"In a time of universal deceit telling the truth is a revolutionary act." -George Orwell

Posts Tagged ‘Wall Street Speculators’

Investors Are Mining For The Next Hot Commodity: Water. Wall Street Smells Profit As California Endures Devastating Drought

In Uncategorized on September 25, 2015 at 7:38 pm

Drip-irrigated lemon orchards at the Cadiz water project in the Mojave Desert.

Oldspeak: “Investing in the water industry is one of the great opportunities for the coming decades, Water is the scarce resource that will define the 21st century, much like plentiful oil defined the last century.” –Matthew J. Diserio ,Water Asset Management

Water has been taken for granted, but reliable access is no longer guaranteed, It will be seen as an asset class that will be allocated in portfolios like health care stocks or energy or real estate. -Disque D. Deane Jr., Water Asset Management

“Business as usual is in effect for Wall St. employed Inverted Corptalitarian Kleptocrats in the water starved and drought-striken American west. Understand how these people think. At least one major Watermongerer, Chairman of Nestle, thinks “human beings have no right to water…. The biggest social responsibility of any CEO, is to maintain and ensure the successful and profitable future of his enterprise.Similarly, observe the deranged and terrifying logic of these Wall St. veterans, uttered quite casually. Their objective is to invest in and profit from water assets to which reliable access is no longer guaranteed. The “asset class” will be added to profitable portfolios established to further enrich their clients. And be sold to others at a premium. No mention of the madness of continuing to drill for water and grow water intensive crops in a fucking desert. No mentions of  the environmental impacts of desalination plants or the pipelines to be built to transport the product and where to store waste. These are nothing more than externalities in the demented calculus of “people” who see the world as something from which to extract market value. An expected view in corporate media outlet like NYT. But the most telling quote from this piece for me was this one  by a long time market analyst Steve Maxwell :”It doesn’t make any difference whether it’s a public agency or a private company that manages your water, the prices are going up, It’s not because of municipal inefficiency or corporate greed. It’s because we’re running out of water.” That’s the bottom-line. The market won’t matter when the water runs out.” –OSJ

Written By  Nelson D. Schwartz @ The New York Times:

Gazing out of a turboprop high above his company’s main asset — 34,000 acres in the Mojave Desert with billions of gallons of fresh water locked deep below the sagebrush-dotted land — Scott Slater paints a lush picture that has enticed a hardy band of investors for a quarter-century.

Yes, Mr. Slater admits, his company, Cadiz, has never earned a dime from water. And he freely concedes it will take at least another $200 million to dig dozens of wells, filter the water and then move it 43 miles across the desert through a new pipeline before thirsty Southern Californians can drink a drop.

But tapping cash, as opposed to actual water, has never been a problem for Cadiz. “I think there’s plenty of money out there,” Mr. Slater said.

Real profits may be nearly as scarce as snow in the High Sierra, but Wall Street, as it is wont to do, smells profit as California endures its worst drought in decades.

“Investing in the water industry is one of the great opportunities for the coming decades,” said Matthew J. Diserio of Water Asset Management, a New York firm that is a major backer of Cadiz. “Water is the scarce resource that will define the 21st century, much like plentiful oil defined the last century.”

So far, though, this veritable Gold Rush has mostly turned up fool’s gold.

Over the last decade, Cadiz has accrued $185 million in losses, and revenue from the lemon groves and vineyards it owns in the Mojave has added up to only a trickle: $7.1 million total since 2005.

To develop the project, the company burns through $10 million to $20 million annually, paying for a never-ending battle in courthouses and conference rooms across California to win make-or-break government permits and to cover the salaries of its 10 full-time employees.

Cadiz has generated that money by borrowing and regularly issuing more shares, prompting skeptics to wonder if it will ever actually deliver any water, much less any profits.

“It’s a tough game,” said John Dickerson, chief executive of Summit Global Management, a 20-year-old San Diego firm that invests in water infrastructure companies, local water suppliers and water rights, both in the United States and overseas.

Scott S. Slater, the chief executive of Cadiz. Monica Almeida/The New York Times

“Cadiz has promoted the dream and for years Wall Street has pumped optimistic paper water for Cadiz,” he added. “But now the hard question for them is, Where is your real water and when can we drink it?”

Other water ventures have also promised more than they have been able to deliver, at least so far. Obstacles abound in the forms of skeptical regulators, wary customers and implacably opposed environmental groups.

