The Bubble Hasn't Burst Yet | TCAF 110
What this covers
On episode 110 of The Compound and Friends, Michael Batnick and Downtown Josh Brown are joined by Jeremy Grantham to discuss: being the "Bubble Historian", Inflation, Modern Valuations, the Four most Dangerous Words, Tesla, Real Estate, Impact Investing, and much more! Including a few extra words of wisdom.
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More from Jeremy: https://www.twitter.com/GMOInsights https://www.granthamfoundation.org/
►00:00 - Cold Open ►08:14 - Intro ►09:12 - What is GMO today? ►10:25 - Quality in Investing ►15:49 - Inflation today vs. the 70s? ►24:01 - Being the "Bubble Historian" (NOT A PERMABEAR!) ►28:56 - Elon, "a wonderful propagandist" ►37:19 - The Next 7 Years ►54:46 - Calling a bottom ►01:05:57 - Are we in a bubble? ►01:12:36 - The Magnificent 7 ►01:15:40 - Is this time different? ►01:20:47 - Inequality ►01:23:25 - Recession risk? ►01:28:04 - Impact Investing ►01:35:36 - Favorites ►01:38:12 - A few last words
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Grantham argues that the U.S. stock market, particularly the Magnificent Seven tech giants, is in a major bubble characterized by historically elevated valuations and speculative behavior, despite fundamental challenges from inflation, declining profit margins, and structural economic headwinds including environmental degradation and demographic collapse.
- Shiller PE ratios are at their second-highest level in history (only below 2000 dot-com bubble), while real profit margins are declining and inflation remains sticky
- The Magnificent Seven have captured 70% of S&P 500 outperformance since 2010, an unprecedented concentration driven by valuation expansion rather than earnings growth alone
- Structural crises including insect biomass collapse, male sperm count decline of 60% since WWII, and fertility crisis threaten long-term economic sustainability and growth assumptions
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Environmental toxicity poses a greater threat than climate change alone: insect biomass is declining 2% annually (compounding to near-extinction within 50 years), male sperm counts in developed countries have fallen 60% since WWII and are declining 2% annually (mimicking insect collapse rate), and one in six young couples now need fertility assistance versus a rounding error 30 years ago—suggesting reproductive system damage from pesticides and endocrine disruptors.
“male sperm count in the developed world is down 60 since World War II what does that mean... a 50 decline then 10 years ago uh in 50 years has not got your attention how about a hundred percent decline in 100 years would that do it... we're out of business we're our sperm count is dropping almost two percent a year also like insects”
Quality stocks—those with high stable returns, low debt, and strong return on equity—have outperformed the market by approximately 0.5% annually over the past 100 years despite taking less risk, representing what may be the only free lunch in investing.
“the AAA stock however has a long history of returning half a percent more than the market it shouldn't it shouldn't be that of course it's ridiculous it's the only free good it completely clashes with the early versions of the efficient market hypothesis”
GMO introduced index fund investing in 1971 alongside Wells Fargo, beating Vanguard's later entry into the market, after concluding that active managers could not consistently beat passive benchmarks.
“we I had the idea of indexing and so we were one of the two firms along with Wells Fargo that introduced indexing in 1971”
Historical summers of 1982 marked the first publicity for Grantham's analysis, with a Wall Street Letter quoting him correctly predicting an 'unprecedented rally in both stock and bond market' and recommending 100% invested positioning (80% equities / 20% long-term bonds), which was precisely correct as the longest bull market in history began.
“the first time we ever got any publicity was the summer of 1982 which is the only other low that matters yeah that that was the the cycle low for 20 years and the Wall Street letter it was called now defunct but of course I have a copy and I'll early July It quotes me for the first time and it says we're close to an unprecedented rally in both the stock and the bond market and we are 100 invested”
In nominal terms, the S&P 500 is only down 5-6% from its peak, but in real (inflation-adjusted) terms it is down 15-17% because inflation of ~20% has eroded purchasing power since the peak, yet investors and media report only nominal figures, masking the true decline in real returns.
“the s p is 15 off its peak at least maybe 16 or 17. because people are not adjusting for inflation we've had quite reasonable inflation in the 20 months since the s p peaked so they can say oh it's only down five or six percent yeah BS it is down in real dollar terms and real dollars are the dollars to count”
Real estate is in a global bubble across developed markets (China, Australia, Canada, UK, US), driven by 40 years of declining interest rates that allowed buyers to bid up prices in line with mortgage affordability; as rates have risen from 3% to 7%, a painful reversal must occur, though the timeline may be extended as current homeowners refuse to downsize and constrain housing supply.
