Tonight, We Leave the Party Like It’s 1999

A lot has been written in recent months about the similarities of the current market phase with the dot-com bubble. I personally think it’s nonsense but it is important to listen and read contrarian views. Here’s one such perspective from GMO, the stories asset management firm run by Jeremy Grantham. They’ve been conservative and bearish for a long time and haven’t been right so far. But nonetheless, do read this:

Let’s state the obvious: it is not 1999. True, stock market valuations in the U.S. are ridiculous today, but they are not yet at the absurd levels reached in the late 90s. Further, many of the largest tech companies today, the so-called FAANGS, are likely not part of the bubble problem: these companies are real and large global businesses, highly profitable, and millions, even billions, of people use their products and services every day.1 These behemoths are nothing like Pets.Com, WebVan, and other infamous Super Bowl ad buyers from the bubble era. Too, interest rates are significantly lower today and, while a debatable point, many argue that lower rates ipso facto should lead to higher equity valuations.2 So, again, this is not exactly 1999 all over again. But history never exactly repeats, it merely rhymes, as Mark Twain thoughtfully pointed out. And today, there are some eerily similar and dangerous rhymes echoing in our ears.


I followed almost all interviews by Ray Dalio…he kept saying that inflation is coming and it will be like 1929…now the markets moving up and up due to excess liquidity is a completely different scenario…even after the vaccines roll out all over the world …what then ? How will the markets behave after that ?
The way market fell in march …same way it’s been moving up for last 6 months …one question also comes like howard marks once said The FED can’t print forever …so it;s gonna be very interesting to see how the market behaves…

His most recent article….

Executive Summary

All 2-sigma equity bubbles in developed countries have broken back to trend. But before they did, a handful went on to become superbubbles of 3-sigma or greater: in the U.S. in 1929 and 2000 and in Japan in 1989. There were also superbubbles in housing in the U.S. in 2006 and Japan in 1989. All five of these superbubbles corrected all the way back to trend with much greater and longer pain than average.

Today in the U.S. we are in the fourth superbubble of the last hundred years.

Previous equity superbubbles had a series of distinct features that individually are rare and collectively are unique to these events. In each case, these shared characteristics have already occurred in this cycle. The checklist for a superbubble running through its phases is now complete and the wild rumpus can begin at any time.

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