Billionaire investor Jeremy Grantham: This is the most expensive market in American history

11/10/2025 11:19:50 PM	short term cautious up	6 days later	-2.87%	-1.44%

Introduces Jeremy Grantham as a legendary bubble caller, co-founder of GMO ($85B AUM), and author of 'Making of a Perma Bear'. Asks if we are in a bubble and how to distinguish understanding economics from calling timing.

Rick

Jeremy Grantham

Defines a bubble statistically as a two-sigma event (expected every 44 years). Of 26 such bubbles identified, all 26 broke all the way back to the pre-existing trend. Some went higher (Japan to almost three sigma) before collapsing, making timing difficult for clients.

The definition is precise and nerdy. The problem is that bubbles can become painfully higher than the initial two-sigma threshold.

Acknowledges the timing problem but notes that being a perma bull has paid shockingly well over the last 100 years compared to being a perma bear.

Rick

Jeremy Grantham

Agrees the economy rises long-term, but half the time investors are waiting to get back to the old high (e.g., 1929 to 1954, 1972 to 1982). The last 16 years of rising markets are not the norm.

People don't realize how long recoveries can take because of the recent bull run.

Asks for a comparable historical period to today's market.

Rick

Jeremy Grantham

States the tech bubble of 2000 is the closest comparable. Based on value systems like stock market vs GDP, this is the most expensive market in American history.

Not sure there is a perfect comparable, but 2000 is closest.

Asks if being the most expensive market means it must go down, or if it could continue rising for many years.

Rick

Jeremy Grantham

Predicts the market will peak sometime between two weeks ago and two years from now, then drop back to trend. The decline from here to trend is closer to 70% than 50%. He notes he predicted a 75% decline for the Nasdaq in 2000, and it fell 82%.

Timing is always terribly uncertain.

Brings up Grantham's 2021 'super bubble' call predicting an imminent crash across stocks, bonds, real estate, and commodities, and a 2023 collapse prediction.

Rick

Jeremy Grantham

Clarifies that 2021 was one of only two times he clearly said 'it's now'. Other times he said the market is overpriced. The 21st century has been overpriced by 20th century standards.

Denies making a collapse prediction in 2023.

Asks if Grantham was ever bullish through the 2010s bull market.

Rick

Jeremy Grantham

Admits he was almost there in 2009, posting a one-pager called 'Reinvesting When Terrified'. But from 2010 until today, the P/E has averaged over 60% higher than the prior 100 years. This indicates the market is expensive, though not necessarily about to collapse.

Nobody else was touting the market at the exact bottom in 2009.

Asks the key question: is this time different due to AI? Could technology fundamentally rewrite the rules of investing and valuations?

References the most dangerous words in economics: 'this time is different'.

Rick

Jeremy Grantham

Argues that great new inventions (railroads, internet, AI) are always accompanied by overinvestment and temporary collapse. AI is a dazzlingly important idea, so everyone wants to invest, leading to overinvestment. People will lose their shirts in AI, just like in railroads and the internet. Amazon fell 92% in 2000 before inheriting the earth.

These are the three great ideas of the last 200 years, and all led to bubbles.

Mentions Jeff Bezos's view that bubbles may be required for great innovation and progress.

Rick

Jeremy Grantham

Acknowledges the fiber optic cable analogy (overinvestment that was eventually used), but notes a key distinction: chips today may be redundant in two years, unlike long-lasting fiber optic cable.

This suggests the current overinvestment may be more wasteful.

Asks if less great things will come out of the current data center buildout compared to past bubbles like biotech.

Rick

Jeremy Grantham

Concludes that AI will change everyone's life, but the disagreement about its consequences is more profound than anything he has seen. Nobel Prize winners, bosses, and worker bees all disagree on whether AI will lead to utopia or destruction.

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