We dove deep into inflation and factors like shadow banking disruption and the USA's "Debt Skyscraper." Is there anything we can do about it?Well, Water on Demand™ is the cavalry bringing a productive, asset-bearing investment that is pegged to inflation to the water space…This could be the most important investment development in Water today.
Transcript from recording
News Show Host: OriginClear is a company that focuses on wastewater treatment.
CEO OriginClear — Riggs: And hello everyone. Welcome to the Water is the New Gold CEO briefing.
Riggs: Our mission is to transform the water industry.
OriginClear Chief Engineer: Decentralization offers us this opportunity.
CEO Manhattan Street Capital: The plan that you've built here is super impressive.
Investor: The world is experiencing a crisis in regards to water. It's a great opportunity that you're giving us investors.
Riggs: Decentralization of water treatment means that we no longer need to establish giant water treatment plants.
OriginClear VP Development: Let them fight over the 20%. Let's work with the 80% that's untreated.
Investment Advisor: Over 21 thousand unique alternative investments.
Riggs: Three million jobs in the US alone.
Investor: Making it easy for the regular investor.
Riggs: All the old trends just accelerated.
Investor: It's lucrative and fulfilling.
OriginClear Chief Engineer: The vision I've got is to standardize these products. Design, Build, Own and Operate.
Riggs: We have 65 people in the room.
CEO AGM Agency: We've got an important message to give to the world.
CEO PhilanthroInvestors: We can put a guy on the moon but our water is horrible.
Pool Cleaning Technician: Recycling all that water, it's a huge impact for the environment.
COO OriginClear: Bringing new infrastructure in drives the growth in America.
Riggs: That's a critical part of the picture.
Progressive Water Engineer: It's a twin 125 gallon per minute RO (reverse osmosis) system.
Riggs: I don't think we're talking about a 10 Million dollar fund, we're talking about a series of 10 million dollar funds.
Overseas Partner: The opportunity itself is very big.
International Investor: You want to live? Take care of the water.
Investor: Not too many CEOs do a weekly briefing and are willing to talk to individual investors.
Welcome everyone to the CEO briefing, and we're excited to be here tonight and we're going to even enable the green screen so that you can actually see the back of my chair. I don't look like a ghost. This is good.
How's everyone? I'm so excited. This is the last briefing of the week. This is the last briefing of the year, and on the twenty seventh, I'm taking off to ski with friends, family. It's going to be wonderful, but I will be doing a briefing on the 6th of January while I'm still in Steamboat Springs because, well, you got to do briefings, right?
This one is especially interesting. We decided to do a deep dive on inflation because there's a lot of talk about it and we really need to start quantifying what's going on. What does it mean? And we've done some work to to back up, maybe give you more insight than you've been getting from the media and, you know, Telegram and Rumble and all these amazing sources.
Water Like an Oil Well
So Water is the New Gold, it is December 16th and it is proving to be an amazing asset that we are enabling direct investment in. And this is becoming the, it blows people's minds when people realize that there's no way for a regular investor to invest in a water equipment vehicle directly.
People go, "Really?" No! Water like an oil well, it doesn't happen. And so that's the sort of the cavalry you know, Water on Demand program is the cavalry bringing investment into the space at a time when it desperately needs it.
All right. So sure enough, this is the last briefing of Twenty Twenty One, and you can hear it in Spanish as well. So just click on the globe on your little dialog and you'll be off and running. It's a pleasure to have the Spanish speakers on board, and Heather does a wonderful job. We look forward to having her in the new year as well.
Forward Looking Statements
Ok. Safe Harbor Statement As you know, we do our very best to tell you how it is and if it changes or differs, we will tell you. We're always trying to tell you exactly how it is. I'd like to say that we are the most transparent public company in America, and I think that's true.
Ok, so inflation, where are we going? Really good question. So the first thing is that a friend of mine sent me some slides from a Moody's presentation on the 7th of December.
A Tangled Web
This slide is very, very interesting. And I'm going to blow it up in just one second. But just to tell you what the source was, Moody's Analytics their presentation, "A Tangled Web," December 7th. All right, let's take a closer look at this now.
This is a really interesting chart. So, it's interesting because, I saw an article about inflation being caused by climate change. I'm sorry, it's, climate change is real, but it's not causing inflation. And as you can tell, Moody's agrees with low likelihood and low economic severity of shock. It is simply what it is. That article that I read and did not put in this thing because I thought it was completely off the, you know, meaningless, was that we have not been paying all the environmental costs of our wasteful economic ways, and this is true. No question it's true, but it's not. This is a bill we haven't paid yet. We're spending in other ways. And the runaway spending that's driving us down the road.
