Market momentum is green. Deploy capital in the sectors that are working: Energy, shipping, water, and other commodities essential to our life.
My father is recovering well from surgery at Johns Hopkins. I’ve now traveled home, and I’ll wait to see him in a few weeks. We have an extraordinary relationship.
He taught me everything I know about baseball, stock valuations, and how to pour a vodka drink. You’d be stunned how important that latter skill has come into play over the years. All of these subjects revolve around math.
A few years ago, my father and I went on a ship ride in the Middle East. It was a vacation… but I used it as a chance to scout projects on water and agriculture in a few countries that are in need of help today.
We started in Istanbul, and we finished in Dubai over 25 days. On the last day, we were bored and didn’t know what to do before the flight home. So we went to the movies and saw John Wick.
The movie was terrific, especially when surrounded by the private security of Dubai’s royal elite. When we got home – after a 16-hour flight – my wife and mother asked about our trip. We saw the Pyramid, we saw the room where Jesus had the Last Supper, we saw the ruins of a Seventh Wonder of the World in Turkey…
And all we could talk about was how good John Wick was as a movie. My mom asked, “Was the movie actually that good?” And in very rare form, Dad cursed about how great John Wick was… This is one of my favorite memories of my father.
While on the ship, we also had a deep conversation about something important. Water.
Go For It
When you’re on a boat with someone for 25 days, you learn a lot about them. We were in the same 150 square space for the duration of the trip. My father sleepwalks. Didn’t know that. My father sneezes in fives.
My father drinks a lot of water in the middle of the night. But one of the problems on the ship was the lack of fresh water.
We had to – constantly – buy bottled water and smuggle it on the ship. I don’t know why this was a problem, but it was. So, we cut corners where we had to and paid all of the college tuition for the Evian family.
My father and I were playing cards on the boat. He always beats me in Gin Rummy. Badly. I usually quit halfway through the game because I swear that it’s rigged…
Well, we got talking about water. He asked me whether or not it was a good investment. I said it was. I’ve been writing about the California water crisis for eight years now, and it’s only getting worse. The state is legitimately running out of water.
It operates on a two-tier system that subsidizes farmers and undercuts residents. Water is cheaper for farmers. Residents pay through the nose. What do the farmers do with this incredible financial benefit?
They plant water-intensive crops like alfalfa, almonds, and cotton in a desert. They sell a lot of the alfalfa to China, which feeds it to their cows. Get that?
The California government subsidizes its water supply only to see tens of billions of that water supply go to extremely water-intensive and water-dense crops that feed Chinese cows. Great policy, California. Okay, what did I tell dad to buy?
Water, Water Everywhere
Buy JG Boswell Company (OTC: BWEL). Boswell is one of the biggest cotton companies in California. It’s really stupid that we grow cotton in a desert. But it’s not surprising. But there’s a surprise. Boswell owns one of the largest water rights in the state.
If we only focused on the water rights that they own, shares would likely be about four times more. I didn’t come up with this one. The glory goes to the great Rick Rule, who pointed this out to me seven years ago. That’s how long I’ve been focused on this problem.
I predict that California will have to change its water policies in the coming years. The most likely result will be a water market similar to what Australia does to make the whole system more efficient.
A market will raise the price of water… but it will also improve the flow of supply and demand for this scarce resource. So, I want to own a secret water company with immense upside. BWEL costs $950 a share. The upside is $2,500. Buy a share, and don’t look at it.