In terms of strategy, Grantham summarizes his view in what he believes should be investors' motto: "Don't be brave, run away. Live to fight another day."

Specifically, as far as house prices are concerned Grantham looks at the ratio of US median house prices to family income and states: "In order for house prices to reach normal from here, they must either decline 17% immediately or experience four flat years while income catches up, or some combination." Even more worrying, however, is the normal tendency for bubbles to overrun on the downside.