Merryn Talks Money GMO's Jeremy Grantham on buying start-ups, an AI bubble and why the small-cap premium is a myth
22 snips
Jan 19, 2026 
Jeremy Grantham, co-founder of GMO and a veteran investor known for spotting market bubbles, shares his insights on the current AI bubble and how it mirrors past market disasters. He debunks the myth of the small-cap premium, discusses the interplay between quality and momentum in investing, and warns individual investors to watch for valuation signals. Grantham also highlights the dangers posed by central bankers and offers advice on venture capital and mission-driven work, emphasizing the importance of practical skills in today's market.
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Quality Stocks Offer A Free Lunch
- Jeremy Grantham finds 'quality' stocks consistently outperform, contradicting typical risk-return assumptions.
- He calls this a "free lunch" that challenges efficient market theory.
Small-Cap Premium Is Mostly Reshuffling
- Grantham argues the small-cap premium largely disappears once you remove automatic rebalancing effects.
- Much of apparent small-cap outperformance comes from reshuffling winners and losers each year.
Monopoly Power Inflates Profits, Slows GDP
- Grantham links rising industry concentration and monopoly power to higher corporate profit margins.
- He warns this boosts corporate profits but hampers GDP growth and squeezes smaller firms and households.
