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00:00You believe that the bull market that started in March of 2009 the longest bull market in history has matured into a speculative fever of rare proportions. In your words a fully fledged epic bubble. Tell me more. It would be surprising if you could have won that long. That didn't end up with the animal spirits beginning to freak out a bit. And this one has. Normally it takes a nearly perfect economy and friendly. Fred the Fed behavior but this one hasn't managed to do it with a somewhat wounded economy on a global basis. And to compensate for that we have had. Even more spectacular said friendliness and government friendliness. So we've had for once the joining of fiscal spending with the with the that's behavior and the usual moral hazard that has been going on for since Greenspan arrived in in the 90s. And the result of this is. The confidence has risen and risen until finally. People are reaching for the greatest demonstration of confidence they have had an investment career. They're borrowing more money to throw it into the market. That belief in the market is profound. The common wisdom is that with the Fed on your side how can you lose. When they first said that back in Greenspan there were a few doubters and they said it with Bernanke. There were less doubters but some. And now finally there appear to be almost no doubt as the toll the belief is more or less complete that all it takes is the Fed on your side and stocks will rise forever. What are some of the signs. We'll all look at what the clarity of hindsight and say of course it was a bubble. If you want crazy ones and you need crazy by the way. That's the best timing for a bubble top. It's crazy behavior. You look at the over-the-counter trading. I was big over-the-counter trader in a speculative bubble of 1969. I'd almost forgotten there was a over-the-counter. But they last February it traded about 80 million shares for the month and it worked its way steadily through the year until November was about 380. So it had gone up four times. And and then in December it went to one point one five trillion shares for the month. Having tripled it then tripled again in the single month of December. I can't tell you what it's going to be in January but these are spectacular performances. Would a bubble have formed absent the coveted 19 pandemic. It's coded broad in spectacular excesses on the part of the Fed and the government writing checks. And I say excessive. Perhaps it was necessary. But in any case it was unprecedented. And the combination was very powerful without covered. We cannot know the market had resisted opportunities to bubble earlier in this 11 year cycle. It looked like it was getting pretty close about three years ago. I mean it just kind of fizzled away. The confidence dissipated. The market had a decline. And those bull markets can go on forever. And you don't know how long and you don't know how high they can go. There's the burst of euphoria that typically brings these things to an end. And we are seeing it all around us today.

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Grantham Sees Bubble Signal in Huge Penny-Stock Volumes

Jeremy Grantham, co-founder and chief investment strategist of Boston’s GMO, points to the trillions of shares traded in penny stocks as the kind of “crazy behavior” indicative of a bubble top in the equity market. He also discusses investors’ misplaced faith in monetary stimulus. Grantham spoke exclusively to Erik Schatzker on Bloomberg’s “Front Row.” (Source: Bloomberg)

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