Man who predicted 2007 crash issues warning to anyone investing in US stocks right now
Billionaire investor Jeremy Grantham was one of the few to successfully predict the 2007 housing crash, and he's back with another warning for people who are currently invested in U.S. stocks.
Despite most of the world's most valuable companies being based in the United States, Grantham actually urges people to say away from American investments as he believes that their value is inflated and better stocks can be found elsewhere.
Of course, if you happened to be invested in a company like Nvidia before its explosion alongside the rise of AI then you will have been able to make a lot of money, but for anyone looking to get on the market right now – or switch up their investments – then you're better off looking beyond American soil according to the finance expert.
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Speaking to Steven Bartlett on The Diary of a CEO podcast, Grantham outlined his warning:
"If you have to own stocks, own them outside America. Don't own U.S. stocks. That's a nice simple strategy that you can act on," he explained.
Expanding on this unexpected piece of advice, Grantham indicated that non-American stocks are much cheaper and have actually 'handsomely' outperformed alternatives based in the U.S. despite those companies perhaps having higher-on-average valuations.
Stocks, after all, are less about the overall value of a company but instead about the growth you gain from your initial investment. It's not much use to you buying into Apple when it's at an incredibly high valuation, as you'll gain far more from a company whose shares rise from $1 to $2 compared to one that goes from $120 to $150.
He points towards 'foreign stocks' in emerging countries, European companies, and nations like Japan, Canada and Australia.
"I'm sure they'll muddle through okay over the next 10 or 20 years," Grantham adds, noting that he is "not confident that the U.S. will do that," pointing towards a belief that U.S. equities will not be in tact in 5 or 10 years.
Key to the reasoning behind this stance is the belief from Grantham and many others that U.S. stocks are currently wildly overpriced — which we've already seen the result of with the sharp drop in value for SpaceX, impacting Elon Musk's previously trillion-dollar net worth considerably.
"Back in the tech bubble of 2000, we had a 10-year forecast for U.S. equities of minus 2% a year for 10 years," Grantham explains, "and they came out with minus 3%.
"The period from 2000 to 2010, you simply lost money in the U.S. market. 10 years later you had less money than you started with, and this is a higher price market, I believe, than 2000."