#water

Get ready to buy Boral & ABC rather than watch a market swim in concrete shoes

Governments rarely have imagination during crises. Usually, it involves chucking uncosted cash around. How many projects have we seen run way over the promised budget? Submarines anyone? NBN?

Handing out $750 cheques to 6 million struggling Aussies in the hopes they’ll spend it is a bit of a wing and a prayer strategy. Maybe those struggling will just use it to pay down debts of previous consumption rather than ignite a new spending splurge.

At some stage, large-scale infrastructure spending will return to the headlines to stem the economic slowdown. Look at the state of national infra spending forecasts in the chart above.

Bridges to nowhere. Tunnels, highways, schools and hospitals. New projects to get people back to work. It happens pretty much every downturn. So why should we expect anything different?

A read of the latest infrastructure report states quite clearly there are 4 areas to address:

  1. Population growth has become a major point of contention in infrastructure debates. In our largest cities, ageing assets have been put under growing strain, with rising road congestion, crowding on public transport and growing demands on social infrastructure, such as health, education and green space.
  2. Energy affordability has also deteriorated over recent years. A steep rise in network costs has driven energy bills 35% higher over the past decade, and up by 56% per unit of electricity consumed in real terms.
  3. In telecommunications, the nbn rollout continues to face challenges. In the 4.8 million households in which it has activated, services have not met the expectations of many users.
  4. In the water sector, the past four years have seen mixed results. Many metropolitan utilities are increasing the sustainability and quality of their services through innovation, supporting the liveability of our cities. But many regional areas are suffering from growing water security fears as large parts of the country are in drought.  

Cement companies play straight at the heart of three of these four distinct areas. Roads, rail, hospitals, schools, dams and so on. In the energy space, whatever direction we take (solar, wind, coal, gas or nuke), cement, asphalt and aggregates will be required to achieve it.

Bellwether Boral (BLD) is perhaps best positioned to benefit as it makes railway ballast, asphalt, cement, concrete. Boral shares have yet to be kicked as hard as others. Boral hit a GFC low around the $1.64 mark. It stands at $3.00, 33% above that level.

BLDAX

50% of Boral’s Aussie revenue comes from NSW, the state with by far the healthiest balance sheet and the biggest infrastructure projects. 50% of revenue is Australian based with another 38% coming from the US which has huge infrastructure needs. 25% of group revenue comes from roads, highways, subdivisions and bridges. Good leverage.

Adelaide Brighton (ABC) has been bludgeoned in this market meltdown and $1.35 is the level it hit at the pits of the GFC in 2008. If it starts to sink below that level, it will start to look interesting again. If you look at the chart you can see it has slid from almost $7 in 2018 to its current price of $2.24.

Adelaide

A read through ABC’s last set of results points to the difficulties in the market for its cement and aggregates business. It has also embarked on a rationalisation program before all of this coronavirus hysteria.

We hold no positions in ABC or BLD as yet but will look to accumulate should the market continue its sell-off towards these 2008/9 lows.

The national government is out of options but to build out locally. They have already used the bushfires excuse to ditch the budget surplus plans so might as well push a bold infrastructure plan to save us all!  The best plan would be a high-speed rail project which addresses real long term needs of Australians.

10-15 flushes & the media is still floating

Pie chart of our water use

In 2018, Congress passed the WaterSense Bill which meant that the EPA would only attach WaterSense labels to products that are 20% more water-efficient and perform as well as or better than standard models. The legislation was passed because of long-standing issues with respect to water conservation. According to a 2014 Government Accountability Report, 40 out of 50 state water managers expect water shortages under average conditions in some portion of their states over the next decade.

Streamgages.png

Of interest on p.51 of that same GAO report was the admission that “State water managers and other experts we interviewed said maintaining the streamgage network is critical… …Specifically, 40 of 50 state water managers identified collecting data to determine the quantity of available surface water, a function that streamgages provide, as very or somewhat importantMoreover, many state water managers reported that increasing the number of streamgages to collect water quantity data would be a useful action federal agencies could take to assist states’ water management efforts. USGS works in partnership with more than 850 federal, state, tribal, and local agencies to operate and maintain the network of over 8,000 streamgages around the United States.

As the report documents in the chart above, 3,500 streamgages have been discontinued. Which begs the question, why aren’t legislators looking at getting better access to data with which to make more informed decisions?

What do you know? The GAO pointed to the following:

“In response to these data concerns, federal officials told us that insufficient funding is a primary barrier to expanding their data collection efforts. For example, an USGS official told us that the agency is committed to expanding data networks, but USGS’s ability to collect data at more locations, improve timeliness, and conduct additional analyses is severely hampered by funding constraints.

Wouldn’t it be better to bash Trump for demanding more budget cuts at the USGS (ignored by Congress by the way) instead of taking him to task for his style and manner in elucidating concerns over the efficacy of WaterSense legislation in practice?

Yet the mainstream media just couldn’t help but take everything out of context in order to mock Trump. His remarks about flushing toilets “10-15x instead of once” is now headline news. Not the president’s questions with respect to whether the newly labelled products are living up to the product claims. If the media wants to bash him, they only need to do a little digging to find plenty of factual ways of criticizing him instead of playing than man rather than the ball.

Thomas Sowell perhaps said it best with respect to government spending and efficacy,

Those who cry out that the government should ‘do something’ never even ask for data on what has actually happened when the government did something, compared to what actually happened when the government did nothing.”

Merkel trembles uncontrollably

German Chancellor Angela Merkel puts her shaking fit in Ukraine down to dehydration. Not sure if such a medical diagnosis would be made. Three cups of water with very strong medication would seem the more likely scenario. CM hopes she is alright. Undoubtedly under a lot of stress.

Justin Trudeau explains his plastics ban

Canadian PM Justin Trudeau put forward his case for cutting down on plastics with such eloquence. How could one not be sold?

Note CM has discussed the stupidity of plastic bag bans here.

A guide to gender-sensitive bombing

Apparently, the Royal Australian Air Force (RAAF) is being asked to consider “the role of gender” while bombing under ‘Gender in Air Operations‘ guidelines. It stems from the risk that should a sortie damage a bridge it might cause the local women to have to walk further to perform daily necessities such as gathering firewood or water supplies. Perhaps they should drop leaflets instead of bombs that tell the males on the ground to ditch their toxic masculinity and do their bit for equality!

Isn’t the point of having air superiority one that gives the home side a tactical advantage in warfare against an enemy sworn to kill? Are we funding our military to win wars or assist the enemy to gain tactical advantages against our own ground troops? What next? Shall we supply the enemy with surface-to-air missiles to even out the fight for the sake of battlefield equality?

Our military has lost the plot. Only last week, a ban was put out to stop the use of death symbols. Camouflage Helly Kitty here we come. Seriously though, if such patches make soldiers feel 10 foot tall then surely the morale-boosting benefits outweigh getting in step with the times. As General Patton once said, “The object of war is not to die for your country but to make the other bastard die for his.”