Valuetainment - September 13, 2023


Global Water Crisis： Why Michael Burry is Investing in Blue Gold


Episode Stats

Length

14 minutes

Words per Minute

213.00587

Word Count

3,079

Sentence Count

214


Summary


Transcript

00:00:00.000 So if I was to ask you right now, if an enemy wanted to attack our country, U.S., let's
00:00:03.420 just say, how would they do it?
00:00:04.400 You may say, well, Pat, they're going to do cyber.
00:00:06.020 They're going to do biowarfare.
00:00:07.420 No, they're going to do nuclear.
00:00:08.820 What if I told you they could do it with water?
00:00:10.780 If U.S. had a water crisis and you and I don't have water, you know how long we can go without
00:00:15.180 water?
00:00:15.660 Three days.
00:00:16.420 Some say up to a week, but most studies say three days.
00:00:20.300 And one of the biggest crises we're dealing with right now worldwide is water crisis.
00:00:24.780 When I show you some of the statistics on what it's looking like, when you watch the
00:00:28.740 movie Big Short, if you remember the movie Big Short with Michael Burry, one of the biggest
00:00:32.800 investors that everybody worldwide follows, he's got this hedge fund called Scion Hedge
00:00:37.940 Fund that I think he manages nearly $2 billion.
00:00:40.140 You know what it said at the end of the movie?
00:00:41.900 They said Michael Burry, his next investment and commodity that he's focused on is only
00:00:47.160 one thing.
00:00:47.760 And what do you think it was?
00:00:48.960 Water.
00:00:49.520 We're going to take a deep dive why so many people around the world are worried about the
00:00:54.280 water crisis.
00:00:58.740 Okay, so if you get value out of this video, give it a thumbs up, subscribe to the channel.
00:01:07.820 Let's get right into it.
00:01:08.600 According to a UN Water Conference, the world faces a 40% shortfall in fresh water supply
00:01:13.940 by 2030.
00:01:15.020 And when we break down water on how much we use worldwide, we use more than 4 trillion cubic
00:01:20.700 meters of fresh water per year.
00:01:22.620 And just to kind of put that in context on how much 4 trillion cubic meters is, one cubic
00:01:27.800 meter equals 264 gallons of water, one cubic meter.
00:01:32.280 So now, let's continue.
00:01:33.280 Pat, what do you mean by all this water?
00:01:35.000 Don't we have all this water?
00:01:36.060 The ocean?
00:01:36.780 Why should we be worried about water?
00:01:38.620 71% of Earth's surface is covered by water.
00:01:42.200 That should be good news.
00:01:43.280 No?
00:01:43.660 Well, there's a difference between what kind of water we drink.
00:01:46.220 Watch this.
00:01:46.720 97% of Earth's water is salt water.
00:01:49.480 2% is fresh water trapped in glaciers.
00:01:52.100 0.65% is the fresh water that we use for everything, such as drinking.
00:01:57.340 Let's focus on this 0.65%.
00:01:59.340 Where do we get this fresh water from?
00:02:01.140 Here's what it looks like.
00:02:02.280 75% of it is withdrawn each year from rivers, lakes, and reservoirs.
00:02:07.520 25% comes from groundwater aquifers.
00:02:10.460 And 80% of water withdrawn in the U.S. is used for cooling electric power plants and
00:02:16.100 for irrigation.
00:02:17.400 So I just want to give you a visual here.
00:02:18.820 When you look at two of the reservoirs, the largest reservoirs we have in U.S., you'll
00:02:22.380 see Lake Mead and Lake Powell.
00:02:24.380 And if you look at these pictures, both of them have experienced critically low levels
00:02:28.580 recently.
00:02:29.360 Here's what it looks like in 2000 versus today.
00:02:32.480 In 2000, these two reservoirs were full.
00:02:35.740 95% they were full.
00:02:37.320 Today, they're roughly 25%, said Brad Udall, a water and climate scientist at Colorado State
00:02:43.500 University.
00:02:44.260 It's hard to overstate how important the Colorado River is to the entire American Southwest.
00:02:48.900 Now, you may say, I'm not a math guy.
00:02:50.780 Look, 95% just 23 years ago to today, 25%.
00:02:56.200 No matter what the number is, that's not a good thing on what the numbers are looking
00:02:59.500 like, where we've gone to where we are today.
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00:04:01.780 So now let's take a look at how much water we domestically have been withdrawn since 1960.
00:04:06.780 When you look at this chart, here's what it shows.
00:04:09.200 If you look at the dark blue, it's domestic, then industrial, then total irrigation on livestock.
00:04:13.620 So obviously 600% increase since 1960.
00:04:15.980 That's 73 years ago to today.
00:04:17.480 That's not a good thing to see.
00:04:18.540 However, 70% of freshwater withdrawals are used for agriculture purposes, 20% for industrial
00:04:23.940 use.
00:04:24.480 The rest of the 10% are used for domestic.
