Does GMO’s Jeremy Grantham See a Bubble Coming?

GMO’s Jeremy Grantham says stocks and bonds will “fail to generate inflation-beating returns over the next seven years, but he doesn’t see an imminent crash in share prices,” according to a recent article in The Wall Street Journal. The article says that Grantham, who predicted bubbles in 2000 and 2007, argues that while current stock valuations are high, they are supported by healthy profit margins. Further, he believes that the Fed’s low interest rate policy “supports share prices by making fixed-income investments less attractive as an alternative to stocks.” In an interview with WSJ, Grantham offered the following insights: Valuations […]

Grantham Sets the Record Straight

In a recent Barron’s article, Boston-based asset management firm GMO’s co-founder Jeremy Grantham sets the record straight after what he calls “a few misquotes and misunderstandings by journalists.” The journalists, writes Grantham, implied that he believes high share prices are here to stay and that “regression to the mean has ended. This is, of course,” he asserts, “inaccurate, as readers of my quarterly letters know.” Grantham emphasizes his belief that the speed of mean regression has abated and become “sticky.” The slowdown, he explains, has occurred because “nearly all of the factors causing it are themselves unlikely to change fast. […]

Hulbert on the Likelihood of a Market Bubble

A new study conducted by Harvard University professors reveals that a share price run-up is not necessarily a precursor to a market bubble, writes Mark Hulbert in a recent Barron’s article. The study also suggests, says Hulbert, that the “mere existence of a major decline doesn’t automatically mean that the previous run-up was a bubble.” [The study defines a bubble as a price increase of at least 100% over a two-year period followed within the subsequent two years by a drop of at least 40%.] When this definition is applied to a small sample, the research reflects that “very few […]

Siegel: No Bubble Trouble

Stock market talk has been filled with references to “bubbles” over the past couple years. But Wharton Professor and author Jeremy Siegel says those seeing a bubble in the current market need to get their eyes checked.