Global Supply Chain
And so, let's take a look at some of these factors. So we look at the up to the right. So what's the number one danger here? Smaller fiscal packages passed. So the stock market sees, I personally think we should stop passing these two trillion dollar things, but the stock market sees that as a risk, right? So they want a lot of liquidity in the system. The Republicans are going to push against this "Build Back Better" thing. I don't, you know, I think that we're overspending, period. But, the point I'm making is that for the market, it's a risk also that global chain issues don't ease. Now the changes in red are either an increase in the odds or a new downside risk.
Shadow Banking Disruption
So the global change issues have been with us for a while. Now, they're still bad, the inventory cycle — bad. Shadow banking disruption, what does that mean? That means the things that happen that are like banks, you know, like, for example, you know, payday lending and things like that. So disruption of some of the things that are in the secondary banking environment. Sudden shift to fiscal austerity. Now this was just announced, but this slide was done back in December 7th. But just what was it yesterday or the day before the Fed announced that they were going to beef up interest rates?
I think that is complete insanity because it'll create stagflation, right? What we had with President Carter, and I'm old enough to have been in the workforce during President Carter, and what we had was because interest rates were very, very high. We had poor growth and we had inflation at the same time called stagflation. So sudden shift of fiscal austerity? I think they'll blink, I don't think it'll happen, but it has a very high economic severity.
Labor supply issues continue to be a big problem, and another pandemic would have a very, very high effect but likelihood? Low likelihood of seasonal waves of COVID 19. We seem to have adapted, you know, there's a lot of noise — blue states, red states and a lot of strong viewpoints either way. But from a market point of view, we really are at the, sort of absorbed it's been absorbed.
Oil Price Surge
European sovereign debt crisis, same thing. Oil prices surging...you know, they've surged, it's done. All right now, by the way, oil prices? You know, we're on Zoom right now, we're not suffering from oil prices. But on Saturday, my housekeeper is going to drive in from 20 miles away and it hurts her to have these high prices. So that's not good. I also think the Chinese debt crisis is is going to be more unsettling than this slide shows anyway. So that's just me being a bit of a geek about these things.
Could Cyprus Happen?
But you see, you can see this is fascinating and and a lot of factors weigh into this, but here is the most important one. The debt skyscraper, you've seen this slide. And so interestingly enough, it started in the 80s, right? U.S. national debt has basically it's a skyscraper, but it started literally around the time of Ronald Reagan and then all the way to 2000 took a little pause at the 2000 crash and then took off after that. And the article comes from an article that says, "Could Cyprus happen here?" You bet it can and will.
Cyprus is where basically the banking system fell apart and the the people owning bank accounts were their banks. The money was just taken from their accounts. I don't think it's very likely personally, but purchasing power, that's the interesting thing.
Let's take a look at purchasing power. Right here. So I just saw Tucker Carlson on Fox talk about a bottle of water. $8. Well, I think that's high, but nonetheless it is happening. But let's take a closer look at this chart.
So a dollar in twenty twenty. Is one twenty sixth of that dollar in nineteen thirteen. And these are the things that were bought at that time, so 50 cent Hershey's chocolate bars and so forth, it kind of gives you an idea of. Now you can buy a McDonald's coffee. I think in a a cup of Joe back in nineteen thirteen was probably, I don't know, 10 cents. No, maybe less. Maybe five cents.
So. Interestingly enough, I heard some time ago that the price of a haircut of a salon haircut in Paris has been the same since the French Revolution until now in in currency terms. Now again, it takes more, more francs and then eventually euros to pay for it. But in terms of purchasing power it's the same. But I think that we've broken apart where that hairdresser got paid the same in the French Revolution as in, you know, year 2000. I don't think that's true anymore, I think we have a we have a I think the wages are lagging and I think that's a big problem.
Greenspan Messed With It
Nonetheless, this is an interesting graph, but here's where we're really getting in trouble. The. The consumer price index, the CPI is false. It's just starting right there in the mid 1983 looks like, 1982. We decided to mess with the numbers, and the idea was... that was Greenspan. He's like, well, you know, if the price of steak goes too high, you'll buy ground beef. So therefore, we don't have to worry about the price of steak going too high. I'm sorry, steak is not ground beef. So basically he was saying you'll do just fine with ground beef, but I don't think that he stopped eating steaks. So this is a typical case of the elite deciding what's happening.
Can't Trust It
And of course, it shows inflation going down when if you take the 1980 thing and you didn't change it, it's gone up steadily. And so by 2017, it was at nine percent and supposedly we were at one point two six percent. "Inflation is under control, inflation is too low." And all this stuff, it was B.S., right? So that unfortunately has been the case. So it has tended to hide it. And the conclusion is, you cannot trust the CPI.