00:04:26.900 You and I drinking water.
00:04:27.920 By 2050, water demand is expected to increase from 20% to 30%.
00:04:31.680 And by the way, when we're saying 2050, I want to show you what the comparable was of where
00:04:35.700 we were in 2010 and what they're expecting to be by 2050.
00:04:39.520 In 2010, 1.9 billion people lived in severely water-scarce places.
00:04:44.440 And this number is expected to increase to 3.2 billion by 2050.
00:04:49.380 So now if you wanted to find out where is the freshwater scarcity trend worldwide, here's
00:04:53.760 what we would look at.
00:04:54.420 If you look at this chart here, you will look at the numbers to the right that says 100%.
00:04:58.760 So Northern Africa, 100%.
00:05:00.800 Middle East, South Asia, they're not in a good place.
00:05:03.480 And second worst would be East Asia, and you could look at Southern Africa.
00:05:07.700 And if you were to say which ones are the best, you got North America, South America, and
00:05:11.360 Australia Pacific, all at 25%.
00:05:13.620 Now, when you look at this, you know, the issue with water, there's been many scandals
00:05:17.740 with water over the years.
00:05:18.820 I'll give you one of them, especially with Nestle.
00:05:20.620 When it was discovered that Flint, Michigan's lead-tainted pipes created a local water crisis,
00:05:25.560 the government originally gave out free bottled waters, but it eventually ended.
00:05:29.220 And at the same time, Department of Environmental Quality had approved Nestle's request to increase
00:05:33.340 the amount of water it pumps from the Great Lakes.
00:05:35.860 In the same month, the state decided to stop giving free bottled water to Flint.
00:05:39.020 It was effectively deciding to give away millions of gallons to multinational corporations,
00:05:43.580 besides a one-time $5,000 permit application fee, under Michigan law, Nestle, the largest
00:05:50.140 food and beverage company in the world, must pay the state only $200 every year.
00:05:55.640 Administrative fee to bottle and sell 400 gallons a minute of Michigan groundwater.
00:06:02.040 And that's just Nestle in Michigan.
00:06:03.800 Now, let's look at Nestle in California.
00:06:05.440 Nestle has maintained that its rights to California spring water date back to 1865, but a 2017
00:06:10.820 investigation found that Nestle was taking far more than its share.
00:06:14.080 In 2020, the company drew out about 58 million gallons, far surpassing the 2.3 million gallons
00:06:20.320 a year it could validly claim.
00:06:22.240 According to the report, Nestle has taken on average 25 times as much water as it may have
00:06:27.540 a right to, according to the story of a stuff project and environmental group that has been
00:06:32.080 fighting to stop the bottled water company's operation in California for years, while California
00:06:36.060 is facing record droughts and wildfires.
00:06:38.460 So now, every time there's a crisis, there's opportunity.
00:06:41.280 Why?
00:06:41.580 Because a capitalist or an entrepreneur can come in and say, let's solve this problem.
00:06:45.740 If we can solve this problem, there could be a lot of incentives for it as well.
00:06:49.200 So watch what's been happening with this.
00:06:50.900 Matthew Deseri, the president and co-founder of the hedge fund Water Asset Management, that's
00:06:56.700 literally what it's called, called the U.S. water business, the biggest emerging market
00:07:00.440 on earth, a trillion dollar market opportunity.
00:07:03.880 And matter of fact, like I told you earlier, even Michael Burry at the end of the movie in big
00:07:07.440 short, said that his focus had become on one commodity, and that is water.
00:07:12.300 Here's what he said in an interview in 2015.
00:07:14.660 Transporting water is impractical for both political and physical reasons, so buying up
00:07:18.880 water rights did not make a lot of sense to me.
00:07:20.920 What became clear to me is that food is the way to invest in water.
00:07:24.180 That is, grow food in water-rich areas and transport it for sale in water-poor areas.
00:07:28.860 This is the method for redistributing water that is least contentious and ultimately can be
00:07:33.440 profitable, which will ensure that this redistribution is sustainable.
00:07:37.260 And he said the following about wine.
00:07:38.480 Those of you guys that drink wine, you ready for this?
00:07:40.460 A bottle of wine takes over 400 bottles of water to produce the water embedded in food
00:07:47.200 is what I have found interesting.
00:07:49.160 Church just tells you, guys that are thinkers, they're going to see opportunities to fix this
00:07:52.980 problem, which means that's a good thing for us long term.
00:07:55.460 There are three ways to invest into water.
00:07:56.960 Number one, purchasing water rights.