But some projects are finally nearing fruition. Near San Diego, the privately held Poseidon Water is getting ready to flip the switch on a new desalination plant that it built after 15 years of battling lawsuits filed by environmental groups and waiting for go-aheads from cautious regulators.

The drought, however, hasn’t softened local opposition to private players like Cadiz or Poseidon entering California’s water market. A main reason is money.

After Poseidon’s new plant begins producing desalinated water late this year, the monthly water bill for a typical consumer in the San Diego area will rise by about $5, to $80, according to the San Diego County Water Authority.

Drip-irrigated lemon trees and vineyards are so far producing the project’s only revenue. Monica Almeida/The New York Times

Located on the grounds of a power plant in Carlsbad facing the Pacific Ocean, the facility should produce as much as 50 million gallons of drinking water a day, if not more, expanding the region’s water supply nearly 10 percent.

Nonetheless, for Adam Scow, California director of Food and Water Watch, a nonprofit environmental group that opposes the desalination project, any private control over the water supply is too much.

“Water is a public trust, and it shouldn’t be privatized,” Mr. Scow said. “It can’t be managed for the benefit of a few people like Poseidon’s investors. The rates are unjustified.”

Poseidon officials reject arguments from critics like Mr. Scow that they are taking advantage of consumers.

“The Carlsbad desalination project is a true public-private partnership,” said Andrew Kingman, executive vice president at Poseidon Water. “Poseidon’s role in the project is that of a service provider. The Water Authority doesn’t have any payment obligations for the water until it is converted and delivered, and thereafter has full control over its use.”

Cadiz plans to construct a 43-mile pipeline along the railroad tracks to carry water from the eastern edge of San Bernardino County to thirsty cities to the west. Monica Almeida/The New York Times

Indeed, despite fears that Wall Street is making money off the drought, so far it has mainly been Poseidon’s investors who have been on the losing end. The company’s first return on its investment is not expected until next year, after years on the drawing board. A similar Poseidon project up the coast in Huntington Beach is still mired in the permitting process.

“It took more than a decade of struggle to get the Poseidon project permitted, not the kind of experience to make for happy investors,” Mr. Dickerson said. “This may well discourage potential investors in future desalination projects in California.”

But for those with a long enough time horizon, water may ultimately prove to be a good investment.

“Water has been taken for granted, but reliable access is no longer guaranteed,” said Disque D. Deane Jr., a Wall Street veteran who runs Water Asset Management with Mr. Diserio. “It will be seen as an asset class that will be allocated in portfolios like health care stocks or energy or real estate.”

Their firm now oversees more than $500 million for pension plans, sovereign funds and wealthy families, and their flagship fund has generally outperformed global stock market benchmarks since inception in 2006. Assets at Impax Asset Management, a London-based firm that also focuses on water, have doubled to $1.8 billion over the last two years.

While some projects may be more far-fetched than others, experts involved in the business insist there’s nothing wrong with making a profit selling water.

“It takes money to process, treat and move water, but now water itself is becoming increasingly valuable in the West,” said Steve Maxwell, a veteran industry consultant who is based in Boulder, Colo.

“It doesn’t make any difference whether it’s a public agency or a private company that manages your water, the prices are going up,” he added. “It’s not because of municipal inefficiency or corporate greed. It’s because we’re running out of water.”

Many investors are looking for less risky ways to make money in the water business. Rather than wade into bruising battles over water rights or developing new supplies only to face accusations of trying to profit off the drought, investors like Simon Gottelier of Impax are focusing on companies that supply infrastructure to water utilities and industrial users, not the water itself.

“As long-term investors focused on managing a ‘sleep at night’ fund, we are reticent about water rights companies because of how emotive the issue can be,” Mr. Gottelier said. “We don’t want to make investments in companies that become a subject of ire from farmers or generate headlines.”

Disque Deane Jr., sitting, and Matthew J. Diserio are major backers of Cadiz. Sasha Maslov for The New York Times

For Impax, that means there is appeal in stocks like Xylem, a maker of pumps, filtration equipment, and water treatment and testing supplies. Other Impax holdings might include makers of reverse osmosis membranes, like those at the heart of Poseidon’s new desalination plant, which Mr. Gottelier visited in June.

He sees California’s water shortage not just as a driver of demand for the individual companies in his portfolio, but also as a spur to individuals and institutions wanting in on the water trade but not ready for moonshots like Cadiz.

