‘Big Short’ investor Michael Burry warned the biggest market bubble in history would end with the ‘mother of all crashes.’ He just hinted the collapse is now underway.
Burry has suggested the S&P 500 could plummet by another 53% before bottoming out.
The Scion Asset Management chief’s stance seems to be that the market boom is over, stocks are headed downward, and any rallies will prove short-lived.
Bear-market rallies are a common feature of ‘superbubbles,’ says legendary investor Jeremy Grantham
A “superbubble” appears dangerously near its “final act” after the recent rally in U.S. stocks lured some investors back into the market just ahead of potential “tragedy,” according to Jeremy Grantham, the legendary co-founder of Boston-based investment firm GMO.
He also highlighted the “speed and scale” of other bear-market rallies.
“In 1973, the summer rally after the initial decline recovered 59% of the S&P 500’s total loss from the high,” he wrote. More recently, in 2000, Grantham wrote that “the Nasdaq (which had been the main event of the tech bubble) recovered 60% of its initial losses in just 2 months.”
Powell seems to be willing to crash the market to bring inflation to heel.
How sanguine is ye that we won’t have a 50% decline of the S&P 500?
50% wouldn’t be so bad under the circumstances. Recovery time is what upsets people (A little investor’s humor there.)
To wit: To return to trend we’d have to get down to about 2800. We’ve already overcompensated for the COVID crash. Look at the chart. Ridiculous! These things never go in a proper spot-on well-behaved manner. So, you have to figure dipping a bit below trend to bottom out then return to normal programming. The high was in … Jan…? right at ~4800 on the S&P. So, 2400-2800 give or take is hardly out of reasonable projections and one doesn’t even have to do any hand wringing over bubbles and such.
A 50% drop (to 2400) would take us back to only about 2017 levels and not as low as the COVID low. The next huge generational bottom that takes out 10-15 years of gains should come in about 15 or so years and that will take us down to whatever the low the current Bear reaches. That’s not me crystal balling, that’s just what the charts show historically and what some esteemed investment sages (pundits) have noted
That is because we are more free market oriented than after the great depression.
I think more like 13 years between fails.
Yes, you can’t exactly time these things with a stop watch or even a calendar.
Suffice it to say we will not see a 10-15 year bottom this time. Nobody sees the 2009 bottom happening. The take-away is: Bottom in 2023 maybe 2004. Then make a lot of money for 10+ years. Get out again for a few more years.
At 65 with major heart heart problems I wont see the big one but am looking forward to making some money on this one.
Certainly from the standpoint of these charts (whose prices include dividends) the market has a way to go to even reach its 30-year average…much less going below that average:
Good post, tj. I just cross-posted it to the Destiny Solutions Board.
Coming back atcha, two crossposts from the Destiny Solutions Board.
End of month, August 2022, look at the $SPX and its 11 Sectors. (The chart views here are static, that is, they are not updating for today. They show what each sector and the S&P 500 looked like on monthly charts end of day yesterday, 31 Aug 22:
End of month, August 2022, look at the indices, energy, treasury yields, precious metals, certain ETFs, etc. Also contains links to see the weekly/monthly charts for all of the symbols listed, which are also updating during the day. Since these are on my public charts list on stockcharts.com, you can see updated weekly and monthly charts for the symbols listed:
Oh, I misread you. We will see the big new low this time. Maybe not as low as 2009 or nearly as dramatic but a similarly marked low. We are sliding away because of corporate IRR.
Oh, I misread you. We will see the big new low this time. Maybe not as low as 2009 or nearly as dramatic but a similarly marked low. We are sliding away because of corporate IRR.
Ok. I don’t mind being disagreed with if it’s for good reasons and hopefully I learn something
I am looking simply at charts and cyclicality. Don’t confuse just a big crash with one of those big crashes. 1929 killed off 10+ years worth of gains (can’t get data going back further) 1937 did not. 1942…9 years. 1970… 7 years. 1974… 12-13 years. 1982, a close call. 11 years I think. 2003… only 6 years. Then 2009… 12-13 years. Seems like The Big One actually likes to skip a Bear Market with an intermediate drubbing in between. 1933-1974 was off as you said, from massaging market mechanics due to the Depression, plus I figure, WWII held things up about 5 years pushing it all into the 40 year time frame.
