Grantham Says Sell U.S. Stocks to Avoid Unprecedented Bubble (Summers Say House Prices ARE Inflation … And Scary!)

Some are saying the bull market may last up to five years while others are saying that markets are in a huge bubble that could burst at any moment (or if The Federal Reserve decides to cut monetary stimulus).

(Bloomberg) — Jeremy Grantham said the U.S. stock market is in a bubble and investing in it is “simply playing with fire.”

“I have been completely amazed,” the veteran bearish investor said in an interview Wednesday on CNBC. “It is a rally without precedent — the fastest in this time ever and the only one in the history books that takes place against a background of undeniable economic problems.”

Individual investors jumping into the market now should sell U.S. stocks, buy emerging market equities and “throw the key away” for a few years, he said, adding “this is becoming the fourth real McCoy bubble of my career.

The S&P 500 index has jumped almost 40% from its March 23 low even as the coronavirus pandemic has damaged almost every sector of the economy and put millions of people out of work.

And the S&P 500 index has soared since The Fed’s epic intervention in 2008 and then again in March 2020.

And then we have Larry Summers (former Chief Economist of the World Bank, US Treasury Secretary, former director of the National Economic Council for President Obama and former president of Harvard University) saying “This is scary. Rising house prices in most people’s common sense of the world represents inflation.”

Yes Larry, I agree with you. The house price graph looks eerily similar to the S&P 500 index graph.

Here is a nice Q2 summary of asset price changes for Q2 from GoldSilver.com.

For all the talk of The Fed raising rates and cutting monetary stimulus, here is a disturbing chart showing U-3 unemployment rate against the CBO’s short-term natural rate of unemployment. If The Fed is chasing lower unemployment rates, they might be around longer than many anticipate (especially if there is a Covid Delta shutdown).

The inflation numbers will be released on Monday. Knock on wood.

But it appears that we are addicted to gov and Fed intervention.

Doctor, Doctor, here is the news. We’ve got a bad case of asset bubbles.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.