Source: Jinshi Data
In a conversation, the host interviewed Jeremy Grantham, co-founder of GMO and an investment strategist known for accurately predicting market bubbles.
Based on more than 50 years of investment experience, Grantham analyzed the current market's "super bubble", green transformation dilemma, population crisis and other issues, and issued a severe warning to the US stock market. The following is a selected excerpt from the conversation.
US stocks: an unprecedented super bubble
Q: You predicted that the US stock market will usher in a major adjustment, but the market has remained strong so far. The AI boom has even intensified the bubble. Has your opinion changed?
Grantham: The bigger the bubble, the higher the risk. The current US stock market has becomethe third largest super bubble in history, second only to the Japanese stock market and real estate bubble in 1989, but far exceeding the Great Depression in 1929 and the previous peak in 2021. Measured by the Shiller PE ratio, the valuation of US stocks has reached an all-time high, and the ratio of total market value to economic added value has set a record. If the behavioral model returns to normal, the US stock market needs to plummet by 50% - this is only to return to the "normal psychological tolerance range of humans."
Q: Supporters believe that AI will reshape the economy and high valuations will be absorbed by future growth. How do you refute it?
Grantham: Major technological revolutions are bound to be accompanied by bubbles! The railways in the 19th century and the Internet in the late 20th century were all like this. People invested madly in the vision of "changing the world", and in the end most people lost everything, and the survivors (such as Amazon) took over the market. AI also cannot escape this law: it will indeed subvert society, but when the bubble bursts, 99% of the concept stocks will disappear, and only a few winners will reap the dividends.
The paradox of AI: productivity improvement and social division
Q: If AI completely replaces human labor, how can the economic system be maintained?
Grantham: Assuming that all the work in the future is done by robots, who will consume? The answer can only be strong redistribution by the government. History has proven that when productivity growth benefits the general public (such as the "golden age" of the United States from 1935 to 1975), social stability is the strongest; and if wealth is concentrated at the top (such as the United States after 1975), dissatisfaction will cause political turmoil. The current general aversion of the European and American people to the establishment is a reflection of this imbalance.
Q: Does the AI era require a "big government"?
Grantham: It must! The government does not need a huge bureaucracy, but it needs to ensure that wealth flows to the bottom through taxes and welfare. Otherwise, we will face famine or revolution.
Investment safe haven: green transformation and shock-resistant assets
Q: Are there still safe corners in the US stock market?
Grantham: Stocks related to the green economy are seriously undervalued. The urgency of the climate crisis cannot be avoided - fires and floods have become normalized, and the global decarbonization process will inevitably accelerate, and related fields will usher in long-term investment opportunities. In addition, high-quality companies with high profits and low debt (such as Coca-Cola's performance in the 1929 crisis) are more resilient than cheap stocks.
Q: Are the European and Chinese markets worth paying attention to?
Grantham: Non-US market valuations are relatively reasonable and may outperform US stocks in the long run. Take emerging markets as an example. The S&P fell 22% in 2022, but they were almost flat. This differentiation will continue in the future.
Population crisis: an ignored time bomb
Q: Why is population decline so dangerous?
Grantham: The shrinking labor force directly drags down GDP, and what is more terrible is the blow to "animal spirits". When companies no longer expand and promotion opportunities decrease, society will fall into conservatism and pessimism. Japan's "lost twenty years" is a lesson learned. Immigration can only relieve pressure in the short term, but the global fertility decline is irreversible-Africa's fertility rate has dropped sharply from 6.5 to 4.2, and many European countries rely on immigration to maintain their population, but this is not a long-term solution.
Q: What is the solution?
Grantham: Social incentives must be reconstructed! The government needs to reshape fertility into a "public good" through policies such as housing subsidies, high childcare subsidies, and free education. Culturally, family values need to be re-endowed with a high status, rather than regarding fertility as a personal burden.
Gold and cryptocurrency: safe haven or trap?
Q: What do you think of gold and Bitcoin?
Grantham: Although gold has no actual output, it has been tested for thousands of years and is much more reliable than cryptocurrency. Bitcoin is a purely speculative tool, and the surge in electricity demand caused by AI has made cryptocurrency mining an environmental disaster.
Ultimate Warning: The Physical Boundary of Economics
Grantham: Traditional economics ignores the fact that the pursuit of unlimited growth on a finite planet will inevitably hit the wall of physical laws. When resources are exhausted and the environment collapses, any model will fail - this is the biggest bubble of mankind.
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