DECEMBER 2016, VOLUME 8 | Issue 12

The world doesn’t have enough water.

That’s just a fact. Though water covers about 70% of the globe, only 2.5% of that is fresh water — the sort we need to survive.

And of that 2.5%, only 1% is accessible. The rest is trapped in glaciers, snowfields or far below the surface of the Earth.

No wonder 1.8 billion people live with water scarcity. That’s almost one-third of the entire world’s population.

No wonder around 800 million don’t have access to enough food — which is closely tied to water.

No wonder there have been 195 conflicts over water since 2000.

But in America, we’ve never been able to invest in water.

Of course, we could invest in water infrastructure — as we’ve done before in the Unconventional Wealth Portfolio.

Or we could invest in new water technology — as we’ve also done.

But you can’t invest directly in water as a resource. It’s protected and politically explosive. It’s a nonstarter.

Until today.

That’s because I’ve found a very unconventional way to invest in water directly. It’s not obvious. It’s not easily recognizable even, unless you understand the mechanics behind this trade.

Luckily, we do. And by bypassing all the common obstacles that are thrown up in front of water investing, we’re in an amazing position to make a truckload of money in a way that Wall Street hasn’t figured out yet.

How much money?

Well, this investment has gone up 12% a year for 20 years — beating the S&P 500.

This investment is one of only three that made money in 2008, when the entire financial world was crumbling.

Invest in the Most Important Resource in the World With “Water Certificates”

Profits Over Popularity

INSIDE THIS ISSUE

Water Is More Important Than Ever

We Need Water More Than Ever

No Easy Answer for Drought-Stricken Regions

Listen to the Smartest Man in the Room

Your Groceries Are One Giant Bag of Water

Farming Without Being a Farmer

How to Invest in Water

The Farmland Partners REIT (NYSE:FPI)

Action to Take

Ryan ColeEditor

www.lfb.org

2 unconventional wealthwww.lfb.org

And this investment looks set to accelerate over the coming years, making past returns look paltry by comparison.

But before I tell you just what these “water certificates” are, let’s take a closer look at why they’re so important today.

Water Is More Important Than EverOn Dec. 17, 2010, a Tunisian street vendor named Mohamed Bouazizi set himself on fire in protest.

Ostensibly, this was about officials trying to confiscate the fruit he was selling. But really, this was about water. Food prices were skyrocketing because there just wasn’t enough water to grow the food that people needed to survive.

Tunisia, along with the rest of the Middle East, was soon engulfed in the Arab Spring. And though the Arab Spring fizzled, the fights in that region continue — and they all have their roots in water.

Iraq. Syria. Yemen. North Africa. All the conflict currently engulfing the region isn’t really about sectarian violence. Sectarian violence was sparked because there isn’t enough to go around — there isn’t enough water.

Indeed, just before the Egyptian regime was overthrown in 2011, generals were saying, “The only thing we really need to worry about is a revolution of the hungry. That would be the end of us.”

A week later, Hosni Mubarak’s government fell. Because his people were going hungry. Because there wasn’t enough water to grow crops in the region.

Since then, things have only gotten worse.

And if you think this is just a Middle East problem, think again. Here in the States — even after El Niño delivered much-needed relief — California and the entire West Coast are suffering catastrophic drought conditions.

Indeed — El Niño only relieved about 2% of the Califor-nia drought. Today, reservoirs and rivers are still in danger of running entirely dry.

The dry conditions have made the region a tinderbox, with massive forest fires becoming the norm.

And unsurprisingly, California’s drought has affected food supply and prices. Supply is down and prices are up.

All told, California is in its worst drought in 1,200 years. And there’s no relief in sight. Simply put, our climate has changed — and it appears that California’s rainfall patterns may never return to what they once were.

The story is the same around the world. Beijing is under threat of being swallowed by the Gobi Desert — with the Chinese capitol suffering sandstorms on a semiregular basis now.

South Africa is suffering its worst drought in 20 years.

North Korea — no stranger to famine — is suffering its worst drought in at least a century. Brazil is hurting worse than it has in 50 years. Even the lush nation of Costa Rica is parched.

The long and the short of it is this: Our weather has changed. It continues to change. And it couldn’t come at a worse moment.

Copyright 2016 by Laissez Faire Books LLC. All rights reserved. This newsletter may only be used pursu-ant to the subscription agreement, and any reproduction, copying or redistribution (electronic or otherwise, including on the World Wide Web), in whole or in part, is strictly prohibited without the express written permission of Laissez Faire Books LLC, 808 Saint Paul Street, Baltimore, MD 21202-2406.