But well, let's stay with the shadow stats definition and take a look at, this is a bigger chart just so you can see, blown up a bit. So we were already at nine percent annual inflation in twenty seventeen, it's only got worse. So this is a really interesting chart. Very sobering. And you'll see where I'm going with this.
Actual Figures Suppressed
Now, actual inflation then, if we take, you know, that was up to 2017, let's take it to twenty twenty one. Now, as of November twenty twenty one, we're running 15 percent on the true inflation, whereas CPI claims a seven and a half percent, which is very high. I mean, it's freaking people out, but notice how it's basically been suppressed. It's been going up since the early nineties steadily, and now it's just take it off. Whereas the fake numbers have been going down, down, down and all of a sudden they took off. They could not be concealed any more.
Here it is large, and the shadow stats site, shadowstats.com is excellent for this stuff. And by the way, they're very responsive. If you go on their site and ask them questions, they they're happy to help you out. So this is, you know, a problem now. We thought, well, now why don't we extrapolate this number? See where we're going, right? Let's not drive backwards. Let's not look in the rearview mirror. Let's look forward.
So we went ahead and did it. Let's take a look. Oh, my God. So if we just go out five years. We are at if we take the original 1980s index, we have fifty six percent per year inflation. Even with the official index, we're still at thirty six percent in five years. So. That's well, you know, that's Argentina, right? Argentina has that kind of there's a number of countries where inflation is a complete disaster and we will be there. What does this mean? This is, you know, really shocking.
Any investment does not track with this level of inflation will lose money. So this is a scary stat. It's on our Facebook page if you want to grab it the OriginClear Facebook page. But, there some additional problems. Ok, so so people are freaked out and they know it and they're trying to make money. So of course, what happens? The stock market, right?
Inflation and Using Margin
And what's happening there's this is from the same Moody's presentation I used earlier. Margin accounts have taken off. Six hundred billion dollars worth of margin accounts. That means these are accounts where people are borrowing to bet on the stock market. Well, guess what? Stock market crashes all those people margin calls. I don't know if you've had a margin call is one of the most horrible things, I had my share of them in the year 2000, and it was not a fun experience.
So you don't want to have margin calls. Well, the entire system is stuck with margin calls, trying to keep up with inflation. Using margin means that, say you have 100 dollars in your brokerage account, and you could, depending on what kind of client you are, you could say borrow up to, I think you're allowed up to 50 percent more. So you could you could purchase a hundred and fifty dollars worth of stock. The problem is, of course, if it crashes, then you've got to pay off a bunch. So that is, I think, almost a crash of 1929 type look.
Ok, now also, they're talking about a wage-price spiral. Now this, as you can see, inflation taking off. Again, this is percentage of change from the previous year, and the waste tracker is steadily going up from 2012, 2010. That's great. For some reason, it went nuts in 2020 and then crashed and is coming back, it's got some weird gyrations there. It's trending upwards, right? But it's only, you know, going upwards at a rate of, you know, two point six percent.
It's accelerating change. Remember, this is a change from the year before, so it's an accelerating change. But so is the CPI, right? Each percentage of inflation as the previous percentage of inflation. So some effects on wages spiraling up, but not fast enough. So we're going to have a squeeze for wage earners. And that is going to be an ongoing problem paying, you know, eight — ten dollars a pound for a pound of ground beef, things like that — not going to be fun for any of us.
Staying Ahead of Inflation
Ok. So. But the good news is for us, of course, is that water rates are way ahead of inflation. They've historically stayed about three times ahead of inflation. So I think that is it's bad for users because having to pay a ton of money for your water is going to create a problem. We can't worry about residential customers. It's just not our space right now.
And it's, you know, remember that only 13 percent of total water use is residential. The bulk of it, the eighty seven percent is industrial, agricultural. Those users are going to be looking for ways to get their own water treatment and not have to pay more and recycle, for example, the minute if you're treating your own water, then you can recycle it and you get twice the amount of water for the same money.
Making it Work
All right, so we can provide a savings to customers on their per gallon fees and still make excellent returns for the investors. So that, you know, that's kind of what Solar City offered with its, you know, they would install the solar panel. You didn't have to pay for it and you would pay solar city as if they were the utility, the energy company. And they promised to charge less, a little bit less and they made money on the difference.
So similarly here, and this is happening in the water industry, people, companies, breweries, for example, are investing in a system because they're being charged way too much money for the wastewater. And if they're treating it themselves, they're able to recycle it. And in many cases, the local water district is just refusing to treat the water altogether. No, we won't do it. So these people are really being forced to do it and we can make it work.
