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Speaker 1: Hi.

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Speaker 2: I'm Maren Sumseetweb. I am a senior columnist at Bloomberg

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Speaker 2: and also the host of the Merin Talks Money podcast.

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Speaker 2: Every week we have a conversation with somebody interesting and

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Speaker 2: exciting in the investment markets.

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Speaker 1: Now.

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Speaker 2: This week our guest was Jeremy Grantsam, and we have

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Speaker 2: talked to him at some length about what's going on

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Speaker 2: in the equity markets, the bond markets, and pretty much

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Speaker 2: all asset classes around the world. We've talked about how

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Speaker 2: what we are seeing bursting at the moment is one

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Speaker 2: of the greatest bubbles of all time, and crucially, we've

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Speaker 2: talked about what you can do to protect yourself from

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Speaker 2: the chaos you see around you today. You can listen

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Speaker 2: to a bit of that conversation here, but to hear

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Speaker 2: more of it, or to hear the whole conversation, subscribe

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Speaker 2: to Merin Talks Money wherever you listen to your podcasts.

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Speaker 1: Jeremy, thank you so much for joining us today.

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Speaker 3: That's a pleasure.

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Speaker 2: Now, last time we talked, which was just over two

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Speaker 2: years ago, it was the end of twenty twenty one.

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Speaker 2: Later middle of aug was twenty twenty one. I think

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Speaker 2: you and I had a conversation where we talked about

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Speaker 2: how we were and one of the greatest bubbles in

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Speaker 2: financial history, which seemed pretty obvious to you, and actually

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Speaker 2: pretty obvious to me at the time, not so obvious

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Speaker 2: to everybody else.

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Speaker 1: Out with some other people.

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Speaker 2: And we talked about where investors could hide from the

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Speaker 2: craziness of that bubble, although we couldn't find very many places.

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Speaker 2: And the best advice you gave my listeners at the time,

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Speaker 2: which was purely, absolutely brilliant, and I hope that they

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Speaker 2: all took it, was to rush out and get the

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Speaker 2: longest fixed rate mortgage on their house that they possibly could.

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Speaker 2: So fingers crossed, lots of them did that and sitting

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Speaker 2: there with a ten year mortgage of one to one

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Speaker 2: and a half percent instead of six to six and

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Speaker 2: a half percent.

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Speaker 3: Yeah, well, if a handful of people did it, we

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Speaker 3: could feel justified.

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Speaker 2: I think so if we saved anybody. So let's talk

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Speaker 2: about that great bubble. It was excellent timing, and hopefully

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Speaker 2: the listeners also rushed out and solved their overpriced equities,

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Speaker 2: because twenty twenty two so the beginning of the popping

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Speaker 2: of that bubble, and I'm saying the beginning because I'm

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Speaker 2: guessing that what you're going to tell me is that

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Speaker 2: we are only part way through that bubble collapsing.

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Speaker 1: So where are we with the whole thing now?

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Speaker 3: Well, everything was proceeding perfectly well, and the great bubbles

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Speaker 3: take their time quite a few years going up, quite

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Speaker 3: a few years coming down, and the market suffers from

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Speaker 3: attention deficit disorder, so it always stinks every rally at

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Speaker 3: the beginning of the next great ball market and so on.

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Speaker 3: But there were some definitely original interferences with this deflating period.

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Speaker 3: The first of them was what I call the presidential cycle,

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Speaker 3: which I wrote about suggesting we would have a time

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Speaker 3: out because there's never been a serious market decline between

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Speaker 3: October the first of the second presidential year and the

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Speaker 3: end of April in the third year, because the administration

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Speaker 3: would like to have a strong labor market running up

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Speaker 3: to the election, and they realized, of course that economics

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Speaker 3: moves rather a lot of inertia, and so they had

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Speaker 3: to stimulate it a year and a quarter before, and

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Speaker 3: so that's the period of stimulus, and since FDR there

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Speaker 3: has never been a big decline, and the average gain

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Speaker 3: in that seven month window equals the remaining forty one months.

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Speaker 3: It's amazing. Of the four year presidential cycle. It seems impossible,

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Speaker 3: but it's true. Check it, and the average gain is

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Speaker 3: about fifteen percent in that window, and this time we

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Speaker 3: had thirteen or fourteen.

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Speaker 1: It was right on the nose.

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Speaker 3: So we had a typical presidential cycle rally and we

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Speaker 3: had a strong January bounds. If you've wiped out the

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Speaker 3: growth stocks, the following January, you always have a great bounce,

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Speaker 3: even if the bear market is not over. The perfect

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Speaker 3: example would be two thousand and one. The tech bubble

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Speaker 3: was huge. It got the growth stocks got hammered. In

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Speaker 3: two thousand they were down fifty percent, and then rallied

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Speaker 3: a bit at the end of the year, and then

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Speaker 3: in January they had a huge rally eight or nine percent,

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Speaker 3: And so we should have expected the same, and basically

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Speaker 3: we got it a little bit less, but a strong

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Speaker 3: January rallied. Why not because there were lots of tax

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Speaker 3: losses that had been taken and people replacing their position,

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Speaker 3: investing their Christmas bonuses and so on. So that was

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Speaker 3: fairly normal, and so was the presidential cycle effect. What

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Speaker 3: was abnormal is that they occurred in the middle of

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Speaker 3: a great bubble that was on the way down. This

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Speaker 3: had not happened in nineteen twenty nine, seventy two, or

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Speaker 3: a two thousand or two thousand and seven. All of

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Speaker 3: them had neatly sidestepped that seven month window. But this

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Speaker 3: one it fell right in the middle of the deflating phase.

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Speaker 1: So we got a bit of a reprieve as a

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Speaker 1: result of that.

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Speaker 3: Yeah, we got a bit of a temporary reprieve. And

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Speaker 3: then I argued back to the meat grinder, but both

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Speaker 3: the meat grinder had time to really get going. We

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Speaker 3: ran into the artificial intelligence mini rally, and yes it

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Speaker 3: was only a dozen or two stocks, but it included

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Speaker 3: some very big ones and they had huge rallies. And

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Speaker 3: even though the average stock didn't move, it sent the

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Speaker 3: S and P l oh, I don't know, fifteen sixteen

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Speaker 3: seventeen percent this year year today, and on the backs

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Speaker 3: of these handful of huge names.

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Speaker 1: Okay, so another little reprieve for the index.

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Speaker 3: Yeah, his artificial intelligence for real. And my answer is yes, absolutely,

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Speaker 3: it is for real. It will have huge effect. Is

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Speaker 3: it big enough soon enough to stop the deflating No,

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Speaker 3: I don't think it is.

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Speaker 2: Drop every Friday. They're really interesting do listen