- Jeremy Grantham said housing was “bubbly” in almost every major market in the world.
- He told a Morningstar conference the SPAC boom and the Nasdaq had likely peaked.
- Grantham, who cofounded GMO, also said “pessimism termites” might soon get the rest of the market.
- Sign up here our daily newsletter, 10 Things Before the Opening Bell.
Jeremy Grantham said on Wednesday that real-estate bubbles were popping up in almost every market around the world and that eventually there’d be a “day of reckoning.”
The legendary investor, who cofounded the asset-management firm GMO, also said the market for special-purpose acquisition companies, or SPACs, had likely peaked, along with the tech-heavy Nasdaq stock index.
And he said “pessimism termites” may soon get to the rest of the market.
Speaking at the Morningstar Australia investment conference, Grantham compared the state of housing markets across developed economies to the 2008 financial crisis.
“This time you look around and you find the real estate is suddenly pretty bubbly in almost every interesting market in the world,” he said.
In the US, the Case-Shiller house-price gauge soared 13.2% year-over-year in March. In the UK, house prices shot up 10.9% year-over-year in April as a result of government stimulus and people looking for more space.
“You can’t keep an asset class like housing, where the house doesn’t change, and you’re just marking it up in real terms year after year,” Grantham said. “Eventually there’ll be a day of reckoning.”
Grantham, one of the most famous investors in cheap or “value” stocks, also said the SPAC market appeared to have been a bubble that has popped.
He said an index of SPACs – blank-check companies that go public before finding a target to merge with – was down sharply from its all-time high while many of the shell entities were trading below their initial price.
He said the Nasdaq had probably also peaked in February. On Wednesday, the tech-laden stock index was about 3% off its all-time high, reached in April.
Read more: Legendary investor Jeremy Grantham called the dot-com bubble and the 2008 financial crisis. He told us how 4 indicators have lined up for what could be ‘the biggest loss of perceived value from assets that we have ever seen.’
Grantham is a prominent bear, or someone who believes prices are about to fall. Many investors have come to discount his pronouncements given that stocks have consistently hit all-time highs over the past year.
Grantham continued his bearish theme at the Morningstar conference, saying that “pessimism termites” might “get to the rest of the market” in a few months. He said there were signs of craziness, particularly in the sky-high prices of electric-vehicle stocks such as Tesla.
“We’ve turned the pressure up and up, more money, more moral hazard, and here we are at the peak,” he said.