Jeremy Grantham, the legendary investor and chief investment strategist of Grantham, Mayo, & van Otterloo said in an interview with Bloomberg that Tesla (TSLA) -1.93% is in a bubble, and it has no chance to meet its shareholders’ expectations.
Grantham raises the inflation alarm and condemns pumping up asset prices by the Federal Reserve. In his opinion the biggest market crash in US history is coming.
Theron Mohamed from Business Insider cites Grantham’s 7 quotes from the interview. For better clarity some of the quotes have been edited and condensed by him.
1. "Tesla's valuation assumes it will be not only brilliantly successful but multiples as successful as the FAANGs, which are some of the great companies in the history of capitalism. That is a big ask."The price-to-sales ratio of Tesla is several times higher than the ratio of Facebook (FB) +1.96%, Amazon (AMZN) +0.58%, or other tech giants. (Business Insider, 2021)
2. "Every great automobile company - Mercedes, BMW, Volkswagen - is gearing up to go electric. Tesla is going to have some serious competition. Living up to the expectations of the stock price will be impossible."He indicates here that Tesla is in a bubble. (Business Insider, 2021)
3. "There's a bigger buy-in this time to the idea that prices never decline, and that all you have do is buy, than there has ever been. When the decline comes, it will perhaps be bigger and better than anything previously in US history."Grantham warns that investors seem to be more optimistic now comparing to the time around 1929 when the Great Crash had its place. (Business Insider, 2021)
4. "This is the first time that inflation, the number one predictor of a market downturn since 1925, is being ignored. Every bull market before this one had low inflation.In order to explain today's market, you have to assume 100% ignoring of the rising inflation, which is quite remarkable. We've never seen anything like this. (Business Insider, 2021)
5. "The Fed hasn't done a thing right since Paul Volcker, who was brilliant.All of the other chairs have encouraged a series of really dangerous asset bubbles. They overstimulated to get to 2000, they overstimulated in the mid-2000s housing market, and have they learned? Absolutely not." (Business Insider, 2021)
6. "Did you need to throw this much money all over the world so that it flows into the stock market and creates these meme stocks? This craziness that had Avis stock triple in oneday? In response to Tesla and Hertz and Tom Brady, Avis said, 'Hey dudes, we're going to buy some electric cars too,' and wham, it triples." Grantham criticises here overstimulating economies and fuelling rampant speculation by central banks. (Business Insider, 2021)
7. "This is more extreme in scale and size of market cap than anything that occurred in 1929, even adjusted for the size of the economy."(Business Insider, 2021)
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*Stock percentage taken on 16.11.2021 at 08:48.
*Mohamed, Theron (14. November 2021). Business Insider: Legendary investor Jeremy Grantham warns Tesla stock is in a bubble, rings the inflation alarm, and predicts an epic market crash. Last viewed on 15.11.20210 on https://markets.businessinsider.com/news/stocks/jeremy-grantham-tesla-stock-price-bubble-inflation-fed-market-crash-2021-11
