For those who are mandated to always be in equities (like pensions and long always funds) emerging market stocks are less extremely valued than developed markets and could drop less than when the present global bubble pops. But a loss of maybe 30% versus 50%+ is still a huge setback.
With the risk-trade massively correlated worldwide on the way up, stocks, corporate debt, commodities and most currencies typically slide together on the way down. What diversity benefit?
For those who don’t have to helplessly buy and hold overvalued securities–most individuals–cash, North American government bonds and the US dollar offer rare, liquid, safe havens to wait for attractive investment opportunities once other assets go on liquidation sale. Yes, we can be financially self-disciplined and use bubbles to our individual benefit. Will you?
Famed investor Jeremy Grantham on Thursday reiterated his warning that Wall Street is in a bubble as individual traders get “carried away.”
“They’re becoming euphoric … They’re borrowing money. They’re trading more shares,” Grantham, co-founder and chief investment strategist at Grantham, Mayo, & van Otterloo told CNBC’s “Squawk Box Asia” on Thursday.
In recent months, Grantham has warned that the massive runs on Wall Street are turning into an “epic bubble.” On Thursday, Grantham pointed to the number of over-the-counter shares traded since last February rocketing to 280 million shares in November and quadrupling to 1.15 trillion shares in December. Here is a direct video link.
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