In late 2017, the investing legend Jeremy Grantham was officially on bubble watch.

That all changed in January when, as he describes it, stories of investor overconfidence became too numerous to ignore.He said as much in a quarterly letter he coauthored for his firm, Grantham, Mayo, & van Otterloo (GMO), back in December. It wasn't an extremely pressing concern quite yet but something in the back of his mind.

Grantham's favorite anecdote came courtesy of the bus one of his Boston-based colleagues would take to work from New Hampshire. Every morning, an elderly woman would see the GMO employee reading financial literature and ask questions.

One inquiry in particular stuck out to him: Should she sell her house worth about $300,000 and put it in the stock market?

"What do you expect to get?" the GMO employee recalled asking.

Her response stunned him. And when he relayed it to Grantham, the market guru was sure an unsustainable situation was afoot.

"Well, the market has been rising at 17% per year," she'd replied. "And I'd be hoping for 20%."

That, to Grantham, was stock market overexuberance personified - and a glaring warning sign of an impending financial bubble. He began to brace in earnest for an imminent bust.

This was significant, since predicting major asset bubbles is what has made Grantham such a world-renowned investor. His track record speaks for itself. He predicted the dot-com and housing bubbles that wound up crushing markets. In fact, his otherworldly prescience actually extends back to the late 1980s, when he called a bubble in Japanese equities and real estate.

But mere months after his January revelation, something happened that made him reconsider once again. And President Donald Trump was at the center of it.

"We were only a few months from being in ecstasy land," Grantham, the cofounder and chief investment strategist at GMO, which oversees $71 billion, told Business Insider by phone. "Then the trouble with trade, and the US proposals for tariffs that have now become more than proposals, came into play."

An outlook derailed by Trump's trade war

Grantham estimates that if the trade sanctions and tariffs announced and gradually implemented by Trump hadn't materialized, the market could be 10% higher than it is today.

Such a continuation of overstretched valuations would've perfectly met his definition of a "melt-up" in stocks - otherwise known as the period of steep increases that normally occurs at the end of a market cycle, before the bubble bursts.

"The effect on currencies and emerging markets has really made it difficult to maintain a super-high level of euphoria," Grantham said. "I consider this a melt-up nipped in the bud by you-know-who."

While many pundits have decried Trump's trade escalation as heavy-handed and potentially damaging to the global economy, in an ironic twist of fate it may have saved the US market from a painful explosion.

But to hear Grantham tell it, that may not have been such a good thing.

"It's a pity, because we know how great bull markets and great economies end," he said. "They traditionally end with a melt-up and a blowup. What about when that doesn't happen? Who knows? We have no experience of a decadelong bull market fizzling out. Here we are, in no-man's land."

That's not to say the market landscape is devoid of bubble-like behavior. A few years ago, Grantham said the latest cycle wouldn't reach peak bubble conditions until at least one of two things happened: a new high in deals or a new high in initial public offerings.

Well, as it now stands, merger-and-acquisition activity is, in fact, occurring at a record pace. And if you consider IPO equivalents - such as when a private company is acquired by what Grantham calls "the Googles of the world" - another record situation may be forming.

Grantham sees this, but he can't fully talk himself into a dangerous bubble - not since Trump's trade tensions injected a big dose of skepticism into the market. That's a far cry from his dot-com and housing bubble calls, in which his level of conviction was through the roof.

"There are decent indicators of the market being in a late stage," Grantham said. "But that still doesn't free us from the conundrum of - how can we end if we don't get a spectacular blowup and a collapse? Collapses in the past have needed that last adrenaline shock - that last 30% or so of complete speculation."

Grantham's new bull-market endgame

Just because Grantham's expectation for a sudden market crash has been muted doesn't mean stocks will continue climbing indefinitely. He says it simply means the inevitable downturn will be a protracted version of prior meltdowns.

