Renowned veteran investor and GMO co-founder Jeremy Grantham explained how investors should position their portfolios amid historic market speculation when the so-called “superbubble” in the stock market bursts, writes Business Insider.

Grantham advised holding cash, avoiding investments in U.S. stocks except for high-quality stocks that can withstand a major downturn, and looking for bargains in emerging markets.

Jeremy Grantham recently revealed that the US market is inflating its fourth superbubble in the last century and warned that the benchmark S&P 500 index would collapse 43% to around 2,500 points once the bubble bursts.

“What I would do is make sure there is a cash reserve. There could be some great buying opportunities in the next couple years.” About himself, Grantham said he has cash on hand, so he can easily use it, as well as a small amount of gold and silver.

As the credit crisis looms, the best thing to do to survive it is to invest in blue chip stocks, avoid debt and if possible, invest in the U.S. market, as it is, he said, the most overvalued market.

“Real estate is overvalued all over the world. But the stock market outside the U.S., oddly enough, is not that bad. It is in a bullish trend.

“There are some cheap [to invest in] countries. Japan looks pretty cheap, and yes, the UK isn’t too bad. If you are looking for cheap stocks, invest in growth stocks as opposed to value stocks. It’s probably the turn of cheap stocks and cheap countries again.”

Grantham is also known for criticizing the Fed for being indifferent to the consequences that will follow for investors once the market bubble bursts.

“One of the main reasons I deplore superbubbles and resent the Fed and other financial regulators for allowing and facilitating them is the underappreciated damage that bubbles do when they deflate and reduce our wealth,” the investor said.