The investor who warns of a collapse: “The most expensive stock market in history”

“Based on stock market value relative to GDP, with some adjustments, this is the most valuable market in American history,” Grantham told CNBC’s “Squawk Box.”

Grantham noted that he is not sure there is a parallel period in history to what we are experiencing now, but according to him the tech bubble of the year 2000 is the closest analogy. He also highlighted the so-called “Buffett index”, which compares the total value of the American stock market with the GDP of the economy as an indication of the problematic situation.

The market cap to GDP ratio Grantham was referring to is now estimated at 235%, according to Longtermtrends.com. This means that the total market cap of the stock market is more than twice the size of the entire US economy.

Buffett has used this index in the past, noting years ago that when the ratio “approaches 200% – as it did in 1999 and part of 2000 – you are playing with fire.”

Grantham is a famous investor known for his history of predicting a bear market and he has issued similar dire warnings in the past, including in March 2024.

“The long-term prospects for the broad US stock market look as bad as almost at any other time in history,” Grantham wrote at the time in a prediction that has so far failed to materialize.

Now in another apocalyptic prediction, he claims that artificial intelligence is the biggest investment bubble ever in the US, warns of a potential 70% drop in share prices in the field. He calls Bitcoin “useless” and predicts that it will eventually reach zero.

“He’ll just know you and go away, in my estimation – not with a loud fanfare, but with a weak answer,” Grantham said. “This is not a stable form of value.”