“40 Years of lower and lower interest rates push asset prices up particularly housing through the mortgage mechanism how can it not if you can afford to pay more for your house because the mortgage rates are three percent sooner or later you pay more for it yeah and so the competition bids the price up to fill the available affordability now the mortgage is a seven the same will happen in Reverse”
In March 2009, just as the stock market bottomed, Grantham published 'Reinvesting When Terrifying,' arguing that investors should overcome paralysis and deploy capital despite apparent weakness, because valuations of 22+ years of historical cheapness statistically guarantee double-digit returns over the following seven years.
“you wrote an article very timely in 2009 in fact it came out in March saying that stuff came out on the day the market hit the low there we go even more precise”
Renewable energy (solar, wind, storage) is a solved problem becoming cheaper than fossil fuels; storage costs will fall to ~10 cents per kilowatt-hour in 10-20 years, while fusion, geothermal, and naturally occurring hydrogen represent longer-term backups that will likely succeed partially, making clean energy abundance inevitable.
“there's a pretty decent chance of fusion there's a pretty decent chance of of geothermal with some of the technology from fracking... and a naturally occurring hydrogen which is a longer shot but possible some of these will work I suspect and when solar and storage it's done deal anyway and they're much cheaper than fossil fuels”
From 2002-2007 (the housing bubble cycle), emerging markets outperformed the S&P by 180 percentage points (2.8x return), demonstrating that the current 2010-present U.S. outperformance is likely cyclical and will reverse, with emerging markets representing a superior risk-reward at current valuations.
“let me point out that in the great cycle from 2002 to the housing bubble oh seven emerging outperformed by a hundred and eighty percentage points it went up 2.8 times the s p the bricks error”
Warren Buffett discovered the quality premium before academic finance formally named it, initially practicing 'cigar butt' value investing (buying cheap junk), but pivoted to buying great companies at fair prices after Charlie Munger's influence, capturing the quality factor as a major source of excess returns.
“it is absolutely it's a very big component of his excess return of his free lunch if you will right so yes and let me just say that the GMO put a lot of resources into quality always and we've been running a quality fund for a long time it has a terrific record but it isn't just pro forma”
The Federal Reserve under every chairman since Greenspan has gotten major calls wrong, created the conditions for three separate bubbles (1990s, housing 2000s, current equity/asset bubble), and relies on the false belief that it can execute a soft landing, which has never occurred in any major bubble in U.S. history.
“since Greenspan the Federal Reserve has got nothing important right right every time it turns it gets it wrong every opinion it gives about a soft Landing is wrong and their battle plan has been wrong their battle plan was push up the market to help the economy”
Inequality is a primary structural problem driven by low interest rates and asset inflation, which benefits only asset owners (wealthy) while wage earners face price inflation, creating a vicious cycle where monetary policy is used to reflate asset prices, further concentrating wealth.
“low rates driving up assets only owned by rich people is it's feeding that flame is in first place”
Oil companies (Exxon Mobil, Chevron) knowingly suppressed research and funded climate denial organizations for decades despite their own internal research in the 1950s-60s showing the dangers of CO2, constituting a betrayal comparable to tobacco companies and potentially costing humanity 10-15 years of mitigation time with crippling incremental costs.
“back in the 50s and 60s they talked about the problems that would come in the 70s their files are dripping with reports that this will be dangerous they had an ocean-going research vessel in the early 70s in Exxon and then under one of their CEOs they sell the boat they fire the scientists and the money that they had been putting into making reports on the study of carbon dioxide go into funding climate denialist organizations”
Major bubbles can take prolonged time to fully resolve: 2000-2003 was a 3-year bear market with 72% NASDAQ decline, Amazon fell 92% before rallying, followed by gentle recession with cheap housing and bonds; this extended timeframe means investors lacking patience miss recovery opportunities.
“the four Great bubbles they can take a long time the market the bear Market in 2000 was a three-year bear market and that was a gentle recession no problems the housing market was cheap the bond market was cheap it was as specific and localized as you could get and we had a three-year bear Market 72 percent decline in NASDAQ Amazon went down 92 before rallying like mad”
Since 2010, the U.S. stock market has outperformed the rest of the developed world by 70 percentage points, an unprecedented gap in history that is primarily driven by the Magnificent Seven tech giants (Apple, Microsoft, Google, Amazon, Nvidia, Tesla, Facebook/Meta), which alone account for 70 points of that outperformance; the rest of the U.S. market has only outperformed by 10-15 points.
