Friday, July 22, 2011

"Why water is energy, not an asset class"

Some smart commentary at Alphaville:
On Thursday, the highly esteemed Willem Buiter, chief economist at Citigroup, declared boldly in a research note that water would soon become the next big thing when it comes to commodity asset classes.
As he envisioned:
I see fleets of water tankers (single-hulled!) and storage facilities that will dwarf those we currently have for oil, natural gas and LNG. I see new canal systems dug for water transportation, similar in ambition and scale to those currently in progress in China, linking the Yangtze River in the South to the Yellow River in the arid north.
But Reuters’ resident commodities guru, John Kemp, remains unconvinced.
While he acknowledges that trading firms have long dreamed about global markets in water — a dream that Enron momentarilly tried to propel into reality by buying a water utility in south-west England — there’s a reason why that dream died quickly, along with Enron. (And possibly also why Tank Girl bombed at the cinema.)

The reason: it’s hard to make a convincing argument that H2O really is a global commodity, let alone a tradable and investable asset....MORE
If you are interested in more on the Crooked E, Rebecca Marks and the fantasy of trading water the way they gamed electrons the Guardian had a quick overview:
How Enron's great water adventure ended in tears
For more on Enron use the 'blog search' box, keyword Enron or take a look at enron