Toxic
Jeremy Grantham, co-founder of GMO, needs no introduction. He has recently authored an outstanding article entitled ‘Rising Toxicity and the Threat to Capitalism and Life itself’.
This is a must read.
Toxicity is the degree to which a substance can damage an organism. Granthan highlights the cumulative negative health effects from some of the hundreds of thousands of new chemicals invented since World War 2. He correctly points out almost none of these new chemicals were tested for long-term safety for humans and nature and suggests that they are now poisoning us more effectively than lead in paint and gasoline once did.
Grantham reasons, very elegantly, that toxicity is a major and totally unappreciated contributor to the accelerating population collapse that many countries now face. Traditionally this author has looked at demographics through a narrow lens. The only two economic variables that correlate (inversely) with birth rates are per capita GDP and urbanisation. Statistically, and intuitively this makes sense. Grantham has changed my mind. Add toxicity (positively correlated) to the list.
He notes that these chemicals cannot now be tested on humans for ethical reasons, but that animal tests and human correlation studies show that tiny quantities of some of these chemicals absorbed in utero can respectively cause lifelong weight gain, neurodevelopment disruption and, perhaps most importantly, impairment of fertility.
A further interesting speculation is that many of the companies that make these substances will face lawsuits in due course. The example of Bayer was noted. The stock is down 75% since the purchase of Monsanto whose most profitable product (glyphosate) has been deemed, in successful lawsuits, to cause cancer.
The investment conclusion, according to Grantham, is that the ‘easy money’ generated by rising equity prices over the past seven decades is dead and buried. His suggestion is to search for high quality stocks, with moats and margins, that have the ability to withstand an increasingly risky global environment. He speculates that the failure rate of lower margin and highly leveraged companies will increase. Conversely, he believes the value of resilience will steadily increase.
This is a compelling proposition.
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