Value investment guru Grantham: Global assets are in a bubble, liquidation is imminent.
The prophet of bubbles is bearish again, claiming that even if the US stock market is halved, "it is mathematically reasonable."
With the surge in US bond yields casting a shadow over the stock market and other asset classes, the bearish sentiment towards the United States is growing stronger.
Jeremy Grantham, co-founder of hedge fund GMO and a value investing guru, has warned that there is a massive bubble in all asset classes, from stocks to real estate, and no one should be investing in the United States right now.
Known as the "prophet of doom" for his frequent bearish calls on US stocks, Grantham had previously stated in 2021 that global assets were in the biggest bubble ever and a reckoning was imminent.
During a recent podcast appearance, he stated that the reckoning had already begun in 2022, although there had been a temporary pause earlier this year. Now, it is back in full swing.
Grantham pointed out that the Russell 2000 index, which is dominated by small-cap stocks, is particularly dangerous. The index is filled with zombie companies and has alarming levels of debt. He referred to the Russell 2000 as the "most vulnerable area to rising interest rates."
As for the overall US stock market, Grantham is extremely bearish. He believes that if the "seven sisters" leading the market higher were to decline, the stock market would collapse as well. He even thinks that a 50% decline in the overall US stock market is mathematically reasonable given the current level of yields.
The real estate market is even more precarious. Grantham stated that housing is unsafe anywhere, and the speed of the collapse depends on the local mortgage market and lending culture. However, the direction is the same: rising rates and falling prices. He believes that global real estate is generally overpriced, just like "farms, forests, and art."