{"id":59107,"date":"2022-09-30T10:28:58","date_gmt":"2022-09-30T14:28:58","guid":{"rendered":"https:\/\/www.technologyinvestor.com\/?p=59107"},"modified":"2022-09-30T10:28:58","modified_gmt":"2022-09-30T14:28:58","slug":"if-you-hold-shares-you-will-lose-money-heres-jeremy-granthams-take-hes-the-best-watch-out-for-sloppy-mercedes","status":"publish","type":"post","link":"https:\/\/www.technologyinvestor.com\/?p=59107","title":{"rendered":"If you hold shares, you will lose money. Here’s Jeremy Grantham’s take. He’s the best. Watch out for sloppy Mercedes."},"content":{"rendered":"

Jeremy Grantham has a reputation for being super smart and super prescient.\u00a0 He has always been right on major market calls, albeit usually early \u2013 Japan, Tech Bubble, real estate bubble in 2008, reinvesting in March 2009, and now on everything. In late August, he published “Entering the Superbubble’s Final Act.<\/em>“<\/p>\n

Here’s his Executive Summary:<\/p>\n

Only a few market events in an investor\u2019s career really matter, and among the most
\nimportant of all are superbubbles.1 These superbubbles are events unlike any others: while
\nthere are only a few in history for investors to study, they have clear features in common.
\nOne of those features is the bear market rally after the initial derating stage of the
\ndecline but before the economy has clearly begun to deteriorate, as it always has when
\nsuperbubbles burst. This in all three previous cases recovered over half the market\u2019s
\ninitial losses, luring unwary investors back just in time for the market to turn down
\nagain, only more viciously, and the economy to weaken. This summer\u2019s rally has so far
\nperfectly fit the pattern.<\/p>\n

The U.S. stock market remains very expensive and an increase in inflation like the
\none this year has always hurt multiples, although more slowly than normal this
\ntime. But now the fundamentals have also started to deteriorate enormously and
\nsurprisingly: between COVID in China, war in Europe, food and energy crises, record
\nfiscal tightening, and more, the outlook is far grimmer than could have been foreseen
\nin January. Longer term, a broad and permanent food and resource shortage is
\nthreatening, all made worse by accelerating climate damage.<\/p>\n

The current superbubble features an unprecedentedly dangerous mix of cross-asset
\novervaluation (with bonds, housing, and stocks all critically overpriced and now rapidly
\nlosing momentum), commodity shock, and Fed hawkishness. Each cycle is different and
\nunique \u2013 but every historical parallel suggests that the worst is yet to come.<\/p>\n

He continues:<\/p>\n

The Times that Really Matter for Investors<\/strong><\/p>\n

Most of the time (85% or thereabouts) markets behave quite normally. In these periods,
\ninvestors (managers, clients, and individuals) are happy enough, but alas these periods
\ndo not truly matter. It is only the other 15% of the time that matters, when investors get
\ncarried away and become irrational. Mostly (about 12% of the time2), this irrationality
\nis excessive optimism, when you see meme stock squeezes and IPO frenzies, such as
\nin the last 2 years; and just now and then (about 3% of the time), investors panic and
\nsell regardless of value, as they did at 666 on the S&P in 2009 and with many stocks
\ntrading at a 2.5 P\/E in 1974. These times of euphoria and panic are the most important
\nfor portfolios and the most dangerous for careers. (Keynes\u2019 famous Chapter 12 would
\nsuggest that when confronted with a bubble, running off the cliff with company is the
\nsafest strategy for managers, whose business imperative, after all, is to be a permabull,
\nwhere the real money can be made. This is a strategy adopted reasonably enough by
\nalmost everyone.3) …<\/p>\n

We\u2019ve been in such a period, a true superbubble, for a little while now. And the first
\nthing to remember here is that these superbubbles, as well as ordinary 2 sigma bubbles,
\nhave always \u2013 in developed equity markets \u2013 broken back to trend. The higher they go,
\ntherefore, the further they have to fall.<\/p>\n

The Stages of a Superbubble<\/strong><\/p>\n

My theory is that the breaking of these superbubbles takes multiple stages. First, the
\nbubble forms; second, a setback occurs, as it just did in the first half of this year, when
\nsome wrinkle in the economic or political environment causes investors to realize
\nthat perfection will, after all, not last forever, and valuations take a half-step back.
\nThen there is what we have just seen \u2013 the bear market rally. Fourth and finally,
\nfundamentals deteriorate and the market declines to a low.<\/p>\n