“from 2010 until today the U.S market in total goes up 70 better earnings than the rest of the developed World it has never done that in history and it probably will never do it again but for 10 or 12 years it had this amazing 70 excess performance if you take out the fangs the rest of the American Market did better maybe by 10 or 15”
South Korea and Japan demonstrate a path to involuntary population decline through cultural loss of interest in procreation: South Korea's fertility rate is 0.8 (implying near-extinction within 3 generations), and 40% of South Korean women in their 40s have never had children, suggesting hormonal disruption and/or cultural shifts are causing reproductive disengagement.
“in other words if you look at the countries leading the charge South Korea and Japan it is clear that their societies are not interested they are not like we were 40 years ago they're not going out to bars and looking for maids right they're going home to play computer games... forty percent of their 40 year olds have never had a child in South Korean South Korea in South Korea their fertility rate is 0.8”
Citizens United and campaign finance mechanisms enable wealthy donors to make 'offers that politicians can't refuse' (spending $5 million to paint opponents as geniuses or idiots), allowing direct purchase of legislative policy without transparency, creating a system where capital effectively owns the regulatory apparatus.
“they own in a way Congress because of citizens united it is their absolute right of free speech to spend the stockholders money without revealing how much they spend lobbying con super unsuper they can make a congressman an offer he can't refuse we have five million here to point out that your opponent is a genius or an idiot your call”
The Magnificent Seven companies benefit from three structural advantages absent in the 1980 largest companies: they are unconstrained by industry boundaries (Amazon moved horizontally into infrastructure, entertainment, cloud), they operate as modern monopolies with pricing control, and they benefit from insufficient antitrust enforcement in the United States relative to Europe.
“Extremely Loud okay completely so you agree with that the other one though is more interesting to me these companies refused to play in their own sandbox and be boxed in to a specific industry they they move horizontally”
SEC should require public companies to report environmental risk and carbon footprint impacts on shareholder returns, as well-being of ordinary people takes precedence over 'irritating the hell out of reporting officers', representing choice between societal welfare and corporate convenience.
“in a long-run battle between the well-being of Ordinary People and irritating the hell out of the reporting officers of a corporation I think that's an that's an easy call okay”
The Magnificent Seven have generated revenue growth at 16% annually and free cash flow growth at 13% annually over the past decade despite being trillion-dollar companies, which is unprecedented in history and unsustainable relative to global GDP growth.
“so it's it's Apple Amazon Google Facebook Microsoft uh Nvidia and Tesla since 2000 so for a decade uh they've they've compounded Magnificent Seven revenue and then free cash flow both of which are just extraordinary given the size of these companies”
The Shiller PE (10-year cyclically adjusted PE) is currently at 29x, well above the model-predicted fair value of 16.8x, and second only to the 2000 dot-com bubble peak; this gap suggests the market is pricing in assumptions that contradict historical patterns of mean reversion.
“the model calls for 16.8 which in the long term is still pretty high but the actual Market is 29. uh 16.8 times earnings yes on a Shiller on a smooth basis okay and on a Shiller it's 29.”
A path to long-term sustainability exists if humanity voluntarily reduces population to ~2 billion (from current 8 billion) while simultaneously developing synthetic food production, synthetic materials, and renewable energy—allowing rewilding of half the farmland and providing 175 years to remediate environmental toxicity before catastrophic overshoot occurs.
“so come back in 170 years we may very well be down to a couple of billion people without a crisis where you overshoot and then everything blows up because you run out of oil and lithium and so on we may be down to two billion because we have chosen to go down to 2 billion and because we have chosen to have a toxic environment which will take a long time to fix the good news is we have 175 years to fix it”
Two small studies from Harvard and Mass General suggest pesticide residues on fruits and vegetables consumed during pregnancy may reduce fertility in offspring, as pesticides are designed to kill insects/plants/fungi and unlikely to be beneficial when ingested by humans.
“based on two very good tiny studies done by Harvard and and Mass general which is pretty cool um it's the chemicals on fruit and vegetables that you eat whilst you're pregnant okay these things are designed to kill insects plants and fungus it would not seem that surprising would it that they don't do you any good when you eat them they're Killers”
Environmental toxicity is accelerating with insurance costs tripling and quadrupling in certain areas, directly impacting economic functioning for first time, and represents the biggest issue ever faced that will dominate investment portfolios forever.
