Global Market Comments
January 30, 2019
Fiat Lux
Featured Trade:
(WHY WATER WILL SOON BE WORTH MORE THAN OIL),
(CGW), (PHO), (FIW), (VE), (TTEK), (PNR),
(WHY WARREN BUFFETT HATES GOLD),
(GLD), (GDX), (ABX),
Posts
If you think that an energy shortage was bad, it will pale in comparison to the next water crisis. So investment in fresh water infrastructure is going to be a great recurring long-term investment theme.
One theory about the endless wars in the Middle East since 1918 is that they have really been over water rights.
Although Earth is often referred to as the water planet, only 2.5% is fresh, and three quarters of that is locked up in ice at the North and South poles.
In places like China, with a quarter of the world?s population, up to 90% of the fresh water is already polluted, some irretrievably so.
Some 18% of the world population lacks access to potable water, and demand is expected to rise by 40% in the next 20 years.
Aquifers in the US, which took nature millennia to create, are approaching exhaustion, especially in California?s Central Valley.
While membrane osmosis technologies exist to convert seawater into fresh, they use ten times more energy than current treatment processes, a real problem if you don't have any, and will easily double the end cost of water to consumers.?
While it may take 16 pounds of grain to produce a pound of beef,?it takes a staggering 2,416 gallons of water?to do the same. Beef exports are really a way of shipping water abroad in highly concentrated form.
The UN says that $11 billion a year is needed for water infrastructure investment and $15 billion of the 2008 US stimulus package was similarly spent.
It says a lot that when I went to the University of California at Berkeley's School of Engineering to research this piece, most of the experts in the field had already been retained by major hedge funds!
At the top of the shopping list to participate here would be the Guggenheim S&P Global Water Index ETF (CGW).
You can also check out the PowerShares Water Resources Portfolio (PHO), the First Trust ISE Water Index Fund (FIW), or the individual stocks Veolia Environment (VEOEY), Tetra-Tech (TTEK) and Pentair (PNR).
Bonus Question:? Which country has the world?s greatest water resources? Siberia, which could become a major exporter of H2O to China in the decades to come.
The New Liquid Gold?
I have always considered the US military to have one of the world?s greatest research organizations. The frustrating thing is that their ?clients? only consist of the President and a handful of three and four star generals.
So I thought that I would review my notes from a dinner I had with General James E. Cartwright, the former Vice Chairman of the Joint Chiefs of Staff, who is known as ?Hoss? to his close subordinates.
Meeting the tip of the spear in person was fascinating. The four star Marine pilot was the second highest ranking officer in the US armed forces and showed up in his drab green alpha suit, his naval aviator wings matching my own, and spit and polished shoes.
As he spoke, I was ticking off the stock, ETF and futures plays that would best capitalize on the long term trends he was outlining.
The cycle of warfare is now driven by Moore?s Law more than anything else (XLK), (CSCO) and (PANW). Peer nation states, like Russia, are no longer the main concern.
Historically, inertia has limited changes in defense budgets to 5%-10% a year, but in 2010 defense secretary Robert Gates pulled off a 30% realignment, thanks to a major management shakeup. We can only afford to spend on winning current conflicts, not potential future wars. No more exercises in the Fulda Gap.
The war on terrorism will continue for at least 4-8 more years. Afghanistan is a long haul that will depend more on cooperation from neighboring Iran and Pakistan. ?We?re not going to be able to kill our way or buy our way to success in Afghanistan,? said the general.? However, the 30,000-man surge there brought a dramatic improvement on the ground situation.
Iran is a big concern and the strategy there is to interfere with outside suppliers of nuclear technology in order to stretch out their weapons development until a regime change cancels the whole program.
Water (PHO), (CGW) is going to become a big defense issue, as the countries running out the fastest, like Pakistan and the Sahel, happen to be the least politically stable.
Cyber warfare is another weak point, as excellent protection of .mil sites cannot legally be extended to .gov and .com sites.?
