Transcription
Nothing can stop it. A 70% stock market crash by December in 2026 is coming, according to legendary investor Jeremy Grantham.
>> The time between [music] 2 weeks ago, 2 weeks from now, 2 months, 2 quarters, and conceivably 2 years. The timing is always terribly uncertain. The market's going to peak out and drop back to trend. And getting back to trend from here is uh closer to a 70% decline than a 50% decline.
>> A 70% decline you think is in order?
>> Yes, I do. And
>> This is the man that warned about and predicted the huge bubble in Japan in the early 1990s, warned about and predicted the stock market crash in the 2000 dot com bubble, warned about the housing market crash in 2008, and is now warning the American stock market has never been more overpriced throughout history, and a crash is guaranteed to come. So, in today's video, I'm going to break down exactly what he's predicting, how likely I think this is to happen, his worst-case 70% stock market crash, how we can position ourselves to benefit after these assets do crash to finally get into the market and get some assets for pennies on the dollar, and also about what other assets may outperform during this market correction. So, everyone, you know what time it is. Let's get straight into the news, the facts, and the data.
Well, okay, like I was telling you everyone, this is not clickbait. He genuinely thinks a 70% stock market crash is coming. Now, like I said earlier, why we should pay attention to him is because he's built a reputation for identifying major market excesses, including the Japanese asset bubble, the US booms that preceded the dot com and housing crashes, and his latest remarks add to an ongoing concern about elevated AI-driven valuations. That's exactly right, because with AI, there's so much euphoria, there's so much hype in the markets right now. People just seem to be paying whatever price for whatever stock it is, as long as it has AI in the ticker or the company announces that going to do something with AI. I think the latest IPO from SpaceX signals that we are close to the top with a lot of these private companies going public because of private credit markets are drying up, and so they're trying to cash out on the retail investors.
Grantham said many of the market's biggest AI winners are showing signs of speculative excess and warned that declines as much as 70% in some high-flying stocks cannot be ruled out if sentiment weakens and valuations retreat toward historical norms. Now, definitely agree there could be some companies that could fall more than 70% during this AI boom when a lot of companies just come out of the woodwork, attach AI to their name, and don't really deliver on any goods, but it is a big ask for the actual index, is the S&P 500, to fall up to 70%, but it may be more likely for the Nasdaq 100 to fall by 70% or close to that. But, in the minute I'm going to go over his latest interview with CNBC and give you the actual clips of what he said.
He said long-term market strategists also cautioned that a broad pullback in AI-related shares could extend beyond Wall Street. Falling stock prices may weigh on consumer confidence, which is already in the toilet, spending, which is already in the toilet. The only reason they're saying retail sales is going up is because things are getting more expensive, and corporate hiring, creating economic pressures similar to those that followed previous asset bubbles. And this is what we see time and time again. Before we had the Great Depression, we had the Roaring Twenties, and could the 100-year economic cycle be about to repeat? Well, it just may.
Because CNBC did a sit-down with Jeremy Grantham, and he says this is the most expensive market in American history. Now, he goes on to talk about the Warren Buffett indicator, which is something that I feature many times on the channel, and it's getting to unprecedented levels. At the time of this interview, it was around 235% to GDP. So, that's right. The reason the economy is booming so much in the US is because of all this AI spending and because of the stock market. Main Street is not winning, small businesses are going out of business, the average US worker is not getting huge pay rises, but it's because the stock market is going up. That's what's stopping the US from entering an official recession.
Because I'll go ahead and bring up the Warren Buffett indicator. We can see here over the past, you know, 100 years almost or the past 75 years, it has just gone up and up and up. But we can see here the US GDP, or should I say the US stock market to GDP, compared to 2000, it was 150% of GDP. Now we're over 220% of GDP, and according to the Warren Buffett indicator, this is strongly overvalued and it's probably why he's holding $400 billion in cash. So let's go ahead and listen to his latest interview with CNBC about exactly what is going to happen.
