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Jeremy Gramm has come forward warning that there is a possibility the SMP 500 index could plummet by 30%. According to breaking news that just came out, he even mentioned the possibility of a drop of over 50%. He also warned that an economic recession will definitely come next year and that U.S. housing prices will crash.
Furthermore, much to the displeasure of cryptocurrency investors, he dismissed Bitcoin as a scam. Appearing on a Bloomberg podcast, Jeremy Gramm stated regarding the benchmark stock index that he considers it reasonable if it falls below 3,000. He explained that to reach the SMP 3,000 point, it would need to drop by nearly 1 from its current level.
Gramm said he would n't be surprised even if the SMP went down to 2,000, but added that for that to happen, two wheels would have to fall off. He noted that while wheels tend to fall off as large bubbles burst, that does n't mean it must necessarily happen. However, he suggested that the likelihood of it failing to reach close to 3,000 points is low; in other words, he implied that there is a high probability it will reach that mark.
Jeremy Gramm is also the co-founder of the asset management firm GMO. As you know, he is the so-called "historian of bubbles," famous for making dramatic predictions. He is someone I also admire, and his insight is genius. He has long discussed the dot-com bubble and the financial crisis, and since last year, he has been consistently saying that a massive super bubble in the housing, stock, and commodity sectors is about to burst.
Even without Graham's talk, Wall Street experts believe that stocks are excessively overvalued and inflated. They are discussing a bearish outlook for stocks because they have historically recorded returns 5% higher than 30-year Treasury bonds. According to Graham, a significant portion of this year's S-500 rally, including Apple, Tesla, and Nvidia, was driven by these big tech stocks.
He argues that we should look toward a market that shows normal returns after experiencing a "good" bear market. He suggests that while a "good" bear market would be a drop of less than 50%, in reality, it will not shrink significantly by 50% from its peak. Furthermore, Graham states that the U.S. economy will contract soon, as consumers have effectively used up all their pandemic savings, the deadline for student loan repayments has ended, and key economic indicators continue to worsen.
He stated that corporate credit is strengthening and that the U.S. government has reached the threshold where it must now pay burdensome interest on its record-high debt. Furthermore, he predicted that a recession would begin soon, no later than early next year, adding that while he does not know whether it will be mild or severe, one thing is certain: it will go deep next year.
Known as a prominent value investor, he noted that mortgage costs have fallen and housing prices have risen in many countries due to interest rates at their lowest levels in over 40 years. He pointed out that the government raised interest rates from zero to 5% last year to combat historical inflation, causing U.S.
rates to surpass 7%, a 20-year high. Consequently, he predicted that steep mortgage rates would drive down housing prices. Additionally, regarding his harsh criticism of cryptocurrency over the past few years, he stated that Bitcoin is a very sophisticated scam.
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