Quick Overview
Jeremy Grantham (GMO co-founder and chief investment strategist, managing over $60 billion) discusses the current crisis in this interview, calling it the fourth major event of his investment career, but unlike the first three "nearly certain" bubbles, this crisis is "new and the most uncertain" — the most weighty judgment of the entire video. Grantham argues that the market is facing an unprecedented contradiction: valuations are in the top 10% of historical levels, while the economy is in the bottom 10% of its historical range. At the same time, he remains bullish on long-term opportunities in natural resources (especially metals and high-quality agriculture) and admits he has abandoned his traditional value beliefs, embracing the reality that "this time is truly different."
Theme 1: Four Major Crises – The First Three Were "Near Certainties," This One Is "Unprecedented"
Jeremy Grantham believes that of the four major market events in his career, the first three could be judged with "near certainty" in terms of outcomes, but the crisis triggered by the pandemic is entirely different.
Historical Context: Three "Near-Certain" Bubbles
- Japan Bubble (1989): Japanese stocks had never exceeded 25x PE, yet they surged to 65x; the land value under the Imperial Palace in Tokyo exceeded that of the entire state of California. Grantham says, "We were painfully early, but we eventually made a fortune."
- Tech Bubble (2000): The S&P 500 PE had already reached an all-time high of 21x in January 1998, then continued to 35x; "hundreds of new internet companies were meaningless, and the vast majority went completely bankrupt." Grantham notes that at the time, "cheap things were everywhere"—bonds, real estate, small caps, value stocks.
- Subprime Bubble (2008): Grantham wrote in Fortune magazine about "three near certainties"—a housing market crash, rising risk premiums, and a severe hit to profit margins. He called it a "three-sigma event" (once in a century), noting that a simultaneous bubble in all U.S. housing markets was unprecedented, driven by the "intense focus" of Bernanke and Greenspan.
The Difference in This Crisis
- "This Time Is Truly Different": Grantham bluntly states, "This time is completely different"—the pandemic is "a simultaneous supply shock and demand shock," something never seen in history. He cites the "this time is different" argument he once opposed, noting that "this time is different" is sometimes valid, and the pandemic is a classic example.
- "The Most Vulnerable Moment": The crisis hit at the end of the longest economic expansion in a decade, with unemployment at its lowest but corporate debt at "record highs," sovereign debt also at record highs, "the EU is fragile, U.S. leadership is peculiar."
- Three industries will be permanently changed: air travel, business travel, and remote work models.
Deductions and Uncertainty
- "Mismatch Between Market Valuation and the Economy": The S&P 500 is currently in the top 10% of historical PE, while the economy is in the bottom 10%—"this is a massive mismatch, all propped up by the Fed's paper."
- The Fed is printing massive amounts of money ($2.5 trillion, over 10% of GDP), but "printing 10% of GDP in paper with 10% unemployment cannot solve the fundamental problem."
- When earnings fall 30%–50%, PE will follow, and the market may decline. "If you print 100% of GDP in paper for all the unemployed, with no goods or services to buy, that is the essence of inflation."
Theme 2: Is Value Investing Dead? — Traditional Factors Have Failed, Value Needs to Be Redefined
Jeremy Grantham believes that over the past 20 years, traditional value factors (low P/E, low P/B, high dividend yield) have failed, the underlying structure of capital markets has fundamentally changed, and investors need to move away from "simple, crude value indicators."
Historical Shift: From "Dopey Value" to "Intellectual Capital"
- 1970–2000: Simple factors worked — "low P/B is what the market considers the most useless asset, low P/E is what the market most distrusts in terms of earnings," but "there is no reason it should work." Grantham calls it "dopey value."
- After 2000: Quantitative funds flooded in, academia endorsed the factors, and the factors were "used up"; competition intensified, and historical advantages disappeared.
- The current need is for an "intellectual capital model": dealing with intangible assets, growth, quality, and stability, moving away from "simple, crude P/E and P/B" — "the FAANGs are not Cisco of 2000, not 65 times earnings; they grow fast and are priced high, but you cannot easily dismiss them."
Mechanism Breakdown: Deep Changes in American Capitalism
- Rising Monopoly Power: Over the past 20 years, monopoly power in the U.S. has increased, the influence of government regulation has grown, and the Department of Justice's willingness to break up companies has declined. "High returns should attract competition and be compressed back to average, but this process has weakened."