“There has been a dramatic increase in real and potential investor appetite,” Mr. Gottelier said. Much of the cash flowing into Impax is from institutional clients in Europe, where for-profit water systems have a long history, in contrast to the United States.

Back in the Mojave, in a trailer alongside a sun-baked airstrip built by Cadiz, Mr. Slater likes to show visitors a video of what appears to be an underground river 400 feet below the sand and sagebrush. As the temperature hovers at 95 degrees outside, the sight of all that crystalline, cool water conjures up visions of an imaginary oasis shimmering in the distance, drawing wanderers ever deeper into the desert.

But Mr. Slater insists it is within reach.

“Our expectation is that we’re going to turn dirt next year,” he promised. “We’ve never said before that this is the year. We’re saying it now.”

Correction: September 24, 2015 Because of an editing error, an earlier version of this article misspelled the surname of an executive at Water Asset Management. He is Disque D. Deane Jr., not Dean. The error was repeated in an earlier version of a picture caption.

Wall Street’s Climate Finance Bonanza

In Uncategorized on April 24, 2013 at 12:01 pm

Oldspeak: “Washington is at it again, hijacking the debate about how to support the global transition to a low-carbon, climate-resilient economy — and keeping the public, the press, and even developing countries out of the conversation. They’re repeating the same tired story that rich governments are broke and thus have to call in the private sector to finance climate change solutions… In this corporate-oriented approach, countries would provide generous loan guarantees and export subsidies that sweeten investments for private firms and give them the chance to net big profits while leaving governments (and the taxpayers they represent) to cover the losses if investors’ bets don’t pay off. In today’s economy, mobilizing private finance means going to the capital markets to raise money. But relying on financial markets for funding to support renewable, clean energy or to resettle climate refugees would subordinate climate action to the speculative whims of bankers.” –By Janet Redman and Antonio Tricarico. That last sentence is the key point of this piece. The biosphere IS NOT subordinate to financial markets or the speculative whims of bankers. This all-encompassing life support system has existed and renewed itself for millennia. These artificially created and virulent systems are destroying our planetary life support system.  Bankers, financial markets and their speculative whims don’t matter on a dead planet.  Any “market-based” solution to climate change is doomed to failure, simply because “the market” regards the climate and the biosphere as mere externalities. You’d be wise to be wary of anyone touting market based solutions to climate change (“Cap and Trade”, “Clean Development Mechanisms”, “Reducing Emissions from Deforestation and Degradation“). There is only one market that matters. Our planet. Wall Street has demonstrated time and time again that it does not care about our planet. Why would we leave any plans to sustain it to wall street?!

 By Janet Redman and Antonio Tricarico @ The Huffington Post:

Government officials from an elite group of developed countries meeting in Washington, D.C. at the invitation of U.S. climate envoy Todd Stern appear to be on the brink of instigating yet another corporate handout and big bank giveaway — this time in the name of fighting climate change.

If it follows a recently leaked agenda, the meeting will focus on using capital markets to raise money for climate finance. The goal is to fill the void left by the United States and other developed nations that have failed to meet their legal obligations to deliver funding to poorer countries for climate programs.

In this corporate-oriented approach, countries would provide generous loan guarantees and export subsidies that sweeten investments for private firms and give them the chance to net big profits while leaving governments (and the taxpayers they represent) to cover the losses if investors’ bets don’t pay off. Wealthy countries would then be able to claim that they had moved billions of dollars of new climate investments.

Unfortunately, the projects best placed to benefit from large-scale private investment and market mechanisms — like mega-infrastructure projects and fossil fuel-powered ventures that hide behind a “low-carbon” label — are likely to be those that have fewest sustainable development benefits. In many cases, the funding will channel windfall profits to corporations that would have invested profitably even without these new channels of support.

The sad fact is that this has happened before. Nations spent five years negotiating the Kyoto Protocol — the only multilateral treaty to regulate emissions of greenhouse gasses and spell out binding targets for reducing climate pollution. But before the treaty was finalized in 1997, the United States led a push to replace the enforcement mechanism — a fine for missing reduction targets paid into a clean development fund — with a market mechanism meant to lower the cost of compliance for polluting companies. The accompanying clean development mechanism (CDM) was born so that companies in the industrialized world could purchase ultra-cheap carbon pollution credits from developing nations to offset their continued pollution at home.

In the end the United States pulled out of the Kyoto treaty. But by shifting a global regulatory regime into a market-based regime centered on enticing private-sector investment with promises of profitability, Washington left its mark.

