Whiskey’s for Drinking, Water’s for Fighting

Generally attributed to Mark Twain, this is just as true to day as it was in the 1800s.  Consider California and its increasingly onerous restrictions on water usage.

Water is an essential ingredient of life, and businesses require reliable and economic supplies of water in order to operate.

California’s apparent inability to effectively manage its water resources is likely to have far reaching implications for population and business activity.

Water shortages, in many parts of the world, including California, tend to be cyclical, with years of plenty followed by years of drought.  The solutions are not complex.  Technologies for producing potable water from sea water and other sources are well known, economic, and proven in arid areas around the world.

Water problems are almost always political.  Consider the wrangling over the allocation of California’s limited supplies between environmental, agricultural, and general consumption, for example.  Or, the not in my back yard approach to desalination projects.

Investors should stay tuned.  The recent increase in California’s problems have yet to trigger major movements in population or capital investment, but the full impact of the current restrictions on water use have not been fully felt.  Moreover, there does not appear to be any movement towards a comprehensive solution.

All comments and suggestions are welcome.

Walter J. Kirchberger, CFA®