Population Doom = Commodities Boom!
19/10/2011
One of the most respected US investors over the last few decades, Jeremy Grantham of GMO has recently published a paper on the root cause of exploding commodity prices and explains why this phenomina is set to continue.
More alarmingly however, is that Grantham’s thesis is based around a very dismal outlook for humanity itself.
Grantham concludes that the world has undergone a “paradigm shift” where the number of people on the planet has finally outstripped the planet’s ability to support us.
He hypothesises that the planet can also sustainably support around 1.5 billion people, versus the 7 billion people on the Earth today (set to reach 11 billion by 2050). For all of history, except the last 200 years, the global population has been constrained by the limits of food supply. Grantham believes the same force will soon come back into play.
From an investment standpoint, Grantham believes that the trend of the last 100 years, in which the prices of almost all major commodities have steadily declined, is permanently over. And from here on in, humans will be competing more--and paying more--for ever-scarcer resources.
He concludes that the obvious investment play is to own “the stuff in the ground” or the ground itself.
Grantham has long been a champion of owning natural resources but specifically timber. And if you consider that the global population has increased from 2.5 billion people in 1950 to 7 billion today and become ever more affluent per capita, you can see why.
This argument also supports The Green Investment Company’s investment into our Bamboo product. When you invest in Bamboo, you not only drive an income stream from the timber poles, but also from a second stream in the Bamboo shoots (a staple of the Asian diet) which is sold to the food markets.
We firmly believe that the price of both bamboo poles and shoots will increase over time. And because our bamboo product, once purchased, is 100% owned by the investor and is simply managed on their behalf; when it is harvested and sold at the farm gate, the investor will reap the benefit of any increase in price.
Grantham's arguement really is a very interesting read and if you would like to look at the case facts; click here for his presentation: http://www.businessinsider.com/jeremy-grantham-commodity-prices-2011-6#
