Jeremy Grantham on Commodities

This is from Jeremy Grantham´s letter to shareholders for the first quarter of 2011:

This is an amazing picture and it is absolutely not a reflection of general investment euphoria. Global stocks are pricey but well withinnormal ranges, and housing is mixed. But commodities are collectively worse than equities (S&P 500) were in theU.S. in the tech bubble of 2000! If you believe that commodities are indeed on their old 100-year downward trend,then their current pricing is collectively vastly improbable. It is far more likely that for most commodities the trendhas changed, just as it did for oil back in 1974, as we’ll see later.

GMO April

2 thoughts on “Jeremy Grantham on Commodities

  1. Here is the counter argument by Laurence B. Siegel:

    My thesis is at odds with most received opinion about the future. A very large body of both popular and scientific literature suggests that natural resource constraints, climate change, and other “limits to growth” will cause the future to be crowded, poor, and dirty. Ridley [2010] has noted that the tradition of pessimism among intellectuals of all stripes — literati, scientists, economists – runs very deep. (Maybe, as Peter Bernstein once said, pessimists just sound smarter and more erudite: the archetype of the wise man or woman reciting a cautionary tale to a foolish optimist goes back at least as far as Aesop.) Economists have been among the least pessimistic of this bunch, because they understand the concepts of substitution, incentives, and growth. Yet many economists and market forecasters today see little in the future to look forward to. They are almost certainly wrong.
    Economic growth and environmental remediation do not happen by magic. They involve hard work, ingenuity, and wisdom; and there will be setbacks, some of them on a large scale. But the incentives for wealth-building are overwhelming. No one, having tasted wealth, wants to return to poverty; and, having seen others become rich, most people, if not all, will do what is necessary to have a chance at becoming rich themselves. It’s human nature, which does not change very much over time.4

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