The publisher forbids its writers or consultants from having a financial interest in securities recommended to readers. All other Laissez Faire Books LLC (and its affiliate companies’) employees and agents must wait 24 hours prior to following an initial recommendation published on the Internet, or 72 hours after a printed publication is mailed. The information contained herein has been obtained from sources believed to be reliable. The accuracy of this information cannot be guaranteed. Signed articles represent the opinions of the authors and not necessarily those of the editors. Neither the publisher nor the editor is a registered investment adviser. Readers should carefully review investment prospectuses and should consult investment counsel before investing.

Contact our Customer Care Center:1-877-453-1177 or 443-268-0474or e-mail ucwealth@lfb.org

Unconventional Wealth is published monthly for U.S. $129 per year by Laissez Faire Books LLC, 808 St. Paul Street, Baltimore, MD 21202-2406, www.lfb.org. Laissez Faire Club President: Addison Wiggin Club Director: Doug Hill; Editor: Ryan Cole; Managing Editor: Barbara Hauck; Graphic Design: Max Canner

Source: google.com/maps

3unconventional wealthwww.lfb.org

We Need Water More Than EverIt goes without saying that we need water to produce food. And it also goes without saying that with a growing world population, we need more food, not less.

But that’s just the beginning of the story.

As developing nations grow — especially China — they demand a protein-rich diet. That means more meat. And raising meat requires much more water than for the same number of calories from vegetables or grains like rice.

Fracking in the U.S. uses a huge amount of water — water that has never been factored into demand before.

All told, the average fracking well uses about 9.6 million gallons of water. And the majority of that water — 80% — can’t be used again but turns into waste.

By 2030, half of the world will be dealing with high water stress. And — unlike dealing with oil shortages — without water, you can’t survive.

You don’t need oil and a car to live. But you need water.

Taken all together, we’re looking at a future where water is more valuable than it’s ever been.

No Easy Answers for Drought-Stricken RegionsThe good news is America has plenty of water. The bad news is where that water comes from has shifted.

The West Coast is drying out, while the East Coast gets wetter. The Gulf of Mexico is regularly drenching the South, while the Great Plains have reason to worry about new dust bowls.

What makes this particularly thorny is how difficult it is to move water.

Never mind that we don’t have the infrastructure. Never mind the infrastructure we do have is aging and danger-ous (see: Michigan, Flint).

The bigger issue is water rights — which, in most cases, are owned by individuals but controlled by many, many rules and regulations.

That’s why all the states along the Mississippi or Colorado rivers are fighting over who gets how much. These are fights that turn into wars in other countries — they explain much of the conflict in the Middle East and many of the tensions between China and India.

Here in the U.S., they just turn into prolonged, costly legal battles. Trying to invest directly in water is a bureaucratic nightmare.

But there’s a much better way.

One that’s been ignored by Wall Street for a long time, even as it offered safe, steady 12% gains every year for the past two decades.

But it’s one that’s been spotted by one of the best minds seeing through Wall Street this generation.

Listen to the Smartest Man in the RoomYou may not know him well, but Michael Burry is famous in his own way.

He was an integral character in Michael Lewis’ book The Big Short. In the movie, he was played by Christian Bale.

And as you probably know, he nailed the housing crisis, making nearly a billion dollars predicting the demise of the mortgage market.

All told, his fund — Scion Capital — returned 489.33% from November 2000 to June 2008. Over the same period of time, the S&P gave a piddling 5.2% gain.

Source: Weather.com

4 unconventional wealthwww.lfb.org

This is a man who can spot a crisis — and the opportunity within.

And if you saw The Big Short, you may remember it ended with an interesting tidbit: “Michael Burry is focusing all his trading on one commodity: Water.”

It’s true. Burry sees the financial markets full of the same problems that plagued them in ’08.

Searching high and low for a safe, unconventional invest-ment, Burry found one that’s both safe and soon destined for huge gains.

Water.

Demand is going up — worldwide and in the States. Fracking — sure to be a growing industry again under Trump — is extremely water-intensive, as we’ve seen.

After all, the only way fracking works is to shoot huge fire hoses of water into the earth, breaking up the sponge-like ground beneath to extract trapped oil and gas. As a relatively new industry — especially at the scale we see today — it’s created an entirely new, huge source of demand.