>> But half the time you're waiting to get back to the old high. People don't realize that because we've just spent the last whatever it is, 16 years going up. But in the long run, it's half the time. After 1929, you have to wait until 1954. After 19 72, you have to wait until uh 88
>> 1981 or 1982.
>> 80 80 A long time.
>> 81 or 82.
>> 81 or 82.
>> Yeah. And so
>> So what he's warning about here is even though the stock market has been on a huge run lately, when we do have these unprecedented stock market crashes, unlike what a lot of young investors say to look, just keep on dollar cost averaging, it'll always go up, sometimes it can take decades for the market to recover, like what happened in Japan, like what happened after the dot-com bubble, it took about 15 years for the Nasdaq to recover. And my audience here on YouTube, a lot of my audience is over 55 or already over 65, a lot of them may be retiring soon. So, they cannot take the same advice that a lot of these young YouTubers are putting in to just keep on dollar cost averaging, just keep buying the dip no matter what, to put all their money in these hugely, hugely, uh, leveraged and hugely, hugely risky AI stocks. Because if they have to retire in five to 10 years, well, they may not recoup their investment.
>> Uh, in a very real sense, I'm not sure there is a comparable, but, uh, the tech bubble of 2000 would come the closest. On the ways that are the value systems are the most predictive based, um, on the value of the stock market compared to the GDP with with modifications. Uh, this is, uh, the most expensive market in American history.
>> That's right. What he just said is what I showed you before with the Warren Buffett indicator. This is the most expensive stocks have ever been in history.
>> My guess is sometime between two weeks ago, two weeks from now, two months, two quarters, and conceivably two years. The timing is always terribly uncertain. The market's going to peak out and drop back to trend. And getting back to trend from here is, uh, closer to a 70% decline than a 50% decline.
>> A 70% decline, you think is in order?
>> Yes, I do. And and and bear in mind, we said a 70% 75% decline for the Nasdaq in 2000 in our quarterly letters, and it went down 82.
>> Wow, so that's right. He is calling it it could be in two weeks, it could be in two quarters, it could be next year, but he's saying there's going to be at least a 70% decline in many of these AI stocks. And he said before when he warned about the Nasdaq crashing the two 2000.com bubble, he thought it'll crash by 75% and it actually ended up crashing by over 80% and I think a lot of these AI companies, uh, these ones that just put AI next to their ticker, but don't really deliver, may even go to zero. I'm not talking about the S&P 500, I'm just talking about a lot of these companies that are just coming up out of the woodwork and jumping in on the AI hype.
>> market's going to collapse, but it does indicate it's expensive.
>> Well, that was my but my question, this goes to the technology piece of it and I think we're in this moment now with AI where everybody's, you know, asking the question, which is, you know, the most dangerous words in economics, is this time different? But you talk about a 60 times PE. Are we in a
>> No, no, 60% higher.
>> 60% higher PE. Are we in a in a in a in a moment now though where the technology fundamentally is different and it fundamentally is going to rewrite the rules of investing and valuations and everything else?
>> The great new inventions, railroads, are always accompanied by it's going to rewrite the rules. Internet, a huge invention, changed everybody's life. They were always accompanied by over investment and temporary collapse. Out of which the railroads changed the world, the internet changes the world. This is exactly the case today. AI is so obviously a dazzlingly important idea. Everybody knows it, don't they?
>> Yep.
>> We all know it and therefore we all want to put our money in it, don't we? So we all put our money in it and it sucks in more than you can shake a stick at and you get over investment. So everyone in the end in those situations loses their shirt. They lost their shirts in the railroad, brilliant idea. They lost their shirts in the internet. These are the three great ideas of the last 200 years and they will lose their shirts in the AI. Now out of that, bear in mind that Amazon in 2000 came down 92%. It had gone up six times, it came down 92% and then inherited the earth.