“it is impacting the economy now for the first time it is driving insurance rates not up but tripling and quadrupling in certain areas and that begins to have a real bite it is the biggest issue that we've ever faced it will dominate investment portfolios forever”
The leading economic indicators index has fallen for 17 consecutive months and continues to deteriorate, combined with consumer confidence surveys showing every income group (rich, medium, poor) reporting they feel worse off than a year ago, suggesting a 70% probability of recession in the next 18 months despite statistical GDP growth.
“there was a recent survey we listened to uh driving into Boston on on public radio where they asking people how do you feel compared to last year every category every category Rich medium poor feel nervous and less well-off than they were last year regardless of the data”
In every major bubble in U.S. history (1929, 1972, 2000, 2021-22), there is a unique characteristic where the highest-beta speculative stocks (which should outperform in bull markets) actually decline while blue-chip stocks continue rising, creating a 'primal scream' signal that the bubble is about to break.
“if you look at the great Bubbles and nothing but the great bubbles what you find is the most interesting distinction is one that is unique to them and nothing else it never happens anywhere any other time and that is the leadership of the market going up you know 70 80 in a year starts to go down as the Blue Chips continue up”
The market's PE multiple is driven primarily by investor comfort, which correlates with four factors in order of importance: (1) inflation expectations (loves stable 2% inflation, hates >2% or volatility), (2) profit margins, (3) growth stability (prefers +3% stable over +9% volatile), and (4) growth rate itself, explaining historical market behavior from 1929 to present.
“the market is a coincident indicator of comfort what makes the typical portfolio manager feel comfortable Apple and number one it loves low inflation it hates High inflation okay it likes two percent stable inflation it does not like to see it bouncing around... secondly it loves High profit margins... thirdly way way down in third place is the stability of growth”
Elon Musk generated purchasing power out of thin air by using charisma and stock sales to fund Tesla's growth, talking up the stock valuation ahead of any underlying earnings, then selling additional shares at inflated prices to fund factories, demonstrating exceptional capital allocation but also creating a massive bubble-like dynamic where valuation led development rather than the reverse.
“if you say how did it happen it was such a wonderful propaganda that he talked the stock up way ahead of any possibility and then he saw lots of stock yes got a lot of asset talk the stock up again yes sold a lot of assets over and over again until he had generated out of thin air a massive amount of real buying power which went straight into these Mega factories”
Inflation type matters for market outcomes: the 1950s post-war inflation (money supply expansion from troop returns and family-building) showed normal market behavior, whereas 1970s stagflationary inflation caused severe market underperformance, suggesting inflation driven by expansionary demand may be less damaging than persistent cost-push inflation.
“you had an inflation after World War II where we had spent tons of money and then the troops came home everyone started the family at the same time everybody needed a house everybody needed a car you had inflation in that period but it had a happy ending for the stock market I don't think we had a meaningful decline in the 50s I think we just worked off that inflation”
Most investors were fired in bull markets (by lagging benchmark) rather than in bear markets (when clients freeze and remain patient); this means that active managers face pressure to chase performance during bubbles and are punished for early repositioning, creating a structural bias toward buying overvalued assets.
“people think you get sold you get fired if you do badly in a bear Market that is nonsense in a bear Market all the clients freeze and then eventually pick their way through the rubble you get fired in Bull markets if you lag a bull market they are active if you like a bear Market they are paralyzed greed is more powerful than fear in terms of flows”
The investment implications of involuntary global population decline are significant: a world with 4 billion fewer people to sell iPhones to is incompatible with current equity multiples, which are priced for infinite growth in addressable market and consumption.
“a world where there's four billion people fewer to sell an iPhone to is not great for multiples right yeah this is the point where David Rubinstein two weeks ago”
Risk of regulatory action against Magnificent Seven represents the most likely mechanism for valuation compression, as governments may restrict their practice of acquiring competitors in infancy and preventing competition, with antitrust enforcement becoming political response to inequality concerns.
“maybe it's a regulatory change where they stop that activity that's the answer to Jeremy's question that is the answer to your question uh I think over the last couple of days it's shameful by the way that they are allowed to to Rampage I think they should have some leeway but to the extent that they're buying up everything if they are that that would be a shameful State of Affairs”
The Nifty 50 stocks of 1968-1972 experienced an abnormal lack of business failures in the 15 years prior (1953-1968), which created a false sense of security and justified valuations divorced from risk; once this anomaly reversed, the period 1973-1988 saw major casualties including Avon, Xerox, Eastman Kodak, IBM, and Polaroid suffering major declines.
