Water: The New Oil 61 comments
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It is clear our nation is reliant upon big foreign oil. More and more of our imports come from overseas.
- George W. Bush
When the well is dry, we learn the worth of water.
- Benjamin Franklin
You can own oil, but you can’t own water. You can invest in oil and the industrial complex that finds, produces, refines and distributes it. You can invest in the industrial complex that finds, produces, treats and distributes water, but you can’t invest in water itself. Oil and its byproducts are toxic to life whereas water is essential to all life. Perhaps therein lies the origins of the difference to investors. Fresh water is, for the most part, not owned by anyone but is (in most cases) managed and distributed for the public good. The price you pay for public water is essentially the cost to transport, manage, treat, and distribute it to the tap in your home.
You can’t – at least not yet – buy water on any exchange in the world. As water supplies get tighter across the world, this could change. Water is the new oil – a precious commodity, increasingly harder to find, manage and distribute; and that supply is often subject to the whims of Mother Nature. Control of available water is subject to the whims of government. In some parts of the country, the availability of water is restricting the building of housing.
Some regions in the U.S. are learning the hard way – the Southeast is entering its third year of drought conditions. Lake Lanier, Atlanta’s main source of water is over 13 feet below normal, despite recent rainfall. See embedded drought map of the U.S. below. The world drought map doesn’t look any better.
Like oil, water must be transported from where it is found to where it will be used. Pipelines are commonly constructed to bring the water to a central collection and treatment plant. Once at the central plant, the water must be tested and brought up to potable standards. Only then is the water released into the municipal distribution system. You may have seen news stories about large consumer products companies and their quest for water to fill the millions of plastic bottles they sell each year – a lot of this water comes out of the municipal tap. You may also have seen stories about the treatment of sewage to return it to the potable water supply – this is happening now in Southern California.
Investors can tap into the water pipeline at four main places: infrastructure, treatment of water entering the system, consumer products (bottled water) and treatment of water exiting the system (sewage treatment).
You can find stocks of companies involved in the various phases of water treatment and distribution but as readers know, I am a big believer in the diversification benefits afforded by ETFs. There are currently at least four ETFs concentrating on water – primarily transportation, delivery infrastructure and treatment.
- PowerShares Water Resources Portfolio (PHO)
U.S. focused (largest holding: Tetra Tech, Inc. (TTEK) - Powershares Global Water Resources Portfolio (PIO)
Global focused (largest holding: Tetra Tech, Inc. ) - Claymore S&P Global Water Index ETF (CGW)
Global focused (largest holding: Veolia Environment (VE)) - First Trust ISE Water Index Fund (FIW)
U.S. focused (largest holding: Millipore Corporation, ticker (MIL))
There is a lot of overlap between these ETFs – check their current holdings before investing.
Investors can play the consumer products angle with stock in Coca-Cola – distributor of Dasani (KO), Pepsi-Cola – distributor of Aquafina (PEP) or Nestle – distributor of Poland Spring (NSRGY.PK). U.S. Consumers are paying more for bottled water per gallon than they are for gasoline ($1 for a 16 ounce bottle equates to $8 per gallon).
Asset allocation: these investments are primarily in stocks of companies involved in the water industrial complex - these are not a commodity play on the price of water.
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This article has 61 comments:
DHR and HOO
On Feb 01 06:54 AM dcb wrote:
> HE REAL ISSUE IS ARE DIFFERENT ASSET CLASSES GOING TO START TO MOVE
> DIFFERENTLY, OR ARE THEY GOING TO CONTINUE TO MOVE TOGETHER WITH
> HIGH CORRELATIONS. IF THEY CONTiNUE TO MOVE TOGETHER IT DOESN'T REALLY
> MATTER WHAT YOU TRADE, BUT PIO HAS OUT PERFORMED THE CLAYMORE FUND
> OVER THE PAST THREE MONTHS
You have not shown any correlation between the availability of water and an increase in the value of water processing or bottled water stocks.
If anything less water to process, would mean less profit for water processors who are paid by the gallon. The first solution is always to conserve by not watering lawns, low flow toilets, shorter showers etc..
Bottled water has little effect on total water volume. Bottled water is more a luxury item, that could be hurt by the current recession.
I don't see water as the new oil in America yet.
BUT PIO HAS OUT PERFORMED THE CLAYMORE FUND OVER THE PAST THREE MONTHS"
PHO may have benefited from a stronger dollar, as more of its assets are linked to it. CGW holds over 65% of its portfolio internationally.
We are going to see the cost of water delivery rise in the future, especially in places like China, where companies out of Singapore, like Hyflux, are bringing it to market for 1.2 Billion people. There is a definite need for fresh water globally. Look what California is doing with sewage! Does anyone think it was an accident that China invaded Tibet? They have fresh water flows coming down from the mountains, which are going to be piped straight to the PRC.
By 2050, we will have 9 billion people on this planet. This is going to not only increase direct consumption of fresh water by humans, but the need for fresh water supplies for agricultural irrigation.
