The Man Who Can Predict Economic Twists: Jeremy Grantham

Born in 1938, Jeremy Grantham grew up in southern England in a fairly established family. He had a passion for economics and pursued that at the University of Sheffield. Later, he achieved his MBA from Harvard University. As for his career, he is known as an investor and more popularly known as the co-founder of GMO-LLC, an asset management company. By March 2015, his company had over 100 million dollars in assets. Aside from his professional career, he made his name in the media by predicting the dot-com crash in 2000 and the financial crisis in 2008.

In short, the financial crisis of 2008 was due to the collapse of the housing bubble and unregulated markets. Banks made it extremely affordable for people to buy houses in order to stimulate the economy. Cheap credit and laid back lending allowed for people with average to low credit scores to borrow money to buy homes. Eventually, people failed to fully pay for these homes and this housing bubble burst. Today, the financial crisis of 2008 is known as the second greatest financial crisis, with the infamous Great Depression being first.

Grantham’s career and experiences with patterns and asset bubbles allowed him to make outstanding, accurate predictions. Also, it’s notable that his studies of the Japanese economy heavily influenced his predictions. A YouTube documentary, “Principles for Dealing with the Changing World Order” by Ray Dalio explains how in reality, the economy is incredibly predictable and constantly repeats itself. Grantham’s philosophy in his predictions complies entirely with this idea.

In terms of specifics, other than noticing historical patterns in the market, Grantham’s predictions were also heavily influenced by the general public. He claims that certain shifts in the economy are “often accompanied by high levels of speculation and investor euphoria.” For example, in 2018, he asserted that there were record high prices, high valuations, and excess.

Now, however, it has been advertised that he is yet again making another prediction and this one is incredibly concerning for those invested in the S&P 500 — roughly 150 million people. According to Grantham, “the S&P 500 could potentially plummet by 50% in the worst-case scenario.” It’s up to us to decide whether we should trust Grantham’s predictions based on his apparent accuracy or whether these are simply two of many accurate predictions. If he’s right about this, we have reason to worry.