In their recent episode of the VALUE: After Hours Podcast, Taylor, Brewster, and Carlisle discussed Grantham’s Everything Bubble. Here’s an excerpt from the episode:
Bill: Yeah, we can. I guess it ties in nicely, Grantham’s everything bubble. I listened to the podcast that he did with Consuelo Mack three times.
Jake: Stay away from high places. [laughs]
Bill: Well, I tried to really think about what he was saying. He’s clearly out there on this bubble call, and he’s done it pretty successfully, I guess, in the past. I think that if I can boil it all down to one variable, his argument is– Shiller came out and he said the CAPE is higher than normal, but it’s priced reasonable when you compare it to interest rates. Grantham is like, well, that’s not really– I think what he said is that, that’s not really like a fair way to look at the world. I think if you really boil it down, his argument is that the wealth effect is what everything is a bet on right now, and when that bet goes away, we’re sitting on a bubble of epic proportion. He then advocates something like, I don’t know, 70% emerging market value and 30% cash if you have the stomach for it. I’m not quite sure how the emerging market value– Uh-oh, we’re still live. It works.
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