Investing In The Water Market

The Smart Profits Report: Issue #340
Tuesday, August 8, 2006

Investing In The Water Market: Turn Water Investments Into Profits From This Looming Global Crisis
By Jim Stanton
Advisory Panelist, Mt. Vernon Research

It’s now officially common knowledge… There is a looming “water crisis” both in the U.S. and around the world.

In the coming years as global demand for fresh water increases and more people begin investing in the water market, a sector of the markets that has been ignored for quite a while, water may become as valuable as oil. If you don’t believe me, just take a look at some of these sobering statistics:

Right now, nearly 40% of the world’s population does not have access to clean water or sanitation.
Within 50 years over half of the entire global population will be living with water shortages. In fact, water shortages currently affect 80 countries and will affect 4 billion people by 2050.
By 2025 there will be an additional 3 billion on the planet who will require 20% more water than is currently available.
The water level of the Dead Sea has fallen 66 feet in the past 100 years and is now losing about 3 feet each year.
At current consumption rates, New Delhi will run out of ground water by 2015.
Half the world’s rivers and lakes are so severely polluted that they would require treatment to provide drinkable water.
Two-thirds of China already faces water shortages.

The list goes on. And the bottom line is: There is absolutely no way to make more water.

What’s surprising is that you’ll find little of this information in the mainstream financial media. In fact, the “experts” at CNBC have only just got around to mentioning the story now - and even then, only dedicated a couple of very brief segments to it, totaling less than five minutes. But the problems are there for all to see.

Water: A Critical Commodity Basic to Our Survival

Here in the U.S., much of the talk about water shortages centers on the drought-prone states out west, such as Arizona, Nevada, New Mexico and California, as well as some of the fastest-growing states like Florida.

However, while that concerns weather and demographics, there is another chapter to the saga - one that potentially poses a much greater and enormously expensive threat. The crumbling water infrastructure itself.

For example, did you know that the water pipes that supply older cities such as New York, Washington, Chicago, and Los Angeles are 80-100 years old? Unsurprisingly, they’re beginning to fall apart and The American Society of Civil Engineers estimates that over the next 2 decades, it will take $1 trillion to repair or replace these worn out water pipes.

While that’s an enormous amount of money, you’d better believe that the industry will get whatever money it takes to accomplish the task. After all, there are very few things more important to basic human life than water - it’s a critical commodity that we can’t do without. And demand will never weaken.

This is an industry that could be the greatest investment of the 21st Century. And positioning yourself in companies that are fighting to solve the problems could be one of the greatest investments you could make.

Twin Killing: Global Warming and Population Growth

When mixed with an industry already under increasing supply pressures, global warming and rampant population growth are two more issues driving a plethora of water-related problems - from an overburdened and decaying infrastructure, to strict regulations, to poor quality, and even shortages. And while this obviously poses severe trouble, water companies and investors are poised to take major advantage of this situation.

The National Academy of Sciences said recently that the earth is now the hottest it’s been for 400 years, with the surface temperature of the earth having risen by 1 degree Fahrenheit over last 100 years. Not much in practical terms - but enough to wreak havoc on eco-systems, erode shorelines, dry aquifers, and cause massive water shortages all over the world.

Time magazine points out that, “Mount Kilimanjaro has lost 75% of its ice cap…” Moreover, it could completely lose ALL of its ice by 2020. With the world heating up, it triggers substantial changes in the world’s water resources.

On top of that, there are 6.1 billion people who need water each and every day just to survive.

Population Overload… Water Undersupply

In 1900, there were roughly 1.6 billion people on the planet. Today, there are 6.1 billion. By 2050, there could be as many as 9 billion people on earth. On a more micro level, since 1940, annual global population growth has risen 1.5% to 2%, while global water use increased by an average 2.5% to 3%. No wonder natural resource prices are rising at a blistering rate. More people simply means more demand for resources - like water. And more demand for water simply means that the already overused resource will become even scarcer in the years to come.

Already, the Population Institute says, “Globally, the demand for fresh water exceeds the supply by 17% already.” So it doesn’t bode well when the World Bank notes that global water demand is doubling every 21 years.

Therein lies the problem: The amount of water on the planet is set, but there are more and more people every day.

Global Demand = Escalating Water Prices

In India, for example, the country has drilled over 21 million wells that now pull over 200 cubic kilometers of water out of the earth - and it’s not enough. In China, 449 cities currently suffer water shortages - 110 of which have reached critical levels. According to Summit Global Management, “75% of China’s drinking water is considered unsuitable for drinking and cooking. In Pakistan, 75% of the country’s population does not have access to safe drinking water.

One fact is true: When you have a scarce natural resource that the world’s population is fighting for, the price is going to go up.

But these days, the main focus is on oil, electricity, and natural gas. You hear very little about similar supply and demand problems in the water industry, which is just as important, if not more so. Even less do you hear water investing mentioned as a viable investment, because much of the world’s water is state and government run - an often unappealing and unprofitable option.

However, there are other options for savvy investors seeking stable profits - options that include companies that provide water, improve the infrastructure, and supply essentials such as pumps, filters and desalination plants. And it’s these lucrative companies that could provide you with one of the best profit opportunities you’ll find.

Good Trading,

Jim Stanton

P.S. Xcelerated Profits Report readers recently read all about the significant problems affecting the U.S. water industry and the growing threat of serious shortages. They were also able to take advantage of a company working hard to battle the problems in the U.S. and abroad. This leading water company is rapidly growing its business in the U.S., along with making major inroads in China.

If you’d like to find out more about becoming an Xcelerated Profits Report subscriber and be in position to receive similar investment recommendations from our experts.

Today’s Smart Profits Cribsheet

Since 1994, one company has specifically targeted water and water rights in the thirsty American Southwest. It’s gobbled up land and water rights in this profit-packed region to such an extent that it now owns 1.3 million acres in Nevada, Colorado and Arizona. What’s more… it’s about to sell those rights for 1,285 times the original purchase price. That’s a 102,000% profit, and will immediately inject $408 million into its coffers. Another four major deals are already in the pipeline, so for full details, read the special “just released” report here.

Just when you thought things couldn’t get any worse… BP shuts down its main oil pipeline in Alaska “indefinitely,” due to “severe corrosion.” With America’s biggest oilfield (8% of U.S. production) out of action, oil prices are again headed skywards. What do you do? Check out Smart Profits #333, Options Strategies: The Perfect Options Strategies For A Seesaw Market.

Having trouble identifying trigger points for stocks and options you’d like to buy? Don’t know the best time to buy an investment? Educate yourself on breakout trading and protect yourself from frustrating early losses by following my “Gap Rule” for trading in Smart Profits #314, Breakout Trading: The “Stanton Gap Rule” For Next-Day Profits.

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