“there was an abnormal lack of failures in the 15 years running up to 1968-72 hence the lack of fear in pain hence the light of fear if you then look at the next 15 years you find Avon whoops Xerox whoops Eastman Kodak whoops IBM half whoops”
The investment industry has a structural commercial imperative to be bullish at all times because bullish positioning maximizes returns over full cycles, meaning institutional investors should never expect a major investment house to be bearish regardless of valuation conditions.
“given half a chance the investment business of course has a commercial imperative it absolutely has to be bullish it doesn't make any sense to be anything else it maximizes the return over the full cycle and that's how they do it every time they're bullish so you never expect a major investment house to be bearish”
Small frackers starting companies to meet market demand for oil represent normal capitalism and cannot be blamed for pursuing investment opportunities, whereas major established companies (Exxon, Chevron) with decades of climate knowledge that chose to suppress research deserve accountability.
“if hey if you're a small fracker you you start a company people want your product yeah that's okay that's capitalism it's expecting a lot for you to forego an investment opportunity what I'm interested in is what happened at Exxon mobile and the big guys Chevron”
Bubble and recession analysis receives outsized attention relative to its true importance when compared to existential environmental and demographic risks unfolding currently that will impact children and grandchildren, representing misallocation of intellectual focus in investor community.
“when we sit here talking about Bubbles and recessions and what do investors like and dislike we're like Nero fiddling while Rome Burns yeah we have issues here that are imminent that are breaking not for our great-grandchildren for our children for you guys it's already impacting the smooth working of a global system”
Carbon fiber and other synthetically produced materials using cross-laminated microbial-produced sludge could replace concrete and steel in construction, eliminating massive CO2 producers and reducing structural material footprint while maintaining engineering properties.
“we're pretty close to being able to do the same with materials in other words like carbon fiber is stronger than Etc cement and steel but to produce a material synthetically with well-trained microbes which is kind of state of the art and then you laminate your cross laminated sludge and and you build ings with it and you eliminate the need for vast quantities of concrete and and still which are huge CO2 produces”
Exit polling in a major election (70,000+ respondents) showed unanimous agreement across all demographic groups (Hindu, Christian, Republican, Democrat, rich, poor) that 'this country needs to be saved from the rich and powerful,' indicating widespread recognition of concentrated power regardless of political affiliation.
“I got the printout which was as long as this table it had every conceivable category it had American Hindus you know 275 and it had armies of questions and everyone split on red blue lines okay big deal surprise surprise yeah yeah what else no but one question they all agreed whether they were Hindus or Christians Republicans Or democrats rich or poor and that was this is the exact phrasing of the question this country needs to be saved from the rich and Powerful everyone”
Green venture capital is attracting exceptional talent (25% foreign founders) who are driven by impact as much as profit, representing a fundamentally different breed of capitalist with genuine commitment to solving climate/environmental problems rather than traditional profit maximization.
“the quality and and their Drive is is impressive these these are not your ordinary capitalists they seem at least equally driven but they seem to really value that what they're doing is building something important I I hadn't expected that they are just simply terrific people to be around”
The composition of the S&P 500 has changed significantly over time (from industrial/energy/banking in 1980 to technology/telecommunications in 2024), and in every bull market participants argue that current holdings deserve premium valuations because they are 'new and better'—but this argument, while seductive, has proven false each time when data is reanalyzed.
“every bull market people always say isn't it true that the composition of the s p has changed yes it always has and and if you regrade it this way doesn't it make it cheap yes every single bull market of my career that argument has been offered it is a very tempting okay seductive argument but can it also be true this time”
ESG (Environmental, Social, Governance) investing has some merit in the quality factor (good governance/environment correlates with lower leverage, fewer failures, better quality companies) but has been co-opted as a fad by Wall Street, with large asset managers (BlackRock, State Street) closing ESG funds because they are not commercially viable rather than because the principles are unsound.
“I think there are some very interesting ideas lurking in the ESG and the main one is quality that if you have good behavior yes and G and good e You're simply higher quality better company probably you're a slightly better company yeah and you're worth a little notch on the quality a factor and that is one of the things we do at GMO and I have complete faith that that is a sensible thing to do”
The original Microsoft investment in GMO's dividend discount model was classified as 'value' (buying it at 6x book when the model suggested 9x book), yet it performed as a momentum stock through the 1990s, demonstrating that combining a quality-adjusted valuation model with a momentum overlay captures both value and growth dynamics.
