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- The legendary investor Jeremy Grantham told CNBC on Thursday that he was more convinced than ever of a bubble in the stock market.
- “The more spectacular the rise and the longer it goes, the more certainty one can have that you’re in the ‘real McCoy’ bubble,” said Grantham, the cofounder and chief investment strategist of the asset-management firm GMO.
- The investor, who’s notable for calling major market bubbles, first expressed concern about a stock market bubble in June.
- Grantham said that the bubble was disconnected from economic realities and that neither a coronavirus vaccine nor fiscal stimulus would change its trajectory.
- Visit Business Insider’s homepage for more stories.
The legendary investor Jeremy Grantham told CNBC on Thursday that he was certain the stock market is in a bubble following its “powerful, rapid, and, in many areas, truly crazy” rally from March lows.
“The more spectacular the rise and the longer it goes, the more certainty one can have that you’re in the ‘real McCoy’ bubble,” said Grantham, the cofounder and chief investment strategist of the asset-management firm GMO.
Grantham initially expressed fears about a bubble to CNBC in June, when he told investors to have zero exposure to US equities and said he might be witnessing the fourth major market bubble in his career. The S&P 500 has gained roughly 14% since his call, and Grantham said this and “crazy behavior” from investors were only making him more certain the US is in a bubble.
“You want to see not just the market rise but, if anything, an acceleration. And the rate of market rise since the turn in March/April has been nothing sort of sensational,” the investor said.
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Grantham also said the stock market had its own “psychological node” and behaved independently of economic realities.
“The market can go up on bad news and go up on good news,” Grantham said. “It can interpret a Trump victory as bullish and then seamlessly interpret a Biden victory as bullish. There are all the characteristics of a bubble. There’s nothing much you can throw at when it gets going.”
He added that an effective coronavirus vaccine or more fiscal stimulus in the US wouldn’t change the fact that the stock market is in a bubble.
Grantham has successfully called three market bubbles: Japan’s asset-price bubble in 1989, the dot-com bubble in 2000, and the housing crisis in 2008.
Read more: Peter Lynch disciple William Danoff manages over $124 billion and has beaten the market for 30 years. He shares the 10 investment rules that ensured his success.
On Thursday, he said one year would be a “stretch” for the bubble to continue inflating while two more years of rising prices would be “extremely unlikely.”
“I’ve never had any illusions about my ability to time the bubble breaking; I have a very low definition of success,” Grantham said. “It’s just sooner or later the market will be lower than the point at which I suggested you should get out.”
He added that low, risk-free rates from the Federal Reserve had pushed up the prices of assets.
“The one reality you can never change is that a higher-priced asset will always produce a lower return than a lower-priced asset,” he said. “You can’t have your cake and eat it. You can enjoy it now, or you can enjoy it steadily in the distant future, but not both. And the price we will pay for having this market go higher and higher is a lower and lower 10-year return from the peak.”
Read more: 38 units, retired at 27, and over $10,000 in monthly passive income: How Rachel Richards leveraged a simple real-estate investment strategy into an income-generating empire
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- Billionaire investor Mike Novogratz won half a Bitcoin in an election bet over the weekend, but then hosted a lottery to hand it out to “new Bitcoiners.”
- Novogratz, the CEO and founder of crypto-focused merchant bank Galaxy Digital, was expecting Democrats to secure both the White House and the Congress.
- A Twitter user @Adelgary won the lottery, but others contested the outcome by claiming he already owns Bitcoin and isn’t new to the crypto world.
- Half a Bitcoin is currently worth $7,726.
- Visit Business Insider’s homepage for more stories.
Billionaire investor Mike Novogratz said he won half a Bitcoin in an election bet on Saturday, and gave it up in a self-hosted lottery to a Twitter user.
Half a Bitcoin is currently worth $7,726. Bitcoin has risen 10% in the past week, hitting $15,453 as of 10:20 am GMT on Monday. The price has gained almost 60% since the end of August and is up nearly 300% so far this year.
Novogratz said in a tweet: “I won an election bet with @StoneyBitson. 1/2 BTC. I am going to have a lottery for young Bitcoiners for that coin. No one can enter who already owns a Bitcoin. I’m thinking of a number between 1-1000. Whoever guesses first gets it. I’ll have Stoney send directly. One guess.”
Novogratz previously said he was expecting Democrats to win both the White House and the Congress.
Read More: Morgan Stanley says to load up on these 10 stocks featured on the firm’s ‘buy list,’ which has dominated the broader market this year
A Twitter user @Adelgary won the lottery by guessing the number “826.” Novogratz said he chose the number 8 because he lived in China for 7 years, where the number eight is considered lucky. 26 represents his birthdate.
