Market strategist Jeremy Grantham, co-founder of asset management firm GMO, has warned of “super bubbles” popping. He outlined that the Federal Reserve has “developed a setting favorable to a linked chain of super bubbles that burst with tremendously serious, painful consequences.”
Jeremy Grantham’s Alarm
Market analyst Jeremy Grantham shared his U.S. economic outlook with economist David Rosenberg during a Rosenberg Research webcast, published on March 16. Grantham is a co-founder and investment strategist of asset management firm GMO. He has been an investment expert for more than 40 years and has sat on the investment boards of several non-profit organizations.
Grantham criticized the Federal Reserve for continually causing asset bubbles. He mentioned that he was not shocked by the recent collapses of major banks. He likened the current economic situation to that of 2000, noting that back then, “the economy had a gentle recession” without any real estate or debt markdown issues.
“It’s bad enough just doing the equity market in 2000. This time, we have done a perfect replica of the equity market, plus for flavor, we’ve done the housing market and the bond market,” the strategist commented, further stating:
The problem with this bubble is it’s an all-encompassing bubble. We have bubbled the significant and hazardous housing market to record prices. We bubbled the bond market to levels that had never been seen in the history of man with the lowest rates ever recorded.
“The big picture is we have a small handful of these super bubbles. Each one of them is followed by a recession. If you get something really wrong, like 1929, it’s followed by depression. If you mess around with the financial system, you have the terrible occurrences of the Great Financial Crash,” Grantham illustrated.
“I don’t think the bear market is likely to end until late into next year,” the investment analyst continued, mentioning that “the fundamentals could drag out for quite a while.” Noting that “after April, we will probably start to witness pressure on profit margins, GDP growth, and the labor market,” he concluded:
I hope it’s known by now that the Fed has not got anything right since Paul Volcker. They have merely established an environment conducive to a connected chain of super bubbles that burst with tremendously serious, painful consequences.
Do you agree with Jeremy Grantham? Let us know in the comments section below.
Image Credits: Shutterstock, Pixabay, Wiki Commons, lev radin
Disclaimer: This article is for informational purposes only. It is not a direct offer or solicitation of an offer to buy or sell, or a recommendation or endorsement of any products, services, or companies. Bitcoin.com does not provide investment, tax, legal, or accounting advice. Neither the company nor the author is responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any content, goods or services mentioned in this article.