00:07:58.500 Number two, invest in water-rich farmland.
00:08:00.260 And number three is invest in water utilities, infrastructure, and equipment.
00:08:03.900 So now, one of the technologies that can solve the problem is a process called a desalination,
00:08:08.600 which is a process by which the dissolved mineral salts in water are removed.
00:08:12.900 Currently, this process is applied to seawater, one of the most used to obtain fresh water for
00:08:16.940 human consumption or agriculture purposes.
00:08:19.540 So if you look at this flow here, step number one is seawater intake.
00:08:23.380 Step number two, the intake screening facility.
00:08:25.920 Then it's pretreatment filters.
00:08:27.480 Then it's reverse osmosis membrane.
00:08:30.040 Units remove salt and other impurities from water.
00:08:32.780 And then step number five is post-treatment to drinking water standard.
00:08:35.880 Then you got step number six, drinking water supply tank.
00:08:38.760 And the last but not least, step number seven, seawater concentrate outlet.
00:08:42.500 All of this process turns seawater into drinking water.
00:08:46.560 It looks like a technical process, but one of the largest desalination plants in the world
00:08:51.680 is Sorek desalination plant is located south of Tel Aviv, Israel, and it produces 137 million
00:08:57.560 gallons of potable water a day.
00:08:59.660 And the largest plant we have in the U.S. is in Carlsbad, San Diego, which produces roughly
00:09:04.600 50 million gallons of water per day.
00:09:07.120 So this is all good news because once, you know, the world found out that this was a problem,
00:09:11.440 people started looking into it.
00:09:12.600 And this started in 1960.
00:09:13.960 And if you look at this chart here, you'll see the growth of desalination globally.
00:09:17.180 From 1960 to 2020, it's climbing, and the cost of desalinated water has been coming down
00:09:22.740 as the technology evolved.
00:09:24.020 Matter of fact, in the last three decades, the cost of desalination has dropped by more
00:09:27.240 than half.
00:09:27.940 And even globally, more than 300 million people now get their water from desalination plants
00:09:32.120 from the U.S. southwest to China.
00:09:34.260 But there are some that focus on it more than others, such as Saudi Arabia, which produces
00:09:37.880 20% of the world's desalinated water.
00:09:40.200 With 9 million cubic meters produced per day, 60% of its water is desalinated.
00:09:45.380 And according to Statista, if you look at this, Saudi Arabia is investing heavily in
00:09:49.520 desalination.
00:09:50.220 Here's what it's looking like.
00:09:51.180 If you look at the left, you'll see Saudi Arabia at the top, then it's UAE, then it's
00:09:54.700 Jordan, Egypt, Oman, Morocco, Tunisia, Algeria, Kuwait, and others.
00:09:59.060 So when you're looking at this, of course, any way we see as a solution, you think about
00:10:02.600 it and say, okay, the future looks bright.
00:10:03.820 There's people that are working on this.
00:10:05.020 Now, there's certain people that say there's downsides to desalination, with one of them
00:10:08.420 being it uses a lot of energy, could be bad for the environment, it hurts to fish.
00:10:12.400 Desalinated water is more expensive than imported water.
00:10:14.680 And for every gallon of fresh water created, one and a half gallons of salt water is created
00:10:18.780 and sent back into the ocean.
00:10:20.160 And some argue that this is a problem, and the state of California has increasingly taken
00:10:24.760 an anti-desalination position, citing environmental reasons.
00:10:29.020 So final thoughts on this water, on how I'm processing it.
00:10:32.020 Number one, I trust capitalism.
00:10:33.600 What do I mean by capitalism?
00:10:34.940 Whoever's going to be negatively impacted by this has to fix this.
00:10:38.240 So let's look at drink companies.
00:10:39.540 Who would be negatively impacted by this?
00:10:41.340 Coffee relies on water.
00:10:43.120 So that's who?
00:10:43.820 Coffee being Starbucks, 7-Eleven.
00:10:45.680 Soda is going to be impacted by this, which is who?
00:10:47.900 Coca-Cola, Pepsi, all the other guys have got to figure this out.
00:10:50.360 Water companies are going to be impacted.
00:10:51.740 There's so many companies that are going to be impacted by this.
00:10:54.240 If it got so bad, they would all gather their resources to figure out a way to fight against
00:10:59.720 the water crisis.
00:11:00.440 So that's one.
00:11:01.140 There's too much money involved that there's no way they're going to allow this to happen.
00:11:04.280 Number two, technology advancement.
00:11:05.760 When I was at Harvard, one guy sitting there from Lagos, and he says, here's what we created.
00:11:10.240 We're raising money right now.
