Jeremy Grantham – An Admission of a Past Mistake on Resources

Jeremy Grantham, chief investment strategist at GMO and one of the biggest proponents of the super-cycle theory of ever rising prices has long warned that natural resources were running out and that the price of everything from minerals, energy and food would remain high. He now admits that he was wrong (click here for client note).

Grantham, best know for spotting bubbles in equity markets recognises that they are hard to spot

Giant bubbles are easy to spot statistically but hard to call from a career risk perspective. It is easy to be early, and being early may lose you your job, your clients, and your credibility. The fear is always, “Are these new high prices permanent? Is it a paradigm shift?” Every major bull event is called a paradigm shift but they almost never exist. Almost never. But not never, ever

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China’s commodity data: In the dark

Despite China’s undoubted influence on global commodity markets, developments in its economy continue to remain opaque and hence so too are its implications for commodity prices. Li Keqiang – now Chinese premier, but previously known as the head of Liaoning province’s communist party – admitted over dinner with the US ambassador to China in 2007 that the country’s GDP figures were “man-made” and therefore unreliable.

Now the country’s commodity statistics have been drawn into question.

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How much further will iron ore prices rise?

Iron ore prices have been the surprise best performing commodity of 2016 so far, up over 80% from its December low of $38.30 per tonne to close to $70 per tonne at the start of this week. According to Credit Suisse the highest level of restocking for 15 years is the major cause of the rebound. However, the influx of private investors into this relatively nascent commodity market has increased the risk that prices overshoot, increasing the potential for a sharp pullback in coming weeks.

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So much attention has been focused on the supply side of this market, including reports of a wall of iron ore supply heading to China that the price rebound has come as a surprise. Iron ore prices could have much further to go in the short term with Credit Suisse particularly bullish about the near term prospects [our emphasis].

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