One of the more interesting things you will read this weekend is the Sunday NYT Magazine’s spread on legendary investor Jeremy Grantham. GMO’s chief strategist discusses quite a few topics ranging from investing to global warming to commodity plays to doom & gloom. (Yeah, I have a few words in it).

There are a number of parts of this article I find intriguing, but I found the issue of framing particularly fascinating. In the US, the issue of Global Warming generates a paltry response — but reframe the question as one of finite resources, and everyone pays attention. Its as if we Americans have become the Ferengi of the planet, obsessed with profit and trade and swindling people into bad deals.

Regardless, the article is rather compelling. I’ll skip my excerpt and point you to the framing discussion:

“Having missed a once-in-a-generation legislative opportunity to address climate change, American environmentalists are looking for new strategies. Grantham believes that the best approach may be to recast global warming, which depresses crop yields and worsens soil erosion, as a factor contributing to resource depletion. “People are naturally much more responsive to finite resources than they are to climate change,” he said. “Global warming is bad news. Finite resources is investment advice.” He believes this shift in emphasis plays to Americans’ strength. “Americans are just about the worst at dealing with long-term problems, down there with Uzbekistan,” he said, “but they respond to a market signal better than almost anyone. They roll the dice bigger and quicker than most.”

Not that it’s always easy to derive usable market signals from Grantham’s letters. Ben Inker, GMO’s head of asset allocation, told me: “Just because he’s right and we know something’s going to happen doesn’t mean that we have a brilliant way to make money on it right now. In this industry people want to be right this quarter. Often, they read the letter, and they’re wondering, What would we do about that?”

But among the ways investors might respond to limited resources, beyond simply trying to grab up a lot of what Grantham calls “stuff in the ground,” are many that also address climate change: for instance, investing in farms and forests managed for the long haul, or in companies that retrofit buildings for energy efficiency, build ultralight vehicles or develop non-hydrocarbon-based power.

“There’s an 80-20 overlap between sensible behavior on resource limitation and sensible behavior on climate change,” Ramsay Ravenel, the executive director of the Grantham Foundation, says. “A lot of his audience isn’t that receptive to messaging on the world’s environment going to hell, but they are receptive to resource limitation.”

Fascinating stuff.

The entire article is well worth a read . . .

>

Source:
Can Jeremy Grantham Profit From Ecological Mayhem?
CARLO ROTELLA
NYT, August 11, 2011
http://www.nytimes.com/2011/08/14/magazine/can-jeremy-grantham-profit-from-ecological-mayhem.html?_r=2&ref=magazine&pagewanted=all

Category: Commodities, Investing, Media, Science

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

31 Responses to “GMO’s Jeremy Grantham in Sunday NYT Magazine”

  1. crutcher says:

    “to try to protect whatever and whoever matters to you — biodiversity, family, nation, everybody.”

    As though zero-sum conflicts are not made of precisely these sub-divisions of group loyalty.

    Like BR’s comment about “respect for Humanity,” this schmaltziness is an easy out for the children of the baby-boomers, who spent their lives enjoying the good times and have now left us with the mess.

  2. louiswi says:

    Along a similar line as Grantham is an excellent documentary titled “The Eleventh Hour” narrated by Leonardo DeCaprio. The big issue is resource depletion and there are some insightful and profitable paths offered in the piece. Well worth the view-available on Netflix and other sources.

  3. jaymaster says:

    Well, sure. He’s moving from fantasy based investing to reality based.

    Resource depletion is real. Carbon influenced climate change is still just a theory.

  4. Fixed Carbon says:

    Yes, yes yes! and Mitt Romney is the Grand Nagus, overseer of the Board of Liquidators. Can anyone remember if corporations are people on Ferenginar?

  5. AlexM says:

    Unlike many other prognosticators, Grantham puts his substantial financial resources where his mouth is. Great article even for the non-believers.

  6. machinehead says:

    ‘global warming … depresses crop yields’

    Oh really? Higher temperature accelerates organic processes, including plant growth.

    Perhaps some crop yield is lost in transition as the growing areas of some crops shift poleward. But in principle, longer frost-free growing seasons increase yields, not reduce them.

    From a long-term vantage point, we are living in a record-overextended interglacial period — the longest temperature bull market ever, from a chartist’s perspective. The overdue return of the glaciers poses a serious risk of a major human die-off. Global warming, by contrast, is no biggie — more of an temporary, incremental problem.

