The Blubber

Stocks are in a bubble and could crash by over 50%, per Jeremy Grantham.

Home prices in the US will fall 30%, per Jeremy Grantham.

This was on a podcast, per BI.

"Forty years of lower and lower interest rates push asset prices up, particularly housing through the mortgage mechanism. How can it not? If you can afford to pay more for your house because the mortgage rates are 3%, sooner or later you pay more for it. And so the competition bids the price up to fill the available affordability. Now the mortgage [rate] is 7%. The same thing will happen in reverse. It doesn't happen overnight. Everyone in the market wants everything to happen yesterday. But with interest rates and mortgages, it can take a long time to percolate through. But you can be absolutely certain that it will."

"Real estate is a global bubble. It has driven house prices provably to multiples of family income all over the world: Beijing, Shanghai, Sydney, Adelaide, Canada, London. It used to be multiples of three and a half times family income. London is now 10 times. Toronto is worse. No one can afford to buy a house. No young kids come out to buy a house. This is not a stable equilibrium," Grantham said.

"House prices will come down... 30% would be a pretty good guess."

About stocks, Co-host Michael Batnick asked: "Are we in a big bubble?"

"Yes, of course," Grantham replied.