Grantham: Invest Like This To Prepare For The Next Crash

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In this video we go over Jeremy Grantham's strategies for investing in this market. Yes the market may be pricey, but where are the opportunities...?

📚 Chapters 📚

00:00 - Grantham, Preparation Time?
00:25 - Opportunity In Low Growth Stocks
01:53 - Opportunity In Emerging Markets
03:28 - Mature Markets Overvalued
04:57 - Opportunity In ‘Green Stocks’
06:49 - Grantham’s Thoughts On Gold
07:30 - Grantham’s Thoughts On Bitcoin
08:35 - The FED Is Ruining Things For Investors

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Jeremy Grantham, the well esteemed value investor thinks the next market crash will rival the one we had in 1929 and 2000. You can see my previous video to see his full viewpoints on why that’s the case. But arguably an even bigger question is, how do we invest now to prepare for a crash? Are there any opportunities available, or is everything overpriced?

So Grantham thinks that in todays market the opportunity is in the low growth stocks, or the value stocks that you’d traditionally call them.
The technology, the ai, the so called 10X stocks, those are high growth, but very pricey. The stable low growth stocks, these are the ones that he thinks offer better deals.

Grantham said… “I suspect selling everything would work out just fine, however having said that there are major discrepancies as there were in 2000, between the US tech and everything else. So the low growth stocks are about as cheap relative to the high growth stocks as they ever get, so they will not have the same pain. But they are still at risk to some degree I suspect”.

What he’s saying is, when the crash comes, the ones that are going to get wiped out the most will be the high growth stocks. The so called 10X ones that have just shot up in price. The likes of Tesla, Nio, Zomedica etc. Because these are the ones that sell at high prices compared to what they bring in, in terms of profit. When consumer and investor confidence decreases, these stocks that have gone up so high, have the most to lose.

So value stocks, that’s where Grantham see’s opportunity in today’s market, note that down. The other opportunity that Grantham see’s is in emerging markets. He said “The good news is that overseas, they have not had this same huge bull market and the same overpricing that we have had. And that of course is a heaven-sent opportunity. Because you can go into the emerging markets and they are absolutely not that expensive and compared to the S & P they’re about as cheap as they’ve ever been. They’ve been this cheap 2 or 3 times and each time it’s worked out very well. So you can buy emerging markets and you can look at the intersection between those two ideas. Which is the low growth stocks within the emerging markets, and they are handsomely priced, you should be able to make a really decent 10, 20 year return there”.

So that’s interesting when Grantham looks at the more mature markets, especially the USA, he sees low long-term returns. The emerging markets however, that’s where he sees some real potential.

For those who don’t know, examples of emerging markets include India, Mexico, Russia, Pakistan, Saudi Arabia, China, Brazil. These are economies that are as per the word, emerging, they’re not fully developed, but they’re in that stage of developing and growing in terms of business.

Now the interesting thing about these types of markets, is that investors often shy away from them, even though they’re growing strongly.
Everyone wants to invest in the likes of the USA, or Canada, or the U.K, because things have been established there. But the problem with this is it elevates prices to very high levels. This is what Grantham said on the USA as a market…

“You will not make a handsome 10 or 20 year return in U.S growth stocks.
There is in the air a simple arithmetic, the higher you bid up a price of an asset, the lower the long-term return you will get. There is nothing you can do to change that equation. Every day the market goes higher, you know only one thing with certainty, that the long-term return will be less than it was the day before”.

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DISCLAIMER: It's important to note that I am not a financial adviser and you should do your own research when picking stocks to invest in. This video was made for educational and entertainment purposes only. Consult your financial adviser. * Some of the links on this webpage are affiliate links. This means at no additional cost to you, we earn a commission if you click through and make a purchase and/or subscribe. This has no impact on my opinions, facts or style of video.