors are not scientists or mathematicians but rather good poker players or games-men.

[zood]

Always prepare for the worst when it comes to your hard earned wealth.

[carinaleon]

Totally agree, stock prices Overvalued, it’s time 🤯💣

[__WJK__]

Love the video & the channel content! That said, can you turn up the audio level, because the sound level of the videos seems low, especially compared to other youtube channels with similar content.