Marc Faber, Jeremy Grantham Warn Of Global Bubble
Money managers from around the world gathered in Chicago last week for the CFA Institute’s annual investment seminar. Yesterday, the Chicago Tribune’s Gail MarksJarvis talked about two of the speakers- Jeremy Grantham and Marc Faber. The personal finance columnist wrote:
“I am officially scared,” GMO investment manager Jeremy Grantham told professionals from as far away as Abu Dhabi and Malaysia. “In 2000, we had a technology bubble. But this is massive, a massive credit crisis and a bubble in global housing, global equity and global land.”
Grantham, whose clients have included Vice President Dick Cheney and 2004 presidential candidate John Kerry, warned that the world is working its way through the “first truly global bubble.”
The British money manager shared his investment outlook with seminar participants. MarksJarvis wrote:
When asked by a money manager what he would buy now, Grantham said, “long mattresses” — jesting about the stereotypical nervous behavior of hoarding cash. He seriously suggested: “Put money into something incredibly safe, like a high-quality hedge fund.”
Grantham said rather than buying stocks for the long run now, he would only “short” them, or bet that they will decline in price. He sees “nothing interesting in quality corporate bonds,” and he has been shorting oil. “Commodities had a good run, but that’s over,” he said.
Although downtrodden mortgage-related bonds might be a good deal now because some are selling for 59 cents on the dollar, he said he wonders if the price will seem compelling if home prices fall another 20 percent or 25 percent.
He confessed to the group that “I bought my first gold last week, and I hate gold. It doesn’t pay a dividend. I would only do it if I was desperate.”
MarksJarvis noted:
Generally, when bubbles burst, the asset prices stay down for lengthy periods. Grantham isn’t expecting the stock market to hit its low until 2010.
The Tribune columnist also talked about Marc Faber, who publishes the monthly investment newsletter The Gloom Boom & Doom Report. She quoted the Swiss-born investor as saying:
The Fed has created a bubble in everything — stocks in emerging market, real estate everywhere in the world, commodities, art. The only asset class that is down is the U.S. dollar…
It is quite likely that the current synchronized global economic boom and the universal, all-encompassing asset bubble will lead to a colossal bust.
MarksJarvis also noted:
And with commodity prices so inflated, he expects an “increase in international tensions” over resources.
Source:
“Even the pros may be stuffing the mattresses”
Gail MarksJarvis
Chicago Tribune, July 29, 2008
August 2nd, 2008 at 4:58 pm
now i’m really confused.
1. buy Long Mattresses to store worthless dollars?
2. the commodities run is “over”, and he bought gold?
however, i will steal the Long Mattresses quote
for my “Indian name”. Dances with Wolves
always sounded kinda peculiar.
August 4th, 2008 at 10:44 pm
Thanks for the questions john of sparta.
“1. buy Long Mattresses to store worthless dollars?”
Grantham is kidding about the long mattresses. But he’s not joking when he advised investors to move to cash (I don’t recall him ever specifically mentioning U.S. currency though).
In my March 24 post, I talked about a Financial Times (UK) piece focusing on Grantham. The Times’ Chris Taylor wrote:
In a Boom2Bust.com post from January 25, I wrote:
“2. the commodities run is ‘over’, and he bought gold?”
Gold can be thought of as a commodity. But others believe the yellow metal still functions as an important store of wealth. Grantham brought up the fact that gold pays no dividends. Fans of gold point out that this is actually one of its greatest strengths. If gold were to pay interest, the return on the precious metal would be dependent on the performance of another individual or institution.
August 7th, 2008 at 12:39 am
I wish someone would invent a “CraigsList” index. I was told on good authority that the volume of ads was running almost 3 times that of a year ago. A quick inspection shows that most of these Sellers are living on the edge, trying to peddle Barbies, baseball cards, NASCAR junk, and Longaberger baskets for next week’s grocery money.
Newly-posted FreeCycle goods disappear in seconds, instead of trickling down to the poorest of the poor, only to show up Sunday at the flea market.
What happens when these folks run out of quasi-assets?
I think the next 18 months will prove horrible, cash will be KING, and deflation is a distinct risk on a global scale.
August 7th, 2008 at 2:02 pm
Grantham says the commodity bull cycle is done? I think he’s wrong there. Short-medium term correction if anything. Great time to buy Silver, especially if it gets any lower.
August 8th, 2008 at 10:08 am
Thanks for the comment Doug.
“I wish someone would invent a ‘CraigsList’ index. I was told on good authority that the volume of ads was running almost 3 times that of a year ago.”
I’ve been hearing the same thing. Lot of garage sales these days. And pawn shops are reporting their best business in years…
August 8th, 2008 at 10:11 am
Thanks for the comment Ejectoid.
“Grantham says the commodity bull cycle is done? I think he’s wrong there.”
Mr. Rogers would agree. Commodities are getting hit pretty hard this morning.
