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GMO’s Jeremy Grantham in Sunday NYT Magazine

Posted By Barry Ritholtz On August 13, 2011 @ 10:00 am In Commodities,Investing,Media,Science | Comments Disabled

[1]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 [2] 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? [3]
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


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[1] Image: http://www.ritholtz.com/blog/wp-content/uploads/2011/08/14grantham2-articleInline-v2.jpg

[2] Ferengi: http://en.wikipedia.org/wiki/Ferengi

[3] Can Jeremy Grantham Profit From Ecological Mayhem?: http://www.nytimes.com/2011/08/14/magazine/can-jeremy-grantham-profit-from-ecological-mayhem.html?_r=2&ref=magazine&pagewanted=all

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