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Water the Untapped Opportunity

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Every time I see the film The Big Short, I’m constantly pondering the prophetic remark that appears at the conclusion of the film. “Michael Burry is concentrating all of his trading on one commodity: water.”

The film ‘The Big Short,’ based on Michael Lewis’s book ‘The Big Short: Inside the Doomsday Machine,’ is about investors who predicted the credit and housing bubble collapse in 2008 and entered into trading activity to take advantage of their prediction, earning billions of dollars as a result. Dr. Michael Burry, who is portrayed by Christian Bale in The Big Short, is a real-life hedge fund manager who did just that.

Since the film’s release, Burry has become increasingly vocal about his investment views on water. Here is where my wheels started turning on the issue of water. Why is it that one of the few analysts and traders to correctly predict the housing bubble burst in 2008, and who made a good profit from that prediction, now focuses all of his attention on water? What can he possibly see when he thinks about it, and how can I get involved?

First and foremost, H2O is essential for life.

Every single person on this planet needs water to survive, which makes it a very valuable commodity. There are only a finite amount of freshwater resources available, and with the world’s population continuing to grow, the demand for water is only going to increase. I’m talking about the same guy that was correct on the 2008 financial crisis, so there must be something to back up his interest in water. This individual made billions by shorting the Subprime Loan market, so what kind of return or profit can he anticipate from investing in H2O? And this is where the heart of the issue lies: how can I get involved?

A few ways to get involved in water as an investment are:

-invest in companies that specialize in H2O treatment or transportation

-buy shares of utilities companies

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-look for exchange-traded funds (ETFs) that focus on water-related investments.

While these are all great methods, the better approach to this investment technique would be to hear what Dr. Michael Burry has to say on the subject himself. “I think agricultural land, particularly fertile farmland with access to water, will be quite valuable in the future,” he stated in a 2010 interview with Bloomberg. He also said that “Fresh, clean water is going to become increasingly scarce, and I think its value will continue to go up.”

So there you have it, coming from the man himself. Dr. Michael Burry is investing in H2O because he believes that it will become an increasingly valuable commodity

as time goes on due to the finite nature of freshwater resources. Water is political and litigious. “Water transportation is impossible because of both political and physical factors, so acquiring water rights didn’t make much sense to me unless I was pursuing a greater fool theory of investment; which was not my objective. What became apparent to me is that food is the most effective way to invest in water ……. With this method, it is possible to grow food in water-rich regions and transport it for sale in water-poor areas. This is the most peaceful way of distributing water, and it can be profitable over time, ensuring that this redistribution is permanent. A bottle of wine requires around 400 bottles of water to produce.”* Burry has found the H2O that is contained within food to be a new form of investment opportunity.

*https://greenbackd.com/2010/09/08/bloomberg-on-burry/

I never considered H2O from this viewpoint, and I’m sure that many of you never have either. What I like about this approach is that it isn’t linked to a particular financial instrument such as a stock, ETF, or ETP. There isn’t any need for a chart to illustrate an intricate formula to deconstruct this fundamental truth: take water, grow food, and sell it in areas where H2O is scarce. Of course, there are always going to be inherent risks with any investment, and this is no different. Droughts can occur, which will obviously have an adverse effect on crop yields. Also, the price of oil can play a role in the cost of transporting food to water-scarce areas.

Investing in H2O is a unique opportunity,

and I think it’s one that is definitely worth considering. It’s an investment that can have a positive impact on the world, and it’s something that we all need to survive. Dr. Burry’s idea may provide and preserve wealth for people seeking alternative assets. The majority of the Earth’s surface is covered in water, with 70 percent of it being freshwater. 2.5% of the world’s water is used to grow crops and produce food that we consume. Furthermore, only 1% of freshwater is readily available because the other 99% is stored in glaciers and snowfields. That leaves approximately 0.007 percent of the planet’s water for 7 billion people to utilize.

According to the United Nations, water usage has increased by over twice the rate of global population growth in the last century. We use about 30% of the planet’s total available renewable supply of H2O. The U.N. predicts that, in just a few years, this percentage will be 70%. By 2025, 1.8 billion people will live in water-scarce areas, with two-thirds of the globe’s population living in water-stressed locations. According to a report from The American Society of Civil Engineers (ASCE), by 2020, there will be a $84.4 billion deficit in funding for water infrastructure growth. The report also states that by 2040, this number will rise to $106.5 billion.

This pattern offers the potential of investment possibilities in firms involved in the following sectors,

improving water supply. Activities such as water exploration, desalination, and wastewater treatment are included on the list. Firms which focus on H2O efficiency, such as those that make drought-resistant seeds or irrigation technology, are also interesting. And finally, firms that distribute and trade H2O can take advantage of pricing disparities around the globe.

