Juggling Dynamite

Jeremy Grantham is one of the greatest investors of all time and is famous for correctly identifying the four major stock market bubbles of his 60-year investment career.

Looking at today’s environment, Grantham assesses the Iran War’s impact on oil prices, AI, meme stocks and the “Magnificent Seven”, drawing parallels with the 1970s, 1999, 2007 and the post-COVID boom. He sets out the conditions he believes typically lead to a bubble bursting and also tackles longer-term headwinds – from demographics and de-globalization to climate damage and geopolitical risk – arguing that these are fundamentally at odds with the near-record valuations investors are currently paying.

Along the way, Grantham discusses his early role in the birth of index investing; his respect for Warren Buffett and Jack Bogle; why most institutions will never tell clients to get out before a crash; and how to know when to “reinvest when terrified”. This is a candid, insightful masterclass from one of the defining investment thinkers of the last half-century. Here is a direct video link.

As shown below, the rebound in the S&P 500 since March has been led by fewer stocks than last summer. Weak breadth.

Overall, US stocks are the most highly valued in history at 227% of US GDP (Buffett indicator mentioned in the Gratham discussion, shown below in red since 2000). Canadian stocks are less overvalued, but at 126% of GDP are also at the top end of historic ranges (blue line below).

If only mere mortals were permitted to trade on advance information before it’s made public. Alas, that lucrative privilege is reserved for high-frequency traders and politicians.

Throughout US President Donald Trump’s second term in office, traders have been betting millions of dollars just before he makes major announcements. The BBC has found a consistent pattern of spikes in trades and finical markets just hours, or sometimes minutes, before the president’s most significant market-moving statements were made public. Some analysts say it bears the hallmarks of illegal insider trading, whereby bets are made by people based on information that is not available to the general public. While others say that some traders have become more adept at anticipating the president’s interventions. Here is a direct video link.

The business panel joins to discuss the latest in U.S. and Israel’s war on Iran and more. Here is a direct video link.