00:11:11.260 Each plant is $100 million, and we're able to raise this much money.
00:11:14.140 And if we do this, this is how many gallons of water we can produce on a daily basis.
00:11:17.300 I'm like, okay, this is good.
00:11:18.460 It was a creative way that they were doing it, creating clouds and all this stuff.
00:11:21.580 Very interesting the way he was doing it.
00:11:23.400 It was very different than desalination.
00:11:25.140 But outside of that, I want to give you a project, an operation that the CIA worked on
00:11:29.340 in the 60s called Operation Popeye.
00:11:31.600 I don't know if you've heard about this or not, but we've known how to make rain, fake
00:11:35.660 rain, look real for decades.
00:11:37.860 And we've kept it kind of on the hush-hush, and we use words such as allegedly.
00:11:41.320 But let me kind of read this to you so you can kind of get an idea what this Operation
00:11:44.460 Popeye was about.
00:11:45.540 It wasn't about the Popeye with the big forearm you're talking about.
00:11:48.060 It's a different kind of a Popeye.
00:11:49.020 So Operation Popeye was a military cloud seeding project carried out by the U.S. Air Force
00:11:54.020 during the Vietnam War in 1967-72.
00:11:57.720 The highly classified program attempted to extend the monsoon season over specific areas
00:12:02.740 of the Ho Chi Minh Trail in order to disrupt the North Vietnamese military supplies by softening
00:12:08.160 roads, surfaces, and causing landslides.
00:12:10.760 The former U.S. Secretary of Defense Robert McNamara was aware that there might be objections
00:12:14.980 raised by the international scientific community, but said in a memo to the president that such
00:12:19.180 objections had not in the past been a basis for prevention of military activities considered
00:12:23.600 to be in the interest of U.S. national security and the chemical weather modification program
00:12:27.940 was conducted from Thailand over Cambodia, Laos, and Vietnam, and allegedly sponsored by
00:12:32.660 Secretary of State Henry Kissinger and the CIA without the authorization of then-Secretary
00:12:37.700 of Defense Melvin Laird, who had categorically denied to Congress that a program for modification
00:12:43.220 of weather for use as tactical weapon ever existed.
00:12:46.320 So remember, key word, allegedly, right?
00:12:48.620 Allegedly that this happened.
00:12:50.100 But if that's something they did back in the days, and it turned into a story like this,
00:12:54.680 that means there's plenty of people that have the technology that if they really wanted
00:12:58.060 to create rain, and even Michio Okaku had on the podcast before we interviewed him, he
00:13:03.200 was once sitting down, I think it's with Good Morning USA, Good Morning America, whatever
00:13:07.000 the show is, and he's explaining to them how through laser technology, they're able to manipulate
00:13:11.720 to create rain.
00:13:12.840 And this has been around for a long time, and we can do this today.
00:13:16.060 So again, advancement, I trust it's out there.
00:13:19.660 Capitalists, I trust, are going to figure out a way through using technology.
00:13:23.020 And I just want to put this one thought in your head for you to be thinking about, because
00:13:25.940 I truly believe only the paranoid survive, which is what Andy Grove said.
00:13:29.280 FDR once said the following, in politics, nothing happens by accident.
00:13:33.060 If it happens, you can bet it was planned that way.
00:13:36.160 Why am I saying that quote to you?
00:13:37.460 If in the future, you all of a sudden find yourself with news that's being shared to you
00:13:41.360 to scare you with water crisis, and this is why we have to, whatever, shut down, eat,
00:13:47.060 you know, mosquitoes, or eat this, or eat that, or whatever way they're going to try
00:13:50.540 to figure out to scare the hell out of you, always go back to, wait a minute, we've been
00:13:55.700 able to create rain, we've been able to do all this stuff for so many different decades,
00:13:59.280 why are you using the scare tech?
00:14:00.600 To just go back to, you know what the solutions are, put that together, don't use another crisis
00:14:04.420 to be able to control me and scare the crap out of me so I can vote for you.
00:14:07.540 Be tempted to question and push back when somebody uses that crisis against you.
00:14:12.780 Having said that, if you got value out of this video, give it a thumbs up and subscribe
00:14:15.540 to the channel.
00:14:16.260 If you've never seen the video we did on a vertical farming, incredible video we did
00:14:20.800 on vertical farming, it's another crisis that has to do with farming.
00:14:24.100 If you've not seen it, click here to watch it.
00:14:26.120 Take care, everybody.
00:14:26.820 Bye-bye, bye-bye.