Thread by @RomanRubinstein

🔥This is a (timely) must-listen for any investor 🔥

Grantham exudes wisdom and encyclopedic knowledge of market history with each answer (great questions, @patrick_oshag!)

Some highlights in thread below (transcript courtesy of @joincolossus )

1/n

https://twitter.com/patrick_oshag/status/1364195544529317890

On bubbles going further than anyone can imagine, and the difficulty of being a value investor or growth skeptic.

Japan 1989 went to 65x trailing P/E!

2/n

Valuations are an extremely poor predictor of bubble pop timing. Acceleration and speculative behavior ("touchy-feely" characteristics) are much better indicators.

3/n

Grantham addressed these (acceleration & speculation) at length in the famous 2017 "melt-up" memo - which, incidentally, turned out to be true, just a couple years later.

gmo.com/americas/resea…

4/n

On SPACs. Blistering criticism of SPAC operators, exposing them for what they are. (cc @muddywatersre )

5/n

(In response to @patrick_oshag question of SPACs as alternatives to traditional IPO)

SPACs bad substitute for IPO process. Direct listing better.
Irony of Sir Jeremy invested in of the EV companies that went with a SPAC deal.

6/n

SPACs continued; irony of Grantham's reluctant holding of QuantumScape ( $QS) - also note his integrity calling out the bubble even though he'd benefit from staying mum on the subject until May

7/n

Every new generation of speculators think they're first to discover the joys of rapid returns... But Grantham was doing this *over 50 years ago* in the late 60s!
cf. $GME

8/n

Same thing with options: though volumes today are unprecedented (and never been available to so many people through Robinhood, etc), Grantham was trading those 50+ years ago as well.

$3K to a house & back to $3K.

Also, on the futility of investor education.

9/n

Individual vs institutional-driven asset bubbles.
Professional / institutional investors are not immune.

10/n

This time is NOT different (despite ZIRP and the Fed making it seemingly so). Approaching a Minsky moment.

11/n

Increasing hostility towards bears in late stages of bubbles. Credit to my namesake @MarcRuby for highlighting this one first.

$BTC maniacs sending ad hominem attacks to Grantham is truly rich! (after excellent @ErikSchatzker Bloomberg interview)

https://twitter.com/MarcRuby/status/1364266410755686403?s=20

12/n

Coming baby bust - excerpt from a long answer that is better listened as a whole.

As someone born in the Soviet Union, I know the "pretending to work while they pretend to pay us" joke from childhood. Spot on, Sir Jeremy!🙂

13/n

Expecting inflation back to 20th-century norms. More importantly, high asset prices are *terrible* for the young / future savers; disproportionally favor those already with assets. Leads to slower and slower compounding of future wealth.

14/n

🔥Fascinating point about market volatility and human nature 🔥

15/n

Fiat currencies are FINE!
(no need for $BTC to replace or subsume)

16/n

[Q: What to do in the market?]

Institutional investors are in a tough spot; individual investors have more flexibility!

Either raise cash, or shift into cheap(er) assets, of which pockets always exist.

17/n

[What to do continued]

Grantham recommends intersection of value and emerging markets (side note: he's recommended it for several years, and wrong so far).

Also, CASH.

18/n

Greentech & environmental policy: in favor of carbon tax.

19/20

Conclusion: Grantham not optimistic that his warnings will be heard & lessons learned. Most will dismiss him as a dinosaur who "doesn't get it".

But there's a silver lining: maybe one in a hundred will listen... I did!

Thanks @patrick_oshag for hosting this wise mind.🙇‍♂️

20/20

Correction to #4: "Melt-up" memo was Jan 2018 (not 2017) - and the timing was definitely off, as Grantham himself admitted recently (late 2017 market heat fizzled out by Feb 2018 + 20% correction Nov-Dec 18).

But look at this pic from the paper & shift 2-3 years forward 😮