The Stock Market’s Speculative Frenzy
A Detailed Reading Of Jeremy Grantham’s Bubble Call
(Not intended to be investment advice)
A few weeks ago, I posted a link to legendary value investor Jeremy Grantham’s article about the current market environment. Mr. Grantham’s article is so great and courageous that it deserves a second and more in depth post.
The long, long bull market since 2009 has finally matured into a fully-fledged epic bubble. Featuring extreme overvaluation, explosive price increases, frenzied issuance, and hysterically speculative investor behavior, I believe this event will be recorded as one of the great bubbles of financial history, right along with the South Sea bubble, 1929, and 2000. — Jeremy Grantham
The previous quotation sums up the current situation perfectly. In many parts of the market, valuations have not just decoupled from underlying business fundamentals, valuations have completely blasted off and away from them (to the moon!).
It’s become very much a speculator’s market. A conservative estimate of a what an informed buyer might pay for a business no longer matters — market participants believe en masse that there are and will be no shortage of greater fools to eventually buy their shares.
