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Jeremy Grantham’s Latest Investment Advice

It’s been a while since I’ve blogged about Jeremy Grantham, the co-founder and chief investment strategist of Grantham, Mayo, Van Otterloo & Co. (GMO). To be fair, the British-born investment advisor has been taking a break from his popular quarterly investment letter that’s published on the GMO website. For those of you who aren’t familiar with Mr. Grantham, he’s designated one of this blog’s “crash prophets” along with Marc Faber, Jim Rogers, and Peter Schiff due to his special talent for correctly-calling the direction of the financial markets. He so good that individual clients have included Secretary of State John Kerry and former Vice President Dick Cheney.

Grantham was the subject of a September 20 article in The Wall Street Journal in which Ian Salisbury asked him about investment-related topics, such as the depletion of natural resources on Earth. From the Q and A session:

Q: What are investors supposed to do?
A: The investment implications are, of course, own stock in the ground, own great resources, reserves of phosphorous, potash, oil, copper, tin, zinc—you name it. I’d be less enthusiastic about aluminum and iron ore just because there is so much. And I wouldn’t own coal, and I wouldn’t own tar sands. It’s hugely expensive to build coal utilities, and the plants they have to build for tar sands are massive, and before they get their money back I suspect that the price of solar and wind will have come down so much.

So I wouldn’t use that, but I think oil, the metals and particularly the fertilizers, I would own—and the most important of all is food. The pressures on food are worse than anything else, and therefore, what is the solution? Very good farming, which can be done. The emphasis from an investor’s point of view is on very good farmland. It’s had a big run. You can never afford to ignore price and value, but from time to time you can get good investments in farmland, and if you’re prepared to go abroad, you can do it today. I wouldn’t be too risky. I would stay with distinctly stable countries—Australia, New Zealand, Uruguay, Brazil, Canada, of course, and the U.S. But I would look around, in what I call the nooks and crannies. And forestry is the same. Forestry is not a bad bargain, a little overpriced maybe, but it’s in a world where everything is overpriced today, once again, courtesy of incredibly low interest rates that push people into investing. A wicked plot of the Federal Reserve.

Grantham also shared with Salisbury where he thought stocks were heading. Basically, not only does he think equities can go “a lot higher than this” with Fed backing, but they could even reach bubble territory.

It’s a really good, insightful interview, capped-off with a discussion about unbridled American optimism, which you can read in its entirety here on The Wall Street Journal website.

By Christopher E. Hill, Editor
Survival And Prosperity (www.survivalandprosperity.com)

Source:

Salisbury, Ian. “Our Chat With Jeremy Grantham.” The Wall Street Journal. 20 Sep. 2013. (http://online.wsj.com/article/SB10001424127887323665504579032934293143524.html). 24 Sep. 2013.

(Editor’s notes: Info added to “Crash Prophets” page; I am not responsible for any personal liability, loss, or risk incurred as a consequence of the use and application, either directly or indirectly, of any information presented herein.)

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On TV: Earth 2100

One of our political leaders said not too long ago that the American way of life is non-negotiable. And we’re going to discover the hard way that when you don’t negotiate the circumstances that are sent to you by the universe, you automatically get assigned a new negotiating partner- named reality. And then they will negotiate for you- you don’t even have to be in the room.

-James Howard Kunstler (American author and leading proponent of “New Urbanism” movement), in ABC’s Earth 2100

Back on June 2, 2009, ABC ran a two-hour television program called Earth 2100. Hosted by ABC journalist Bob Woodruff, the show depicted a worst-case scenario for the United States in the next hundred years from a “perfect storm” of unsustainable population growth, disappearing resources, and harmful climate change coming together. From ABC News’ Alexa Danner back on May 29, 2009:

It’s an idea that most of us would rather not face — that within the next century, life as we know it could come to an end. Our civilization could crumble, leaving only traces of modern human existence behind.

It seems outlandish, extreme — even impossible. But according to cutting edge scientific research, it is a very real possibility. And unless we make drastic changes now, it could very well happen.

Experts have a stark warning: that unless we change course, the “perfect storm” of population growth, dwindling resources and climate change has the potential to converge in the next century with catastrophic results.

In order to plan for the worst, we must anticipate it. In that spirit, guided by some of the world’s experts, ABC News’ “Earth 2100,” hosted by Bob Woodruff, will journey through the next century and explore what might be our worst-case scenario.