A decade and half later, carbon markets have collapsed, developing countries are awash with carbon credits for which there is no demand, and the planet keeps getting warmer.

Meanwhile, the clean development mechanism has led to private sector investment in spurious projects like mega-hydropower dams and coal-fired power plants that have delivered little in the way of sustainable development outcomes — and in some cases have further harmed the environment and human health.

Passing the Buck

And now Washington is at it again, hijacking the debate about how to support the global transition to a low-carbon, climate-resilient economy — and keeping the public, the press, and even developing countries out of the conversation. They’re repeating the same tired story that rich governments are broke and thus have to call in the private sector to finance climate change solutions.

In today’s economy, mobilizing private finance means going to the capital markets to raise money. But relying on financial markets for funding to support renewable, clean energy or to resettle climate refugees would subordinate climate action to the speculative whims of bankers.

Americans have visceral reminders of the consequences of leaving decisions about critical needs to the market — the more than 1.6 million families locked out of their homes and the $2.5 trillion in taxpayer dollars handed over to bail out Wall Street and U.S. car companies are just two. Europeans can point to the recent bailout after the carbon bubble burst. If a global climate finance bubble were to burst, we wouldn’t just lose our houses; we might have lost our chance at averting catastrophic global warming.

Governments in the developed world shouldn’t pass the buck to the private sector. They must act now. They can start by cutting subsidies for fossil fuels, including for natural gas “fracking” in the United States, and set binding regulation for reducing climate change pollution. Then governments can adopt innovative ways to raise public money, like taxing pollution from shipping or financial transactions. Indeed, even a very low financial transactions tax would generate substantial revenue and deleverage capital markets.

And of course, if there is any hope of creating a new paradigm of climate-sound development, there will have to be a role for the private sector. But the micro, small, and medium enterprises of the developing world would be preferable partners to the multinational firms that have been responsible for sucking wealth and resources out of countries for decades, leaving pollution and poverty in their wake.

At some point — and for the sake of the future generations who will bear the results of our decisions, we hope it’s sooner rather than later — the government officials who place their bets on private finance will have to learn that putting corporate profits over the needs of climate-impacted people is a risk the rest of us are not willing to take.

Antonio Tricarico is director of the New Public Finance program of the Italian organization Re:Common based in Rome and a former economic correspondent at the Italian newspaper Il Manifesto.

Janet Redman is the co-director of the Sustainable Energy and Economy Network at the Institute for Policy Studies in Washington, DC.

Editorial support by Peter Certo and Oscar Reyes of the Institute for Policy Studies.

Overdose: The Next Financial Crisis

In Uncategorized on December 20, 2012 at 6:09 pm

Oldspeak: ““Ultimately there is going to be a price all around the world to be paid for this and the longer it continues the bigger that price is going to be.” – Peter P. Schiff, President Euro Pacific CapitalWhen the world’s financial bubble blew, the solution was to lower interest rates and pump trillions of dollars into the sick banking system. “The solution is the problem, that’s why we had a problem in the first place”. For Economics Nobel laureate Vernon Smith, the Catch 22 is self-evident. But interest rates have been at rock bottom for years, and governments are running out of fuel to feed the economy. “The governments can save the banks, but who can save the governments?” Forecasts predict all countries’ debt will reach 100% of GDP by next year. Greece and Iceland have already crumbled, who will be next?” The bailout bubble will inevitably pop. It is many times larger than any other financial bubble yet seen and it is global. Corporations world wide are being bailed out by governments, but as we’ve seen in Greece, Iceland, Spain, Italy, Portugal, governments themselves are collapsing under weight of the bailouts. Now governments need bailouts, ceding control to technocrats who go about the business of privatizing public assets, cutting social services and increasing taxes to facilitate extraction of the government and nations resources. Conditions are very much similar to those that existed in 2008 before the last collapse.   When it pops this will be the mother of all bubbles.  Interest rates are at or near zero across much of the world. There is no more rate lowering to be done to make possible more “stimulus packages”. It will be very interesting to see how thing proceed past that point.  My guess is not well.

