Friday, April 27, 2007

Jeremy Grantham; bubble time for the entire world.

Jeremy Grantham, chairman of a Boston investment firm, argues that the entire world is in a bubble that will collapse following additional gains, which collapse will affect all sectors:
From Indian antiquities to modern Chinese art," he wrote in a letter to clients this week following a six-week world tour, "from land in Panama to Mayfair; from forestry, infrastructure and the junkiest bonds to mundane blue chips; it's bubble time!


The bursting of [this] bubble will be across all countries and all assets, with the probable exception of high-grade bonds," Grantham warned. "Since no similar global event has occurred before, the stresses to the system are likely to be unexpected. All of this is likely to depress confidence and lower economic activity.

I have begun to warn about the effects of too little equity in the real estate market. The bubble may be most pronounced in real estate, where home prices have skyrocketed in recent years and homeowners have used equity as a source of spending money.

Take steps now to build savings and equity before it is too late.

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