The article in the url below is part biography/part interview of Jeremy Grantham. Grantham is an investment manager, like Warren Buffett, but while Buffet buys companies, Grantham invests in various asset classes (http://www.gmo.com/).
Also like Buffett, Grantham releases regular letters to the investment community that detail his analysis of current markets and future trends. The article in the url below covers one of his 2011 quarterly letters, which focuses on Grantham’s predictions of commodity shortages (and, therefore, higher prices) in the decades to come.
I will not summarize the content of the article here (it is long), but quote some highlights that I thought were particularly insightful:
“… most economists see global trade as a win-win proposition, but resource limitation turns it into a win-lose, zero-sum contest.”
“Unemployment and interest in environmental issues move inversely.”
“Global warming is bad news. Finite resources is investment advice.”
One passage that caught my eye, in particular, was Grantham’s comments about a 1980 bet between a biologist who believed that commodities would become increasingly scarce as world population increased (Paul Ehrlich) and an economist who believed that humans would continue to innovate to overcome any shortages through increased efficiency or the development of viable alternatives (Julian Simon)—see Wikipedia for more background (http://en.wikipedia.org/wiki/Simon%E2%80%93Ehrlich_wager):
“The two men picked five commodities and wagered on whether their prices, taken as an indicator of scarcity, would be higher or lower in 1990. Simon won, 5-0, even though the world’s population grew by 800 million during that decade. Malthusians have been trying to live down that defeat ever since, but, as Grantham points out in his July letter, if we extend the original bet past its arbitrary 10-year limit to the present day, Ehrlich wins the five-commodity bet 4-1, and he wins big if the bet is further extended to all important commodities.”
In short, our current economic growth is unsustainable. We are drawing on non-renewable resources at rates that exceed the planet’s ability to keep up. While this information may allow investors like Grantham to profit, it carries graver consequences than missed investment opportunities for the rest of us!
Instructor Teaching Site: http://www.sagepub.com/strategiccsr/
The library of CSR Newsletters are archived at: http://strategiccsr-sage.blogspot.com/
Can Jeremy Grantham Profit from Ecological Mayhem?
By Carlo Rotella
August 11, 2011
The New York Times
Late Edition - Final