Sunday, June 6, 2021

"Jeremy Grantham Warns Day of Reckoning Will Bust Housing Bubble & Lead To A Catastrophic Crash!"

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"Jeremy Grantham Warns Day of Reckoning Will 
Bust Housing Bubble & Lead To A Catastrophic Crash!"
by Epic Economist

"The U.S. housing market is headed to an epic crash, and at this point, those who don't know it already are essentially the ones who want to believe things will be different this time. Deep down, they do know that this euphoria can't go on forever, and prices will eventually have to face a sharp correction. Just like the vast majority of frenzied market booms we have seen throughout history, this one will also end up in a catastrophic bust. However, in recent days, bubble deniers have been persistently arguing that market conditions are 'normal' and buyers shouldn't worry about the enormous imbalances, which, in fact, are getting worse by the day. And many people seem to be believing in what they say despite the growing risks and, of course, the exorbitant prices.

For months, we have been reporting how the pace of home price appreciation has become completely unsustainable. We have shown you updated statistics, indicators, rates, and charts. We have exposed several pieces of evidence that prove a housing market crash is just a matter of time. But in times when homebuyers and investors have been so entranced by the prospect of future gains, overlooking potential consequences seem to have become their new natural response. That's why, for this video, we decided to bring some light to the word of those who have seen it all happening before and are now telling us that all of it is going to happen once again. Those who have learned from experience. Veterans inside financial markets who know how cycles work. They have warned us of major financial disasters in the past and are echoing similar grim warnings today.

A very alarming statement that made the headlines recently came from no one less than the CEO of the largest bank in the entire country. JPMorgan's Jamie Dimon, who has also worked on the board of directors of the Federal Reserve and knows better than anyone when things are starting to spiral out of control. During a Senate hearing last week, Senator Jon Tester asked Dimon if we were in a housing bubble. And Dimon was the only big bank CEO to outright say that yes, there is a bubble and the housing boom may be getting out of hand. He then added that today's conditions are different from the ones that led to the housing crash of 2008, but current prices expose the "frothy" environment.

Whenever big executives start to bluntly admit that the outlook is worrying, we can tell that the market frenzy is about to turn into an investor nightmare. On the same note, the legendary investor who called the dot-com bubble and the 2008 financial crisis is saying that the state of today's housing market resembles a lot to what he saw back then. Jeremy Grantham, who co-founded the asset-management firm GMO, said that real-estate bubbles were popping up in almost every market and that a "day of reckoning" is looming. Speaking at the Morningstar Investment Conference Australia, Grantham, who also agrees the government's monetary policies have led to the formation of "The Everything Bubble", argued that the enormous increases in housing prices are simply not sustainable. "This time you look around and you find the real estate is suddenly pretty bubbly in every market," he said. "You can't keep an asset class like housing, where the house doesn't change, and you're just marking it up in real terms year after year. Eventually there'll be a day of reckoning.”

When Grantham speaks, the market listens, and he believes the U.S. markets are on the brink of a catastrophic meltdown, especially considering that they risk crashing at the same time. Grantham has clanged the warning bells for Doomsday one more time, affirming that markets have until the end of the vaccine rollout before bubbles burst. He shared four indicators that are lining up to what could be "the biggest loss of perceived value from assets that we have ever seen". Perhaps, more importantly, Grantham reminds us that "bubbles don’t always burst alike". Just because the macro picture is different doesn't mean that we shouldn't worry about how extensive the bubble has become. As Grantham warned: "the problem with a bubble is not that you don’t realize you’re in it - it’s that you don’t realize when it’s game over". We can only recommend you to watch the next market events very closely because a major financial catastrophe is on the horizon - and one single burst could set off a cascade of other crashes and systemic failures, plunging the entire country into an economic depression much worse than what was in in 1929 and leading to the biggest collective loss of wealth in our entire history."

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