You can’t blame US Federal Reserve Chair Janet Yellen for any of this. Well, you can. But it wouldn’t be fair. Yellen fronted the US Congress yesterday and said nothing notable. She said the Fed was unlikely to raise rates. But she said the Fed wouldn’t cut rates either. It was, for a change, the proverbial “nothingburger”.
European stocks clearly hated it. But the Japanese yen rose against the dollar. And so did gold. In fact, as Charlie Morris noted earlier in the week in his update to new The Fleet Street Letter readers, gold is moving up in multiple currencies. That’s a good sign, if you’re buying.
It’s not a good sign if you’re selling. As I mentioned in this morning’s Facebook video update, Canada’s Ministry of Finance revealed that it sold just under half of the country’s gold reserves last year. But it wasn’t a lot to begin with. The country had three tonnes of gold. It now has 1.7.
It’s not a lot if you’re saving for a rainy day, or a currency crisis. But Canada has plenty of gold in the ground. It has plenty of oil in the ground. It also has plenty of water. Brazil, Russia and the United States actually have more fresh water than Canada, according to various statistics. But a lot of the Canadian water is frozen, trapped in ice and glaciers.
I bring the point up because at the end The Big Short, you learn that fund manager Dr Michael Burry (who closed his fund after his bearish housing bet) was investing in something entirely different: water. Burry explained why in a recent interview with New York magazine (emphasis added is mine):
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.
Category: Economics