Working Papers

The Finite Resource Assumption: Tripling or Quadrupling Down with Jeremy Grantham

Malcolm Turnbull is not the only person to be led astray by the assumption that resources are finite. According to GMO’s Jeremy Grantham:

Scavenging refuse pits will no doubt be a feature of the next century if we are lucky enough to still be in one piece.

Here is Grantham’s strategy for trading commodities:

Given my growing confidence in the idea of resource limitation over the last four years, if commodities were to keep going up, never to fall back, and I owned none of them, then I would have to throw myself under a bus.  If prices continue to run away, then my small position will be a solace and I would then try to focus on the more reasonably priced – “left behind” – commodities.  If on the other hand, more likely, they come down a lot, perhaps a lot lot, then I will grit my teeth and triple or quadruple my stake and look to own them forever. 

Sounds like a good formula for losing ‘a lot lot’. Apparently, this is what passes for macro strategy at GMO.

posted on 06 May 2011 by skirchner in Commodity Prices, Economics, Financial Markets

(2) Comments | Permalink | Main

| More


Isn’t this the same guy who said every ‘bubble’ in history has deflated except - so far - for UK and Australian property?

Posted by .(JavaScript must be enabled to view this email address)  on  05/06  at  10:12 PM

Yes, he wants to short Australia’s housing ‘bubble’, yet doesn’t reconcile this with his long (except when he isn’t) commodities story. Go figure.

Posted by skirchner  on  05/07  at  08:16 AM

Post a Comment

Commenting is not available in this channel entry.

Follow insteconomics on Twitter