- Fewer New Businesses: The number of employees at U.S. businesses less than 1–2 years old has "halved" since the late 1970s — "we are no longer the same aggressive capitalist system."
- CEO-to-Employee Pay Ratio: Has risen from 40 times in 1964 to 300 times today; "companies have become global enterprises, moving factories from country to country to maximize profits."
- "If a company were an individual, and the policy were to maximize personal gain, that would be called antisocial — we have antisocial companies, and we take pride in that slogan."
A Unique View on the FAANGs
- "17.5% of the S&P 500, they are unmatched" — using intangible assets and brands to create market value, "not traditional asset depreciation and part replacement."
- U.S. venture capital is still "the most active part of capitalism" — "the smartest students don't want to go to Goldman Sachs or consulting; they want to start companies, change the world, and make a lot of money."
- Risk: Society may become "increasingly dissatisfied" with them — tax avoidance, political influence, exploiting tax differences between countries; "Europe is already annoyed, and some Americans are too."
Theme 3: Natural Resources — Long-Term Bullish on Metals and Quality Agriculture, Oil is a 'Special Case'
Jeremy Grantham argues that the core logic of natural resource investing is 'you cannot have infinite growth on a finite planet,' but oil, metals, and food must be viewed separately — the long-term opportunities in metals and quality agriculture are clearest, while oil faces the threat of 'peak demand.'
Long-Term Logic: Finite Planet and Compound Growth
- '\"If Egypt grew at 1% annually (below the world population growth rate in my lifetime) for 3,000 years, the population would be 9 trillion times larger.\"'
- "1900-2000: Technology drove cost declines, average commodity prices fell 70% — 'this helped make a lot of money.'"
- "Post-2000: Declining mineral quality began to offset technological progress, 'the long-term downtrend was broken.'"
Metals: The Most Definitive Investment Opportunity
- \"High-grade ores are used up first\": Copper ore grades are now 10% of those in 1900; 'each generation of mines has lower grades.'
- "Rare metals: nickel, copper, tin, lead, zinc, molybdenum, gold, silver, platinum, palladium, etc., together account for less than 0.1% of iron ore — 'they are all beginning to show shortages.'"
- \"Prices will triple, quadruple, then be substituted, and bounce back\" — high volatility will become the norm.
- \"Historical discount of 80%\": The discount of energy and metal stocks relative to the S&P 500 has widened from a historical average of 20% to 80% — 'this is the lowest relative valuation since 1900.'
Food: Long-Term Supply Pressure, but Opportunity in 'Regenerative Agriculture'
- "Population is still growing at over 1% annually, but agricultural productivity growth is hard to sustain; 'only 70 good growing years left, and some places are already degrading.'"
- "Soil carbon content in the U.S. Midwest has fallen from 6% to 1.5% — 'the ability to absorb and retain water has dropped sharply, while heavy rains are intensifying.'"
- \"The big opportunity is in sustainable, regenerative agriculture\": improving soil, carbon content, and microorganisms; 'nutritional quality rises, toxicity falls, and farmers can earn more money.'
Oil: A Special Case — 'Peak Demand' May Have Arrived
- \"Oil is the largest commodity, accounting for half of trading volume\"; in the 2010s, shale gas added 6 million barrels per day to U.S. production, a huge marginal impact on the global total of 100 million barrels.
- \"Without shale gas, oil prices would have been above $100 a long time ago.\"
- \"Shale oil has only 2.5 years of global supply\" — after rapid extraction, it will soon plateau.
- \"We may have already seen peak oil demand\": electric vehicles will reach 'cost parity with gasoline cars in construction cost' within 2-3 years; battery costs have fallen from $1,000/kWh in 2010 to about $130 this year, and next-generation will be below $100; 'the Tesla Model 3 is a joy to drive, quiet, clean, and has only 15% of the moving parts.'
- \"Oil's share of the S&P 500 has fallen from 16% to 3%\" — within a decade, 'one of the worst relative performances possible.'
Theme 4: Finding Opportunities in Interdisciplinary Cracks — VC, Green Tech, and "Common Sense"
Jeremy Grantham believes that the biggest future opportunities lie in the "cracks between disciplines," and that VC is currently the most interesting and creative investment arena.
Grantham Foundation: 70% Target Allocation to VC
- "60% already in VC, targeting 70%" — he considers this "the most interesting, most dynamic opportunity."
