Finance Musings Ep. 5: Jeremy Grantham "Let The Wild Rumpus Begin*" (Part 1)

Finance Musings with Saajan Doshi

26-02-2022 • 28 mins

A quick deep dive into Jeremy Grantham's latest investor letter "Let The Wild Rumpus Begin".

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Quick Excerpt by Jeremy:

“All 2-sigma equity bubbles in developed equity markets have burst – all the way back to trend. The U.S. reached the 2-sigma level in the summer of 2020. But some of them went to 3-sigma or more before they burst – producing longer and deeper pain. The U.S. reached 3-sigma in late 2021. Timing is uncertain and when you get to 3-sigma superbubbles, such as we have now, there are few examples. Yet they have all shown certain characteristics before they broke”

1. A speculative investor frenzy that generated stories for distant decades, which we have had for well over a year;

2. A penultimate blow-off phase where stock gains accelerate, as we had in 2020;

3. And the ultimate narrowing phase – unique to these few superbubbles – where a decreasing number of very large blue chips go up as riskier and more speculative stocks underperform or even decline, as they did in 1929 and 2000 and as they have done since February 2021.

If a, b, and c are accounted for, light the blue touchpaper8 and retire to a safe distance, praying for a paradigm shift.”

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Link to his full article: https://www.gmo.com/americas/research-library/let-the-wild-rumpus-begin/

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