But no one can predict the future, so how do we address the possibilities that lie ahead? Our solution is Lucy, a fictional character devised by the producers at ABC to guide us through the twists and turns of what the next 100 years could look like. It is through her eyes and experiences that we can truly imagine the experts’ worst-case scenario — and be inspired to make changes for the better…

And the worst case scenario dreamed up by some of the world’s foremost scientists and thinkers? Danner added:

If we remain on the current course, it’s estimated that by 2050, the world’s population may have increased by at least half and many parts of the world may be facing grave shortages of resources. The Southwest U.S. could face an extended drought, while pests threaten crops. As global sea levels rise, much of the world map could be redrawn. People will begin to migrate back to urban areas in search of better lives…

But just how bad could things get? In one scenario, scientists imagine that by the year 2100, immense storms irreparably damage major metropolises. Streets, subway tunnels, and buildings would flood and begin to rot. The stagnant water would breed filth and displace residents, forcing them into homelessness. Poverty levels and death rates could skyrocket. A new and virulent strain of disease might develop — then mutate and spread around the globe, potentially claiming tens of thousands of lives.

In this scenario, as the crisis explodes, looting grows rampant, major world powers go to war over water, and millions of people die from famine. Civilization literally collapses under its own weight.

Earth 2100 is divided into a number of chapters that correspond with events in Lucy’s life:

• June 2, 2009, “Born”- Lucy is born in Miami suburbs
• April 4, 2012, “The Good Old Days”
• August 27, 2014, “Summer Of The Dragonfly”- Species start migrating
• February 18, 2015, “Moving Day”- Americans leaving suburbs for the city
• July 14, 2015, “Running On Empty”- Lines form at gas stations, U.S. turns to coal for energy
• October 21, 2015, “Wakeup Call”- Major hurricane devastates Miami
• October 23, 2015, “After The Storm”- Lucy’s home destroyed, family moves to San Diego
• January 6, 2030, “The New Normal”- U.S. plagued by shortages and higher prices
• February 14, 2030, “In Deep Water”- Southwest becomes a desert by 2030s
• November 25, 2040, “On The Brink”- Environmental refugees on southern border
• March 28, 2050, “From Sea To Shining Sea”- Lucy leaves San Diego, witnesses Lake Mead dry, Las Vegas dead, refugees leaving dangerous Southwest, pests migrating north, Midwest still green and fertile
• September 18, 2060, “The Big “Green” Apple- Lucy moves to New York City, which is threatened by rising sea levels. Husband works on barrier.
• September 15, 2070, “Big Fixes”- Sea level up three feet, and island nations, California beaches, Everglades gone. Methane gas released from thawing Arctic tundra causing global temps to soar.
• March 15, 2074, “Plan B”- Ice sheets melt rapidly. Sulfur dioxide is released into atmosphere around the world to cool the Earth’s temperature. Halted because gas eroding ozone layer.
• January 5, 2075, “The Ice Storm”- Big nor’easter hits New York City. Barrier gate gets stuck and flooding ensues.
• January 5, 2075, “After The Storm”- Spouse killed in storm. NYC in shambles. Pandemic strikes. Civilization collapses. Famine strikes. Population dies off. World plunged into new “Dark Age.”

Lucy’s tale ends on June 2, 2100, at which point she is living with her daughter and grandson in the countryside. At the end of the program, contributors discuss what can be done to prevent such a scenario.

Overall, Earth 2100 was interesting to watch- despite, once again, the depressing subject material. Keep in mind that the show relies heavily on the theory of global warming- the belief that increases in the average temperature of the Earth’s near-surface air and oceans since the middle of the last century can be attributed to increased concentrations of greenhouse gases from human activities such as deforestation and the burning of fossil fuel. For believers in global warming, the show could serve as a guide as to where America might be heading- and what to prepare for. For global warming skeptics, keep in mind that Earth 2100 isn’t just about climate change. The show also discusses what could result from unsustainable population growth and dwindling resources, so ideas for surviving and thriving in such a world can be taken away from the ABC special.

Earth 2100 shows up on the History Channel from time to time. If you’d like to view it now, the program has been uploaded to YouTube in nine parts, which you can access in a playlist on SPTV here.

(Editor’s note: Links placed on “Resources” page and SPTV)

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