We may have to lose a few private institutions in an attack to get congress to change the law and accept the legal concept of ?voluntarism.? General Cartwright said ?Anyone in business will tell you that they?re losing intellectual capital on a daily basis.??
The START negotiations have become complicated by the fact that for demographic reasons, Russia (RSX) will never be able to field a million man army again, so they need more tactical nukes to defend against the Chinese (FXI).? The Russians are trying to cut the cost of defending against the US, so they can spend more on defense against a far larger force from China.
I left the dinner with dozens of ideas percolating through my mind, which I will write about in future letters.
If you think that an energy shortage is bad, it will pale in comparison to the next water crisis. So investment in fresh water infrastructure is going to be a great recurring long-term investment theme. One theory about the endless wars in the Middle East since 1918 is that they have really been over water rights.
Although Earth is often referred to as the water planet, only 2.5% is fresh, and three quarters of that is locked up in ice at the North and South poles. In places like China, with a quarter of the world's population, up to 90% of the fresh water is already polluted, some irretrievably so. Some 18% of the world population lacks access to potable water, and demand is expected to rise by 40% in the next 20 years.
Aquifers in the US, which took nature a millennia to create, are approaching exhaustion. While membrane osmosis technologies exist to convert seawater into fresh, they use ten times more energy than current treatment processes, a real problem if you don't have any, and will easily double the end cost of water to consumers. While it may take 16 pounds of grain to produce a pound of beef, it takes a staggering 2,416 gallons of water to do the same. Beef exports are really a way of shipping water abroad in concentrated form.
The UN says that $11 billion a year is needed for water infrastructure investment, and $15 billion of the 2008 US stimulus package was similarly spent. It says a lot that when I went to the University of California at Berkeley School of Engineering to research this piece, most of the experts in the field had already been retained by major hedge funds!
At the top of the shopping list to participate here should be the Claymore S&P Global Water Index ETF (CGW), which has appreciated by 14% since the October low. You can also visit the PowerShares Water Resource Portfolio (PHO), the First Trust ISE Water Index Fund (FIW), or the individual stocks Veolia Environment (VE), Tetra-Tech (TTEK), and Pentair (PNR). Who has the world's greatest per capita water resources? Siberia, which could become a major exporter of H2O to China in the decades to come.
I have always considered the US military to have one of the world?s greatest research organizations. The frustrating thing is that their ?clients? only consist of the President and a handful of three and four star generals. So I thought that I would review my notes from a dinner I had with General James E. Cartwright, the former Vice Chairman of the Joint Chiefs of Staff, and known as ?Hoss? to his close subordinates.
Meeting the tip of the spear in person was fascinating. The four star Marine pilot was the second highest ranking officer in the US armed forces, and showed up in his drab green alpha suit, his naval aviator wings matching my own, and spit and polished shoes. As he spoke, I was ticking off the stock, ETF, and futures plays that would best capitalize on the long term trends he was outlining.
The cycle of warfare is now driven by Moore?s Law more than anything else (XLK), (CSCO), and (GOOG). Peer nation states, like Russia, are no longer the main concern. Budgeting for military expenditures is a challenge in the midst of the worst economic environment since the Great Depression.
Historically, inertia has limited changes in defense budgets to 5%-10% a year, but in 2010 defense secretary Robert Gates pulled off 30% realignment, thanks to a major management shakeup. We can only afford to spend on winning current conflicts, not potential future wars. No more exercises in the Fulda Gap.
The war on terrorism will continue for at least 4-8 more years. Afghanistan is a long haul that will depend more on cooperation from neighboring Iran and Pakistan. ?We?re not going to be able to kill our way or buy our way to success in Afghanistan,? said the general. However, the 30,000-man surge there brought a dramatic improvement on the ground situation.
Iran is a big concern, and the strategy there is to interfere with outside suppliers of nuclear technology in order to stretch out their weapons development until a regime change cancels the whole program.
Water (PHO), (CGW) is going to become a big defense issue, as the countries running out the fastest, like Pakistan and the Sahel, happen to be the least politically stable.