Put it all together and controlling water is going to be more lucrative than it’s ever been.

But owning actual water rights is a headache you don’t want. Burry himself notes that water rights are full of liti-gation, politics, expensive infrastructure and headaches.

Not to mention, as water in some areas becomes scarcer, the legislative ground is likely to shift under our feet. Water is properly seen as a human right — and profits will eventually take a back seat to people when things get bad enough.

But there’s one way to invest in water that isn’t politically explosive or vulnerable.

One way that few people connect to water.

One way that’s been proven safe as a utility — for good reason — without all the strings attached to water.

Farmland.

Your Groceries Are One Giant Bag of WaterOf course, we all know that you need water to grow food. And you need water to grow feed for animals.

But few people realize just how much. Or how powerful that transitive property can be.

Think about this:

One grape — a single grape — takes 0.3 gallons of water to grow. Every bunch easily contains 10 gallons of water in it, from soil to plate.

One almond takes 1.1 gallons of water. Carrying a handful from one room to another while you munch is like lug-ging 20 gallons in your palm.

A walnut, on the other hand, takes nearly 5 gallons of water to grow! That’s simply astonishing. A large bag of walnuts might con-tain 1,000 gallons buried in it.

And guess what? The vast majority of the foods listed at right grow in the most drought-stricken part of the nation.

That’s awful news for food prices. But great news for owners of farmland that isn’t threatened by water scarcity.

Source: motherjones.com

Source: USDA

5unconventional wealthwww.lfb.org

Meat is even more water-intensive. Chicken comes out to 518 gallons of water per pound. Beef is an eye-popping 1,847 gallons per pound.

Even unexpected crops, like coffee, are extremely water-intensive. One gallon of coffee requires 1,056 gallons to produce.

In other words, if want to invest in water, invest in farming. It’s a politically protected water class, so you can sidestep all the litigation and regulatory wrangling.

And goodness knows the demand for food is never going down.

The problem is investing directly has always been hard.

Farming Without Being a FarmerBeing a farm owner — even today — is a great job.

Indeed — you’d be surprised just how many farmers are mil-lionaires, often making their first million in 10 years or less.

But there aren’t many of these jobs available. Sure, you can work directly in the fields for minimum wage (or less). But owning the fruits of that labor is where the money is.

And only 1% of Americans fit that bill — a number that’s

been dropping for over a century.

If you take a broader view, the number of farmers has actually been dropping for closer to a millennium.

Concentrating that entire industry in such a small number of hands is the biggest reason farming is so lucrative.

But most of us will never be farmers. Most of us wouldn’t want to be, frankly. I know I couldn’t cut the 4 a.m. wake-up every single morning of the year — because cows don’t know that it’s Christmas.

Yet we can still participate in farming just by owning farmland.

Farmland is one of the trustiest sources of wealth in the world. It’s returned 12% a year for the past 20 years, and hasn’t ever dipped for long, save during the Great Depression, when crops couldn’t be grown.

You’ll note that the above chart shows a big uptick in prices since 2000. That’s no mistake — farmland is be-coming more valuable as more areas succumb to drought and demand for food continues to steadily rise.

It all adds up to making farmland an unbelievable invest-ment — especially as a direct proxy for water.

Per

cent

Source: Max Roser

Share of the Labor Force Working in Agriculture

1300 1400 1500 1600 1700 1800 1900 2012

70

60

50

40

30

20

10

0

EnglandNetherlandsItalyFrancePoland

Per

cent

Source: USDA

Percent of American Workforce in Agriculture

1840 1860 1880 1900 1920 1940 1960 1980 2000

70

60

50

40

30

20

10

0

$/a

cre

Source: USDA/NASSU.S. Farm Real Estate Values

1950 1960 1970 1980 1990 2000 2010

260024002200200018001600140012001000800600400200

0

6 unconventional wealthwww.lfb.org

But owning farmland is tough. Or it always has been — until recently. But there’s an incredible breakthrough I’ll bring you in just a moment.

How to Invest in WaterAll right — let’s go over the various options available to turn water scarcity into profits.

1. You can own water infrastructure utilities. It’s estimated we’re facing an $84.4 billion gap in water infrastructure by 2020. President-elect Trump has pledged to devote a massive amount of money to infrastructure. If he holds true to that promise, we’ll see a huge influx of cash to water infrastructure projects.