    Although there is no NBER to define the end dates of interglacial periods, this one may already have expired, and we just don’t know it yet. Secular trend changes are hard to spot in real time. But I’m pretty sure global temperature is about to break the neckline of a bearish head-and-shoulders formation. You read it here first.

  7. crutcher says:

    “Oh really? Higher temperature accelerates organic processes” – yeah, anyone who knows anything about temperature thresholds of enzymes knows as much. They must be growing shitloads of bananas on the surface of the sun.

    And yeah, who could doubt that climate is reality bound by the patterns of technical analysis? It’s Elliot wave, head and shoulders, momentum trading, candlestick reality at its best.

  8. jaymaster says:

    To be clear, I do agree that it is a good article. And I am glad to see him put his money on the line.

    I just think he is off base on his interpretation of other folk’s motivations.

    There were a limited number of rubes to be exploited in the early phase of global warming hysteria. The easy money has already been made. Now it’s time to deal with reality.

  9. Orange14 says:

    @machinehead, one of the features of global warming is more violent weather changes and differences in micro-climates. This may elevate crop yields in one place and depress it in another. Try telling the farmers in Texas and Oklahoma that their crop yields will go up this year because of the warming they are experiencing. While warm weather is great, you also need the other requisite inputs for yield: nitrogen and phosphorous fertilizers, pesticides & herbicides, and most of all water. Grantham’s points are well on the mark and the evidence is present in a number of agricultural regions these days.

  10. dougc says:

    Orange 14, the great drought was in the 1930′s, before global warming, so tying a dry year of below normal rain is quite a stretch. Wheat and other small grains in oklahoma are planted in september and harvested in june, so higher temperatures in the growing season would be positive
    .Famines were commom in India and China in the 1940′s and 1950″s and were eliminated by devolrping grains that were dought resistant and heat resistant.
    I enjoy listening to people, whose knowledge is based upon driving by a farm once or twice, discuss the problem but get serious.

  11. Forbes says:

    resource depletion

    well, I guess there is one good thing at least we can confirm that he recycles

    http://news.google.com/newspapers?id=eW1NAAAAIBAJ&sjid=3PoDAAAAIBAJ&pg=7318,69579&dq=&hl=en

    and if folks don’t buy into that meme perhaps he can recycle the world is getting colder meme

    http://news.google.com/newspapers?id=q0MtAAAAIBAJ&sjid=A58FAAAAIBAJ&pg=4372,3666380&dq=&hl=en

  12. machinehead says:

    No disagreement about more violent weather changes. But in principle, a higher mean temperature drives greater evaporation from the seas. The effect won’t be uniform, but planetary warming should be supportive of higher precipitation, summed over the planet’s entire surface.

    Conversely, global cooling has the potential to deliver the deadly duo of cold and drought. It appears that most abandoned ancient cities were felled by this double punch, occurring on a local basis.

    I like Grantham’s commentary better when he focuses on finance and economics. His linked essay is uncomfortably reminiscent of the world’s greatest intellectual fraud, Alan Greenspan, yammering on about natural gas — a subject on which his entire expertise was limited to his own postprandial flatulence.

  13. johnnywalker says:

    re Machinehead and douge:

    Please check out “Climate Trends and Global Crop Production Since 1980″ in the 29 July 2011 issue of Science. They estimate that global production of maize and wheat have declined by 3.8% and 5.5% in that period compared to production estimates without climate change.

    BTW, climate change started well before the 1930s. The “dust bowl” was a result of the convergence of normal but uncommon weather events, greed, ignorance and apathy. We know more now, but not enough to prevent something like that from happening again

    It’s obvious that at some time in the future we will need to transition away from a petroleum based economy. Some people will benefit from the shift and others will not. I heard a chemist speak at least 20 years ago about the essential uses of petroleum for plastics, pharmaceuticals, and other industrial products. He said something to the effect that petroleum was way too valuable to burn for heat and transportation.

  14. Mike in Nola says:

    Seems like BR mentioned one of the unmentionables that brings out the you-know-whats, who, like Gollum say that things cannot be because they don’t want them to be.

    I think Global Warming is probably true. But the more important question is: What are the consequences if it is true and we don’t do anything v. it not being true and we take unnecessary precautions.

  15. JimRino says:

    MachineHead, Limbaugh told you Global Warming wouldn’t affect us for 100 years.
    Texas proves otherwise…
    Then there’s last years Russian Wheat Disaster/Drought.

