Legendary investor Jeremy Grantham is warning anyone who'll listen that share markets have formed a big bubble about to burst.
The co-founder of GMO said it in January, then reiterated it again this week at an Australian investor conference.
"The Nasdaq Composite (INDEXNASDAQ: .IXIC) peaked quite a long time ago," he said this week.
"Maybe in a few months the termites might get to the rest of the market."
According to Grantham at the start of the year, the market was characterised by "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," he said.
"Make no mistake – for the majority of investors today, this could very well be the most important event of your investing lives."
Grantham is famous for predicting the dot-com bust and global financial crisis crash, so people listen when he speaks.
But one investment executive reckons the perma-bear deserves to be completely ignored.
If you're always a bear, you'll be right some of the time
The trouble with bears, according to Bell Potter director Richard Coppleson, is that they will be smug from inevitably being right some of the time.
If you keep saying every 6 months the market will crash, you are not actually predicting anything. You'll merely be correct some of the time because the market naturally goes through ups and downs.
"In an article I read about 8 months ago, several well-known fund managers were warning that dark times were coming and that this rally had gone too far," he posted on Livewire.
"But then I stopped and thought, 'Hey wait a minute — I actually read the exact same stuff from most of these fund managers 11 months ago, 8 months ago, 5 months ago and again now.'"
And this behaviour is exactly what Coppleson accuses Grantham of doing.
"It's worth realising he has been a bear for a very long time," said Coppleson.
"Given we see these falls every decade or so (1987, 2000, 2008/2009, 2020), it's only a matter of time until he is 'proven right' (and then the media will proclaim that 'he picked it')."
To demonstrate, he noted Grantham famously predicted doom for equities in 2010, 2011, 2012, 2013, 2014 and 2015.
"So if one day we see another market crash of say -25% or more, then he would be proven 100% correct and be able to claim he called it."
Coppleson said that if an investor listened to Grantham and held back for the last 10 years, they would have missed a 265% return on the US market, not even including dividends.
"Right now many are 'nervous' after his big call – but it's the same call we have heard now for at least 10 years."
Pre-COVID forces will be back
Two Australian experts thought that the current 'inflation fear' conditions would not last.
Technology and automation is taking over human labour, and that will drive prices for consumers down in the long run.
"It is important for investors to remember the long-term narrative," said Montgomery Investments chief investment officer Roger Montgomery.
"Inflation will bounce around in the short and even medium term but structurally it appears to be heading interminably down. Lower inflation appears to be a structural reality."
Forager Funds chief investment officer Steve Johnson agreed that, while the market's already seen "a violent sell-off" of growth stocks, they will not be in permanent decline.
In fact, it's a nice time to buy.
"We've got a good list of probably 8 to 10 businesses that we'd love to own at the right price that are a lot closer to it today," he told a Forager video.
"So if this goes on for a few more months, you can expect to see a few more new names in the Australian Fund portfolio."
