THE DIARY OF A CEO · EXTRACTED
Billionaire's WARNING: I'm SELLING. The Crash Is Already Here!
The biggest investment bubble in American history, why your investment adviser will never warn you, and what to do with your money before it bursts.
Preview · 3 of 6 tactics
"You will not receive the advice from investment advisers to get your tail out of the market, ever. It is not good business for them to do that, and they will not ever say it to you." — Jeremy Grantham
Jeremy Grantham spent 60 years in the investment business and managed up to 165 billion dollars at his firm GMO. The pop framing of his work is that he calls market crashes, but the actual model he runs is more specific: he looks for the moment when a genuinely important idea attracts so much capital that the price of owning it becomes catastrophically divorced from reality. In this conversation with Steven Bartlett, Grantham argues that the US stock market is currently in the largest investment bubble in American history, driven by AI, and that the structural incentives of the entire financial advisory industry guarantee that no one with a business to protect will tell you this. The protocol below pulls the specific allocation advice, the historical precedents, the fertility and toxicity data, and the framework for thinking about career risk and institutional silence that Grantham laid out across the conversation.
Understand Why No One Will Warn You
Grantham ran an experiment at a 1,200-person conference of the Society of Analysts during the run-up to the 2000 tech bubble. He asked the 400 full-time stock market experts in the room two questions. First: if the market dropped from 31 times earnings back to a more normal 17 times, would that guarantee a major bear market? All 400 said yes. Second: did they think it would happen? More than 99 percent said yes, it would happen. Then he described what those same experts' employers were doing at that exact moment. The senior people from Goldman Sachs, Morgan Stanley, and JP Morgan were on the podium telling audiences to relax and muddle through. The engine room knew. The public face said nothing. Grantham calls it a betrayal of trust. His explanation for why it happens is structural and not conspiratorial: if you warn clients the market is overpriced and the market keeps going up for another two years, the client fires you. You underperform in a bull market, your competitors do not, and you lose the account. His own firm did warn clients in 1998 and lost half their book of business in two and a quarter years before being proved right. His argument is that this dynamic has never changed. It applied in 1929, in 1972, in 2000, and it applies today. The people paid to advise you have an incentive structure that makes honest macro warnings essentially impossible. Knowing this does not require cynicism about individuals. It just requires understanding the system they operate inside.
THE PLAY
Before acting on any investment advice, identify whether the person giving it earns money when you stay invested. If they do, treat their macro outlook as structurally compromised and look at the underlying valuation data yourself. Grantham's shortcut: find the current price-to-earnings ratio of the US market and compare it to the historical average of roughly 15 to 17. If it is dramatically above that, treat the gap as the signal, not the commentary around it.
Build The Bubble-Resistant Portfolio
When Bartlett asked Grantham directly what to do with savings, he gave a specific allocation rather than generalities. Sixty percent of investable money into a broad-based index of non-US equities. Five to ten percent in precious metals. A portion in bonds. Real estate only if already owned and sensibly priced. Zero in US stocks if avoidable, and zero in crypto. The case for non-US equities is historical rotation, not pessimism about individual countries. The US market has been dominant for roughly 20 years. Emerging markets were up 65 percent in the prior 12 months while the S&P returned around 25. Grantham's point is that markets rotate and that markets extrapolate current conditions indefinitely, which is precisely why current conditions are not a reliable guide to the next decade. From 2000 to 2010, the US market returned negative three percent annually. You lost money over an entire decade. He believes today's valuations are higher than they were at the 2000 peak, which in his reading implies a worse outcome. On bonds, the mechanics are straightforward: a bond is a loan to a government or corporation at a fixed interest rate. At the time of this conversation, a US ten-year Treasury was yielding around 4.46 percent and a ten-year Apple corporate bond around 4.7 percent. Grantham's argument for holding some bonds in a bubble environment is that when stocks fall sharply, fixed income tends to hold. They are not exciting. That is the point.
THE PLAY
Shift at least 60 percent of investable assets into a broad non-US equity index, such as a world ex-US or emerging markets fund, available through any major broker. Put 5 to 10 percent into precious metals. Put the remainder into bonds, buying directly through treasurydirect.gov for US Treasuries or through a broker's fixed income section for corporate bonds. Hold the allocation for the cycle, not the quarter.
Newsletter
Get each new playbook the day it drops
One email per drop. No spam. Unsubscribe anytime.
Read The Bubble By Its Own Indicators
Grantham's framework for identifying a bubble is not that the underlying technology is fraudulent. It is the opposite. The biggest bubbles always form around the most genuinely important ideas. Railroads were real and world-changing. The internet was real and world-changing. Amazon fell 92 percent during the dot-com crash, then went on to reshape retail entirely. The greater the idea, the more obvious it is to everyone, the more money floods in, the more the price overshoots, and the bigger the eventual correction. He names two specific numerical thresholds from history that give the framework teeth. Japan in 1989 reached 65 times earnings at the peak, meaning every dollar of corporate earnings was priced at 65 dollars in the stock market. The US hit 35 times earnings in the 2000 tech bubble and the Nasdaq subsequently fell 82 percent. By his reading, US valuations are currently at or above the 2000 level. The Japanese market did not recover its 1989 peak for 35 years. He uses the phrase lost 20 years rather than lost decade as the more accurate description of what followed. His other diagnostic is what he calls indicators of pure crazy euphoria, which he identifies as prospectus language promising to address a quarter of global GDP or mine asteroids, the kind of addressable market claims that are structurally unfalsifiable during the bubble and look like South Sea bubble language in retrospect. When those claims become normal and accepted rather than mocked, he takes it as a late-stage signal.
THE PLAY
Look up the current Shiller CAPE ratio for the US market, which measures price against 10-year averaged earnings and smooths out single-year distortions. If it is above 30, Grantham's framework says you are in dangerous territory. If it is above 35, he treats that as comparable to the 2000 peak. Use this number rather than annual P/E or index levels as your primary valuation reference point.
Subscribers Only
Unlock the Full Playbook
3 more tactics + Action Plan
TACTIC 04
Brace The Business Before The Storm Arrives
TACTIC 05
Treat Sperm Count As An Early Warning System
TACTIC 06
Build Skills That Survive Complexity Collapse
Already subscribed? Log in
THE DIARY OF A CEO · EXTRACTED BY PODEX