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The Retired Investor: Water Becoming a Rare Commodity

By Bill SchmickiBerkshires columnist

America is running out of water. During the next 50 years, the nation could see its fresh water supply reduced by one third. But if you think that's a problem for the next generation, you are wrong. This year alone, as many as 83 out of 204 U.S. water basins could begin to feel the brunt of these shortages.

 And don't think these shortages will only affect those regions that we would expect to be dry. The central and southern Great Plains, the Southwest and central Rocky Mountain states, as well as the South, Midwest, and parts of California are all in danger. The twin culprits are rising temperatures and changing rainfall patterns brought on by climate change.

The wettest regions of the country are getting wetter, while the driest areas are getting dryer. At the same time, we are seeing more intense concentrations of rainfall that make capturing and using that water more difficult. If you combine that with temperature changes that are expected to heat up the nation by 5.7 degrees in the years ahead, you have a perfect storm for water shortages.

But that's only the tip of the iceberg. The demand for clean, fresh water is also increasing. Population growth alone is setting us on a path where we are going to need to make hard choices between water use for drinking, irrigation (37% of water usage is for agriculture) and manufacturing. We already are fighting over water in many states. The Colorado River is just one example of the ongoing controversary of water use and state's rights.

However, most Americans simply assume that if push comes to shove, there will always be enough clean tap water in most of the major cities and towns, at least in places like the Northeast, where I live. Think again. Our drinking water has been contaminated by industry, weakening government oversight, and aging infrastructure for years and years. Did you know, for example, that a water main breaks in the U.S. approximately every two minutes?

Leaking lead from aging pipes in New Jersey, radioactive waste in the ground water in Arizona and New Mexico from uranium mines, hookworm disease in Alabama from sewage pipes, mining spills in Kentucky, chemicals in the South Carolina water supply—these are just some of a long list of calamities that are popping up more and more frequently throughout the country.

In the middle of this crisis, the demographics of the U.S. population are changing. Some cities and communities are getting bigger and richer, while others in areas such as the upper Midwest, the Great Plains, and the Mississippi Delta are dealing with fewer resources and declining populations. Unfortunately, these trends will mean increasingly unaffordable water for certain segments of the population going forward. Today, for example, in some areas of North Carolina, a low-income family of six people needs to work 4 to 5 days each month just to cover their water bill.

Utility disasters, such as the massive lead-tainted water crisis in Flint, Michigan in 2015, are expected to grow in frequency and with increasing economic impact. This week's latest calamity involves a Florida reservoir in the Tampa Bay area on the brink of collapse. It was leaking toxic wastewater and could have devastated much of the region's environment and economy. It was narrowly averted, although environmentalists had been warning of the danger for years.

The truth is that many cities and states face huge upgrades in their water infrastructure and have for many years. The only way to obtain the money is to raise taxes or borrow the funds through municipal bond offerings.  If you live in a big city or state with a prosperous population, that may be costly but still possible. But what do you do if your utilities are serving a shrinking or stagnant population with lower income prospects?

Given the dilemma we face as a nation in this area, the Biden Administration's infrastructure proposal seems to be on the right track in proposing $45 billion in grants to help water utilities replace lead water lines and another $56 billion for water and sewer projects. It seems clear to me that preserving our water supply, both now and in the future, is every bit as important as fixing our roads and bridges. As for our growing water shortage, let's hope we all finally take climate change seriously.

Bill Schmick is the founding partner of Onota Partners, Inc., in the Berkshires. His forecasts and opinions are purely his own and do not necessarily represent the views of Onota Partners Inc. (OPI). None of his commentary is or should be considered investment advice. Direct your inquiries to Bill at 1-413-347-2401 or email him at bill@schmicksretiredinvestor.com.

Anyone seeking individualized investment advice should contact a qualified investment adviser. None of the information presented in this article is intended to be and should not be construed as an endorsement of OPI, Inc. or a solicitation to become a client of OPI. The reader should not assume that any strategies or specific investments discussed are employed, bought, sold, or held by OPI. Investments in securities are not insured, protected, or guaranteed and may result in loss of income and/or principal. This communication may include opinions and forward-looking statements, and we can give no assurance that such beliefs and expectations will prove to be correct. Investments in securities are not insured, protected, or guaranteed and may result in loss of income and/or principal. This communication may include opinions and forward-looking statements, and we can give no assurance that such beliefs and expectations will prove to be correct.
     

