Legendary investor Jeremy Grantham speaks - this is unmissable...
- We have the most uncertain economic outlook in history
- We have the highest stockmarket valuation in history
- oh, and we have the highest debt in history.
He is a legend at spotting bubbles but even he admits that
- this time is different and
- that there is extreme uncertainty about how it pans out.
But he makes some great points on current actions by the authorities:
- Stimulus does not create jobs. You can print $2tn of money or 10% of GDP but it won't reduce the double digit unemployment rate.
I only partly agree with this - they have to do something and some jobs will be created or at least not lost, but see the next point:
- if you print money without creating more output, you have the same amount of services and products floating around the system and more money - the price of those services or products will rise and that means inflation. That is the inevitable end game.
Grantham is a generational thinker: On commodities, he thinks about three groups:
- Oil: we have passed peak oil demand, and shale has had a massive and fast ramp-up but there is not enough of it to keep prices low (demand will help).
- Metals: the real price of most metals has fallen in the last 100 years. That decline is over, apart from plentiful iron and aluminium. Other metals will be increasingly scarce and more expensive in the next generation.
- Food: It will be increasingly difficult to feed the planet and not enough is being done about soil erosion, insect destruction and many other issues.
On the virus, Grantham points out that developed countries have done an awful job. Taiwan, New Zealand, S Korea and many other countries in Asia have handled it well. Elsewhere, only Germany gets a pass. UK performance was woeful and he highlights that Massachusetts and New York are as bad as England. A lack of joined-up thinking is the main culprit - a lesson there for investors.
Vote with your feet
Grantham may have been one of the founders of GMO but his foundation is 60% invested in venture capital and his target is 70%. Asked if he would recommend a career in public equities, he was unequivocal: public equities is a zero sum game, venture capital is an additive game. Insightful.
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