Grantham is not a commodity person, but he is quite smart, and consistently understates his most important points, so this perked my ears a little.
What “paradigm shift” is he noticing?
(you have to register to access.)
Resource Limitation Note
For my money, resource problems exacerbated by weather instability will be our biggest and most complicated
investment problem for years to come. How should we prepare for it? First, we should all transfer more of our
intellectual resources to the problem. Yes, we have already recommended forestry, agricultural land, and “stuff in
the ground.” It would be nice to back this up with more detail. To this end, we are starting to look more closely at commodity cycles, both historically and currently. We will report back from time to time.
By the way, the good news is that our long-term bubble study, started in 1998, has become a monster. Formerly a study of the handfuls of famous, accepted investment bubbles, we are now well into a statistically rigorous review of primary, secondary, and possibly even tertiary bubbles, and now count a stunning 320 completed bubbles. For now,
we do not intend to make our complete review generally available, but we will review some interesting “average”
bubble behavior in a few months.
So, we do know some useful stuff about commodities. The complicating point is that in the recent few years,
commodities seem to be making a paradigm shift. If this is so, it will be the most important paradigm shift to date.
The bad news is that paradigm shifts cannot, by defi nition, be described well using history. It is all about judgment.
Now there’s a real problem.