Jeremy Grantham’s says in his quarterly letter that every asset class in the world is currently under a bubble.

In particular, the current mad rush for ‘alternative investments’ in the hedge fund and private equity misses a crucial point. See an excerpt from his summary below for an answer:

....in the longer run all assets are worth replacement cost and supply/demand imbalances do not change that.  Ben Graham famously said that in the short run the market is a voting machine, but in the long run it is a weighing machine.  In this sense replacement cost is Ben Graham’s ‘weighing machine’ and supply/demand his ‘voting machine.’  Every time the supply/demand imbalance is interrupted, even if only for a short time, prices will trend towards fair value or replacement cost, sometimes quite slowly and sometimes very fast indeed.  So we are probably in for an extended period of mispricing, usually in favor of the trendy assets, but with reactions that will sometimes likely be dramatic.
 
It is also worth remembering that some of these trendy assets are real asset classes like foreign and emerging equities, small cap equities, and timber.  Others, like hedge funds
and private equity, are merely the existing asset classes repackaged at higher fees, with less regulation and much greater leverage.  They are not new asset classes and should be reclassifi ed into their component parts, as I’m sure they will be routinely in a few years.  Above all, these fashionable, repackaged assets are still part of a zero sum game and their higher fees are, in the end, your lower returns.