Episode summary
Stop Ruining My Perfectly Good Bear Market | TCAF 226
Ask The Compound
· · Hosts: Michael Batnick, Josh Brown · Guests: Jeremy Grantham
Summary
Jeremy Grantham argues that the post-2009 advance has effectively been several bull markets stitched together: first the recovery from the crisis, then the buyback era, then the pandemic stimulus surge, and now the AI capex wave. He says the first two phases were ordinary, but the later ones pushed valuations deep into bubble territory, with the great warning signs appearing when the most speculative names crashed while blue chips kept rising. He also says the 2022 drawdown in growth stocks and bonds did not fully reset the market, and that AI has interrupted what had been a perfectly respectable bear market.
A large part of the conversation is about career risk and why it is so hard to stay bearish through a bubble. Grantham says his time horizon has often been longer than the market’s, which hurt performance and client retention even when he was ultimately right. He argues that investors and committees rarely come back after firing a manager, because no one can tolerate watching a neighbor or rival get rich while they underperform.
The discussion widens to market structure and inequality. Grantham says rising profit margins reflect monopoly power, weaker antitrust enforcement, and political influence concentrated among the rich and powerful. He also says the U.S. has spent decades shifting income upward, and that the system will probably only change after an unexpected stumble exposes how fragile the setup really is.
Key takeaways
- Grantham says the current cycle has been four bull markets in one: post-crisis rebound, buybacks, pandemic stimulus, and AI capex.
- He argues the 2022 decline was too shallow to reset valuations; it took the Shiller P/E from record levels to merely badly overpriced.
- Grantham says career risk is fatal in bubbles because clients and committees cannot tolerate long stretches of underperformance, even if the call is right.
- He links rising profit margins to monopoly power, weaker antitrust enforcement, and the growing ability of companies like Amazon and Nvidia to dominate categories.
- He says U.S. inequality has been pushed higher for decades and that only an unexpected financial stumble is likely to reverse it.
Notable quotes
“it becomes this like uh stock buyback thing where almost no matter what happens companies shrink their floats and the stocks are unsinkable”
“the first two were kind of ordinary. Yeah. And the second two were deep into bubble territory”
“my own time horizon interest barely overlaps with anything in the market”
“Everyone has career risk. and and the uncertainty in a great bubble Japan and so on 2000 is longer than the client's patience”
“Bubbles are magnificent ideas that are overhyped”
How the episode opens
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Wow. Episode 226. Jeremy, is that unbelievable? Can you imagine how many times we've done this? — 226 times. — All right. — Yeah, I'm good at numbers. — No, I know. I know. Ladies and gentlemen, welcome to the best investing podcast in the world. I'm your host, downtown Josh Brown. I'm here with my co-host as always, Michael Batnik. Michael, say hello to the folks.
Hello. Hello.
Today, you are in for a very special treat. We have living legend, one of the most thoughtful highly regarded, respected people probably ever to have worked in this industry. His name is Jeremy Grantham.
Jeremy is a co-founder and long-term investment strategist of Bostonbased asset management firm GMO, where he serves as chairman of the board. He's widely known for his Thank you, folks. You're too kind.
He's widely known for his valuationdriven investing approach and his environmental philan phil philanthropy through the Grandanthm Foundation for the protection of the environment. Your team gave me even more stuff to read. Do you want to hear more about yourself or you want to hear me read more about yourself or should we start talking?
All right. AP apologies folks. I think I think we're good on the intro.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- stock market bubbles
- bear markets
- portfolio management
- wealth inequality
- clean energy tech
Watch the episode
Watch “Stop Ruining My Perfectly Good Bear Market | TCAF 226” on YouTube
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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