Renowned "Bubble Predictor" And Founder Of $70 Billion Investment Firm Reveals Why "Dot-Com Crash Was Paradise Compared To Now"

His name is Jeremy Grantham, co-founder and chief investment strategist of global asset manager GMO. He built his legendary reputation by successfully identifying all of the major asset bubbles since the 1980s. 

In a recent CNBC interview, Grantham warned that the recent tech stock collapse looks eerily similar to what occurred in the dot-com era, when early internet companies tanked. But, he didn’t stop there.

The possibility of the meltdown in tech companies bleeding into an economic recession is an even higher likelihood today. But some experts also believe that for investors heeding the warning bells, there may also be more pockets of opportunity to avoid the chaos. 

The “escape hatches” are shut tight

According to Grantham, his biggest fear is that the current macroeconomic environment may be much more dangerous. In 2000, the crash was primarily contained in US stocks, bond yields were “terrific,” the housing market was relatively cheap, and commodities were stable.  

The investor sees just the opposite dynamic today. The bond market has hit the “lowest lows in 6,000 years,” commodity prices like energy and food are skyrocketing, and the housing market, which is frequently described as “red-hot,” is showing signs of cooling. 

Alternative investments gather steam 

One avenue that institutional and ultra-high-net-worth investors have historically relied on in poor economic conditions is alternative assets. Alternatives typically exhibit low correlations to public markets, meaning they may perform favorably through bear markets or economic downturns. Increasingly, with the rise of fintech, ordinary investors are also getting in on the action.  

Invesco IVZ, which manages more than $1.5 trillion in assets, now recommends a 20% portfolio allocation to alternatives. In a recent interview, Guggenheim chief investment officer Scott Minerd told CNBC that if given $10,000 today, he would invest in an alternative asset like fine art. 

Creative investments offer opportunities

For many, fine art is looking particularly suited for today’s markets. It is prized not only for its potential appreciation but its low correlation to public markets, and inflation-hedging qualities. 

Robert Manley, deputy chairman of Philips, one of the three major auction houses, stated that the demand for blue-chip works has been stable, despite shakiness in financial markets. He added that this could indicate a “flee to tangibles” for investors. 

Masterworks, an investment platform focused solely on art, is also reporting favorable results. According to the company’s website, its track record to date is 14.3%. The firm specifically targets blue-chip contemporary artworks, which are viewed as higher quality and more resilient compared to growth artists. 

The only certainty is uncertainty

With more investing veterans joining the list of market bears everyday, investors indicate they are buckling down for prolonged volatility and potentially, a recession. Experts continue to point to the importance of a long term investment approach, and are urging their clients to look outside of stocks and bonds for opportunities. To some, the economics of scarce assets like real estate and art may be an attractive option to consider. 

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