Not So Fast: Coping With Slow Growth

Jeremy Grantham chief investment strategist of GMO whom we feature every quarter with his newsletter (select here for latest) was interviewed by Barrons a few weeks ago.  In the article Grantham touches on many issues that he discussed in his quarterly newsletter such as the slowing growth rates in the world not just the US, his long-term themes or plays which revolve around hard assets especially timber, and his belief in agriculture companies and farm land to support a growing world population.


As I have stated here before I too am very pro ag names when you can buy them at reasonable prices.  Farm land is a difficult investment to get in for the regular investor.  Timber on the other hands can be purchased though REITS or specific names such as Plum Creek $PCL, Weyerhaeuser $WY, and Rayonier $RYN.


Grantham and his team at GMO have been very accurate in forecasting troubles in the economy correctly calling the issues in both 2000 and 2007.  GMO's strength as they state lies within asset allocation, knowing how to get the right mix of assets that work together to perform long-term.  This is precisely what we try to do at DWCM.  


Via Barrons article here

• We do a seven-year forecast every month. On a seven-year forecast, global equities outside the U.S. are boring. They've been so nervous the last year that they mostly reflect the right degree of fear about European problems. Emerging markets and developed markets outside the U.S. are within nickels and dimes of fair value. This is very unusual. We are in the asset-allocation business, and we like to see horrific roller coasters: It gives us something to get our teeth into. What could be more boring than global equity markets at fair value? 
• You can push stocks up to get a wealth effect, but we live in a mean-reverting world, and they come back down again when you least need it. It's a pact with the devil. After-inflation and after-tax returns are going backwards, and who benefits? We know the financial system does. 
• Every investment firm has great expertise. Ours is the recognition and understanding of the great asset-class bubbles. That's why we got 2000 and 2007 so right. We had huge confidence, and were able to stand against the crowd. We said "It's the end of the world, abandon ship," and everyone was just, you know, enjoying the sunshine. This time, we're not experts at these complicated sovereign, political situations. So we say, "Let's concentrate on the seven-year numbers, do our blocking and tackling." 
• I'm very partial to land. It's the key to building up long-term wealth. I really worry about how we are going to feed 10 billion people, so I think agricultural land is also very interesting. 

 

• I would bet you that within 20 years, global trade treats food, fertilizer and water-related issues differently from the rest of world trade, so people will say "I'll trade you my phosphate only if you give me some of your wheat." These are much more important issues than getting a fancier car. 
• I like stuff in the ground—metals, hydrocarbons, oil, even natural gas.  
• The really bad news is that the 2% I thought we would have during the seven lean years is perhaps very close to what the long term will be, even after the seven years are up. It isn't clear to me that the developed world will grow faster than 2%, mainly because of the population, but also because we have caught up with each other.