Brian Rezny's  Instablog

AIG Thanks America

After paying back the $182 billion bailout it received in 2008, AIG recently launched an ad campaign with the tag line "Thank You America". And that is made all too ironic by the fact that behind the scenes, the firm was contemplating suing the US government.

Needless to say, suing the government would have undercut its 'thank you'. And that the idea was even being entertained made the firm appear 'tone deaf'.

The suit was originally filed back in 2011 by the firm's former CEO Maurice "Hank" Greenburg on behalf of fellow shareholders. His complaint is that the terms of the government's bailout - that it took a 92% stake in the company, and charged a high interest rate (over 14%) - cheated shareholders out of money and violated the 5th Amendment by using private property for "public use, without just compensation". So he is suing the government for $25 billion, and he wanted AIG to join him in the suit.

Of course, the government bailout was the only thing standing between the firm and bankruptcy, and the only thing standing between shareholders and losing their investment. And ultimately, in the face of the financial crisis when it had nowhere else to turn, AIG accepted the government's terms.

The firm didn't take Greenburg's bait. The board met last Wednesday and decided, unanimously, not to join the lawsuit. And to be fair, the board technically had a legal obligation to shareholders to consider the suit. But, also to be fair, delaying their decision as they did only prolonged the process, and cost the government more in legal fees.

It was a good thing that AIG chose not to bite the hand that fed it. Too bad it took a while to decide.

Last week was a big week for Ford: the company doubled its quarterly dividend to 10 cents a share and announced that it plans to hire 2,200 white-collar workers this year - the biggest hiring of salaried employees in a decade (that comes after the company added 8,100 jobs last year). And that means the company is well more than halfway to fulfilling its promise to add 12,000 US jobs by 2015. And to cap off the week, the company was added by Goldman Sachs "Americas Conviction List".

No surprise: the stock hit a 52-week high on Friday (shares are up 22% over the past month). And before that, a long-term buy was technically signaled in November. Now, a buy signal is a buy signal, but shares have gotten so hot that the stock looks ripe for a correction (and multiples are at the highest in two years). My conviction: I would watch for the stock to cool off, and if that happens I see a possible support level at just over $12.00.

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Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Water is, and does, a lot of things.  It covers 70% of the earth’s surface.  It makes up 60% of the human body.  It has been a source of conflict for millennia.  It is commodity, and most of all…a basic human need.

 

Source: nasa.gov

It has been suggested that water is the new oil… but that depends on how you look at it.

We have been warned that we are at risk of facing a “global water crisis”, according to the United Nations World Water Assessment.  We could be facing a serious imbalance between supply and demand, and hydraulic shocks could result in dangerous water security issues.

The global population is growing…and water demand is growing faster.  Over the last 50 years, the human population almost doubled (from 3 billion to 6.5 billion), while water demand roughly tripled.  And current estimates suggest that the population will grow to 9 billion by 2050, and in all likelihood water needs will surpass that growth rate.  Specifically, water is growing twice as fast as the population, according to the UN Food and Agriculture Organization.  The projections are not pleasant:  by 2025 1.8 billion people will live in “absolute water scarcity”, and two-thirds of the planet will be under “stress”.  Estimates in a report by The Economist don’t bode any better: by 2050 45% of the human population will live in countries that are chronically short of water.  Whatever numbers you look at, the UN Secretary General put it best: “The challenge of securing safe and plentiful water for all is one of the most daunting challenges faced by the world today”.

Here’s the thing: growing water demand isn’t just the result of human population growth, but also consumption habits.  As incomes rise in developing nations, and people lift themselves out of poverty, their “water intensity” increases.  And water intensity means that consumption isn’t just about drinking water: over-all diets shift towards foods that require more water to produce (often meatier diets).  That going to put a serious strain on supply: the Food and Agriculture Organization estimates that we will need 60% more water for agricultural use to feed the increase in population over the next two decades. 

Now, there is a lot of water on the planet…but of course nearly 97% of it is saltwater (according to the U.S. Geological Survey).  And of the remaining freshwater that moves through the hydraulic cycle, we are only able to utilize something like .75%.  And that means that supply constraints will likely serve as a price support for water in the future.

Is water the new oil? Maybe not.  After all, oil is exhaustible.  And while the supply of water is finite, it is also recyclable.  The bottom line: water is a resource that we can’t survive without, and there is only one direction demand will go.  And while water efficiency may improve, the supply will not grow with demand.

For exposure to water, take a look at Powershares Water Resources (PHO): this ETF tracks the Palisades Water Index and provides exposure to water treatment, utilities, and equipment.