Because the former hedge-fund manager said the coin would go out to new Bitcoin users, other participants in the thread contested his call by pointing out that the winner already owns Bitcoin.
Novogratz, a prominent Bitcoin bull, has suggested that a conservative Senate and less fiscal stimulus would be good for cryptocurrencies. “Less fiscal, more Fed, good for crypto,” he said.
He also believes that every central bank will start issuing digital currencies in 5 years.
Democrat Joe Biden won the 2020 presidential race thanks to victory in Pennsylvania and Nevada over the weekend, in one of the most fractious election races ever.
Read More: ‘It is going to be very, very bad’: Legendary investor Jim Rogers says the US debt load is creating a prime environment for a collapse — and warns the next market blow off will be worse than the Financial Crisis’ 50% decline
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Disney in negotiations with unions to represent 43,000 employees at Walt Disney World
The company is planning mass layoffs as a result of COVID-19 shutdowns.
Activist investor Dan Loeb is urging The Walt Disney Company's CEO Bob Chapek to halt its $3 billion annual dividend payment and redirect the funds towards content production and acquisition for its streaming service, Disney+, according to a letter Wednesday obtained by FOX Business.
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"By reallocating a dividend of a few dollars per share, Disney could more than double its Disney+ original content budget," Loeb wrote. "These incremental dollars would, based on our analysis, generate returns that are multiples of the stock's current dividend yield by driving high life-time-value subscribers to your [direct-to-consumer] platform."
Besides bringing in additional subscribers, Loeb said "increased velocity of dedicated content production will deliver several knock-on benefits spread across your existing base including elevated engagement, lower churn, and increased pricing power."
Loeb, who doubles as CEO and chief investment officer of hedge fund, Third Point LLC wrote that driving more subscriber growth, while reducing "churn" and increasing pricing will "present the opportunity to create tens of billions of dollars in incremental value for Disney shareholders in short order, and hundreds of billions once the platform reaches a larger scale."
Churn is the rate at which customers stop subscribing to video services.
Disney announced in its third quarter earnings report in August that the streaming service had surpassed 60 million subscribers. Meanwhile, Disney-owned Hulu has surpassed 35.5 million subscribers and ESPN+ has surpassed 8.5 million subscribers.
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The letter comes as the coronavirus has prompted the acceleration of cord-cutting from traditional cable and has forced media companies to adapt to a new release model while the pandemic continues to prompt the closure of theaters across the globe, including Cineworld's Regal Cinemas. As for Cineworld's competitors, AMC and Cinemark, both have expressed their commitment to remain open during the pandemic.
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Loeb argued that the new focus on streaming content would allow Disney to stand out amongst its other media competitors.
"A more aggressive content roadmap will distinguish Disney as the only traditional US media company able to thrive in a world beyond the box office and the cable TV ecosystem, alongside digital-first businesses like Netflix and Amazon," Loeb said.
Loeb is also recommending that Disney condense its additional content assets, including Hulu, ESPN+, and the upcoming offering Star, under one platform with its current Disney+ content. He believes the move will allow the company to exceed the subscriber base of the industry leader, Netflix, in just a few years.
However, he warned that time is of the essence and that Disney should consider "significant additional investments in content both through production and acquisitions here and abroad."
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While Disney has been moving big-budget films such as "Mulan" to Disney+ as a matter of necessity due to theater closings during the pandemic, Loeb sees this as the future. The activist investor stressed the benefits that would come from Disney putting its blockbusters straight onto the streaming platform.
"While some pundits have described the Mulan release as a “debacle” due to the $29.99 cost for a VOD download, we see this as a valuable learning experience, expect stumbles on the way to greatness, and believe this will drive a faster decision to make all content available to subscribers for a simple subscription fee," Loeb said.
However, he noted that the media giant should try a different approach going forward than Mulan's initial pay-per-view strategy, arguing subscribers want "an easier and more affordable way to access Disney’s marquee content."
Loeb is "confident" Disney can build a direct to consumer business "that will meaningfully exceed its current cable TV and box office revenue streams, but only if the company leans into this opportunity and invests more aggressively."
By making this move, Loeb concluded, the entertainment giant would be embracing. "the future of home entertainment with the utmost urgency."
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As of June 30, Loeb's Third Point LLC owns about 5.5 million Disney shares, according to a filing with the Securities and Exchange Commission.
A spokesperson for the Walt Disney Company did not immediately return FOX Business' request for comment on the letter.
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