Hedging Water Risks
Ok, now let's talk about water risk. If you're a corporate manager, you are very interested in water risk these days. And let's take a look at it.
40% More Water Needed
Well, of course, we know that the global population is growing and will require 40 percent more fresh water and. Interestingly enough. The global supply of accessible freshwater accounts for less than one percent of water supplies. I think what that means is we have a very slim reserve.
Related to Economics
All right now, in the view of this writer, the risks associated with water are very related to economics and hold back economic growth. There's these stories case studies of, for example, breweries that you know in the Bay Area and Northern California, et cetera, who were not being allowed to expand because the local water district just would not treat their water, and they had to truck it to another county and all that stuff.
Opportunity is Direct Investments
So eventually they did their own critical investments in water purification, reuse, efficiency, delivery infrastructure are required on a global scale and could provide overseas investors. However, as you saw last week, it's only one year's backlog that's being funded by this entire infrastructure bill out of a two trillion dollar bill. Whatever it is, it's only fifty five billion dollars for water, which is a scandal. So the opportunity for investors is not with the central water treatment because it's not being funded. It's actually with direct investments such as Water on Demand.
Will Affect Growth and Create Risks
Ok. These declines in water freshwater availability will affect growth and will create risks on all asset classes. We're seeing, for example, I saw a story yesterday where coal plants, coal power plants, are having to shut down because they cannot meet the water treatment requirement that has been set. And they can, but it's going to cost too much and coal is not priced high enough to make it work. So I mean, it's good for climate change and pollution, but it also means that it's, you know, it further constrains energy prices, for example. Ok. So. Semiconductors, for example, use a lot of water, right, and it has to be ultra pure. Ok?
Long Term Risks
Communities and companies must consider how to plan for mitigate. Companies that lack a full understanding of water risk lag in disclosing water risk or postpone adjustments to regulatory reforms, present long term risks for both the communities and investors and investment companies.
Waiting Too Long
You remember that that project in Troy, Alabama with the trailer park, the owners waited, waited, waited, waited and then they called us. And now they're trying to sell the trailer park, and they're very anxious that they're trying to meet at a certain point and the thing you know, these ponds have to mature and have to have to become pure without spending a million dollars. So basically if you're willing to spend money. Things happen fast. If you don't have the money, then things happen slow. And if you've waited too late, there you are stuck with, for time. So this is where adjustments to regulatory reforms, where regulation requires tighter requirements and you have not planned for it, you will be in trouble.
Inflation is Taking Off
So conclusions? First of all, inflation is taking off at an unheard of rate, so I think we we can say that much. And you saw in our graph there that it is going to go to ridiculous levels and people will be freaked out. Ok? Any investment not tied to inflation will lose out. For example, real estate is good, but if you're trying to live off of rents, how much can you raise those rents? There was a housing complex in Tampa here that that raised its rates 25 percent. There was a huge outcry, but even more to the point they're not going to do it a second time.
Tied to Inflation
They're not going to be twenty five percent next year and the year after that, you can only do it so much. And so and of course, the government gets involved and says you can't do it and so forth. So rents are going to have a hard time keeping up. And other investments that are not tied to inflation, such as consumer goods, could be in trouble. There's a margin squeeze. How much can you charge for something? It's going to be a problem.
Ok. Hidden risks. You know, oil is a great investment is doing well. Prices are high now. Until the pandemic, though, oil was on the way down, it was trending downward. And even now, the way the prices are being kept high is by limiting production. We're being told that the Middle East and Iran are having quote unquote trouble ramping up because they didn't spend enough on infrastructure during the low price years. But it's also a fact that the oil industry is perfectly happy to have not enough oil. They're like, Oh yeah, it's a big problem, not enough oil. I guess we're going to have to charge a lot. They're happy with it, but the people who are partners in those wells are going to get hurt.
It's like, you know, Starbucks doesn't own the buildings that they operate in. It's the buildings and the land are developed by a partnership. If a Starbucks goes in to a community and doesn't work out and they leave, guess who gets hurt? It's not Starbucks, it's the owners of that land and that property that has to now be repurposed.
So that's the danger really is the large, large corporate decisions being affected. Look at hotels, for example, right, where Marriott doesn't own hotels, they operate them so they can pull back. That's OK. But what about the landlord, the people who develop the real estate? These are the hidden risks of this new period.
Water — An Increasing Risk
Ok. Water is an increasing risk. Why? Because, you know, we went through the risks earlier, but there's more and more dirty water being created. This is the nature of population growth and industrial growth. It is essential. It won't go away. And water rates do exceed inflation by a factor of three, which is bad for people and good for us up to a point. And this is where we can perhaps ease the pain of the rates for business users. And still make very good money because inflation will still be huge.
