Juggling Dynamite

When legendary value investor Jeremy Grantham turned 80, he made two resolutions: “to be prepared to write a cheque up to the limits of your ability”, and to “say what you think you should say to everybody”…

In this week’s show, Grantham shares his views on climate change, why he calls it the “Race of Our Lives,” and how he is investing to combat it. Here is a direct video link.

DP note: Grantham’s foundation and the ESG fund he describes are mandated to be fully invested with 30 year plus time horizons.  Grantham describes new business ventures and technologies in this segment but also warns repeatedly that most assets are presently suffering from bubble pricing with greater downside than upside prospects from present levels.  Few individuals have the luxury of decades where they can wait to make back capital losses and not require income or withdrawals in the interim.  It’s important to remember that even world-changing technology and companies can be capital destructive over relevant time frames when bought near cycle peaks.  For individuals, it is pragmatic to define sectors and percentage targets for allocation while waiting for repricing cycles to bring investment-grade entry points before committing capital.

Four pages of big picture insight, Hoisington Investment Management’s Second Quarter Review and Outlook “Too Much Debt” is now available here.  Spoiler alert:

The current economic growth and inflation rates of 2021 will be the highest for a very long time to come. The main obstacle to a return to sustained growth in the standard of living, extreme over-indebtedness, was dramatically worsened by the multiple rounds of fiscal stimulus which has caused the temporary improvement in economic growth and inflation in the second quarter. No pathway out of this trap exists as long as the overreliance on debt remains the only tool of monetary and fiscal policy. The situation is no different in Japan and Europe. Thus, while long Treasury yields can increase over the short run, the fundamentals are too weak for yields to stay elevated. More debt does not cure a subpar economy mired in a debt trap. Given the above, our view is that the trend in long-term Treasury yields remains downward.

Hoisington chief economist Dr. Lacy Hunt spoke with Jay Martin for the Cambridge House Q2 Wrap Up in June, here is a direct video link.

Danielle was a guest with Jim Goddard on Talk Digital Network talking about recent developments in the world economy and markets.  You can listen to an audio clip of the segment here.