“Microsoft was The Sweet Spot in our dividend discount model and from the time it came in the portfolio all the way through the mid and late 90s it was a value stock in we had two components in our Quant products a value stream and a momentum stream okay and it was the most attractive decile of value because our model unlike priced book and PE and all that junk said Microsoft has such amazing price control a complete Monopoly by definition”
Grantham did not anticipate a bubble in 2016 but changed view in late 2018 writing 'Brace Yourself for a Probable Near-Term Melt-Up', and finally identified bubble characteristics in late 2020 post-pandemic when mania appeared (NFTs, meme stocks, QuantumScape), distinguishing between price elevation and bubble behavior which requires both elevated price plus crazy behavior.
“I was deep into thinking despite what I'm accused of and you can see it in my quarterly letters including in their titles I was arguing it's different it's more it isn't a bubble yet I debated the topic of we are in a bubble in 2016 I took the no it's not a bubble and the other side was yes there was a bubble um so I I was not looking I was into this time is different The Surge that took place in late 2020”
Pesticides versus plastics as sources of toxicity: pesticides represent greater threat because they are intentionally designed to kill insects/plants/fungi, whereas plastic contamination is incidental leaching of chemicals, making pesticide exposure orders of magnitude more concerning from toxicology perspective.
“Plastics are not good for you and they they have nasty chemicals but that's almost a coincidence isn't it you you you get some leaching out of a plastic that is deliberate but pesticide is deliberate it's an it's a side it's trying to kill”
The Russell 2000 (small-cap) index has the highest debt levels ever, negative earnings for a large portion of components (60%+), and represents 'zombies' that will be destroyed in a financial crisis or bad economic times, making it a safer short than individual high-beta stocks (which could go up 6x and bankrupt the shorter).
“the Russell 2000 which is trailing both in valuation and in past performance Etc like what what gives you what what gives you the idea that you'd rather be short the smaller stocks in a nutshell if you short these kind of stocks you will have a short but exciting career right okay because sooner or later yeah one or two of them will go up six times and you are asked for six times the money you put up okay and you are out of business that will not happen in the Russell 2000”
Modern monopolies like Amazon benefit politically from consumer welfare because prices remain low, creating no constituency for antitrust action despite market power concentration, meaning political incentives are misaligned with breaking up monopolies that deliver consumer benefits.
“there is no consumer complaining to Congress damn it the goods are too cheap on Amazon it's the type of Monopoly that favors consumers and that's why it's had the runway it's had politically”
401(k) automatic contribution structure and guaranteed monthly buying of U.S. stocks creates structural flow advantage for U.S. equities versus international equities, explaining some portion of valuation divergence independent of earnings, though this advantage has existed for decades yet divergence only emerged post-2010.
“we have 401ks here we have automatic guaranteed buyers every month for US Dollars these differences have always existed right and until the other day we used to track pretty damn well okay it's only since 2010 that we've had this deviation caused by earnings”
Grantham made a $625 million private investment in QuantumScape (a solid-state battery company) nine years prior; when it went public via SPAC, it surged from $40 to $131 (>3x investment) before collapsing to $5.10 by December, illustrating the bubble behavior of high-beta spec stocks and the cruelty of being forced to hold through irrational valuations.
“I invested in Quantum skate nine years ago... fast forward quite a few years and it comes as a SPAC... it sits back secondly it's on the market thirdly it is having no trouble explaining that it's still four years away from having any sales yeah it's experiences it's a brilliant research lab that finds itself in the market as a SPAC four years before having a product so what happens it's ten four times my investment yeah better than a kick in the pants two months later it's 131”
GMO's foundation fund portfolio is structured as 75% early-stage venture capital and 25% hedges (Russell 2000 short positions, credit default swaps), specifically betting on downturn while maintaining exposure to innovation, reflecting Grantham's view that venture capital will benefit from lower valuation multiples and re-concentration of capital to productive use.
“the foundation is 75 early stage venture capital and 25 hedging it as best we can using the Russell as the Hajj you mean among other things yeah okay credit default spots in in case this thing really becomes nasty etc etc”
GMO's Benchmark Free portfolio is significantly underweight U.S. equities (versus their market weight) and overweight emerging markets by 2x, reflecting a contrarian bet against the 70-point S&P outperformance since 2010 and positioning for eventual mean reversion.
“I want to give credit to to the people who are because I might disagree with with the assumptions and I I sure hope they're wrong but you guys are or they those guys are not just talking the talk they're walking the walk if you look at the Benchmark free um portfolio which is you know billions of dollars in there the United States is is you are very or they are very underweight the United States they have twice as much exposure and emerging market stocks than they do in the United States”