- "VC truly changes the world": investing in new ideas, building factories, doing research, producing products — "ordinary investing is flipping stocks, no one cares; VC is using new money to create things that didn't exist before."
"Cracks Between Disciplines"
- Soil scientists don't know what climate scientists are doing, and vice versa; "in the virus problem, virologists know the most, but don't understand economics — economists don't understand viruses — the medical system understands transmission, but not economics."
- "You need an 'elite brain trust' — a few medical experts, a few economics experts, a few social experts, a few people with common sense — locked in a room, FDR-style, until they make a cost-benefit trade-off."
"The Pandemic Was a Global Capability Test"
- Country performance: Taiwan, Singapore, Hong Kong, China, South Korea, Vietnam, New Zealand, Australia "are more than 10 times better than Germany"; "Germany is half of the US, a third of the UK — but the Eastern countries are 10 times better than Germany."
- Japan "never had a full lockdown, but deaths are 1/10 of Germany's, and economic consequences are less" — "an astonishing demonstration of efficiency."
- Massachusetts has more deaths per capita than the UK (the UK already being "one of the worst performers").
Mentioned Positions
| Position |
Guest Attitude |
Key Data |
| FAANGs (Overall) |
Cautiously optimistic, but warns of risks |
17.5% of S&P 500; "Not Cisco in 2000 (65x P/E)"; "Fast growth, high price, but should not be easily dismissed" |
| Tesla |
Personally bullish (owner) |
Battery cost: $1,000/kWh in 2010 → $130 this year → below $100 next generation → $50 within 5 years; "400-mile range coming soon, 500-mile in 2-3 years" |
| Microsoft |
Background mention |
GMO once hired "potential employee #22" |
| Energy/Metals Companies (Overall) |
Bullish (long-term) |
80% discount relative to S&P 500 (historical average 20%); "Every mine's ore grade is declining" |
| Oil Companies (Overall) |
Neutral (risk warning) |
S&P 500 weight from 16% → 3%; "One of the worst relative performances in a decade"; "Peak demand may have already arrived" |
Judgments Worth Remembering
1. "This time is really different" — Jeremy Grantham
The previous three bubbles (Japan 1989, Tech 2000, Subprime 2008) could be "almost certainly" judged in terms of outcomes, but the current pandemic crisis is "unprecedented and entirely new" — a simultaneous supply and demand shock, layered on top of the highest debt in history, at the most fragile moment at the tail end of the longest economic cycle.
2. "The market is in the top 10% of historical PE, the economy is in the bottom 10% of history" — Jeremy Grantham
This is a "massive mismatch, entirely propped up by the Fed's paper money." When earnings fall 30-50%, PE will follow, and the market could decline.
3. "On a finite planet, you cannot have infinite growth" — Jeremy Grantham
If Egypt grew at 1% per year for 3,000 years, its population would be 9 trillion times the original; from 1900 to 2000, commodity prices fell 70%, then "the downward trend was broken," and declining ore quality began to offset technological progress.
4. "Energy/metal stocks are at an 80% discount to the S&P 500" — Jeremy Grantham
Expanding from the historical average 20% discount to 80%, this is "the lowest relative valuation since 1900." Rare metals (nickel, copper, tin, etc.) face long-term supply shortages.
5. "Electrification means oil demand may have already peaked" — Jeremy Grantham
Battery costs have fallen from $1,000/kWh in 2010 to $130/kWh, with the next generation below $100/kWh; the Tesla Model 3 has "only 15% of the moving parts"; "we may have already seen the peak of oil demand."
6. "We have antisocial corporations and are proud of it" — Jeremy Grantham
CEO pay has risen from 40 times the average worker's salary in 1964 to 300 times; "corporations are global profit-maximizing entities, shifting factories between countries" — Michael Friedman's "social responsibility is to maximize profits" is taken as a corporate creed.
7. "VC is more interesting and more useful than ordinary investing" — Jeremy Grantham
The Grantham Foundation allocates 60% to VC (targeting 70%); "ordinary investing is just shuffling paper, nobody cares; VC creates new companies, new factories, new products, changing the world."
8. "Japan never fully locked down, its death toll is 1/10 of Germany's, with fewer economic consequences" — Jeremy Grantham
The pandemic is a "global capacity test," with Eastern countries like Taiwan, Singapore, South Korea, and New Zealand performing more than 10 times better than Germany; "the US, UK, and Massachusetts performed the worst."