    Food Price Spikes
    http://www.huffingtonpost.com/2011/06/19/china-floods-food-prices_n_879897.html?ir=World

    Glacier Melt in Pictures
    http://www.livescience.com/674-glaciers-disappear-photos.html

    Us Drought Monitor( TEXAS )
    http://droughtmonitor.unl.edu/

    North American Drought Monitor
    http://www.ncdc.noaa.gov/temp-and-precip/drought/nadm/nadm-maps.php

    Global Drought Monitor
    http://www.ucl.ac.uk/news/news-articles/0601/06010302

  16. JimRino says:

    MachineHead did you read the first Koch link?
    You’re spouting the exact words Koch has paid Limbaugh to report to you.
    You’ve got good memory skills.

    Now, it’s time to Follow-the-Money and use your Logic Skills.

  17. JimRino says:

    Will it really be so bad adjusting to Climate Change?

    Not really:
    http://www.teslamotors.com/models

  18. GrafSchweik says:

    Machinehead –

    you almost fooled me… or did you?!

    Whatever! Droll, very droll!!

  19. Daniel says:

    This is the reason for global warming or climate change.
    http://www.climateactionreserve.org/
    It will be marketed and traded to profit a few. Fraud has already been reported in other exchanges.
    If there is a problem make the industries clean up their operations.
    Here in California the government wanted the refineries to clean up, but instead a market was created to buy old cars and the refineries bought those credits. Didn’t do anything to clean their operation and to this day they haven’t gotten better. But you know there were special people who made a bunch of money.

  20. Bob A says:

    Wind and Solar. It’s happening now. Thanks in large part to the foresight and investment of Germany (we could learn some lessons from them on healthcare too btw). While wind is well established in the US, mega-scale solar projects are just finally beginning to roll out and will open a whole new chapter.

  21. Orange14 says:

    Solar can also generate jobs and look at what Dow has done! http://www.dowsolar.com/ If we didn’t have to replace our roof last summer, I would have really wanted something like this.

  22. dougc says:

    Johnywalker… If climate change caused the drought and the dust bowl in the 30′s why did it end.

    estimates are just that, based upon facts the world supply of grains have been increasing over the last 80 years.

    I estimate that I will live to be 250 but I don’t claim it to be a fact.

  23. johnnywalker says:

    Dougc,

    I never said the dust bowl was caused by global climate change. I said that global climate change started before 1930. The dust bowl was associated with an extreme drought, but it wasn’t outside the normal range of historical weather conditions. The danger of climate change, as I understand it, is that extreme events like that will become more common and severe.

    Since it is impossible to do a controlled experiment to compare crop yields with/without global climate change, estimates are the best we can do. I would trust estimates based on empirical evidence (projections of historical measures of grain yields, etc) more than those based on wishful thinking (living to 250). The Science article also was subjected to stringent peer-review.

  24. farmera1 says:

    “Oh really? Higher temperature accelerates organic processes, including plant growth.”

    Idiots shouldn’t spout off about things that they don’t know anything about. Corn for example, if you have temps above about 86F, it won’t pollinate. No pollination, no corn. In this part of Michigan, there is lots of corn that didn’t pollinate this year due to historically high temps. Nice green stocks, lots of foliage, but no corn kernels on the cob. Corn doesn’t do sex when it’s too hot. Hope idiots that spout off about things they heard on Rush’s show, end up living on that that phantom corn that does so well in high temps.

    The extent of the damage to corn in the Midwest is unknown, but I can assure you that in this part of southern Michigan the damage is substantial.

  25. godot10 says:

    Wind power generators require a lot of rare earth metals for the magnets.

    Rare earth metals are typically associated with rock that also has lightly radioactive metals. Rare earth metals mining generates lots of weakly radioactive waste rock, leading to radioactive lakes in China that the environmentalists don’t tell you about.

    And when you begin to really scale up wind power, one is introducing a lot of weakly radioactive waste rock into the environment. And the costs of dealing with this isn’t remotely being factored into the all-in costs of wind power.

  26. Bob A says:

    they could use a few more radioactive lakes in china ;)

  27. DeDude says:

    godot10;

    And the cost of pollution and global warming is not factored into carbon based energy production. I agree we should slap all forms of economic activity with a tax that covers its specific social cost. So I guess we can agree on the carbon credit program?

  28. victor says:

    Hybrid autos use Lithium based batteries. Most known deposits of Lithium are in Bolivia and Chile, some recently reported in China and now possibly huge deposits in Afghanistan (hmmm…). I’ve been following a Chilean Company: Sociedad Quimica y Minera (symbol SQM on NYSE, ADR) that produces fertilizers AND Lithium. Investment opportunity a la above article? Any comments?