Cyber warfare is another weak point, as excellent protection of .mil sites cannot legally be extended to .gov and .com sites. We may have to lose a few private institutions in an attack to get congress to change the law and accept the legal concept of ?voluntarism.? General Cartwright said ?Anyone in business will tell you that they?re losing intellectual capital on a daily basis.?
The START negotiations have become complicated by the fact that for demographic reasons, Russia (RSX) will never be able to field a million man army again, so they need more tactical nukes to defend against the Chinese (FXI). The Russians are trying to cut the cost of defending against the US, so they can spend more on defense against a far larger force from China.
I left the dinner with dozens of more ideas percolating through my mind, which I will write about in future letters.
If you think that the upcoming energy shortage is going to be bad, it will pale in comparison to the next water crisis. So investment in fresh water infrastructure is going to be a great recurring long-term investment theme. One theory about the endless wars in the Middle East since 1918 is that they have really been over water rights.
Although Earth is often referred to as the water planet, only 2.5% is fresh, and three quarters of that is locked up in ice at the North and South poles. In places like China, with a quarter of the world's population, up to 90% of the fresh water is already polluted, some irretrievably so. Some 18% of the world population lacks access to potable water, and demand is expected to rise by 40% in the next 20 years.
Aquifers in the US, which took nature millennia to create, are approaching exhaustion. While membrane osmosis technologies exist to convert sea water into fresh, they use ten times more energy than current treatment processes, a real problem if you don't have any, and will easily double the end cost of water to consumers. While it may take 16 pounds of grain to produce a pound of beef, it takes a staggering 2,416 gallons of water to do the same. Beef exports are really a way of shipping water abroad in concentrated form.
The UN says that $11 billion a year is needed for water infrastructure investment and $15 billion of the 2008 US stimulus package was similarly spent. It says a lot that when I went to the University of California at Berkeley School of Engineering to research this piece, most of the experts in the field had already been retained by major hedge funds!
At the top of the shopping list to participate here should be the Claymore S&P Global Water Index ETF (CGW), which has appreciated by 14% since the October low. You can also visit the PowerShares Water Resource Portfolio (PHO), the First Trust ISE Water Index Fund (FIW), or the individual stocks Veolia Environment (VE), Tetra-Tech (TTEK), and Pentair (PNR). Who has the world's greatest per capita water resources? Siberia, which could become a major exporter of H2O to China in the decades to come.
If you think that the upcoming energy shortage is going to be bad, it will pale in comparison to the next water crisis. So investment in fresh water infrastructure is going to be a great recurring long term investment theme. One theory about the endless wars in the Middle East since 1918 is that they have really been over water rights.
Although Earth is often referred to as the water planet, only 2.5% is fresh, and three quarters of that is locked up in ice at the North and South poles. In places like China, with a quarter of the world's population, up to 90% of the fresh water is already polluted, some irretrievably so. Some 18% of the world population lacks access to potable water, and demand is expected to rise by 40% in the next 20 years.
Aquifers in the US, which took nature millennia to create, are approaching exhaustion. While membrane osmosis technologies exist to convert seawater into fresh, they use ten times more energy than current treatment processes, a real problem if you don't have any, and will easily double the end cost of water to consumers. While it may take 16 pounds of grain to produce a pound of beef, it takes a staggering 2,416 gallons of water to do the same. Beef exports are really a way of shipping water abroad in concentrated form.
The UN says that $11 billion a year is needed for water infrastructure investment, and $15 billion of the 2008 US stimulus package was similarly spent. It says a lot that when I went to the University of California at Berkeley School of Engineering to research this piece, most of the experts in the field had already been retained by major hedge funds!
At the top of the shopping list to participate here should be the Claymore S&P Global Water Index ETF (CGW), which has appreciated by 14% since the October low. You can also visit the PowerShares Water Resource Portfolio (PHO), the First Trust ISE Water Index Fund (FIW), or the individual stocks Veolia Environment (VE), Tetra-Tech (TTEK), and Pentair (PNR). Who has the world's greatest per capita water resources? Siberia, which could become a major exporter of H2O to China in the decades to come.
