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.
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45 Comments
Market feels super risky right now!
Need to use the Schiller P/E ratio which uses a 10 year earnings average, inflation adjusted. This is much more accurate and shows the US market at higher level of overvaluation .
According to Jack Bogle there are two ways out. Low returns for the next 10 years or a crash. Take your pick. As he says, international stocks are a better option. I’m also holding 50% cash waiting for a crash . The pure maths of this can double your money. Imagine a stock falls by 50% from 100 dollars to 50. If you buy at 50 and it returns to its previous value that’s a 100% gain. This is how Buffett behaves, sitting on a 200 billion cash mountain waiting for a crash
Still coming 🙂
Russian trash been crying this crap three years now…
If inflation is officially quoted at 3% you can double it and then add some more. Canadian statistics are notoriously incorrect
I don’t want people buying Gov bonds cuz then that’s just added to the debt of America.
What is fascinating is the effect rising costs has on the debt of our country. 1 trillion in debt accumulated in one quarter, which took 17 years to accumulate in the 60s. Whats fascination is rising costs, growth, rising CPI is good for some, if you’re a company that’s been around for 100 years, JP Morgan, with 100s of billions in profit a year, you’d actually prefer the stakes raised across the board. If prices go up and you have wealth, it means people are more likely to need a loan. It also means smaller mom and pop shops who don’t play ball with the banks and more likely to go under do to not being able to afford rising employment costs. Rising employment costs are based off years of rising CPI. If costs become too high, it’s a guarantee for the banks that anyone with a good idea worth while, will have to come to them. By raising the bar they are ensuring they will have more likelihood of being involved in new business. Like shark tank, if you have capital and they don’t, but they have a good idea, you can then cut yourself into that idea. The other reason why banks and some institutions in America like the rising cost of things, is the evidence of the housing crash and the quantitative easing that was done. Banks saw incentive to be risky. They also saw more money come into circulation. Which was good for their deposits. The problem is 80% of newly generated money ends up with the top %. So again, there is incentive to gouge and put pressure on people because then the feds step in. And they will print more money, like stocking a fish pond, they know in time that money will be theirs. If growth is stagnant because the lack of money in circulation, they can pressure the feds into printing more, that will inevitably end up with them. The problem is with the rising cost of everything, americas debt is now insane. And that’s a bill for tomorrow, a bill our grandparents left us and one we will leave to our kids. We are on tract to spend more a year on our debt than on our military budget. So from my point of view I see banks, VC, PE and Wall Street as entities that suck the economy dry, in hopes of causing a print, so they can do it all over again. The government has become a money printing machine for banks and businesses, consumers are just the middleman.
You god meet want what item want meet want ?
그들이 통제속에서 god meet risk up road leader 약탈작전ㆍ수탈작전ㆍ
전개갗되고있다ㆍ이것이
리스크이다 그들은 폭럭조직의
범죄자ㅡ유착
된 패거리 마피아들이다
Korea deep staTe risk know ok god political control leadership ok ok you god meet why want ?
Borrowing money to pay Interest on the Country’s Debt only lasts so long before it begins to Compound.
Anybody that has been in Bankruptcy knows that.
This video is several months ago
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.
Why the hell do people always think there is one type of intelligence?
amazing content!
But still can't say we are in a Recession now ! what a mind hump !!
hope happens really soon I will be pointing and laughing at everybody
Money people pushed politicians to deregulation of financial institutions, which were put in place after the great depression to safeguard against it happening again.
Money people wanted to make their millions to billions quicker.
We all will pay for this greedyness and corruption.
So, what can I do about any of this except worry? I’m 75, living on a small fixed income and semi disabled. I’d try to find an ice flow but I think global warming melted them all.
It's 1929 all over again.
America needs the government to shut down until 2024 elections and midas wellcrash stock market too.
From no ressesion to depression
I will forever be indebted to you, you've changed my whole life and i continue to preach your name to the whole world to hear you've saved me from a huge financial debt with just little investment, Thanks so much Mrs Paula David.
0:00: 📉 Billionaire investor Jeremy Grantham warns that the US stock market is dangerously overvalued and descending from the 2021 tech bubble.