If you can’t afford to buy lush farmland with H2O on site near the Amazonian rainforest but still want to participate in the activities listed above, investing in firms engaged in these industries might be an option for you. SJW Corp. (SJW), Middlesex Water Co. (MSEX), and York Water Co. (YORW) are water utilities that focus on providing clean water to their customers. Aqua America, Inc. (WTR) is another water utility with a nationwide reach. Calgon Carbon Corporation (CCC), Nalco Holding Company (NLC), and Severn Trent plc (SVTLY) all engage in water treatment activities.

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SJW is a conglomerate with four branches: San Jose Water Company, SJW Land Company, SJWTX Inc., and Texas Water Alliance Limited. The companies have an interest in developing new H20 projects as well as acquiring and developing land.

SJW Group (SJW)

SJW

SJW

Chart courtesy of yahoo 5/9/22

MSEX is a water and wastewater utility provider for municipalities and private clients in New Jersey and Delaware.

Middlesex Water Company (MSEX)

These stocks have shown consistent and substantial gains over the previous five years, suggesting that they may be sleeping giants. If the commodity of water keeps on growing in secondary industries, Dr. Burry’s prospects and fortune-hunting enterprises involving H2O have a chance of coming true in the same way as his bet on the collapse of the subprime loan market.

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Massive Update: NEW Chinese Policy on NIO Stock

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NIO

The stock of NIO and other electric car companies is poised to turn the corner higher and head in the right direction after the Chinese government indicated that it was exploring “severe measures” to improve manufacturing production.

This is earth-shattering news for the stocks of Chinese electric vehicle manufacturers like NIO. China has become the global leader in the electric vehicle market. In point of fact, sixty percent of all of the world’s batteries for electric vehicles are produced there. As a result, the manufacturing of electric vehicles in China will continue to advance in lockstep with the growth of China’s overall manufacturing output. If companies can speed up the production of these autos, it won’t be long before they see a return on their investment and start turning a profit. And very shortly after that, the value of their stock will skyrocket.

Additionally, China has announced that it would be extending tax benefits for consumers who are acquiring their first electric vehicle. These consumers will be eligible for these benefits beginning in 2022. At the end of this year, these would become invalid because their time limit had been reached. On the other hand, in view of continuous economic volatility and issues with the supply chain, it has been agreed to extend the suspensions through the year 2023, and possibly even further than that.

As a consequence of this, demand ought to continue being consistent. The bull thesis on electric vehicle stocks is gaining ground as a result of the strengthening of demand drivers as well as supply issues. This is especially true for NIO, which Luke thinks is one of the top electric vehicle stocks that are now available for purchase.

About NIO: Corporate Profile

NIO Inc. is a pioneer and a leading company in the premium smart electric vehicle market. Founded in November 2014, NIO’s mission is to shape a joyful lifestyle. NIO aims to build a community starting with smart electric vehicles to share joy and grow together with users. NIO designs, develops, jointly manufactures and sells premium smart electric vehicles, driving innovations in next-generation technologies in autonomous driving, digital technologies, electric powertrains and batteries. NIO differentiates itself through its continuous technological breakthroughs and innovations, such as its industry-leading battery swapping technologies, Battery as a Service, or BaaS, as well as its proprietary autonomous driving technologies and Autonomous Driving as a Service, or ADaaS. NIO launched the ES8, a seven-seater flagship premium smart electric SUV in December 2017, and began deliveries of the ES8 in June 2018 and its variant, the six-seater ES8, in March 2019. NIO launched the ES6, a five-seater high-performance premium smart electric SUV, in December 2018, and began deliveries of the ES6 in June 2019. NIO launched the EC6, a five-seater premium smart electric coupe SUV, in December 2019, and began deliveries of the EC6 in September 2020. NIO launched the ET7, a flagship premium smart electric sedan, in January 2021, and began deliveries of the ET7 in March 2022. NIO launched the ET5, a mid-size premium smart electric sedan, in December 2021. NIO launched the ES7, a mid-large five-seater premium smart electric SUV, in June 2022.

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Intel’s CEO Threatens to Expand in Europe if Congress Doesn’t Act

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Intel

Pat Gelsinger, CEO of Intel, warned Tuesday that if Congress fails to pass $52 billion in government subsidies promised under the CHIPS Act, he may expand chip manufacturing in Europe instead of the United States.

At the Aspen Ideas Festival, Gelsinger remarked, “The rest of the world is moving rapidly despite the inability of Congress to get this finished.”

It was only in 2021 that Congress finally gave CHIPS the funding it needed as part of the National Defense Authorization Act. Attempts by the House and Senate to overcome differences on a broader package of policies to help the United States’ tech industry compete with China have left the money for subsidies stalled.

