5 ms·

Jeremy Grantham predicts the US 'superbubble' will pop, wiping out $35T

30 points by gibsonf1 5y ago

MattGaiser 5y ago
A decade of bubble predictions: https://hn.algolia.com/?dateRange=all&page=0&prefix=true&query=stock%20bubble&sort=byDate&type=story https://hn.algolia.com/?dateRange=all&page=0&prefix=true&que...
- andrewmcwatters 5y ago
  There's no bubble to predict. We know we're in a bubble. When it pops is what people predict. If you bought a traded business today for over 30 times earnings over the age of 35, you wouldn't break even until you were retirement age. Does that sound like a good investment to you?
  - cplusplusfellow 5y ago
    You’re not really buying actual return of investment dollars via dividends anymore. You’re buying access to market share. Companies drive revenue so that they can drive market share more than anything. Owning a piece of the economy is what folks are doing with their 35 PE share purchases, particularly if they think the revenue as a percentage of market is going to grow.
    - andrewmcwatters 5y ago
      > You’re buying access to market share. What does this even mean? > Owning a piece of the economy is what folks are doing with their 35 PE share purchases, particularly if they think the revenue as a percentage of market is going to grow. If any given market shrinks in absolute terms, it doesn't matter if "market share" goes up. 100% of 5 customers is 5 customers.
    - anm89 5y ago
      These are the kinds of quotes they post in the documentary about the crash to demonstrate the hubris of the time. You are essentially arguing for the financial equivalent of a perpetual motion machine.
    - hyperman1 5y ago
      Do I get this right? The only way to make money from a stock is to sell it to someone else. The only reason they buy it from you is to do the same. So everybody gets richer, except the one who owns it when the bubble bursts, who loses everything. This is the definition of a ponzy scheme.
      - mike_d 5y ago
        In a Stocks 101 sense, yes. You can receive dividends from companies, use or sell your vote to influence company decisions, loan your stock in exchange for money, etc.
      - anm89 5y ago
        This is very specifically not the definition of a ponzi scheme. actually it meets literally none of the criteria of a ponzi scheme except maybe the fact that money is involved and somebody loses money. if there is a real asset involved in the scheme its just called speculation. not all speculation has anything to do with a ponzi scheme. it would be a ponzi scheme if you advertised this investment as a service and then never bought the actual underlying asset but just shuffled funds through to payout investors. so yeah, literally zero overlap with a ponzi scheme. another angle: by your definition, all investments in commodities where you don't plan to take physical delivery are ponzi schemes and all zero dividend stocks are ponzi schemes (which is wrong)
  - dannyz 5y ago
    This assumes that the company will not continue to grow at all
  - MattGaiser 5y ago
    If you assume no growth, then you have a point. But plenty of them are growing like weeds.
    - srean 5y ago
      > But plenty of them are growing like weeds. But for how long ? A common growth model that I have seen used is exponential growth, but has this been empirically verified on historical data ? I would expect a more logistic curve growth at best. Even with the growth factored in P/E of 100 and more seems a dangerous asset to own unless I believe that I can pass the bag on for somebody else to hold. The danger is that I might end up holding the bag that no one wants to buy. Furthermore, if the expected growth was predicated on the availability of cheap capital and that does not come to pass because of interest rate hikes, then that's a problem. The P/E will likely correct to a more plausible growth rate, so unless there is an earning growth that compensates for shrinking P/E the price will fall.
    - andrewmcwatters 5y ago
      If you looked at the 3000+ publicly traded US companies' price movements, you'd realize almost none of them grow. A small portion of the largest companies do, and even some of the biggest brands on Earth struggle to grow. If you bought Twitter at IPO and held and did nothing, you wouldn't have made a cent.
  - UncleMeat 5y ago
    Businesses innovate. Few businesses will stay stagnant for 30 years and deliver the same earnings year by year like a robot.
tedyoung 5y ago
Apparently journalists don’t check Grantham’s past predictions…e.g., https://www.marketwatch.com/story/stock-market-legend-who-called-3-stock-market-bubbles-says-this-one-is-the-real-mccoy-this-is-crazy-stuff-2020-06-17 https://www.marketwatch.com/story/stock-market-legend-who-ca... Even given the recent turmoil, being bearish like he was in June 2020 would have cost you lots of money. It’s easy to “call” the bubble if you keep saying it every six months
deleted 5y ago
[deleted]
Woodi 5y ago
Bubble or not typical one but: > 11. "Cryptocurrencies leave me increasingly feeling like the boy > watching the naked emperor passing in procession. So many > significant people and institutions are admiring his incredible > coat, which is so technically complicated and superior that normal > people simply can't comprehend it and must take it on trust. I would > not." Give him a Nobel prize in economy ! Or Pulitzer :) Btw. measuring someone "richness" by auction prices is very bad metric, imo, it appels more to imagination then reality. But price need to be big BIG ! Investors like to inflate, it kind a money printing :> And seriously: bubbles alone are not enough, you need to have accumulated big amount of greed, stupidity and usually lot of scams in hi places too...
mdrzn 5y ago
Not sure when this bubble will pop, but I for one can't wait. I will finally be able to enter the housing market and stock market at decent prices.
meristohm 5y ago
I’m tired of boom/bust economics, in part because I’m one of many little rafts in raging seas while the few massive capital ships can weather the storm, buy up devalued rafts, and rent them out later. I’d much rather the rafts make their own floating city.