3:20: 📈 The US stock market has experienced significant growth over the past 15 years, reaching historically high levels.
6:08: 💰 Low interest rates can cause stock prices to skyrocket, leading to potential bubbles forming in the market.
8:49: 💸 Even the brightest minds can fall victim to the prospect of easy money, as seen in the story of Isaac Newton and the South Sea bubble.
12:37: 💰 The U.S. stock market has a high price-to-earnings ratio, indicating overvaluation compared to other countries.
Recap by Tammy AI
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.
All I’m hearing is that we’re entering into one of the greatest buying opportunity of our lifetime.
We’re in a recession, and have been for two years now! What’s coming will affect EVERYONE not just those who aren’t ready! Everyone will feel this collapse! World war will devastate the planet!
These subscribers/commenters read like shills. Crypto is a Ponzi scheme. Stick to Blue Chips.
Again, he didn't actually say whats in the title
We should have a FED-FUNDS FUND and also Jim Cramer Fund=DO THE OPPOSITE OF THOSE BOTH!
recession starts 2023 third quarter greatest depression starting 2024 to 2025 they have no more tools left to avert this. that is why they are pushing war.
JACOBY:Even some of the largest beneficiaries of this trend told me it made them uncomfortable,
like legendary investor Jeremy Grantham.
Grantham: In my career in America, the percentage of GDP that goes to finance
has gone from three-and-a-half to eight-and-a-half. (chuckling): We're, in a way, we're like a giant bloodsucker,
and we have more than doubled in size, and sucking more than twice the blood out of
the rest of the economy. And we do not generate any widgets.
We do not generate any, any real increase in income. We are just a cost.
JACOBY: When you say "we," you mean you and other members of the financial community have been this kind of
"bloodsucker" on the economy? Is that, is that what you're saying?
Grantham: Yes– collectively, we fulfill a completely necessary service, but what we have done is created layers upon layers
of more and more convoluted, expensive financial instruments. And that's what makes all the profits for the financial industry.
And it's, it's taken a lot of ingenuity and salesmanship to make this happen. And a lot of lobbying in Congress, et cetera, et cetera.
And we have imposed on the rest of the economy the idea that banking and finance are utterly important at all times.
If, if you do anything wrong to us, the entire economy will collapse in ragged disarray. (said with a smile, sarcastic tone and inflection)
PE US is future. Solve labor shortages and the golden age for the US starts.
The market's value (the various companies in the market) is relatively the same. It's the value of the dollar (and many other major currencies as well) that has sunken. You need more dollars to equal the same value…so the stock prices only "appear" high. It's an illusion. Look how many more dollars it takes to buy your groceries, or eat out, etc. Our Communist owners are stealing our value out from under our noses. And we keep voting for it. Notice the graph they show in the video, the graph of the S & P performance…notice it started climbing massively since 2008…that's when we started piling on our now 33 Trillion in debt. It matches perfectly.
Jeremy Grantham's insights always give me pause for thought. The history of major market crashes he's predicted is undeniable, and we're at a point where caution seems prudent. 📉 It's not just about recognizing a recession; it's about positioning ourselves to weather it effectively. 💪 As investors, let's remain vigilant and stay informed in these uncertain times. 📊🤔
endless dollars printing game over
now you have to work hard for money
Give unto Caesar what is Caesar`s.
The amount of AI generated replies on your videos is concerning. I assume its making you money though. 🤖
Great video
Treading on thin ice!!!! Thank you Dems!!!!!
Chill out Mr. Burns its not that bad
Geting most wage earners to put their retirement into the stock market and removimg pensions also fueled the rise of stock prices. That and 15% captial gains tax and stock buybacks and executive and board member compensation in stock grants and warrants. The discount rate should be more akin to CPI or PCE.
Please get back to financial statement analysis.
I guess he should stick to climate change! 🙃 Since that issue is settled?
Fear sells! Let me explain. Scare the bejesus out of people and watch them to subscribe to your channel. Down markets, if timed right, are the long-term investors buying opportunities. 😮
Thanks dude❤