Tags: grantham | bullish | commodities | stocks

Grantham Bullish on Outlook for Commodities

By    |   Wednesday, 27 June 2012 06:39 PM

U.S. stocks and bonds are overvalued, while commodities are headed higher, says Jeremy Grantham, chief investment strategist at GMO.

As for equities, which have almost doubled from their March 2009 lows, “the U.S. seems overpriced, and if you take out the blue chips, it seems substantially overpriced,” he tells Money magazine.

But, “it doesn't feel to me that we're in the late stages of a bubble.”

Editor's Note: I Wish I Were Wrong — Economist Laments Being Right. See Interview.

As for fixed income, “you have what I would call an anti-bubble,” Grantham says.

Investors are flocking to Treasurys because the Federal Reserve is keeping interest rates artificially low and investors are nervous over Europe, economic weakness, and the financial system’s fragility, he says.

“The next giant move in bonds will be bad for long-term-bond holders.”

When it comes to commodities, “we used to live in a world where the price of resources came down steadily, and now the world has changed,” Grantham says.

“You have a great mismatch between finite resources and exponential population growth. ... You'd better expect prices to rise.”

As for investing in commodities, Grantham recommends the stocks of companies that produce them rather than commodity futures.

Not everyone is bullish on commodities. BHP Billiton, the world’s largest miner, has cut its forecast for commodities prices over the next three to five years, the Financial Times reports.

“The [economic] crisis has made everyone a bit more conservative,” a senior industry executive tells the paper.

Editor's Note: I Wish I Were Wrong — Economist Laments Being Right. See Interview.

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