The Retired Investor: Will Infrastructure Spending Boost Clean Energy Stocks?

By Bill SchmickiBerkshires columnist
Renewable energy stocks were all the rage last year. This year, however, not so much with clean energy funds taking hits of between 25-50 percent. Will President Biden's proposed $2.25 trillion infrastructure bill breathe new life into this sector? 
 
President Biden ran on a platform that included the build out of an infrastructure plan that would "achieve net-zero emissions, economy-wide, by no later than 2050." By the time of his November election last year, investors had bid up the clean energy sector, which includes everything from electric cars, and clean water to solar and wind power, by over 200 percent in some cases.
 
New renewable energy exchange traded funds (ETFs) and mutual funds were offered with names like "Tan" and "Fan" that were snapped up in anticipation that they could only go higher. Of course, like all mini-manias, prices failed to keep up with investor's expectations. Markets moved on to buying "reopening trades" like dirty old oil stocks, airlines, and cruise ships.
 
However, on Wednesday, March 31, President Biden unveiled some of the details of his multitrillion-dollar infrastructure plan. In addition to programs to upgrade the nation's schools and spend $580 billion in job training and R&D, the plan should benefit many companies in the clean energy sectors.
 
About $621 billion will go toward physical improvements to roads, bridges, public transit, ports, airports and electric vehicles. Another $300 billion is earmarked for improving drinking-water infrastructure, expanding broadband access, and upgrading electric grids. Included in that spending will be energy-efficient affordable housing, electric vehicle charging stations, as well as potential extensions in government tax credits that would benefit both the solar and hydropower industries.
 
Congress has already extended the investment tax credit used for residential and commercial solar projects at the current rate of 26 percent for two years in 2020 as part of the $2.3 trillion spending and coronavirus relief bill. If the clean energy lobbyists get what they want, it could mean billions of dollars for solar, wind, clean energy storage, and other industries from electric vehicles to pollution controls that would decarbonize our environment.
 
Allied Market Research, an expert in this area, forecasts that the global clean energy market will be worth $1.5 trillion by 2025. There is an array of companies to choose from, in fact, so many that the average investor may have a hard time making investment decisions. However, fear not, because there are many exchange traded funds that do the work for you. 
 
Some funds that are available include the IShares Global Clean Energy ETF (ICLN), the Invesco WilderHill Clean Energy ETF (PBW), and the ALPS Clean Energy ETF (ACES). There are also some more focused funds such as the Invesco Solar ETF (Tan) and the First Trust Global Wind Energy ETF (Fan).
 
Although President Biden's infrastructure plan should be good news for Americans and the economy it is far from a done deal. His plan to raise corporate taxes to 28 percent from 21 percent and to establish a global minimum tax for multinationals corporations to ensure they pay at least 21 percent (up from 13 percent) in taxes in any country won't sit well with Republicans and many others on Wall Street. I expect there will be a lot of horse trading in the weeks and months ahead before a final agreement is reached and passed. But if it is, some of the prime beneficiaries should be the clean energy companies.
 

Bill Schmick is the founding partner of Onota Partners, Inc., in the Berkshires. His forecasts and opinions are purely his own and do not necessarily represent the views of Onota Partners Inc. (OPI). None of his commentary is or should be considered investment advice. Direct your inquiries to Bill at 1-413-347-2401 or email him at bill@schmicksretiredinvestor.com.

Anyone seeking individualized investment advice should contact a qualified investment adviser. None of the information presented in this article is intended to be and should not be construed as an endorsement of OPI, Inc. or a solicitation to become a client of OPI. The reader should not assume that any strategies or specific investments discussed are employed, bought, sold, or held by OPI. Investments in securities are not insured, protected, or guaranteed and may result in loss of income and/or principal. This communication may include opinions and forward-looking statements, and we can give no assurance that such beliefs and expectations will prove to be correct. Investments in securities are not insured, protected, or guaranteed and may result in loss of income and/or principal. This communication may include opinions and forward-looking statements, and we can give no assurance that such beliefs and expectations will prove to be correct.

