Thursday, October 11, 2012
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“You can never plan the future by the past.”
– Edmund Burke, 18th century statesman
During the last century, oil was at the heart of the global economy, and oil prices oftentimes still lead the financial news.
Just last week, $5-a-gallon gasoline prices in California affected markets and the presidential race.
But in the 21st century, the price and supply of another scarce commodity will dominate the headlines. A commodity even more important than oil and at the heart of everything we do, from growing food to manufacturing.
While we take an inexpensive and steady supply of water as a birthright, in many countries, this is anything but the case…
Take Jakarta, Indonesia, for example. More than 40% of its residents do not have running water. In many countries, the situation is even worse, with 10% of all diseases carried by impure water.
Water also plays a key role in geopolitics. One example is Tibet. The Qinghai-Tibet Plateau is the source of some 20 major rivers, and Tibet’s glaciers and lakes hold some 400 billion cubic meters of fresh water. Waters originating in Tibet supply around 30% of China’s fresh water.
So after returning to America after three years in Asia, I decided to get involved with a couple of entrepreneurial water companies. One used wave action off Galveston, Texas to create energy to pump fresh water to farming communities. The other was a deep-drilling technology company looking to find water locked in deep pockets of the Earth’s crust in the Middle East.
Alas, neither of these gambits worked out, but my interest in investing in water has remained strong. The fundamentals seem unassailable.
- ✓ World per capita water consumption is accelerating – up six-fold in the last century, with no end in sight.
- ✓ The World Bank estimates that global water demand is doubling every 20 years.
- ✓ World population is growing at a rate of 200,000 per day and expected to reach nine billion by 2030.
- ✓ Only 2% of the world’s water supply is fresh water, and rivers and lakes are draining fast.
- ✓ Agricultural demand for water is skyrocketing.
- ✓ 95% of the world’s cities still dump raw sewage into their waters.
- ✓ Underground water levels are plummeting.
This is why Texas billionaire T. Boone Pickens has already become the largest individual water owner in America, with rights to an underground aquifer supplying 27% of all irrigation in the United States.
With this doomsday scenario and T. Boone leading the way, one would think that investing in water would be a no-brainer.
Not so fast.
First, if you think oil is political, water is five times more so. Governments heavily subsidize water prices and like to keep tight control over water supplies.
Second, most water investment opportunities are boring, low-growth utilities and water treatment plants.
This means your water investment strategy must look first to higher-growth emerging markets and, secondly, to breakthrough, game-changing water technologies.
In today’s edition of Investment U Plus, I’m recommending a company that I’ve been tracking in South America. It’s up 68.3% so far this year, beating the Emerging Market Index by a 12 to 1 margin. Better yet, it pays a 3.4% dividend yield.
I’ll also keep you posted in the coming weeks of any new developments.
In the meantime, can you imagine $5-a-gallon prices for water?
Good Investing,
Carl
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