Read on Twitter
1/ Waiting for the Last Dance (J. Grantham: Jan. 5, 2021)
"Featuring extreme overvaluation, explosive price increases, frenzied issuance, and hysterically speculative behavior, I believe today's event will be recorded as one of history's great bubbles." https://www.gmo.com/americas/research-library/waiting-for-the-last-dance/
"Featuring extreme overvaluation, explosive price increases, frenzied issuance, and hysterically speculative behavior, I believe today's event will be recorded as one of history's great bubbles." https://www.gmo.com/americas/research-library/waiting-for-the-last-dance/
2/ "These great bubbles are where fortunes are made/lost, where investors truly prove their mettle. Positioning a portfolio is the most difficult part. Every career incentive in the industry and every fault of individual human psychology will work toward sucking investors in."
3/ "Tesla's market cap, >$600 billion, amounts to over $1.25 million per car sold each year versus $9,000 per car for GM. What has 1929 got to equal that?
"Any of these tidbits could perhaps be dismissed as isolated cases (they are not), but big-picture metrics look even worse."
"Any of these tidbits could perhaps be dismissed as isolated cases (they are not), but big-picture metrics look even worse."
4/ "The 'Buffett indicator,' total market cap / GDP, broke its 2000 record. In 2020, there were 480 IPOs (incl. 248 SPACs) – more new listings than the 406 IPOs in 2000.
"The volume of small retail purchases of calls on U.S. equities has increased 8-fold compared to 2019.
"The volume of small retail purchases of calls on U.S. equities has increased 8-fold compared to 2019.
5/ "Bonds are even more expensive by historical comparison than stocks.
"The P/E ratio of the market is in the top few % of the historical range; the economy is in the worst few %. This is without precedent and may even be a better measure of speculative intensity SPACs.
"The P/E ratio of the market is in the top few % of the historical range; the economy is in the worst few %. This is without precedent and may even be a better measure of speculative intensity SPACs.
6/ "More than in any previous bubble, investors are relying on accommodative monetary conditions and zero real rates extrapolated indefinitely.
"But neither perfect economic conditions nor perfect financial conditions can last forever.
"But neither perfect economic conditions nor perfect financial conditions can last forever.
7/ "Even with hindsight, it is seldom easy to point to the pin that burst the bubble. The great bull markets did not break when presented with a major unexpected negative. Those events, like 1987's portfolio insurance fiasco, tend to give sharp down legs and quick recoveries.
8/ "The great bull markets typically turn down when the market conditions are very favorable, just subtly less favorable than they were yesterday. And that is why they are always missed.
"In 1929, to be a bear was to risk physical attack and guarantee character assassination.
"In 1929, to be a bear was to risk physical attack and guarantee character assassination.
9/ "In the last few months, the hostile tone has been rapidly ratcheting up. The irony for bears is that it’s exactly what we want to hear. It’s a classic precursor of the ultimate break (together w/ stocks rising, not for their fundamentals, but simply because they are rising).
10/ "Once in a long while (1989 Japan, 2000, 2008, 2021), the market spirals away from reality. Fortunes are made and lost in a hurry, and investment advisors have a rare chance to really justify their existence. But these opportunities to be useful come loaded with career risk.
11/ "The combination of timing uncertainty and rapidly accelerating regret on the part of clients means that the career and business risk of fighting the bubble is too great for large commercial enterprises. They can never put their full weight behind bearish advice.
12/ "The nearest any of these giant institutions have ever come to offering fully bearish advice in a bubble was UBS in 1999.
"They changed their tack and converted to a fully invested growth stock recommendation in February 2000, just before the market peak.
"They changed their tack and converted to a fully invested growth stock recommendation in February 2000, just before the market peak.
13/ "So don't wait for Goldmans and Morgan Stanleys to become bearish: it can never happen.
"It is profitable and risk-reducing for clients but commercially impractical for advisors. Their best policy: always be bullish. It is good for business and intellectually undemanding.
"It is profitable and risk-reducing for clients but commercially impractical for advisors. Their best policy: always be bullish. It is good for business and intellectually undemanding.
14/ "Today’s market features extreme disparities in value by asset class, sector, and company.
"We believe it is to the overlap of Value and Emerging that your bets should go, along with the greatest avoidance of U.S. Growth stocks that your career and business risk will allow."
"We believe it is to the overlap of Value and Emerging that your bets should go, along with the greatest avoidance of U.S. Growth stocks that your career and business risk will allow."
15/ More about financial advisors as a group: https://twitter.com/ReformedTrader/status/1247968297242378240
16/ Related reading:
Thread: Magazine cover predictions, shoeshine boy tips, and other questionable calls
https://twitter.com/ReformedTrader/status/1316380442765914115
Thread: Bubble stock anecdotes
https://twitter.com/ReformedTrader/status/1312440353241264128
Thread about today's very wide value spread https://twitter.com/ReformedTrader/status/1259165422412128259
Thread: Magazine cover predictions, shoeshine boy tips, and other questionable calls
https://twitter.com/ReformedTrader/status/1316380442765914115
Thread: Bubble stock anecdotes
https://twitter.com/ReformedTrader/status/1312440353241264128
Thread about today's very wide value spread https://twitter.com/ReformedTrader/status/1259165422412128259
17/ Anecdotes from the 2020 retail trading frenzy (thread):
https://twitter.com/ReformedTrader/status/1270039014741962752
Hedge Fund Market Wizards (interviews with traders recalling the 2008 crisis):
https://twitter.com/ReformedTrader/status/1202766501956087808
What investors were thinking in 1999: https://twitter.com/ReformedTrader/status/1347579512842645506
https://twitter.com/ReformedTrader/status/1270039014741962752
Hedge Fund Market Wizards (interviews with traders recalling the 2008 crisis):
https://twitter.com/ReformedTrader/status/1202766501956087808
What investors were thinking in 1999: https://twitter.com/ReformedTrader/status/1347579512842645506
18/ Lessons from the 1999 bubble (thread): https://twitter.com/corry_wang/status/1345192546297933824
19/ Great thread/commentary on Grantham's January 5 bubble call: https://twitter.com/RudyHavenstein/status/1346878304943529991