 

     

The Retired Investor: Cannabis Catalysts Coming Soon

By Bill SchmickiBerkshires columnist
Last week, a bipartisan slate of U.S. Senate co-sponsors introduced the Secure and Fair Enforcement Banking Act (the SAFE Act) that would allow the cannabis industry to tap the federal banking system. If passed, this could be a game changer for marijuana companies.
 
The SAFE Act has already been passed by the House back in September 2019 but was never brought up for a hearing, much less a vote in the Senate.
 
The bill's author, Congressman Ed Perlmutter, a Colorado Democrat, has introduced several versions of this bill many times over the last eight years. During that time, the legalization of marijuana has moved from a pie-in-the-sky hope of a few legislators to something that may actually have the votes to pass.
 
Forty-seven states have already legalized either recreational or medical marijuana (as well as the District of Columbia and four U.S. territories). That should have been pressure enough to overcome lawmakers' resistance and yet, the legal status remains the same. Cannabis is still a Schedule 1 drug that makes it illegal on the federal level; as such, most cannabis companies are excluded from utilizing banking accounts. They have to operate on a cash-only basis.
 
At the same time, the banking sector, as well as numerous public companies that might want to enter the cannabis space, are precluded from doing so in fear that they will run into problems with federal insurers and the federal government.
 
The cash-only model hamstrings marijuana companies that would like to borrow in order to expand but can't because bank loans are unavailable. It is both frustrating and somewhat ludicrous to many that this U.S. sector, which is valued at $17 billion, remains a cash business. It has also developed into a public safety issue since cash-laden tills of cannabis companies are prime targets for robberies and burglaries.
 
During the pandemic, a large number of states deemed the cannabis industry an essential business due to medical marijuana prescriptions. That also presents a public health concern, since more and more of these medical marijuana companies are dealing with increased demand. Many of them need access to the banking system to insure the continued flow of product to their patients.
 
In any case, in order for the SAFE Act to pass in the Senate, a minimum of 60 votes would be needed. At last count, advocates believe they have 59 votes, which would be more than enough momentum to at least field a Senate committee hearing. After that, the bill could be moved to the full Senate for a vote within the next month.
 
In the meantime, the New York State Legislature is expected to vote on its own Marijuana Regulation and Taxation Act, any day now. Passage would legalize recreational marijuana, as well as provide $350 million in tax revenue per year. This could be another large boost in revenue for several marijuana companies. The market for recreational pot could become a multibillion-dollar industry in the state. Some forecasters expect sales to grow as high as $7 billion throughout the next four years.
 
And while investors focus on the U.S., don't forget that Mexico has already passed legislation in their lower house, the Chamber of Deputies, this month. The bill will now go to the Senate before being sent to President Andres Lopez Obrador, who already supports passage. The legislation is expected to be approved by their Senate any day now. Mexico, with 130 million people, would represent the largest marijuana market in the world by population.
 
With all this good news on the legislative font, it appears to me that we are on the cusp of a major series of catalysts that should benefit the cannabis industry and propel the stock prices of several well-positioned and profitable marijuana companies here in North America.  
 

Bill Schmick is the founding partner of Onota Partners, Inc., in the Berkshires. His forecasts and opinions are purely his own and do not necessarily represent the views of Onota Partners Inc. (OPI). None of his commentary is or should be considered investment advice. Direct your inquiries to Bill at 1-413-347-2401 or email him at bill@schmicksretiredinvestor.com.

Anyone seeking individualized investment advice should contact a qualified investment adviser. None of the information presented in this article is intended to be and should not be construed as an endorsement of OPI, Inc. or a solicitation to become a client of OPI. The reader should not assume that any strategies or specific investments discussed are employed, bought, sold, or held by OPI. Investments in securities are not insured, protected, or guaranteed and may result in loss of income and/or principal. This communication may include opinions and forward-looking statements, and we can give no assurance that such beliefs and expectations will prove to be correct. Investments in securities are not insured, protected, or guaranteed and may result in loss of income and/or principal. This communication may include opinions and forward-looking statements, and we can give no assurance that such beliefs and expectations will prove to be correct.

