Jeremy Grantham on How to Tell If a Bubble Is About to Burst
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What insights does Jeremy Grantham share about identifying market bubbles?
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Hello and welcome to another episode of the All Thoughts Podcast. I'm Tracy Alloway.
And I'm Joe Weisenthal.
Joe, I have a headline for you.
Go on. This is a good day for headlines. We're recording this June 16th. You have a lot of headlines you could choose from.
But one in particular, I'm sure you saw this already. SpaceX extends gain to 17% set to overtake Microsoft in value.
I had a feeling. I think at some point, did they also overtake Amazon? Yeah, I think so. Like all of those? Yes. I think in the last week, I mean, we were traveling the week of the SpaceX IPO, but it just captivated everyone day after day. And there are any number of superlatives. You know, at Bloomberg, we really like superlatives. It's like the largest gain since X or the biggest. Sure.
These are more stats than superlatives, right? Yeah.
Well, I suppose. But there was also one I saw, I guess, yesterday. So June 15th was the world's 500 richest people collectively added $366 billion to their wealth is the single biggest. The numbers get bigger over time. There are some it's some big times for the market.
A nice day for them. But the crazy thing about SpaceX is, okay, you have this company that's now worth $2.7 trillion or something on $20 billion of revenue from 2025. And I can't even do, you know, if we're talking about valuations, you can't even do a traditional price-earnings ratio because there's no earnings. There's just sales. And the price-to-sales ratio is more than 100, something like that.
You know, look, like... I don't even know where to begin. I mean, you've seen. Choose a superlative. Yeah, choose a superlative. I mean, the argument that's being made is that there's a lot of arguments being made. And people are like, oh, it's actually an AI company because of all the GPUs and data centers that they've built. They really do have, and we've done an episode on this, an extraordinarily commanding lead in space and satellites and Starlink, et cetera. The revenue is what it is. I don't know.
But also, I think it's fair to say things feel a little bit speculative at the moment, right? You see a headline like that, 17%. That's overtaking a stalwart of the tech industry in the space of, it's been less than a week, right?
Yeah, I mean, the other thing is, look, these companies, and we're going to get these other big IPOs later in the year with OpenAI and Anthropic, presumably. I mean, SpaceX has been around for a long time. Historically, companies came public much earlier, et cetera. So obviously, it does have 22,000 employees. It's a big company. But the revenue is what it is. And if you're looking at it from a sort of valuation-based metric, you would have to say, at a very minimum,
How does Jeremy Grantham compare today's market with historical bubbles?
Investors, you have to be banking on very rapid growth in the very short term in the coming years to expect good returns here.
Right. So obviously one of the big talking points.
I'm looking at the DES page for SpaceX. Do you know where it's headquartered?
No, actually.
Starbase, Texas.
Oh.
So they have their own town in Texas that they got to name. But that is their corporate info on the DES page, Starbase, Texas.
Well, that's definitely worth $2.7 trillion. All right. The big talking point in markets is obviously valuations, all of this AI frenzy. Is it a bubble? Is it not? But even if you think that a lot of this is speculative.
Yeah.
My big question is, what do you actually do at this point, right? Because so much of the market has been momentum-driven recently.
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Chapters
8 chapters
1
What insights does Jeremy Grantham share about identifying market bubbles?
0:00–3:32
2
How does Jeremy Grantham compare today's market with historical bubbles?
3:32–7:40
3
What signs indicate that a market bubble may be about to burst?
7:40–13:28
4
How does Grantham view the impact of AI on current market valuations?
13:28–18:09
5
What investment strategies does Grantham recommend during market speculation?
18:09–23:05
6
How does Grantham manage client expectations in a bubble environment?
23:05–28:25
7
What historical examples does Grantham use to illustrate market behavior?
28:25–33:00
8
What are Grantham's thoughts on the future of AI and its implications for society?
33:00–1:01:45
Speakers
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