But infrastructure investing is tricky. There’s a huge amount of bureaucracy to wade through. The process for awarding contracts is opaque and often subject to nonmarket forces (like a kickback or two).

That makes picking a winner difficult. And even if you correctly nail it, the gains will be modest inside the huge companies up for these contracts.

Water infrastructure is a safe play. But it doesn’t have much promise for big gains, and it certainly isn’t un-conventional. Pass.

2. You can buy water rights outright. Water rights are exactly what they sound like — they give you control over the water in a parcel of land.

But water rights, believe it or not, are risky. The only way to make money is to sell your water rights to a business that wants to use them (or another investor).

In other words, water rights are something like a pyra-mid scheme, where you only make money by finding the greater fool.

For retail investors, that greater fool often is you.

What’s more, water rights are highly elastic. Farms can buy water rights for as little as $50 an acre-foot, while fracking companies can pay north of $3,000 an acre-foot.

All that means is unless you know ahead of time exactly who is interested in your water, you’re taking a huge risk paying going rates.

Furthermore, to really optimize your water rights, you need some of that water infrastructure running through you.

If it’s in place, the prices will already be jacked up. And if it isn’t, you don’t want the headaches — not the mention

the astronomical bills — that come with trying to get a pipeline from your water to somewhere else.

Pass again.

3. You can invest in future technologies. Like water desalination plants. I love this idea — so much so that we’ve already got plays in our portfolio covering this ground. No need to go back over them here.

4. You can invest directly in farmland. This is a surefire winner. The farmland itself carries all sorts of water rights, and its value is on a steep upward trajectory.

Plus, you can make money by selling your “water” in the form of food. So not only is your initial investment growing in the value of the land, but it’s throwing off “dividends” every harvest!

However, farming is complex, and hard. You can hire folks to do it for you or just rent the land out and let someone else do all the work — and keep most of the profits — but that sort of defeats the point.

Unless you’re ready to uproot your life and actually till the soil, owning farmland directly is more trouble than it’s worth. Yes, you can always let the ground lay fallow — but now you’re just sitting on your valuable water instead of putting it to good use.

5. You can invest in “water certificates.” Finally, we come to my favorite way to play the water markets. I call them “water certificates” because that’s basically what they are.

I’m talking about farmland REITs.

These are trusts that own lots of farmland and take care of all the associated logistics. They take care of all the business involved and pay out profits every quarter, as they’re required to do by law.

That means you get to take advantage of the gains in farmland prices and the growing importance of water.

$/a

cre

Source: USDA/NASSAverage U.S. Farm Real Estate Value

1970 1975 1980 1985 1990 1995 2000 2005 2010 2015

3,750

3,000

2,250

1,500

750

0

Nominal Value of Farm Real EstateInflation-Adjusted Value of Farm Real Estate

www.lfb.org 7unconventional wealth

And you also get to sell that water — in the form of food — and realize high dividends as long as you own the REIT.

This is the best possible way to invest in water. It’s exactly how Michael Burry is doing it. And it’s exactly what you should be doing.

It’s only very recently that farmland REITs were even invented. But already, there’s one trust that rises above the rest.

The Farmland Partners REIT (NYSE: FPI)Since coming online in 2014, Farmland Partners has been gobbling up real estate. And unlike the few others out there, it’s well diversified, with holdings in the South, the middle of the country and even a few productive areas in California.

FPI is all the light green in the map — that’s a lot of farmland.

But it’s also all the darker green in the map, because

Farmland Partners just bought out the American Farm-land Co. (NYSE: AFCO).

That’s a dominant position. And it’s one that will only grow more profitable as water — and, by extension, food — grows scarcer and scarcer.

The best part is there’s just about no way to lose. If all the droughts break and water becomes a problem for another day, FPI still owns a dominant amount of always-valuable farmland.

Farmland that is now paying out nearly 5% a year on its own.

But if the water problem continues to grow worse, the land that FPI owns is going to just keep gaining value.

We’ve got a REIT that’s assured of making you money quarterly like a utility… and is nearly assured to grow your principal like a growth stock as water resources become more valuable.

It’s hard to find investments that have both a high ceiling and a high floor. FPI is one such investment. Get in now, before Wall Street once again catches up to the wisdom of Michael Burry and this REIT’s price goes through the roof.

Buy Farmland Partners Inc. (NYSE: FPI) up to $12. Then forget about it and watch the profits roll in quarterly. Make sure you have a DRIP program set up — so you can invest your 5% dividend back into the REIT, exponentially growing your stake.

