The worst US drought in 50 years is having a significant effect on global food prices
Such is the gloomy worldview of Jeremy Grantham, chief investment strategist of Boston-based institutional money manager GMO LLC. He envisions a future of scarce resources, where food and the means to produce it is the coin of an unstable realm.
"We are five years into a severe global food crisis that is very unlikely to go away," Grantham wrote in a letter to GMO clients, published late Tuesday.
"It will threaten poor countries with increased malnutrition and starvation and even collapse," Grantham predicted. "Resource squabbles and waves of food-induced migration will threaten global stability and global growth. This threat is badly underestimated by almost everybody and all institutions with the possible exception of some military establishments."
Comment: Yes, you can rest assured that the Pentagon is at least aware enough of the reality of the situation to have preparations in place to cope with the social and political turmoil to follow.
Food, and the lack of it, will be the world's foremost social, economic and political priority for several decades, Grantham said. The crisis is unlikely to abate "at least until the global population has considerably declined from its likely peak of over nine billion in 2050."
The good news is that science and technology is engineering better ways to increase food production, Grantham said. The trouble is that these efforts might not be successful and in any event, demand will most certainly overwhelm supply.
Jeremy Grantham
"I believe that this is substantially optimistic," he wrote. "Much more likely, we will not come close because there are too many factors that will make growth in food output increasingly difficult."
Among the factors Grantham cites are declines in grain harvests, obstacles to efficient irrigation, bad farming practices that undermine productivity and increasing weather instability including floods, droughts and heat. "The climate is changing," Grantham said.
Comment: It certainly is, but not in the way most believe:
Forget About Global Warming: We're One Step From Extinction!
Moreover, he said, rising production costs will price many people literally out of the market.
"Even if we could produce enough food globally to feed everyone satisfactorily," Grantham said, "the continued steady rise in the cost of inputs will mean increasing numbers will not be able to afford the food we produce."
Shopping list
Grantham has been concerned with resource scarcity for several years and frequently raises the issue. The Grantham Foundation for the Protection of the Environment works to promote environmental awareness and action.
The foundation has an investment portfolio, separate from Grantham's work at GMO, that allocates with an eye to the next 10 years and beyond. Farming and timber assets are top areas to consider on a global basis, as are shares of companies involved in fertilizer, chemicals, farm equipment, irrigation and other areas of agricultural production.
"I am very bearish on the problems we humans face and, sadly, very bullish on resources," Grantham said. "You can confidently expect that if resource prices steadily rise in real terms, then resource stocks should outperform the market."
Grantham said he's targeting a 30% allocation to resources in the foundation's portfolio, and is about two-thirds of the way there. The breakdown of assets, he estimated, would be about 15% in forestry and farms, 10% in "stuff in the ground" and 5% in resource-efficiency investments.
Yet the opportunities for investors in food-related businesses are double-edged. While higher food prices will benefit resource stocks, the "resource squeeze" and other economic developments that curtail corporate growth are likely to trim investors' total return, Grantham said.
"Rising resource prices will worsen the prospects for the balance of the portfolio,' Grantham said, "by both squeezing profit margins and reducing overall growth."
Accordingly, Grantham said, he continues to favor shares of "quality" companies. "They have much lower resource costs as a percentage of total revenues than typical companies," he wrote, "and they have a higher margin base from which to resist margin pressure."
Out of one side of his mouth his is warning of mass starvation and out of the other side of his mouth he is advising the wealthy on how to profit from the situation.
There is a psychopathic disconnect at work here.
It seems that many of us just assume now that life is a game in which the inept people suffer and die while the more able survive by virtue of their ingenuity. Just like the animals.
We have now exposed that this long-held view of life is deceptive to the extent that psychopathic humans exist who act to exterminate their fellow humans, using paradigms such as "survival of he fittest" as a cover for their actions. This is illustrated by a study of eugenics movements.
The psychopaths have been quite successful at rationalizing this paradigm. But they continue to be resisted (and I hope they will be forever) because this paradigm is morally and spiritually broken. It is truthfully NOT a workable paradigm and should be replaced by a more workable approach (such approaches do exist). The "profit off the misfortune of others" strategy will never produce happiness in the long run, for the profiteers know in their hearts that it is wrong.