In his quarterly letter, Mr. Grantham estimates the market is currently overvalued by 65%, predominately because of the types of investors driving the market in the short-term.

“Purist value managers may try to block out the siren call because they don’t wish to be tempted, and some may hear it and do nothing because the gains are never certain and the lack of prudence is painfully obvious in the end,” he wrote. “Yet long-term value managers are outnumbered by momentum managers – always were and probably always will be – and momentum managers have no such qualms. Why this time, then, would they not play the game with even more enthusiasm, at least enough to drive the market to…2,250 and perhaps a fair bit beyond? And although nothing is certain in the market, this is exactly what I believe will happen.”

At some point, though, the party will stop. And that’s when a decline similar to what transpired in 2000 and 2008 could play out again, he says.

“The bull market may come to an end any time, indeed as I write it may already have happened,” Mr. Grantham said. “It could be derailed by disappointing global growth, profits sagging as deficits are cut, a Russian miscalculation, or, perhaps most dangerous and likely, an extreme Chinese slowdown. But I believe it probably (i.e., over 50%) will not end for at least a year or two and probably not before it reaches a level in excess of 2,250 on the S&P 500.”