Action to Take

NOT FOR THE FAINT OF HEART: The Fastest Gains EVER?World-renowned trading strategist Michael Covel recently uncovered an anomaly

that affects less than 3% of stocks.

One that, in 100% of those cases, sends stocks straight on a vertical line.

In one trade we spotted during our back-testing, investors had the chance to book 454% in just five days.

Imagine investing $1,000 on Monday… and cashing out on Friday with $5,540.

If you’re looking for a way to grow your nest egg as fast as possible, we urge you to check this out immediately.

Source: FarmDocDailyFarmland REIT Holdings by County

AFCOLandFPILand & FPILand & AFCOUSDA Regions

8 unconventional wealthwww.lfb.org

COMPANY BUY DATE BUY PRICE RECENT PRICE GAINS

Farmland Partners Inc. (FPI) 11/17/16 NEW! NEW! NEW!Blueprint Medicines Corp. (BPMC) 8/18/16 $28.24 $35.15 24%

Qiagen (QGEN) 8/18/16 $27.33 $27.44 0%Illumina, Inc. (ILMN) 8/18/16 $164.34 $134.87 -18%

Spirit Airlines (SAVE) 6/16/16 $41.94 $53.31 27%Trimble Navigation (TRMB) 5/18/16 $23.63 $28.01 19%Mobileye (MBLY) 5/18/16 $36.47 $37.57 3%Delphi Automotive (DLPH) 5/18/16 $67.22 $66.54 -1%Daimler AG (DDAIY) 5/18/16 $64.40 $69.25 8%SPDR Barclays Capital High Yield Bond ETF (JNK)

4/21/16 $35.02 $35.72 2%

BWX Technologies (BWXT) 1/13/16 $30.73 $40.10 30%Uranium Participation Corp. (U) 1/13/16 $5.06 $3.69 -27%Bitcoin Investment Trust (GBTC) 11/9/15 $42.00 $106.50 154%Splunk (SPLK) 10/14/15 $55.44 $60.32 9%Nielsen Holdings (NLSN) 10/14/15 $46.89 $44.63 -5%Energy Transfer Partners (ETP) 9/10/15 $46.71 $37.64 -19%Lending Club (LC) 7/9/15 $14.37 $6.38 -56%Consolidated Water Co. (CWCO)* 6/8/15 $12.71 $11.40 -10%Syngenta AG (SYT)* 6/8/15 $86.83 $75.49 -13%California Water Service Group (CWT)* 6/8/15 $23.66 $34.45 46%Matrix Services (MTRX)* 6/8/15 $18.35 $20.15 10%Clean Harbors (CLH) * 6/8/15 $56.04 $49.23 -12%Generac Holdings (GNRC)* 6/8/15 $40.54 $40.98 1%Tesla (TSLA)* 6/8/15 $256.29 $183.93 -28%

Equity LifeStyle Properties Inc. (ELS) 5/15/15 $54.41 $68.26 25%

Verisign (VRSN) 1/12/15 $57.07 $79.69 40%Outfront Media (OUT) 12/8/14 $27.40 $22.60 -18%Herzfeld Caribbean Basin Fund (CUBA) 12/8/14 $7.12 $6.28 -12%Lifelock (LOCK) 11/10/14 $16.92 $20.42 21%NCI International (NCIT) 11/10/14 $10.82 $12.85 19%Whole Foods (WFM) 10/8/14 $37.80 $31.06 -18%NXP Semiconductors (NXPI) 6/16/14 $62.45 $97.83 57%Cheniere Energy (LNG) 1/17/14 $45.75 $37.09 -19%KBR Inc. (KBR) 1/17/14 $32.85 $15.81 -52%SolarCity (SCTY) 11/9/13 $50.18 $19.83 -60%International Flavors & Fragrances Inc (IFF)

10/14/13 $81.32 $120.83 49%

Senomyx (SNMX) 10/14/13 $3.43 $1.32 -62%Claymore S&P Global Water Index (CGW) 8/6/13 $24.97 $28.98 16%Dominion Diamond Corp (formerly, Harry Winston Diamond Corp.) (DDC)

07/16/12 $11.93 $8.58 -28%

Sothebys (BID) 10/15/12 $31.47 $37.24 18%

Unconventional Wealth Portfolio

Profits Over Popularity

Prices as of 11/17/16 * Included in the Unconventional Wealth Climate Portfolio