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 dot.com 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.