>> That's exactly right, everyone, and this is what I tried to talk about and try to warn people about every single time there's a new technology that comes out like the railroads, like the internet, yes this will be technology that changes the world, but again, it doesn't mean you just pay whatever price for it. And it doesn't mean every single company in that industry is going to make it. And like he said earlier, after the dot com bubble, Amazon crashed by over 90%. So that means there's always huge euphoria, people always over price, they always get over hyped, and then reality finally starts to hit once people see that the earnings aren't actually catching up to what the stock is worth.
Now another big warning he says is all of these companies are spending hundreds of billions of dollars on these AI data centers and chips, but what if this technology becomes redundant when a better chip comes out in a couple of years or three, four years? Well, they're going to have to, if they want to compete, they're going to have to get the new chips. And the revenue, with the amount of money they're spending, just simply isn't going to make economic sense.
>> chips today may be redundant in two years.
>> So you think there's you think there's actually a big distinction
>> I do.
>> between some of the investments that were made then? And you know, we were talking, when I was talking to Jeff, it was about uh biotechnology. And actually a lot of stuff that actually, you know, there's that bio biotech bubble, and but a lot of great things came out of it. Do you think less great things are ultimately going to come out of this sort of data center build out?
>> This is going to change everyone's life. The disagreement in opinion is more profound than I've seen in any other anything in the stock market ever, really. The Nobel Prize winners disagree, the bosses disagree, the worker bees disagree, everyone disagrees about the consequences. We're either going to be sitting on the beach getting served mint juleps by machines, or they're going to kill us accidentally or on purpose.
>> Wow, okay, that was a big statement, but I don't disagree with him. It's very, very uncertain with how this AI technology is going to pan out. There's a lot of people warning this is very, very dangerous. We need to slow down. On the other hand, a lot of these tech billionaires, or even trillionaires should I say now, with Elon Musk, are saying, "No, it's going to be a utopia. It's going to be so good. Just, you know, continue to deregulate the market. Continue to let us, you know, just expand and build all these AI data centers that are going to use all your electricity and all your water and drive utilities up. Don't worry, everything will be fine."
So, everyone, I'm sure what you wanted to know, "Well, okay, what does this mean simple terms? How likely is this going to happen? And how can we position ourselves to protect ourselves?" Well, I think this is pretty likely. I don't think the S&P 500 would fall 70%. I think a more conservative approach would probably be 30 to 40%, but, like he said, a lot of these companies, these individual companies that are hugely overvalued could easily fall 60% or 70% and a lot of people are going to lose their shirts, just like what they did with the railroad boom, just like they did in the dot-com boom. So, let's figure out what he recommends investors do to protect themselves.
Well, as part of his investment outlook, Grantham recommended reducing reliance on US equities and increasing exposure to international markets. I definitely agree. If you're all in just on US companies and you have no diversification across international markets, that's definitely a good way to diversify, which he described as more attractively valued, which is true. He also favored allocations to bonds and precious metals such as gold and silver. And hey, you know me, I love gold and silver, so I would definitely recommend that, especially with all the geopolitical risk right now, with all the central banks buying right now, and with the US continuing to lose its power across the world, less and less people are buying US government bonds, or should I say foreign central banks. More and more countries are using the yuan to try to find ways to get around the US petrodollar. So, the US is slowly losing its influence, but the US companies are becoming increasingly overvalued.
So everyone, you're definitely going to want to be cautious, especially my older viewers. Don't get sucked into the AI hype when it's already had a huge run. Maybe he'll be right. Maybe it will crash in a matter of months or a matter of next year. No one knows for certain, but what we do know is it has never been more risky to invest. The market has never been more overvalued than it is today. But everyone, what do you think about all of this? Let me know down below.
Now, if you want to learn more about investing in gold and silver, I'm having 80% discount off my program right now. You can click the top link in the description to sign up. Thanks for watching. You're awesome. I'll see you all in the next video.