GMO co-founder Jeremy Grantham believes that the bubble in bonds has burst after a 40-year bull market. Equities and housing are likely right behind it, though he admits he isn’t sure which one will be next.

Housing was “late to the party,” in Grantham’s view, but prices have soared 15% in the last year. Bidding wars among Americans afflicted with cabin fever have erupted and home prices broke through their 2006 peaks.

If “we manage to pull a trifecta” and all three markets were to crash in the next year or two, the negative wealth effect, closely correlated to the severity of recessions, could be enormous, said Grantham. Were markets to re-price stocks, bonds and housing back to “near normal,” somewhere between $20 trillion and $30 trillion in wealth could disappear.

Back in 2017, Grantham told Financial Advisor that ever since 1995 stock prices had levitated to price levels only seen once in the early 20th Century–in 1929. Then a confluence of factors converged at the turn of the millennium to propel price-to-earnings multiples to new heights—60% higher than they stood at for most of 1900-1995 period.

Valuations remained near these levels for all but a few brief periods since the late 1990s, which Grantham views as a “long-term aberration.”

Globalization was probably the biggest single factor driving this anomaly. An expanding global labor market gave corporations a huge one-time advantage that weakened labor in the developed world. “Five hundred million Chinese were joined unexcitedly by 200 million Eastern Europeans [who had been] pretending to work for their Communist” masters, he explains. 

American workers saw sharp declines in their negotiating power. Wages in the U.S. rose only 10% after inflation in the last 50 years, Grantham notes. In contrast, real wages climbed more than 60% in both England and France, a little noticed fact.

This permitted American corporations to double their profit margins over a half century. Grantham expects the balance of power between capital and labor to drift partially back towards historical parity in the coming decade.

Sincere or not, both political parties in the U.S. suddenly have signaled increased sympathy for workers in lieu of corporations in recent years.  This is evidenced by the growing political clout of asymmetric politicians with similar appeal like Sen. Bernie Sanders and former President Donald Trump.

Thirty years of easy monetary policy dating back to former Fed Chairman Alan Greenspan also played a huge role in the bond bubble, Grantham says. Many global bond markets hit a 2,000-year high in 2020, he adds, crediting newsletter publisher Jim Grant for that observation.

Around the developed world, interest rates are even lower than in the U.S. Equities abroad, however, have not reached the heights that they have in America, home to the vibrant tech sector.


GMO's Grantham Says Market Is In An 'Epic Bubble'

JANUARY 5, 2021 • CHRISTOPHER ROBBINS

Financial markets are in a “fully fledged epic bubble,” according to Jeremy Grantham, co-founder and chief investment officer of Boston-based Grantham, Mayo & van Otterloo (GMO).

“Featuring extreme overvaluation, explosive price increases, frenzied issuance, and hysterically speculative investor behavior, I believe this event will be recorded as one of the great bubbles of financial history, right along with the South Sea bubble, 1929, and 2000.,” wrote Grantham in "Waiting For The Last Dance," a blog posted Tuesday to GMO's website, noting that bubbles are usually where fortunes are made and lost.

The current bubble has created opportunity for investors in the areas of value stocks and emerging markets, said Grantham.


Democrats Choose Illegals Over Americans


It is a simple choice with only two options for Democrats: do they favor Americans or illegal aliens? Every time they’ve been given the choice, Democrats choose illegal aliens. So why would anyone be surprised that they’re doing it again when it comes to COVID?

I don’t care for writers to quote themselves extensively, but in this case I have to. I also have to say “I told you so,” another thing I’m not a fan of. But both are necessary for this because I’ve already written about this and, honestly, I told people so.

In December, I wrote a piece called, “Democrats Have to Choose Between Ending the Pandemic and Open Borders.” In it I wrote about the left having to choose “between reopening the country safely and their desire for open borders, pointing out that no matter how deeply they desire it “they can’t have both.”

They’re trying to, and Americans are going to suffer.

As I wrote then, “We know the vaccine works, but we don’t know for how long it will work. If a person needs annual or bi-annual booster shots until the virus is eradicated, that means we can’t be welcoming in anyone from a country that does not have a functioning government capable of inoculating their population.” Three months later, that is exactly what the Biden administration is doing.

The borders are open for illegals. Anyone crazy enough to walk up to an official crossing won’t be welcomed, but walk to one of the huge open areas and you’re in.

Try to fly here from most of the world, and you likely won’t be allowed to. The odds are high your country is still on the suspended list. But fly to Mexico and walk across the border and you’ll get greeted with open arms, especially if you have a kid with you. The only people allowed to enter the country at will are rich liberals, celebrities, and illegal aliens.

The Biden administration has not only released more than 100 illegals who’ve tested positive for COVID into the country, they don’t quarantine the others for anywhere near the length of time of the incubation period for the virus to know how many hundreds more had it before they were set loose in America. How many made it evading Border Patrol altogether?

How helpful to returning to some semblance of normal life is this policy? It is not.

And it’s not as though sick illegal aliens were released into a field somewhere they couldn’t infect others, they were put on contained buses that set off for cities across the country. If you wanted someone to get people sick, that’s exactly what you’d do. How many people were infected from there is anyone’s guess. The Biden administration is pretending the whole thing isn’t happening and it’s of little interest to the media.

It’s impossible for caravans not to be petri dishes of infection – thousands of people marching for weeks, sharing food and water is the exact breeding ground for disease it sounds like it would be. If Democrats aren’t interested in protecting Americans, which they clearly aren’t, why on Earth would they give a damn about illegal aliens? The survival rate is so high that the vast majority will live long enough to eventually be granted amnesty, citizenship, and the ultimate goal of a voter registration card.

Dealing with, or even exposing, the reality of this does not serve the left's agenda. If a bunch of people have to get unnecessarily sick, so be it. If some die – and some will die – well, it’s not like progressives have ever had a problem with causing large numbers of deaths. The last century of their existence exposed that horrific fact.

Three months ago I asked the simple question, “[D]oes Joe Biden favor Americans over illegal aliens?” It was rhetorical, of course, but I answered it with another: “Is there anything he, Kamala Harris, or any Democrat has said in the last 15 years that would make you think the answer is Americans?” The answer to that last question is now as clear as it has always been obvious, and they aren’t even bothering to try to hide it.

Derek Hunter is the host of a free daily podcast (subscribe!), host of a daily radio show on WCBM in Maryland, and author of the book, Outrage, INC., which exposes how liberals use fear and hatred to manipulate the masses. Follow him on Twitter at @DerekAHunter.