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Jeremy Grantham thinks US stocks could crash next year.
Grantham is the founder of GMO, a firm that manages $118 billion. He’s widely respected for warning about the 2000 market crash and the 2008 financial crisis.
Although most large money managers will tell you to always be in the market (which means you will always pay them fees), Grantham is willing to speak his mind, even if that means telling people to get out of the market.
Grantham just made another bold call. He thinks the US market is “ripe for a major decline” in 2016. He says it could spark the worst crisis since the Great Depression. The Financial Times explains:
The famously bearish and often prescient money manager said this could trigger a “very different” type of crisis, because many governments had become considerably more indebted and much of the liabilities had shifted to the balance sheets of central banks.
Given that central banks were able to create money to recapitalize themselves, this “could be a crisis we could weather,” Mr Grantham said. “If not, then we’re talking the 1930s, where you have a chain-link of government defaults.”
It’s an ugly picture. Grantham doesn’t know exactly what will ignite the next crisis. But high valuations will contribute to the selling pressure.
Mr Grantham is uncertain what could trigger the next crisis, pointing out that bubbles do not burst simply because financial assets are overvalued. But he argued that by late 2016 markets would probably be extremely vulnerable to a crash, given lofty valuations.
“We might get lucky and withstand one more crisis and just have an equity washout, and on the other hand it might just break the system,” he said. “It would be new, novel, and it could result in national defaults.”
Global markets are fragile right now. Since the last financial crisis, governments have tried to print away their problems. They’ve piled on debt. And most are devaluing their currencies.
https://www.caseyresearch.com/articles/one-of-the-worlds-most-respected-investors-predicts-2016-stock-crash
Grantham is the founder of GMO, a firm that manages $118 billion. He’s widely respected for warning about the 2000 market crash and the 2008 financial crisis.
Although most large money managers will tell you to always be in the market (which means you will always pay them fees), Grantham is willing to speak his mind, even if that means telling people to get out of the market.
Grantham just made another bold call. He thinks the US market is “ripe for a major decline” in 2016. He says it could spark the worst crisis since the Great Depression. The Financial Times explains:
The famously bearish and often prescient money manager said this could trigger a “very different” type of crisis, because many governments had become considerably more indebted and much of the liabilities had shifted to the balance sheets of central banks.
Given that central banks were able to create money to recapitalize themselves, this “could be a crisis we could weather,” Mr Grantham said. “If not, then we’re talking the 1930s, where you have a chain-link of government defaults.”
It’s an ugly picture. Grantham doesn’t know exactly what will ignite the next crisis. But high valuations will contribute to the selling pressure.
Mr Grantham is uncertain what could trigger the next crisis, pointing out that bubbles do not burst simply because financial assets are overvalued. But he argued that by late 2016 markets would probably be extremely vulnerable to a crash, given lofty valuations.
“We might get lucky and withstand one more crisis and just have an equity washout, and on the other hand it might just break the system,” he said. “It would be new, novel, and it could result in national defaults.”
Global markets are fragile right now. Since the last financial crisis, governments have tried to print away their problems. They’ve piled on debt. And most are devaluing their currencies.
https://www.caseyresearch.com/articles/one-of-the-worlds-most-respected-investors-predicts-2016-stock-crash
