The Rude Awakening
Laguna Beach, California
Monday, July 31, 2006

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• A brief "to-do" list to take to the bank,
  
  
• Bill Bonner wraps up the Wealth Symposium - There's
  no "doom and gloom" in a little decaying,
  
  
• Grab yourself some Blue Gold, the entire conference
  on CD, market data galore and more...

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Eric Fry, reporting from the Southern California
shoreline...

Late last week, your editor found his passport, after which
he promptly hopped a plane to Vancouver to catch what
remained of the Agora Wealth Symposium. Although he had
missed most of the five day event, he managed to catch a
few very interesting presentations, not the least of which
was the closing address by Bill Bonner, the founder of
Agora and dispenser of your editor's paycheck.

"Tout casse...tout passe," Bonner declared to the
attendees. "Everything breaks, everything passes along.
That's just the way the world works."

Bonner offered this bit of dispiriting wisdom in response
to the charge that he is a doom-and-gloomer.

"I am not a doom-and-gloomer," he insisted emphatically. "I
don't know where this idea comes from. Just because the
U.S. dollar is doomed...and the U.S. housing market is
doomed...and the U.S. government is doomed...and life as we
know it is doomed...That doesn't mean I've got a gloomy
view of life," Bonner joked to boisterous laughter. "I just
accept all this as the natural order of things. We're all
gonna die some day. But that's okay. Birth, death and
renewal. That's the way the entire universe works. I accept
it.

"Empires also go through a life-and-death cycle. They
emerge; they prosper for a while; then they begin to decay;
and eventually they crumble...The American Empire is in
decay. But that may not be so bad. Things can decay for a
very long time. In fact, some things improve as they age:
wine, cheese, maple leaves...even women. All these facets
of life benefit from a hint of decay," he suggested.

"The Roman Empire enjoyed its finest years well after its
prime. Perhaps America's will enjoy a similar experience."

At this point, Bonner seemed to be nearing a decisive
conclusion like, "So here's what you should do about all
this..."

Instead, he merely stopped himself, smiled, and said, "So
there you have it. Good luck."

The audience chuckled and broke into a very warm applause.
Even though Bonner did not suggest any specific investment
response to the decaying of the American Empire, the
symposium attendees did not lack for investment ideas from
the rest of the presenters. Chris Mayer, for example,
suggested ways to capitalize upon the literal, physical
decay of the American Empire –  specifically, how to invest
in the coming renovation of our country's vast network of
aging roads, bridges and water pipes.

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----------------------------

...Found in Vancouver
By Eric J. Fry

Chris Mayer is not so sure that the entire American Empire
is in decay, but he is very sure that the empire's physical
infrastructure is breaking down. Therein lies an investment
opportunity.

"America's infrastructure is crumbling," Chris observed.
"The companies that will repair this infrastructure will
make a lot of money over the next few years. So I've been
spending quite a bit of time trying to identify the likely
beneficiaries. My research process begins with a top-down
view and tries to 'connect the dots' until I arrive at
specific companies."

To illustrate his process, Mayer dissected the costs of
repairing America's aging water and sewage systems over the
next 20 years. "The American Society of Civil Engineers
reports that American will spend nearly $1 trillion in
critical drinking water and wastewater investments over the
next two decades," Mayer observed.

"So the next thing I wanted to know was, 'Where's that
spending going to occur?' The Environmental Protection
Agency provides part of the answer: The biggest part of
'Future Drinking Water Infrastructure Expenditure' will
occur in the area of 'Transmission and Distribution.' In
other words, 'pipes.'"

"According to the EPA," Mayer reported, "One quarter of the
nation's water pipes are in very poor shape and need to be
replaced. By 2020, almost half the pipes in the country
will require replacement or major repairs.

"So naturally," Mayer continued, "I wanted to figure out
who would be supplying all these pipes. After doing a
little digging, I found a company called Northwest Pipe,
which controls nearly three times the U.S. market share of
its largest competitor. Northwest controls 44% of the U.S.
market for water pipes. And that's just the beginning of
the story.

"Northwest's earnings are already growing nicely," Mayer
continued, "But growth will likely accelerate over the next
few years. Even so, the stock is trading for less than 10
times it's estimated earnings for 2007. So you're not
paying a very high price to participate in a powerful long-
term trend."

Mayer also put in a kind word for SJW Corp. (NYSE:SJW), the
water utility stock he profiled in the July 13th issue of
the Rude Awakening.

"SJW is the water utility that services San Jose,
California," Mayer explained to the Symposium attendees.
"But it is also a significant landowner. And most of the
land that it owns it purchased at 19th century prices."

The company owns 7,000 acres of watershed in the Santa Cruz
Mountains, which includes about 1,000 acres of timberland.
Obviously, no one knows the precise value of these lands,
but they are certainly worth something more than nothing.
Nevertheless, nothing seems to be the approximate value
that SJW's lands receive in the stock market.

"Despite its significant land holdings," Mayer noted, "SJW
carries a lower stock market valuation than most of its
peers. SJW is selling for about 20 times earnings, while
stocks like Aqua America (NYSE: WTR) and California Water
(NYSE: CWT) sell for more than 25 times earnings.

"SJW's low valuation is all the more surprising," Mayer
remarked, "when you consider that one single land sale of
5.5 acres in 2005 brought in $25 million, which was more
money than the company's utility operations earned that
year."

The company does not intend to conduct very many outright
land sales, Mayer explained, because it would incur very
high taxes in doping so. Instead, SJW looks for
opportunities to conduct tax-free exchanges into income-
producing properties.

"I like this approach," Mayer concluded. "And I like this
stock. So let me suggest the following brief 'To Do' list:

1) Buy Northwest Pipe up to $30.
2) Buy SJW Corp. up to $28.
3) Read Capital & Crisis.

"Thanks for coming. I hope to see you all here in Vancouver
again next year."

[Joel's Note: One thing about Chris is that you can always
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calls, "Special Situations." Find out more about this
explosive approach to investing right here:

Mayer's Special Situations:
http://www.isecureonline.com/Reports/MSS/EMSSG712

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----------------------------

And the Markets...