We have previously posted a number of blogs outlining California’s water problems. We have noted that the issue of adequate fresh water supplies tended to reflect a lack of concerted political effort and the cyclicality of rain and snow fall.
State officials recently reported that, as of the end of the September fiscal year, the state’s reservoirs stood at 128% of their historical average. Welcome news after 12 years of drought. Despite what may prove to be a short-term reprieve, state officials are still attempting to find agreement on how to manage and allocate water in the future.
Investors should consider that fluctuations in California’s water supply are normal and have been well known for decades. It may be advisable to carefully consider short-term risks in making long-term decisions.
Incidentally, the above normal level of precipitation in California may have contributed to a materially smaller than normal wildfire season. So far this year, just over 476 square miles have burned, compared to the five-year average of 2,031 square miles.
All comments and suggestions are welcome.
Walter J. Kirchberger, CFA