Overdose: The Next Financial Crisis

https://www.youtube.com/watch?feature=player_embedded&v=4ECi6WJpbzE

With Corn Feed Scarcer, Costlier Than Ever, U.S. Farmers Feed Cookies, Marshmellows & Fruit Loops To Cattle

In Uncategorized on September 25, 2012 at 11:37 am

Oldspeak:”In the mix are cookies, gummy worms, marshmallows, fruit loops, orange peels, even dried cranberries. Cattlemen are feeding virtually anything they can get their hands on that will replace the starchy sugar content traditionally delivered to the animals through corn. “-Carey Gillam Is there a more perfect descriptor of the utter and complete absurdity of industrial scale agriculture? Rather thank let their cattle graze on grass, as farmers have done for the bulk of human history, BigAg farmers in a desperate attempt to cut feeding costs, are feeding their cattle even more unnatural,  less healthy & nutritious junk food. America, as the most gluttonously obese nation on the planet literally is what it eats. Junk.  Junk in, Junk out.  A junk economy. Junk politics, Junk science. Junk education. Junk spirituality. Junk laws. Etc etc etc… This is a perfect illustration of the madness that Casino Capitalism begets.  Poisons Proliferate. Profit is Paramount. Wall Street “Speculators” gamble with the global food supply. Greed defies logic. It skirts safety. It makes human and animal health mere “externalities”.  This is unsustainable. We will reap what we sow.”

By Carey Gillam @ Reuters:

Mike Yoder’s herd of dairy cattle are living the sweet life. With corn feed scarcer and costlier than ever, Yoder increasingly is looking for cheaper alternatives — and this summer he found a good deal on ice cream sprinkles.

“It’s a pretty colorful load,” said Yoder, who operates about 450 dairy cows on his farm in northern Indiana. “Anything that keeps the feed costs down.”

As the worst drought in half a century has ravaged this year’s U.S. corn crop and driven corn prices sky high, the market for alternative feed rations for beef and dairy cows has also skyrocketed. Brokers are gathering up discarded food products and putting them out for the highest bid to feed lot operators and dairy producers, who are scrambling to keep their animals fed.

In the mix are cookies, gummy worms, marshmallows, fruit loops, orange peels, even dried cranberries. Cattlemen are feeding virtually anything they can get their hands on that will replace the starchy sugar content traditionally delivered to the animals through corn.

“Everybody is looking for alternatives,” said Ki Fanning, a nutritionist with Great Plains Livestock Consulting in Eagle, Nebraska. “It’s kind of funny the first time you see it but it works well. The big advantage to that is you can turn something you normally throw away into something that can be consumed. The amazing thing about a ruminant, a cow, you can take those type of ingredients and turn them into food.”

PRICING VARIES

Feed is generally the largest single production expense for cattle operators. Whatever is fed needs to supply energy and protein levels that meet the animals’ nutritional needs. High prices for soy has operators seeking alternatives for both corn and soy.

Corn alternatives are in particular demand as supplies are so tight that in some areas of the country, feed corn is not available at any price.

Pricing and availability of the many different “co-products” as they are called, varies from place to place, but buyers report savings of 10 percent to 50 percent.

The savings for operators are shrinking, however, as savvy resellers tie pricing for their alternative offerings to the price of corn, which surged to record highs this summer due to drought damage.

The U.S. Department of Agriculture said last month the harvest now underway will yield the smallest corn crop in six years due to the drought that is still gripping more than half of the nation.

“They are using less corn in a number of these rations, but as corn prices go up, prices for really every other co-product go up too,” said Greg Lardy, head of the animal sciences department at North Dakota State University.

Operators must be careful to follow detailed nutritional analyses for their animals to make sure they are getting a healthy mix of nutrients, animal nutritionists caution. But ruminant animals such as cattle can safely ingest a wide variety of feedstuffs that chickens and hogs can’t.

The candy and cookies are only a small part of a broad mix of alternative feed offerings for cattle. Many operators use distillers grains, a byproduct that comes from the manufacture of ethanol. Other common non-corn alternatives include cottonseed hulls, rice products, potato products, peanut pellet.

Wheat “middlings,” a byproduct of milling wheat for flour that contain particles of flour, bran, and wheat germ, also are fed.

And every now and then, there is a little chocolate for the hungry cows.

Hansen Mueller Grain out of Omaha, Nebraska, which markets chocolate bars alongside oats and peanut pellets, said it all comes down to fat, sugar and energy.

“That’s all it is,” said Bran Dill, a spokesman at Hansen Mueller. Demand is high, he said.

But he also said increasing prices are making alternatives less attractive.

“The price of this stuff has gone up so much it’s gotten ridiculous,” he said.

(Additional reporting by Michael Hirtzer in Chicago; Editing by Leslie Gevirtz)