A shortage of government funding forced Intel to postpone the groundbreaking ceremony for a new $20 billion facility in Ohio, the company announced last week. He stated Tuesday, “I hate the idea of announcing a delay,” Gelsinger said.  Although Intel “would end up investing a lot more in Europe as a result,” he cautioned. A new $18 billion plant in Germany will be built as part of a $35 billion expansion of the chipmaker’s European operations.

According to Gelsinger, the CHIPS Act’s subsidies, which are limited to $3 billion per site, would help the United States “approximately competitive with other regions of the world.” There were no “handouts” in the industry, he claimed.

There are also calls from other semiconductor companies to support American chip manufacturers.

The construction of a $12 billion facility in Arizona by Taiwan Semiconductor Manufacturing Corporation will necessitate the U.S. government to subsidize the gap in operating expenses between Taiwan and the United States.

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Taiwanese chipmaker GlobalWafer launched a new $5 billion facility in Texas on Monday. Despite this, Commerce Secretary Gina Raimondo told CNBC that the contract “will go away” if Congress does not approve subsidies for the project.

Government leaders in Taiwan are urging Congress to approve financing for the island nation. For the most part, this is because TSMC has already commenced construction in Arizona. Ming-Hsin Kung, a minister on Taiwan’s National Development Council, told the Washington Post on Tuesday that the Chips Act is expected to pass the Congress.

East Asian chipmakers “all believe they need to put more manufacturing in the U.S.” Gelsinger stated. There is no rivalry between us and TMSC or Samsung.” ‘We are not competing with TMSC or Samsung. We are competing with Taiwan and Japan and Korea,” he declared.

According to the European Chips Act, the European Union allocated $46 billion in support for chip manufacturing in February. Intel’s new factory in Germany will receive $7.3 billion of that money.

A $4.5 billion fund set up by the Japanese government to boost the country’s semiconductor industry would finance 40% of the cost of a new TSMC factory in Kumamoto.

As a matter of national security, according to Gelsinger, the United States must invest in chip manufacturing, transferring production away from East Asia. As he spoke, he said, “This is the future of geopolitics.”

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Robinhood Shares Rise 16% After Report FTX is Considering a Buyout

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Robinhood

The trading of the no-commission trading platform Robinhood (HOOD) was briefly halted after it was reported, citing people with knowledge of the matter, that cryptocurrency exchange FTX was looking into a possible deal to acquire the company. This report caused the shares of Robinhood to rise by approximately 16 percent, and trading was halted briefly.

The article states that FTX has not yet made a formal offer, and it is possible that the company will decide against moving forward with any plans. An SEC document made public in May disclosed that Sam Bankman-Fried, founder and CEO of FTX, had acquired a 7.6 percent ownership in Robinhood through Emergent Fidelity Technologies Ltd., a company based in Antigua.

“We are excited about Robinhood’s business prospects and potential ways we could partner with them, and I have always been impressed by the business that [Robinhood CEO Vlad Tenev] and his team have built,” wrote Bankman-Fried in a statement. “That being said, there are no active M&A conversations with Robinhood.”

Coinbase (COIN) shares were downgraded by Goldman Sachs in a report published on Monday morning. The reduction was a result of the steep decrease in cryptocurrency prices and accompanying trading activity. Goldman Sachs raised shares of Robinhood from sell to neutral.

The price of a share of Robinhood has decreased by 47 percent so far this year. They have dropped by almost 75% since its initial public offering level in July of last year. The percentage of Robinhood’s revenue that comes from commissions earned from the trading of cryptocurrencies continues to rise.

About Robinhood (HOOD)

Robinhood is a cryptocurrency broker that not only makes trades easier but also enables users to buy stocks and alternative cryptocurrencies. You may purchase and sell a variety of cryptocurrencies within the Robinhood app, including Bitcoin, Ethereum, Bitcoin Cash, and even Dogecoin. These cryptocurrencies are all offered by Robinhood. The absence of trading costs, which may be rather variable among traditional exchanges, is one of the primary benefits of trading cryptocurrencies on Robinhood, just as it is with the company’s other investing opportunities.

Its accessibility as an investment platform is a major lure for many users, regardless of whether they are investing in cryptocurrencies or the stock market; nevertheless, this accessibility is also what can make Robinhood risky for users. It has been criticized on the grounds that it makes trading too much like a game and that it promotes volatility through aggressive trading rather than the growth of long-term investments. If you approach an already speculative asset like cryptocurrency with such a mindset, it might make your investment an even bigger bet. This is similar to how stock transactions work. Always asses the risk involved when making investment choices and seek professional guidance to insure you make the right decision for your investment strategy.

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