 

     

The Retired Investor: Food Scarcity in a Nation of Obesity

By Bill SchmickiBerkshires columnist
Thirty-three percent of adults are obese, while ten percent of households with children are facing a food crisis. This is happening together, at the same time, in the same place — America. How can this be?
 
During the height of the pandemic, if you recall, the media featured long lines of hungry Americans queuing up at food banks and other community centers for food to feed their families. That was a shocking sight to me. In the supposed wealthiest country in the world, where Americans usually throw away more food than they eat, there are people going hungry? I thought it must be caused by supply chain problems, not the scarcity of food.
 
Digging deeper, I discovered that millions of Americans have been facing food insecurity well before the coronavirus. The pandemic simply made a bad situation worse and food scarcity strikes hardest at the most vulnerable populations. Black families, for example, are twice as likely as white to have inadequate access to healthy food.
 
But first, we need to understand the definition of food scarcity or food insecurity, since both terms are being used to define the same thing. The term refers to the lack of access to enough good, healthy, and culturally appropriate food. From an economic perspective, it is defined as the inability to afford that same healthy food for all family members.
 
Let me be clear, however, food insecurity and hunger are not the same concept, even though they may be somewhat related. Food insecurity is socio-economic, which means its roots are both financial and cultural. Hunger is physiological, meaning physical. It is a physical sensation that might be a consequence of food scarcity or insecurity, but not always. We usually measure food scarcity at the household level and hunger at the individual level.
 
Back in the day, my family was considered "poor" (lower income would be the politically correct handle in today's world), but we were never hungry. Although, I suspect that there may have been times that my mother went without to feed us kids, but I couldn't prove it. Thank God, however, for the little backyard summer garden we had (although eating tomato sandwiches for lunch several times a week was a bit much).  
 
Today's food security (or insecurity) is our society's attempt to move the discussion of food policy beyond simple hunger. It is an effort to capture the reality of individuals and families who struggle to get enough good quality food on the table. Food scarcity and obesity, believe it or not, have much in common.
 
Obesity is defined as having excess body fat. Adults 35 years of age and older with a Body Mass Index (BMI) greater than 30 are considered obese. Former President Donald Trump, for example, falls onto that category. Where food scarcity and the problem of obesity meet most often is around the meaning of "good and healthy" foods.
 
The lifestyle of the obese and the poor coincide in a number of areas. Poorer working families (especially single parent households), for example, have neither the money, nor the time to plan meals and supervise their family's food intake. Skipping breakfast, eating out at cheap, fast food joints, consuming highly processed and calorie-rich foods, snacking in front of the television, and drinking sugar-sweetened beverages are regular occurrences for families working to put food on the table. Those same eating habits are also commonly found among obese families and individuals.
 
Given that background, it should not surprise us that one out of every six American children are at risk of food scarcity and suffer from obesity as well. Food insecurity is influenced by any number of factors including income, employment, race/ethnicity and disability. It can be long-term or temporary.
 
For years, I have written about the growing income inequality in this country. Unfortunately, both the private and public sectors have ignored that issue. The onset of the pandemic only made a bad situation much worse. The huge rise in unemployment, the long-term trend of sinking real wages in the service industries, coupled with the shrinking safety net of both private health care and social programs have resulted in problems only one of which is food scarcity.
 

Bill Schmick is the founding partner of Onota Partners, Inc., in the Berkshires. His forecasts and opinions are purely his own and do not necessarily represent the views of Onota Partners Inc. (OPI). None of his commentary is or should be considered investment advice. Direct your inquiries to Bill at 1-413-347-2401 or email him at bill@schmicksretiredinvestor.com.

Anyone seeking individualized investment advice should contact a qualified investment adviser. None of the information presented in this article is intended to be and should not be construed as an endorsement of OPI, Inc. or a solicitation to become a client of OPI. The reader should not assume that any strategies or specific investments discussed are employed, bought, sold, or held by OPI. Investments in securities are not insured, protected, or guaranteed and may result in loss of income and/or principal. This communication may include opinions and forward-looking statements, and we can give no assurance that such beliefs and expectations will prove to be correct. Investments in securities are not insured, protected, or guaranteed and may result in loss of income and/or principal. This communication may include opinions and forward-looking statements, and we can give no assurance that such beliefs and expectations will prove to be correct.

