At the end of the movie adaptation of ‘The Big Short’ — Michael Lewis’ famous book about the few men who saw the financial crisis coming — the hero of the book is said to be focusing all of his trading on one thing: water.
Michael Burry is the man who figured out that the global mortgage market was on the verge of collapse. Complicated stuff, where as water sounds fairly simple. People need water where they don’t have it, so buy the water and sell it to them. Right?
Burry recently filled out a Q&A for Jessica Pressler of New York Magazine and was asked to explain that trade in more detail.
Fundamentally, 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.