Grantham isn't making that kind of argument. But the odds in favor of a melt up are closer to 20 percent as we move further into the late stages of the economic cycle. A big rally is still possible, he added.
Most big market declines have been preceded by bubbles and euphoria, but not all, according to Grantham. Some bull markets just dwindle and fade away. He has described the current bull market as an “anti-bubble.”
Grantham will be speaking at FolioFn’s SRI Investing conference in Colorado Springs on November 1.
Asked about research analysis conducted by the world's largest hedge fund, Bridgewater & Associates, claiming that 40 percent of the gains in equities since 1982 can be attributed to falling interest rates, Grantham said that the argument holds serious merit. However, he declined to place a specific number on this correlation.
On another subject, Grantham expressed amazement that the performance of his $900 million Grantham Foundation For The Protection Of The Environment ranked it in the top one percent of all foundations tracked by Cambridge. “Our foundation made a lot of mistakes,” he said.
Over 50 percent of the foundation’s assets are invested in broadly diversified venture capital. As of June 2017, a $58,000 investment by the foundation in Snap was worth over $12 million. Not bad for a value investors who disdains bubbles. The guess here is that the foundation has since unloaded the stock.
“Venture capital is what we [Americans] do better than the rest of the world,” he said, adding that S&P 500 companies have really cut back on research and development. “VC is far less overpriced than the blue-chip stocks.”