 

     

The Retired Investor: The Coming Economic Boom

By Bill SchmickiBerkshires columnist
The nation should have a lot to celebrate in the coming months. Most economists are busily raising their forecasts for growth for the remainder of the year. If their forecasts are accurate, Americans can expect a booming economy this year and into 2022.
 
The arguments for growth are straightforward. The number of Americans that are being vaccinated is now higher than the number of new coronavirus cases. By the end of May 2021, if government forecasts are correct, almost everyone in the U.S. that wants a vaccination should have one. As a result, we can expect to see a re-opening of most businesses no later than the second half of the year. That, in turn, should lead to a rapid hike in economic activity.
 
But what will really spark the coming boom for the nation's economy is the $1.9 trillion American Relief Plan. The bill has just passed Congress and, according to the Biden Administration, money will start flowing into the pockets of those Americans who have suffered the most in the past year.
 
As a result, economic growth is expected to be the strongest since 1984. The latest consensus numbers of 76 economists are looking for Gross Domestic Product to rise by an annualized 5.6 percent in the second quarter, followed by 6.2 percent in the third quarter. Some see the economy jumping by as much as 10 percent between April and June.
 
The engines of growth are expected to be a combination of business investment and consumer spending on everything from airlines to restaurants. Throughout the last year, Americans that could, have saved as much as 20 percent of their total income. That brings the total savings amount for the month of January to $4 trillion. Some of that savings is expected to find its way into the economy as pent-up demand comes to the forefront. If you combine that with additional fiscal spending, we have what could be a perfect storm of demand for goods and services.
 
Recent manufacturing data from the Institute for Supply Management revealed that the sector had logged its highest growth level since August 2018. Personal income surged 10 percent in January, while household wealth increased nearly $2 trillion for that month.
 
Recently, many market participants have jumped on the inflation bandwagon figuring that all this demand coupled with the central banks loose monetary policies will trigger a higher rate of inflation. The Federal Reserve Bank has already said that they would be willing to allow inflation to rise to something above their long-stated ceiling of 2 percent. I expect that 2 percent rate should be achieved sometime in the next few months if economic growth is close to the forecast. Unfortunately, it will take job growth much longer to recover. Full employment could take years to accomplish.
 
None of these economic forecasts consider the possibility of an infrastructure program later on this year. The numbers talked about today are about equal to the amount of the $1.9 trillion relief package. Estimates that, at the minimum, such a program could mean another $2 trillion or more would surely boost the economy further into next year.
 
But, unlike the Democrat-sponsored and passed American Relief Bill, a meaningful infrastructure effort would require a bi-partisan effort. Politics has been the death knell in just about every past attempt at fixing the nation's roads, bridges and airports. Given the present state of uncertainty and division within and between both parties, the chances of that happening are neutral at best. But for the nation's sake, we can always hope.
 

Bill Schmick is the founding partner of Onota Partners, Inc., in the Berkshires. His forecasts and opinions are purely his own and do not necessarily represent the views of Onota Partners Inc. (OPI). None of his commentary is or should be considered investment advice. Direct your inquiries to Bill at 1-413-347-2401 or email him at bill@schmicksretiredinvestor.com.

Anyone seeking individualized investment advice should contact a qualified investment adviser. None of the information presented in this article is intended to be and should not be construed as an endorsement of OPI, Inc. or a solicitation to become a client of OPI. The reader should not assume that any strategies or specific investments discussed are employed, bought, sold, or held by OPI. Investments in securities are not insured, protected, or guaranteed and may result in loss of income and/or principal. This communication may include opinions and forward-looking statements, and we can give no assurance that such beliefs and expectations will prove to be correct. Investments in securities are not insured, protected, or guaranteed and may result in loss of income and/or principal. This communication may include opinions and forward-looking statements, and we can give no assurance that such beliefs and expectations will prove to be correct.

 

     
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