In his latest GMO Quarterly Newsletter, Jeremy Grantham (eloquently, as always) continued to channel his “inner Malthus” to deliver grave warnings on resource limitations that he anticipates humanity will face with increasing severity and urgency as the 21st century rolls on. You may remember that Grantham’s Q1 newsletter focused on what he called a “paradigm shift” in commodity prices, due to a 200-year hydrocarbon boom winding down. (See: Jeremy Grantham gets bullish on commodities).
His Q2 letter is a quite a bit darker and more philosophical, too – he’s genuinely worried that the planet may not be able to feed everyone soon.
This quarter, I would like to focus on the most dangerous parts of the coming shortages. I will try to separate those that, for us rich countries, are merely going to slow down the growth rate of our wealth through rising prices, and those that will do not only that, but will actually be a threat to the long-term viability of our species when we reach a population level of 10 billion. In all cases, poorer countries will be the most threatened. Situations that will irritate some of us with higher prices will cause others to starve. Situations that will cause some of us to go hungry will be for others a real disaster, and I believe this, unfortunately, will not be in the dim and distant future.
Investment implications?
The moral however, is clear. As Jim Rogers likes to say: be a farmer not a banker – the world needs good farmers! I might add: or become a resource ef?ciency expert and help the world save some of them for our grandchildren. Farming will be a satisfying and enriching experience if, on a global basis, we rise to the longterm agricultural challenges.
In terms of efficiency, Grantham is especially concerned about the depletion of fertilizers (potash and phosphates) – which will, of course, provide money making opportunities for those with who produce and/or are sitting on reserves of these resources.
You can read Grantham’s full Q2 2011 newsletter here.
Eponymous fertilizer play Potash Corp (POT) and its 3-year uptrend. (Source: StockCharts.com)
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