CNBC: Jeremy Grantham Says the Market is in a Bubble With 'Very Seldom Seen Levels of Investor Euphoria'

Article by Weizhen Tan in CNBC financial

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.

“We have very seldom seen levels of investor euphoria like this,” he said, referring to individual investor speculation, rather than institutional.

Grantham said individual investors “are throwing their hearts and souls into it and putting all their cash reserves into the market.”

What could burst this bubble?

Grantham cautioned that there has “never been a great bull market that ended in this kind of bubble that did not decline by at least 50%.” But he said the catalyst that triggers that drop is “much more difficult” to predict.

“It’s entitled to go tomorrow if you look at all the signs … As soon as the new president gets settled in, that would be a perfectly good time for the bubble to start deflating,” he said.

But, assuming that the world “gets lucky” and the bubble carries on, with people getting their second vaccine doses, he said it would still hit investors at some point that the world “really hasn’t changed.”

“It has all the problems it had a year ago. Global trade is declining as a ratio … global growth is getting steadily slower and slower for the last few decades. And the population profile is busting – there are fewer baby cohorts … these are all very bad for growth,” Grantham said. “Most of what happens these days in America is ....

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