August 14th, 2008 at 10:53 pm
since last time Gold went from 9xx to 8xx USD.
here’s my “take”: deflation. across the board.
gold, gas, houses, whatever. King Cash.
to paraphrase: “Got Cash?”
August 15th, 2008 at 9:57 am
Thanks for the comment john of sparta.
“here’s my ‘take’: deflation. across the board.”
Interesting. I wonder if we’ll be hearing a lot more of the inflation/deflation debate again, like we did a few years ago?
By the way, I love the moniker— reminds me of something out of an ancient Greek tale.
August 19th, 2008 at 1:43 am
In Faber’s latest (August 1) commentary(paid subscription) the only thing he was bullish on was, in fact, gold coins. He did say they would be a good buy at $800/oz, which they have now fallen to.
Cash is king only if they don’t monetize their way out of this, and the dollar doesn’t crash because of all the govt. debt and increased social, credit liabilities heading into a recession or worse.
I’d prefer Swiss Franc “cash” (like the eft, FXF).
August 19th, 2008 at 9:33 am
Thanks for the comment paul. Back on June 30, I noted that Dr. Faber saw gold as a good investment.
“Marc Faber Would Rather Buy Gold At This Stage Than Oil”
http://www.investorazzi.com/2008/06/30/marc-faber-%e2%80%98would-rather-buy-gold-at-this-stage-than-oil%e2%80%99/
November 2nd, 2008 at 7:45 pm
it’s now November.
in August i said Deflation.
oil is down 50%.
gold/silver down 20%.
houses/cars? who needs ‘em?
the Dollar is King.
“they can’t make it cheap enough.”
November 3rd, 2008 at 5:29 pm
Thanks for the comment john of sparta.
November 17th, 2008 at 11:24 pm
thanks for the love above.
the winds have changed.
it was deflation, now inflation.
bottom line:
for the rest of 2008…deflation.
for all of 2009…inflation.
Nov 08 gas was under $2/gal.
Nov 09 gas could be $4/gal.
(double)
gold in the $2000’s.
(double+)
buy low (now), sell high (later).
November 18th, 2008 at 10:54 am
Thanks for the comment john of sparta.
“the winds have changed.
it was deflation, now inflation.”
Care to share with us what made you change your forecast?
November 27th, 2008 at 11:08 pm
money changes everything….old song title.
there’s gonna be lots of USD in circulation
during 2009, that’s the #1 reason.
up to now, the banks have been hoarding.
#2 it’s the old “buy low sell high” with dollars.
time to sell. (is this a Dollar Bubble?)
#3 domestic tax increases across the board.
everywhere and on everything in 2009.
#4 finally, commodities are low due to a sell-off
to raise cash for 2008, because selling Gold
got more money than selling Lehman Brothers.
those positions are now gone. when i see
“baby steps” up the inflation stairs with
Food and Metals, that’s enough for me.
December 1st, 2008 at 10:34 pm
Thanks for the reply john of sparta. Great points!
December 28th, 2008 at 9:30 pm
remember the Christmas Bali Tidal Wave (Tsunami)?
people were picking up fish stranded by the receding
surf…THEN the wave hit. today (December 2008), the
inflation waters are gone. in other words: GO PICK UP
THE FISH! whatever: gold/gas/guns/etc. whatever you
want and can safely store before the Inflation Wave
hits. if you are really, really good: take on DEBT. you will repay it with cheap dollars or toilet paper.
January 5th, 2009 at 9:44 am
Thanks for the comment john of sparta. Your insights are always appreciated.
January 27th, 2009 at 5:38 pm
here we go.
it’s January 27th.
Gold is stair-stepping up.
the new Treasury Secretary
says “China is the bad guy” which
means tariffs and Mo’Money.
what’s Walmart gonna do?
what am i gonna do?
buy cheap commodities.
c ya in the Spring.
January 28th, 2009 at 10:46 am
Thanks for sharing those insights john of sparta. Hope you can find time to grace us with your presence again sometime before the spring!
May 11th, 2009 at 4:49 pm
gaining speed….
coffee and sugar prices up 30%.
does that make Fourbucks, Fivebucks?
retail gasoline has increased 20% (around here).
AND, my state has “locked in” the tax increase.
as for my commodity investments: they’re up.
not much, but UP beats both Down or Static.
my 401K had the old “dead cat bounce”.
it might actually do even better this summer.
maybe a “cloned cat climb”?
May 12th, 2009 at 8:15 am
Thanks for the comment john of sparta. It’s been awhile!
June 9th, 2009 at 7:47 pm
actually, as of June 9th, everything is up.
commodities, stocks, even real estate is
up over January. if everything goes up
in value…isn’t that an inflation symptom?
June 11th, 2009 at 7:03 pm
Thanks for the comment john of sparta.
“if everything goes up in value…isn’t that an inflation symptom?”
Depends on your definition of inflation.