In all of this I did not count 1987 as that was neither an economic event and as a stock market event warranted maybe only a 10-15% correction but was abetted by the 8086 machines. I also did not count the COVID crash. Again, it was totally an exogenous event and recovered even before covid itself got all that bad.
Why do you think we will see 2009 level low this time?
1)I’m not predicting that big a dive but apparently some insider types as noted
earlier, are. I see it as a possibility only. My observation of a 2800-ish bottom is based only on the visible trend which is not the same as the average altho maybe it’s kinda like-an average but not really.
2) I’m using trend from most recent major low, not a sample sequence of years. You’re using average or so many years. It will almost certainly violate the average. That’s how averages are made. That’s why we’re noticeably off. Who will win…?!
Since 1981 we have deregulated here states side. We can not use prior charts.
The process of deregulation really led from Clinton’s time into Bush’s. There has been no structural redress.
There is no economy without the government. Whatever structure is in place is determinant. I am not asking for a single change. But the outcome will be very similar to 2009. Just played out very differently across China, the US and EU. The parties will be in a different order in 2035. Currently it is the Chinese meltdown. But our corporate IRRs are in deep trouble. It is not just the FED raising rates.
Since 1981 we have deregulated here states side. We can not use prior charts.
The process of deregulation really led from Clinton’s time into Bush’s. There has been no structural redress.
There is no economy without the government. Whatever structure is in place is determinant. I am not asking for a single change. But the outcome will be very similar to 2009. Just played out very differently across China, the US and EU. The parties will be in a different order in 2035. Currently it is the Chinese meltdown. But our corporate IRRs are in deep trouble. It is not just the FED raising rates.
I’m going to assume you know more than me because most people do. As far as We can not use prior charts. My understanding is: You can say this about almost any time in history. Just point to something that happened in the past 20-30 yrs and claim/believe it has changed things. And yes, Ok, I guess they do change something. But the general belief (among marketeers, I’ll call them) is The cycles and trends in economies persist. No matter what. They might get disrupted by a major event but they do not simply go away or fundamentally change. Not saying this is my “religion” but plus ça change plus c’est la meme chose seems to be the rule. In fact I remember reading about a famous Russian economist (name escapes me now) who was hired by Stalin to prove capitalism was a failure. He noticed certain trends and cycles in economic systems that not only affect capitalism but would also affect a communist economy and any other system. So, Stalin had him killed. His work must have been pretty good
I’m leery of throwing il bambino out with the bath water just because… we used to not be regulated… then we were… then we weren’t…Throw in China problems, yes, they’re big now, not big 50-100 yrs ago, but what does that really mean?
BTW: What is corporate IRR? Internal rate of return?
I do not read Grantham’s pronouncements. I seem to only see him mentioned when he is warning of major market downturns. Has he ever issued a bull market prediction or a major market upturn declaration?
I do not read Grantham’s pronouncements. I seem to only see him mentioned when he is warning of major market downturns. Has he ever issued a bull market prediction or a major market upturn declaration?
I could find none. But in reading about Grantham it seems he is a value investor. Likely he is uncomfortable whenever the market is overvalued.
He did predict & avoided Japan 1990’s, Us 2000 & 2008-9 bubbles.
Of course, it takes time for bubbles to burst so he loses money for that time he is out of the market prior to bust; but he regains as he buys after the collapse. Also during the highly valued stock market prior to the burst he loses investors/assets in his funds. Folks cannot to miss out while market booming even though it is overvalued.
It might behoove folk’s to Liston to Grantham. It is a choice though. I understand investors in Blurry’s Scion hedge fund were infuriated when he was shorting the mortgage market & they could not pull their money out I guess because contractual reasons. Their tune change when the real estate market burst.