The problem is, there's no real precedent for a bull market ending in such fashion. But Grantham still ventures to offer a grand prediction - one characterized by regular bouts of moderate turbulence that he says will wear on the psyches of investors.

"My guess is - you have an extended, very psychologically painful, long, drawn-out series of stumbles and starts, where you go up 10% and down 15%, up 12% and down 14%," he said.

"You have this series of nonspectacular, ordinary mini-bear markets that wear away at the P/E, and eventually the economy weakens, and eventually the profit margins go down," Grantham continued. "It helps drip, drip, drip the market back down. Not with a bang - more with a whimper."

Grantham does note that blockbuster earnings growth has already eroded traditional measures of P/E in recent quarters, as profits have outpaced share gains; however, that would be more encouraging if US profit margins weren't already at an all-time peak and thereby primed to drop.

Ultimately, when it comes to Grantham's forecast "drip" down in stocks, Trump's trade war still takes center stage. He says now that the market was deprived of one last bout of speculative fervor, the eventual market meltdown will be less immediately severe. Rather than being spring-loaded to quickly drop, say, 50%, he says it will instead fall 20% to 25% over multiple years.

Still, Grantham isn't ruling out a continuation of January's dangerous "melt-up." He says that if the trade war gets resolved or turns out to be less punishing for investors than initially advertised, speculative behavior could come roaring back.

But judging by how things have gone in recent months, that seems like a stretch.

"Back last December, I said there was a 50% chance that we'd have a traditional melt-up and blowup," Grantham said. "That's gradually come down every week these trade and currency war things go on, and as we come closer to the end of this economic cycle."

 Courtesy -- Joe Ciolli | Business Insider

Since the International Monetary Fund (IMF) lowered its estimation for global growth for 2015, the equity markets have seen a sizeable correction. Last week, before the correction in stock indices was reversed, over $3.2 trillion was momentarily wiped out from the value of the global stock market. In addition to this, various worries ranging from the spread of the Ebola virus to the Federal Reserve (Fed) tightening its monetary policy, added to the general feel of the investment world as we’ve known it over the last four to five years, coming, if not to and end, at least close to it. This translated into strength in Gold which is often viewed as a safe haven when global threats arise or when the Fed expands its balance sheet. It is clear from the charts that when things got jittery, money flowed out of the other markets, but not from gold. Instead, gold gained after it touched a long term support level. According to the Financial Times, flows into gold investment funds hit an eight week high in the week to October 15^th. At the same time the comments from the St. Louis Fed president Mr. Bullard have left the door open for further expansion of the Fed’s balance sheet. Based on all of the above, it is safe to assume that gold prices will be either sustained above the latest weekly low (support level at 1183) or trend higher over the coming months.

In this video Mike Maloney tries explaining why and how the US Government is creating a false sense of economic security to the nation. If you work hard for your money and you want it to matter, I suggest you watch this. If you have further questions about how you can protect yourself against the pending wealth transfer, visit my site here.   

On June 4, Oklahoma joined Utah, Texas, and Louisiana in affirming that gold and silver coins are (as they always have been under the Constitution) legal tender in the payment of debts in the state. On the surface this seems almost nonsensical: affirming a right that already exists in Article I, Section 10 of the U.S. Constitution. But it is much more than that.

Senate Bill 862, which Oklahoma Governor Mary Fallin signed into law this week, says,

Gold and silver coins issued by the United States government are legal tender in the State of Oklahoma.No person may compel another person to tender or accept gold or silver coins that are issued by the United States government, except as agreed upon by contract.

The new law also exempts all state-level taxes that Oklahoma residents would otherwise have to pay when exchanging gold or silver back into paper money:

For taxable years beginning on or after January 1, 2015, there shall be exempt from Oklahoma taxable income, or in the case of an individual, the Oklahoma adjusted gross income, any amount of net capital gains ... which result from the sale or exchange of gold or silver for another form of legal tender.

