Jeremy Grantham rang the alarm on inflation, interest rates, markets, and the economy.
The veteran investor predicts stocks will tumble and a protracted recession will strike.
Grantham shared the story of his dot-com bubble call, and said he’s betting big on venture capital.
Get ready for stocks to slump, a recession to strike, and both inflation and interest rates to remain elevated for years, Jeremy Grantham warns in a new episode of “Bloomberg Wealth with David Rubenstein.”
The veteran investor and GMO cofounder, who rang the alarm on a “superbubble” and predicted a devastating crash last year, says the world has bigger problems than the outlook for financial markets and the economy.
He also shares the painful experience of calling the dot-com bubble, and reveals he’s virtually all-in on venture capital.
Here are Grantham’s eight best quotes from the interview, edited and condensed for clarity:
1. “I’m very sensitive to the idea that you can be so depressing no one would want to live with you.” (Grantham was asked whether people get tired of his grim warnings and gloomy predictions.)
2. “In the end, life is simple. Low rates push up asset prices. Higher rates push asset prices down. We’re now in an era that will average higher rates than we had for the last 10 years.”
3. “I suspect inflation will never be as low as it averaged for the last 10 years, that we have re-entered a period of moderately higher inflation, and therefore moderately higher interest rates.”
4. “The Fed’s record on these things is wonderful. It’s almost guaranteed to be wrong. They have never called a recession – and particularly not the ones following the great bubbles.”
5. “AI is very important. But it’s perhaps too little, too late to save us from a recession. The deflationary forces from the tech stocks breaking in 2021 — probably too big. The power of interest rates rising and depressing the real estate market — very negative, slow-moving influence. I suspect that they will once again dominate, and we will have a recession running perhaps deep into next year, and an accompanying decline in stock prices.”
6. “The economy, and particularly the stock market, are very secondary to a list of important long-term problems that we have that no one takes seriously enough yet. When we sit here discussing the stock market, we’re a little like Emperor Nero fiddling while Rome burns.” (Grantham pointed to climate change, widespread inequality, and population declines in several countries as examples.)
7. “So the market made a magnificent move from its all-time high in early 1998. It went straight up until March of 2000. Our clients did not approve of us being early and, to a very considerable degree, fired us. They were very upset. Missing out on making money when your golfing partner at the neighboring pension fund is making a fortune is very irritating.”
8. “We are invested 75% in early-stage venture capital, which most people would consider a bizarre concentration. We consider it the best part of capitalism, and very much the best part of American capitalism.” (Grantham was speaking about his foundation, which holds 95% of his wealth.)
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