Legendary investor Jeremy Grantham is back with a fresh warning of a market bubble, which he's calling the "biggest one in American history." Leading the charge into recent unprecedented levels are the "artificial intelligence high flyers," with a 70% decline in prices not to be ruled out. Grantham says it's different this time around, compared with prior bubbles like railroads and the internet, where everyone could see their clear utility and impacts.

Quote: "The indicators of crazy euphoria, like SpaceX (SPCX), are all over the place. SpaceX defines its addressable market as a quarter of the global GDP," he declared on Steven Bartlett's podcast, The Diary Of A CEO. "It's a fabulous B.S. story: mining asteroids and the huge incredible success of AI. It's the classic description of a market peak. It's what you look for at the top of a terrific bubble."

What will it mean for the economy: "The high flyers [companies] will lay people off, and a lot of people will feel less rich. People who feel poorer will spend a little less, so the economy tends to be under some stress. If you look at the great bubbles breaking of the past, you find that it's followed by really tough times."

How should the average person invest? "Rule No. 1 is to be diversified. Hold a broad-based index of non-U.S. equities for 60% of your money. They're much cheaper, and since the beginning of last year, they have handsomely outperformed. [Another] 5%-10% in precious metals like gold and silver. If it's convenient and sensible, hold a bit of real estate, but it's pretty darn expensive by historical standards. The rest, I'd put in bonds."

Go deeper: While Grantham's resume includes predictions of famous market crashes in 1989 Japan, and 2000 and 2007 in the U.S., the permabear has been predicting epic crashes for much of the last decade, leading some to reference the famous saying "Even a broken clock is right twice a day." Grantham has released an "epic crash" article on Seeking Alpha nearly every year since 2021, with titles such as Waiting For The Last Dance, Let The Wild Rumpus Begin, Entering The Superbubble's Final Act, and, most recently, Valuing AI: Anatomy Of A Technology Mania (Part 2). Is this a case of a delayed start, crying wolf, or will the doomsday prophecy finally come true? (35 comments)