Jeremy Grantham’s firm, GMO, says the bubble in U.S. stocks is busting. Grantham is an expert in financial bubbles and widely known for identifying in advance the dangers of the dotcom and housing bubbles.
In a recent piece written by one of Grantham’s associates, a new model of bubbles suggests we may be at the beginning of the end of inflated U.S. stock valuations.
Bloomberg has the story.
The size and duration of the moves in stock prices in the final three months of 2018 toward their long-term average valuation is consistent with the moves linked with the bursting of the technology boom in early 2000 and the crash of 1929, according to Martin Tarlie, part of the asset-allocation team at the firm overseeing about $70 billion…
Problem is, timing the deflation is tricky. Owning as little U.S. equity as possible is the next best thing to do, recommends Tarlie, whose theoretical work on a bubble model appeared in the International Review of Financial Analysis journal.
Read more here.
Jeremy Jones, CFA
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