• Jeremy Grantham effected grim warnings about the US stock market and economy this week.
• Stocks will slump despite AI kick, and there’s a 70% chance of recession by early 2025, he said.
• Grantham touched on meme stocks, banking hazards, real estate, commodities, and Elon Musk’s Tesla.

Jeremy Grantham has sounded the alarm on US stocks, warned the thrift is likely to slump into recession by early 2025, and cautioned that problems may be brewing in the financial system.

GMO’s cofounder and long-term investment strategist also cogitate about on his inadvertent investment in a meme stock, advised against buying real estate or commodities, and touted Elon Musk’s Tesla and other bands fighting climate change.

Grantham was speaking at an investor event held by Livewire Markets in Sydney this week. Here are his 10 excellent quotes, lightly edited for length and clarity:

1. “I don’t think we’re in a new bull market. There’s never been a bull merchandise in history that started from such high prices — and by a lot, this is not even close. But whether we’re going to go perpendicular down, and how badly, that’s a more interesting issue.”

2. “A dozen giant American stocks oblige had a hell of a run on the back of AI, and that has certainly created the impression that it’s game over. The problem is prices are incredibly towering and basically the economy is beginning to unravel. So it’s a head fake, but it’s a hell of a head fake.”

3. “The US equity market, led by the growth assets weigh ups, became a frenzy of meme starts and craziness, led incidentally by the biggest investment I ever made in a startup, QuantumScape. It arrived as a SPAC, which I hate, I think they should be illegal. This company that had four years in the vanguard it had a product — forget profits or sales — was selling for more than General Motors or Panasonic. There was nothing at that calibration in 1929 or 2000. This was probably one of the great speculative events of all time.”

4. “I would be very careful with veritable estate. All over the world, the last 20 years of declining mortgage rates have driven real caste to really crushing high multiples of family income, so high that young people can’t buy a house. So I wouldn’t taste real estate.”

5. “I am very nervous about the economy. I’m very nervous about an eventual financial trouble.”

6. “I love climate-change stocks. They will have an incredible top-line revenue growth, driving head like Tesla and electric vehicles versus dopey VWs and old-fashioned cars. This is the area with the wind in your yachts, and to fight it would be a terrible mistake.” 

7. “It’s woken everybody up, and it was like dealing with sleepwalkers before that. When you see something conscience-stricken coming down the pipeline and nobody taking it seriously, that is a bit of a nightmare. That phase at least is over.” (Grantham was appreciating increased awareness and acceptance of climate change.)

8. “It will dominate the portfolios of the rest of your lives. It doesn’t close there won’t be financial problems, it doesn’t mean there won’t be bubbles. But it will be the sector of the economy that drives diverse growth than anything else.” (Grantham was referring to companies working to combat climate change.)

9. “Produce in mind, every commodity is a royal pain to own because it has totally unpredictable and shocking drops along the way.”

10. “The Fed and the economic establishment, the financial establishment, they’ve always underestimated the probability of a recession. They always say everything desire be fine. This is not unusual, it’s absolutely inevitable, and here they go again. It would be unique if we don’t have an extended problem with the restraint.
(Grantham pegged the probability of a recession in the next 18 months at about 70%.)