GMO Founder Grantham: AI Intervened to Prevent a Crash That Was Bound to Happen, but 'Every Feather Will Fly to Ground'

Jeremy Grantham, the legendary investor who accurately predicted the 2000 internet bubble and the 2008 subprime crisis, recently underwent an in-depth interview with Stephen Clapham, the founder of the well-known investment research institution Behind the Balance Sheet. He made a series of incisive judgments on current market valuations, the frenzy of AI capital expenditure, and the long-term risks facing the globe.

In Grantham's view, the U.S. stock market in 2022 had all the conditions for a bubble burst— the S&P 500 falling by 25%, the "Seven Tech Titans" dropping by 40%, and the bond market experiencing the most brutal year in history. "But then, ChatGPT was born. This is the first time in history that a bubble has been interrupted by such a powerful force." He stated that the massive capital expenditure brought by AI— second only to the railway construction boom of yesteryears— directly interrupted the recession that should have happened, pushing the stock prices of tech giants to nearly double, and ultimately driving the entire market to new highs.

However, Grantham warned that the current market bubble has surpassed that of 2000. He cited the ratio of the total market value of stocks to GDP, stating that this is the most expensive market in recorded valuations. More dangerously, the market is making the "worst case of double counting" mistake— multiplying record high profit margins by record high price-to-earnings ratios. "At the top of every great bull market, traditionally the worst times follow. Don't kid yourself." He clearly prophesied that if the bubble bursts, the S&P 500 will fall by at least 50%, "as with all great bubbles".

Regarding why mainstream institutions never issue bubble warnings, Grantham offered a sharp explanation, and quoted Keynes: "Never fail alone." He said that spokespeople from large institutions like Goldman Sachs and JP Morgan would never tell you to exit the market because it is an extremely poor business strategy— if the judgment is made too early, the patience of clients is often shorter than the uncertainty of the market, and you will be fired before being proven right.

At the global macro level, Grantham characterized the current environment as "technically the worst period in history." Climate change has evolved from a potential threat into a tangible economic drag, with an estimated annual loss of 0.5% of global GDP, and surging insurance costs, even disappearing, are impacting the core pillars of capitalism.

He also brought up a topic that is more overlooked by the market— the collapse of global fertility rates. He cited data stating that human sperm count has fallen from a historical benchmark of 100 million to 35 million, and has been accelerating at about 2.5% annually since the 21st century. WHO data shows that about 17% to 18% of young couples now require assisted fertility, and leading experts predict that this will become the norm in 20 to 25 years. "Nothing can stop the trend of declining labor force and productivity."

Regarding investment strategy, Grantham advised moving away from the American market and转向非美国发达市场与新兴市场. He mentioned that the GMO fund he manages has risen against the market trend by about 9% this year, employing a long-short strategy of being long cheap assets and short expensive assets. He believes that the U.S. may be facing a decade-long relative downturn.

As for when the bubble will burst, Grantham concluded with a vivid metaphor: "It's like tossing a bag of feathers from a high-rise building in Florida during a hurricane. In the short term, you know nothing, but you are clear about the long-term result— sooner or later, every single feather will land."