Jeremy Grantham says US market is now in bubble phase

[hiriskpaul]

Yes, I think the one line summary is that the superbubble has been pricked but not yet fully deflated.

As far as I can tell, his latest public discussion of this was in August:

https://www.gmo.com/americas/research-l ... final-act/

There was then a flurry of third party reporting on what he said. I think this pensioncraft video is a good description of JGs thinking at the time:

https://m.youtube.com/watch?v=zXJewIRzSMU

It is a particularly pivotal moment for me because I have decided to become much more passive. In particular, I have decided to stop trading options. I had a great year in 2022, but it is very time consuming and somewhat addictive. I don't want to spend so much time on financial matters while I am physically and mentally fit and able to enjoy other activities. I am also cognisant of Warren Buffet's quote "Never risk what you have and need for what we don’t have and don’t need". I could lose a substantial amount of money on options if a major shock came along at the wrong time.

The stopping of option trading has released a large amount of cash that I will passively invest. The question is, what should my asset allocation be? It is good to hear arguments from people like JG as otherwise my instinct would push me towards a very high allocation in global equities.

[1nvest]

I intensely dislike these long long threads. This one started almost exactly two years ago and the headline is now well out of date.

The outcome would also suggest that my view about most commentators is about right. Occasionally they will be correct but to use them for any long term guidance is not very sensible.

Nice to be able to look back at the first post(s) however, for instance since his call, over the next two years US stocks have declined at -6% annualised real.

[1nvest]

The stopping of option trading has released a large amount of cash that I will passively invest. The question is, what should my asset allocation be? It is good to hear arguments from people like JG as otherwise my instinct would push me towards a very high allocation in global equities.

Split initially equally between US$ (hard currency/cash), Gold, FT250 (accumulation fund).
Draw 3% SWR (RPI is OK, so looking like a 17.5% increase this calendar year)
and a historic high probability you'll see that last 30+ years.
Just draw SWR from whichever is the higher valued at the time - other than that no other 'rebalancing' required.
Sleep well with so many dollar bills under the mattress.
Two thirds with no counter-party risk.
Bank runs/queues avoided
Fiat currency failure fears avoided
Greatest risk is not getting to live another 30 years to see how well it worked out
Worst case was a mid 1980's start date, when gold had spiked to pretty high overpriced levels (Dow/Gold down at near 1.0 levels), where that covered 31 odd years before all having been spent. Other than that you more often ended 30 years with 50% or more of the inflation adjusted start date portfolio value still available (for synthetic data extending back 120+ years (since 1896)).