If you know the story (or perhaps you've seen the Hollywood film, The Big Short) where Michael Burry and a few other traders were able to spot the looming housing market crash of 2008, you know that these guys are on their game. So, when Burry says there's another important commodity to focus on, we better listen. Right?
So, what is it, you ask.
If you're thinking about investing in bottled water companies or buying land where the water comes from, you're off-base. Burry explains that the real value in water trading is the food that holds it. Fruit and other foods that grow in water-rich areas can be easily transported, while water is a pain to move around.
"Fundamentally, said Burry, "I started looking at investments in water about 15 years ago. Fresh, clean water cannot be taken for granted. And it is not — water is political, and litigious. Transporting water is impractical for both political and physical reasons, so buying up water rights did not make a lot of sense to me, unless I was pursuing a greater fool theory of investment — which was not my intention.
"What became clear to me is that food is the way to invest in water. That is, grow food in water-rich areas and transport it for sale in water-poor areas. This is the method for redistributing water that is least contentious, and ultimately it can be profitable, which will ensure that this redistribution is sustainable. A bottle of wine takes over 400 bottles of water to produce — the water embedded in food is what I found interesting."
Perhaps he's right. Perhaps there are other ways to disperse water to those that need it, but if profit is your game you should be looking at one of the most valuable commodities on the planet. H2O.
Here's a video where he also discusses investing in water, gold and land, similar markets.