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… Read More

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… Read More

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… Read More

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.

The Brain Science Behind Bubbles

It’s no secret that investors can behave quite strangely during market manias. But a new study that looks at the science of the brain takes a stab at exactly why they do so. The study, performed by California Institute of Technology researchers, examined why bubbles form in asset prices. They found that people are more likely to make irrational decisions when they attempt to predict how others will behave, which is what happens during bubbles. “In a bubble… Read More

Where Shiller Sees Potential Bubbles (Hint: It’s Not the Stock Market)

Yale economist Robert Shiller has a reputation for being one of the most astute “bubble-spotters” in the world, having warned of both the tech stock bubble of the late 1990s and the recent U.S. housing bubble shortly before they popped. Now, he says a couple areas are on his bubble-radar: farmland, and commodities. “My favorite dark-horse bubble candidate for the next decade or so is farmland,” Shiller writes on the web site Project Syndicate. He… Read More

Grantham on Why Bubbles Matter

In the second half of his year-end letter, GMO’s Jeremy Grantham takes a look at numerous asset bubbles throughout history, warning investors to ignore bubbles at their own peril. “Responding to the ebbs and flows of major cycles and saving your big bets for the outlying extremes is, in my opinion, easily the best way for a large pool of money to add value and reduce risk,” Grantham writes. “In comparison, waiting on the railroad… Read More