Legendary investor Jeremy Grantham: "The bubble will burst by May; the avalanche will compete in 1929"
"Individual investors are completely insane," warned Jeremy Grantham.
Jeremy Grantham, the renowned value investor, spotted the financial bubbles for four decades before they burst, warned that the unprecedented stock market bubble created an influx of individual investors is likely to burst.
The founder and chief investment strategist of hedge fund and mutual fund company GMO said, "The current bubble is even more impressive than that of 2000, which was the largest of all." In an interview on the 'Invest Like The Best' podcast. We will be lucky if this bubble survives until May."
Grantham, 82, explained that there are already signs that the bubble is on the verge of bursting. "When the financial headlines migrate to the front pages when the evening news is reminiscent of the market or the crazy behavior of GameStop and Tesla, you know it's very warming.
"This is not a bubble created primarily by institutional investors; it is a bubble of individual investors," continued Grantham, known for his ability to accurately predict a variety of financial and economic events in recent decades. "Individual investors are insane. They have increased their market share, and they have entered the market with great enthusiasm for the first time in decades."
"I have to admit it's exciting. I'm just a little worried about the relatively new investors who have been dragged into these things and then will learn the lesson the hard way. I fully understand the hearts of these people who enjoy this bubble, but they always ended very badly, and I have no doubt it will ", said.
The veteran investor was able to predict the bursting of the technology stock bubble in 2000, and in 2006 warned of the bubble bursting in the U.S. real estate market. Years earlier, in 1989, he had managed to spot the peak of Japan's economy, and seven years earlier, in 1982, he had predicted that the U.S. market was facing a major recovery.
In an interview with him, Grantham admitted that it is doubtful whether speculative investors will support his advice. "I'm not optimistic that someone who is part of the stock market gain would want to listen to my advice and act on it," he said. "When you're caught in this enthusiasm, for mini madness, it's pretty hard to stop you with dry historical stories. 'It was then, and it's now, baby! Well, the problem is, we do catch on, But there is no way to convince them."
"We are a crazy market full of irrational people who behave nicely 80% of the time, and then 20% of the time, completely derailed one way or another," he added.
In an interview with Bloomberg last month, Grantham warned that the collapse that would come with the current burst of the stock market bubble would compete with the crashes of 1929 and 2000.