30 points by gibsonf1 5y ago

A decade of bubble predictions: https://hn.algolia.com/?dateRange=all&page=0&prefix=true&query=stock%20bubble&sort=byDate&type=story https://hn.algolia.com/?dateRange=all&page=0&prefix=true&que...

andrewmcwatters 5y ago
There's no bubble to predict. We know we're in a bubble. When it pops is what people predict. If you bought a traded business today for over 30 times earnings over the age of 35, you wouldn't break even until you were retirement age. Does that sound like a good investment to you?
- cplusplusfellow 5y ago
  You’re not really buying actual return of investment dollars via dividends anymore. You’re buying access to market share. Companies drive revenue so that they can drive market share more than anything. Owning a piece of the economy is what folks are doing with their 35 PE share purchases, particularly if they think the revenue as a percentage of market is going to grow.
  - andrewmcwatters 5y ago
    > You’re buying access to market share. What does this even mean? > Owning a piece of the economy is what folks are doing with their 35 PE share purchases, particularly if they think the revenue as a percentage of market is going to grow. If any given market shrinks in absolute terms, it doesn't matter if "market share" goes up. 100% of 5 customers is 5 customers.
  - anm89 5y ago
    These are the kinds of quotes they post in the documentary about the crash to demonstrate the hubris of the time. You are essentially arguing for the financial equivalent of a perpetual motion machine.
  - hyperman1 5y ago
    Do I get this right? The only way to make money from a stock is to sell it to someone else. The only reason they buy it from you is to do the same. So everybody gets richer, except the one who owns it when the bubble bursts, who loses everything. This is the definition of a ponzy scheme.
    - mike_d 5y ago
      In a Stocks 101 sense, yes. You can receive dividends from companies, use or sell your vote to influence company decisions, loan your stock in exchange for money, etc.
    - anm89 5y ago
      This is very specifically not the definition of a ponzi scheme. actually it meets literally none of the criteria of a ponzi scheme except maybe the fact that money is involved and somebody loses money. if there is a real asset involved in the scheme its just called speculation. not all speculation has anything to do with a ponzi scheme. it would be a ponzi scheme if you advertised this investment as a service and then never bought the actual underlying asset but just shuffled funds through to payout investors. so yeah, literally zero overlap with a ponzi scheme. another angle: by your definition, all investments in commodities where you don't plan to take physical delivery are ponzi schemes and all zero dividend stocks are ponzi schemes (which is wrong)
- dannyz 5y ago
  This assumes that the company will not continue to grow at all
- MattGaiser 5y ago
  If you assume no growth, then you have a point. But plenty of them are growing like weeds.
  - srean 5y ago
    > But plenty of them are growing like weeds. But for how long ? A common growth model that I have seen used is exponential growth, but has this been empirically verified on historical data ? I would expect a more logistic curve growth at best. Even with the growth factored in P/E of 100 and more seems a dangerous asset to own unless I believe that I can pass the bag on for somebody else to hold. The danger is that I might end up holding the bag that no one wants to buy. Furthermore, if the expected growth was predicated on the availability of cheap capital and that does not come to pass because of interest rate hikes, then that's a problem. The P/E will likely correct to a more plausible growth rate, so unless there is an earning growth that compensates for shrinking P/E the price will fall.
  - andrewmcwatters 5y ago
    If you looked at the 3000+ publicly traded US companies' price movements, you'd realize almost none of them grow. A small portion of the largest companies do, and even some of the biggest brands on Earth struggle to grow. If you bought Twitter at IPO and held and did nothing, you wouldn't have made a cent.
- UncleMeat 5y ago
  Businesses innovate. Few businesses will stay stagnant for 30 years and deliver the same earnings year by year like a robot.

tedyoung 5y ago

Apparently journalists don’t check Grantham’s past predictions…e.g., https://www.marketwatch.com/story/stock-market-legend-who-called-3-stock-market-bubbles-says-this-one-is-the-real-mccoy-this-is-crazy-stuff-2020-06-17 https://www.marketwatch.com/story/stock-market-legend-who-ca... Even given the recent turmoil, being bearish like he was in June 2020 would have cost you lots of money. It’s easy to “call” the bubble if you keep saying it every six months

deleted 5y ago

[deleted]

Woodi 5y ago

Bubble or not typical one but: > 11. "Cryptocurrencies leave me increasingly feeling like the boy > watching the naked emperor passing in procession. So many > significant people and institutions are admiring his incredible > coat, which is so technically complicated and superior that normal > people simply can't comprehend it and must take it on trust. I would > not." Give him a Nobel prize in economy ! Or Pulitzer :) Btw. measuring someone "richness" by auction prices is very bad metric, imo, it appels more to imagination then reality. But price need to be big BIG ! Investors like to inflate, it kind a money printing :> And seriously: bubbles alone are not enough, you need to have accumulated big amount of greed, stupidity and usually lot of scams in hi places too...

mdrzn 5y ago

Not sure when this bubble will pop, but I for one can't wait. I will finally be able to enter the housing market and stock market at decent prices.

meristohm 5y ago

I’m tired of boom/bust economics, in part because I’m one of many little rafts in raging seas while the few massive capital ships can weather the storm, buy up devalued rafts, and rent them out later. I’d much rather the rafts make their own floating city.