All this appears to do is affirm the language from the U.S. Constitution: "No state shall ... make any Thing but gold and silver Coin a Tender in Payment of Debts."

But it does much more. Sean Fieler, Chairman of American Principles in Action, one of the bill’s primary supporters and promoters, came close to explaining why:

I commend the people of Oklahoma, particularly Senator Clarke Jolley and Governor Mary Fallin, for asserting their state’s constitutional right to declare gold and silver legal tender.

With the Federal Reserve actively suppressing interest rates and eroding the purchasing power of the U.S. dollar, it is welcome news to see one more state give its citizens free access to money that holds its value over time.

It’s about options. When citizens become comfortable with using money that retains its value over time, it will mark the beginning of the end of paper currency backed by nothing. This would be the inevitable end point of the process that began on August 15, 1971 when then-President Richard Nixon unilaterally ended the dollar’s convertibility into gold. For the past 43 years the world has been subjected to floating currencies pegged to nothing other than future promises to pay in more paper money. As Ron Paul noted in his book The Case for Gold, first published in 1982,

Under a gold standard, the amount of credit that an economy can support is determined by the economy’s tangible assets, since every credit instrument is ultimately a claim on some tangible asset. But [today’s] government bonds are not backed by tangible wealth [but] only by the government’s promise to pay out of future tax revenues....

In the absence of a gold standard, there is no way to protect savings from confiscation through inflation....

This is the shabby secret of the welfare states’ tirades against gold. [Unlimited] deficit spending is simply a scheme for the hidden confiscation of wealth. Gold stands in the way of this insidious process.

Paul was referring to the "shabby secret" revealed by former Federal Reserve Chairman Alan Greenspan before he was assimilated by the monetary Borg of the Federal Reserve. In July of 1966, Greenspan wrote in Gold and Monetary Freedom about that secret:

In the absence of a gold standard there is no way to protect savings from confiscation through inflation. There is no safe store of value....

If everyone decided, for example, to convert all his [paper] bank deposits to silver [or gold] ... bank deposits would lose their purchasing power and government-created bank credit would be worthless....

This is the shabby secret of the welfare statists’ tirades against gold. Deficit spending is simply a scheme for the “hidden” confiscation of wealth. Gold stands in the way of this insidious process....

If one grasps this, one has no difficulty in understanding the statists’ antagonism toward the gold standard.

That confiscation has been accelerating exponentially since 1971, as seen by clicking here to view price levels in the United States from 1965 through 2013. Once the gold standard was abandoned by Nixon in 1971, the price level in the United States has risen by a factor of six! Put another way, citizens’ paper money has lost almost 80 percent of its value in just 43 years.

That Oklahoma has joined with other states in its affirmation of gold and silver (with still others considering similar measures) could mark the beginning of the end of the paper machine itself — the Federal Reserve. William H. Greene is an economics professor at New York University’s Stern School of Business. While a seemingly unlikely spokesman for the abolition of the Fed, his view of the coming inevitable end of the Fed is remarkable:

Over time, as residents of the state use both Federal Reserve Notes and silver and gold coins, the fact that the coins hold their value more than Federal Reserve Notes do will lead to a “reverse Gresham’s Law” effect, where good money (gold and silver coins) will drive out bad money (Federal Reserve Notes). As this happens, a cascade of events can begin to occur, including ... an influx of banking business from outside the state ... and an eventual outcry against the use of Federal Reserve Notes for any transactions. [Emphasis added.]

This is most encouraging to the Tenth Amendment Center, which noted, "Once things get to that point, Federal Reserve notes would become largely unwanted and irrelevant for ordinary people. Nullifying the Fed on a state-by-state level is what will get us there."

That’s what makes Oklahoma’s affirmation of a right so important. If every state would affirm their rights under Article I, Section 10, the end of the Fed would merely be a matter of time. Federal Reserve Notes would become irrelevant — a relic of a failed statist experiment in organized, sophisticated theft.