Let\u2019s return to where we are in this process today. Bear market rallies in superbubbles
\nare easier and faster than any other rallies. Investors surmise, this stock sold for $100
\n6 months ago, so now at $50, or $60, or $70, it must be cheap. Outside of the late stage
\nof a superbubble, new highs are slow and nervous as investors realize that no one has
\never bought this stock at this price before: so it is four steps forward, three steps back,
\ngingerly exploring terra incognita. Bear market rallies are the opposite: it sold at $100
\nbefore, maybe it could sell at $100 again.<\/p>\n

For Grantham’s full brilliant report, click here.<\/strong><\/a><\/p>\n

Apple is falling<\/strong><\/span><\/p>\n

The analysts are downgrading it because of aching consumer demand. I’m beginning to think the analysts re right.<\/p>\n

Every night I crawl into bed with a laptop and read the reviews on my Apple products — the watch, the iPhone 14 pro max, and the new Airpods pro. I can’t get excited.<\/p>\n

I love my watch series 7, my iPhone 13 pro max and my many generations of Airpods.<\/p>\n

I have decided to skip buying anything Apple for now. Maybe others have, too? Look at Apple’s stock over the last month (I’m short it.)<\/p>\n

\"\"<\/p>\n

Check. Check. Check.<\/strong><\/span><\/p>\n

God bless Mercedes. This is what the instruction book for my wife’s car says:<\/p>\n

\"\"<\/p>\n

This is what the fuel filler flap says:<\/p>\n

\"\"<\/p>\n

The real pressure is on the inside of the driver’s door:<\/p>\n

\"\"<\/p>\n

For four years we drove around with 34 in all four tires, just as Mercedes told us.<\/p>\n

We replaced all tires several times — until some nice mechanic said we should be inflating to 42 in the front and 48 in the back, as it said on the inside of the driver’s door.<\/p>\n

Can you believe that Mercedes would be so egregiously negligent?<\/p>\n

Check. Check. Check.<\/p>\n

Be wary of Windows 11<\/strong><\/span><\/p>\n

Microsoft is now trying to sneak Windows 11 onto people like you and me happily running Windows 10.<\/p>\n

It’s pushing Windows 11 as an “upgrade.” It’s not.<\/p>\n

Be wary of what you let Microsoft “upgrade.”<\/p>\n

Great cartoons<\/strong><\/span><\/p>\n

\"\"<\/p>\n

\"\"<\/p>\n

The military man who rules Myanmar<\/strong><\/span><\/p>\n

It’s amazing he can stand with all those medals.<\/p>\n

\"\"<\/p>\n

He’s another case of Power corrupts. Absolute power corrupts absolutely.\u00a0<\/em><\/p>\n

He hasn’t killed as many people as Putin, but he’s right up there.<\/p>\n

Don’t be fooled by today’s uptick in the market.<\/p>\n

See you this weekend. — Harry Newton<\/em><\/p>\n

 <\/p>\n","protected":false},"excerpt":{"rendered":"

Jeremy Grantham has a reputation for being super smart and super prescient.\u00a0 He has always been right on major market calls, albeit usually early \u2013 Japan, Tech Bubble, real estate bubble in 2008, reinvesting in March 2009, and now on everything. In late August, he published “Entering the Superbubble’s Final Act.“ Here’s his Executive Summary: […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-59107","post","type-post","status-publish","format-standard","hentry","category-uncategorized"],"_links":{"self":[{"href":"https:\/\/www.technologyinvestor.com\/index.php?rest_route=\/wp\/v2\/posts\/59107","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.technologyinvestor.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.technologyinvestor.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.technologyinvestor.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.technologyinvestor.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=59107"}],"version-history":[{"count":15,"href":"https:\/\/www.technologyinvestor.com\/index.php?rest_route=\/wp\/v2\/posts\/59107\/revisions"}],"predecessor-version":[{"id":59136,"href":"https:\/\/www.technologyinvestor.com\/index.php?rest_route=\/wp\/v2\/posts\/59107\/revisions\/59136"}],"wp:attachment":[{"href":"https:\/\/www.technologyinvestor.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=59107"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.technologyinvestor.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=59107"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.technologyinvestor.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=59107"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}