http://seekingalpha.com/article/236462-jeremy-grantham-has-already-started-to-sell?source=dashboard_macro-view

This is a must-see video right here that runs 30 minutes. Take your time to watch the whole thing. It is a real coup that CNBC got Grantham on their program.

Overall, Grantham’s view is the same as mine. The Fed should get out of trying to use monetary policy to do fiscal policy. It doesn’t work; it creates bubbles that are destabilising. The Fed should be moving against bubbles instead of creating them. Fiscal policy is the way to go to deal with a large output gap. Bernanke knows this too. Think of how a 21st century unemployment insurance program targeted on infrastructure spending could reduce unemployment in the less skilled segment of the population (more on that here and here). Of course, because of the move to austerity in the US, this is never going to happen. So, Bernanke is going QE – which, by the way, doesn’t endear the US to anyone.

Note that the emerging markets are up over 3 times as much as the S&P 500 since 2000. Do we really need more money pumped into those economies? As an aside, Grantham is a macro-oriented investor. Grantham uses the EM example to point out that asset allocation is more powerful than picking individual stocks. If a whole sector is moving up that much, do you really think you can call individual picks within it to make significantly more?

Grantham believes the U.S. is overpriced already. And the Fed seems to be trying to push the market up even higher via animal spirits. He says he has "already started to sell." So, regarding the QE pump and dump, I have been saying buy the rumour, sell the news. Grantham recommends buying high quality blue chips and holding a decent amount of cash.

On peak commodities, I am in the Grantham boat. I think we are reaching a point where the demand for natural resources is outstripping supply. Debt deflationary moves like the one we have witnessed over the past few years can mask this temporarily. But eventually the supply demand imbalance will re-assert itself as we have seen this year. The move in commodities is two parts fundamental and one part speculative, especially toward the end (see my 2008 post on peak oil here). These price rises are self-destructing due to the demand destruction they induce. But over time, they cause higher lows and higher highs in commodities.

Please also see CNBC’s piece on the interview: Have Cash, Wait for Stocks to Fall: Jeremy Grantham