Enabling Direct Investment
Enabling direct investment in water is not only good for Main Street investors, it is the first major step forward in water investment in decades. Think about it. There's the only way to invest in water has been to buy water bonds, municipal bonds for water, which were fine, nothing wrong with it and. You know, buy stock in big water companies or invest in an exchange traded fund, an ETF.
First Major Step Forward
That's it. It's all indirect and it's all kind of out of control. It's one of those passive things you put in your 401K and you forget it. But for putting things in your 401k and forgetting them is no longer what you must do. You must become an active investor. Now, offering to investors the ability to invest directly in water systems? It's a revolution, and that's why I say it's the first major step forward.
Like GM FInancial
And it is a financial pure play, right? Remember this? This chart, I ran this chart in the middle of 2020 when I was first talking about this model and we showed how GM, GM's Financial was running, this is the red line, was running way, way higher in terms of profit margin and also was pretty much going in opposite direction to GM itself. Gm started going downhill in 2017, long before, it was long after the crash of 2008, long before the pandemic.
They were going downhill, whereas the financing was going uphill. So that tells us that that's the business to be in. What business would you be in looking at this? I don't think you'd be in a negative percentile business, right?
So. What Water on Demand is, is, you know, obviously we'll give business to our Dallas operation and Dan Early up in Newcastle, Virginia will get business and so forth, but they'll get maxed out quickly. And then what do we do? We will go ahead and give contracts to water companies to build the systems and also to manage them, and we will be the financial managers. And that's truly scalable. Money is the most scalable product in the history of the universe.
So with that said, the time has come for Water on Demand. So we're rolling. It's incredibly popular. Ken Berenger is just going night and day. He has to, we had to tear him away. Many days he misses lunch altogether. He's on the phone constantly. People are fascinated. They're excited because this is an asset investment. The old days of OriginClear paying for its development, you know... Yes, it's still paying for its development, but specifically for this capital fund, which is not really a fund, it's more of a subsidiary.
It's 4 subsidiaries, Water on Demand number one, two, three, four. And each one of us has different focuses and partners, and those are being capitalized. And that money is there to be put into water systems, and that is so popular that frankly, Ken is finding people just coming out of the woodwork and getting involved.
$5 Million Club
So one of the reasons it's working so well is that are offering our private placement is it has it has different levels of conversion, which there's a higher level that kicks in at $5 million investment. Well, we decided to make it possible to break that down and to kind of package people up. And so give the $5 million rate to people investing anything they wanted as long as they're accredited, and that has been extremely popular.
Digital Bearer Bond
Now, before I go on, I want to mention about the $H2O™ coin, which we have not forgotten. I will be covering in the new year, but we have our developers working on the white paper for it, and it's fascinating. There's so many new elements to it. Oh my gosh, so you're going to love this thing. Stand by for some exciting things. Remember, the $H2O coin is a packaged digital bearer bond, meaning that it packages all the revenue streams for an investor.
But there's going to be some bells and whistles that'll be really, really interesting so that people can also invest in the coin, speculate on the coin, right? Now remember, this coin is for accredited investors only, so it permits investment in speculation, the way a non-security coin would not.
That other coin that we wish to not be a coin for accredited investors will happen, but we're getting this one done first. Why? Because it's tied to the big, big important initiative. The only issue that matters right now, which is Water on Demand.
Again, the sweet spot is this $5 million is a way that you can get in and please talk to Ken. He will be around.
And to simply book a call with him at oc.gold/Ken, or email or call him up at extension 201 at OriginClear or simply email us. I'm available as well. You can always reply to any one of my CEO updates and it'll come right into my inbox.
So we love you. We think you're the best and we want to wish you a happy new year and wishing you a winning year for us all.
And Linda, "Have a great time skiing." Thank you. We're going to Steamboat Springs and it turns out that it is snowing there. I will have, I'll have my WiFi set up and we'll do the briefing on the 6th. It's going to be fantastic and I'll have one of those raccoon type suntans, right? From skiing, that should be fun. Anyway, thank you all. I love doing these briefings. JRW says, "Blessing to all, Happy Holidays."
And remember to take care of yourself, stay warm. And I really appreciate everything you've done to support us throughout this year, so thank you very much. If you try to raise your hand, I don't do that. You're going to have to chat, you're going to have to type a little chat. So I'll give you a couple more seconds to do that. I'm talking to you, Ruthie from Texas. But nonetheless, thank you all. Have a great night, and I'll see you on the 6th of January.