The Financial Times has an interview with Jeremy Grantham, founder and chief strategist at GMO, on bubbles.
Mr Grantham has identified over 34 bubbles over the years based on the 40 year event based from price and volatility. At present 32 of the 34 bubbles have moved back to trend before the bubble existed, with the Japan asset bubble, Tech Wreck and more recently the U.S. housing bubble included in these. He says the U.S. housing bubble was a good example of an ideal bubble.
He says two bubbles remain in play at present. These are the Australian housing bubble and the U.K. housing bubble. He believes mortgage rates came down significantly to protect these two bubbles and now we have to wait and see what happens when interest rates rise. If they don’t come down to the trend line multiple of family income, it will be the first time in history that the bubble hasn’t broken. (I guess property speculators here, do say Australia is different and it won’t happen here!)
He also identifies potentially forming bubbles as commodities and emerging market equities. Commodities could come as another blow to Australia.
Watch the interview here – Apr-19-Jeremy-Grantham-on-bubbles.