Jeremy Grantham - Fed Creating a Bubble

[Terrel L. Shields]

http://www.bloomberg.com/news/2010-...-may-make-stocks-dangerously-overpriced-.html

CNBC had an interview of Jeremy Grantham today and he said that the Feds asset purchases would make people take huge speculative risks in an effort to get return and that the end result will be another pop of the bubble which will hurt many people very badly.

Grantham is renown for calling the Japan "lost decade" in 1989; predicting the Dot.com Bust; and in 2000 said stocks would have negative returns for the first decade of the century. He also predicted the housing bubble would be global in scope.

For the short term, he thinks we have 2011 to see gains in the stock market but at some point, the bubble has to burst. 2012 is his target date. But he believes that super-low interest rates limit the FED's ability to control the crisis. Long term he sees the U. S. pretty much losing a decade or more with sky high commodity prices and boom/bust Bond and stock cycles.

Pretty gloomy outlook... sad to say, I agree.

 

[Randolph Kinney]

I believe that makes him agree with us on the out look. He has media recognition so he gets the glory.

It is all about income and deficits. The FED and the government are trying to give away money to raise the income level.

At some point, people will take their savings and buy stuff rather than trust the government and banks. Another debacle in the markets will finish off any faith in the markets.

Just look at the withdrawals from 401k and IRA accounts.

 

[Meandering]

Wait until people are stuffing their mattresses with their money instead of using the banks.

It'll be the end of it all.

 

[Terrel L. Shields]

Just look at the withdrawals from 401k and IRA accounts

yeah, but who is withdrawing it? The people who own the accounts or the people who are mismanaging those accounts.

I never cease to be amazed at brokers who counsel you to buy into stocks that are rapidly rising but any stock that is falling, they want you to sign waivers. I have never made a dime on a stock that was going up up up... It always peaks. It is stocks that are cheap that make money, not expensive stock with three digit multiples.