Water is going to be big. reeeeeaaal big! Some suggest wars may even be fought over it.
Mac
On Feb 01 10:03 AM Hmm?! wrote:
> Sorry, I am not sold on this one. You are basically talking about
> utilities. No different that power companies or waste management.
>
>
> You have not shown any correlation between the availability of water
> and an increase in the value of water processing or bottled water
> stocks.
>
> If anything less water to process, would mean less profit for water
> processors who are paid by the gallon. The first solution is always
> to conserve by not watering lawns, low flow toilets, shorter showers
> etc..
>
> Bottled water has little effect on total water volume. Bottled water
> is more a luxury item, that could be hurt by the current recession.
>
>
> I don't see water as the new oil in America yet.
finance.yahoo.com/q?s=...
biz.yahoo.com/prnews/0...
"Our advantage lies in having developed a prepackaged system for quick delivery and easy installation to purify water at relatively low capital and operating costs. The benefits are quite compelling," Houtz said. "These tests verify the steps the company is taking to provide a convenient and cost-effective system for clean and affordable drinking water."
This statement is incorrect, in many instances. In the Western US, water is owned ("water rights") by, in theory, the first user. Western (US) water law is extremely complicated.
To call water "public" is a confusing way of saying that water is owned by governments. In the US, these are sometimes special purpose government entities e.g., "water districts."
The author uses the term "fresh water" when a more precise term is "potable water," A lot of water is not salty, not "sea water," but also not "potable."
He starts out by saying: "You can own oil, but you can’t own water. You can invest in oil and the industrial complex that finds, produces, refines and distributes it. You can invest in the industrial complex that finds, produces, treats and distributes water, but you can’t invest in water itself." That statement is patently false.
There is a very active and viable market in water rights in the western U.S. and an even more organized and securitized physical water market in Australia. Very large sums of money trade every year in the physical water markets and this has gone on for many decades. Yes, you can buy water and the market is not controlled by the government. He clearly did no research before making these seriously misleading statements.
This article is replete with so many errors of fact and emphasis that it really doesn't deserve further comment. Suffice it to say that any experienced investor in the water arena, either in stocks and/or in physical water itself, would consider this author to be an uninformed and misleading charlatan.
We have water coming out of ears.
OK, we get the odd shortage, but that is basically because our infrastructure has been little updated since the Victorian era.
In developed countries, bottled water is Dramatically Unbelievable Marketing Brash.
2) Yes these seem to be more infrastructure plays. If you are interested in the utility aspect you could buy water utility bonds.
3) Paying for bottled water in a recession makes a hell of a lot less sense than when the economy is fine. The laws of the market don't exempt them. I would be very hesitant to buy these in this market. Also, if there is a drought, the cost for water bottlers may also rise accordingly and it is possible governments will cut off the few water rights they do have under emergency measures. So drought may not be in their best interest. Especially if the water rights they own also dry up.
This is not a safe investment by any means. Water piping companies that depend on expanded construction have probably already been hit. Just look at copper and copper pipe prices.
And yes, he is clearly talking about potable water. There is not much demand for salt water except proper purified saline water for eye drops. Is there an investment there? Boush and Lomb, but they already went private.
Around 90% of China's water is toxic. They are very busy in the area of water desalinization. They also are building a multi-thousand mile water pipeline from South to North for agricultural purposes (will take 20 years or more to complete) since the water tables in the north are now about 800 feet deep.
This is Jimmy Roger's major concern regarding future Chinese development, the lack of clean water for agriculture and drinking.
The infrastructure build to install new pipes will cost billions and years of manpower. The companies making these pipes will be winners.
That you know of, I able to buy Aussie publically traded firms.
www.prosefights.org/ab...
To keep new construction going, of course.
We all must conserve on water and energy in New Mexico .... so that new construction can continue.
The municipal water utilities are politically controlled and are guaranteed a certain return on assets by law (the utility is, not necessarily the utility investor). Existing capital will get no less than the legislated return, but also no more. If the utility needs to expand, it underwrites more capital.
Lastly, as many private land owners in the west are discovering, water rights extend only straight down. If someone buys land that shares an underground aquifer with you, you have zero legal control over how much water he can draw. About a year ago, ranchers in Nevada sued the municipality of Las Vegas. LV went and secured land (and water rights) that were downhill (geologically speaking) from the rancher's land and began drawing as much water as they could. The ranchers had been ranching on their land for generations -- long before the city of Las Vegas was even imagined. None the less, the grass their herds eat is brown and dry, and the wells their cattle drink from depleted.
The ranchers may not have had the best legal counsel, but the problem is more politicial. If thousands of city voters want water, and thousands of jobs (and state revenue) depend on that water -- legal water rights become rather fluid (pun intended). Water ownership rights don't have the legal protection that oil / natural gas fields do
As long as the rivers don't run dry they should be ok. They are also involved in domestic plumbing supplies so exposed to the housing downturn.
On Feb 02 08:04 AM paultaut wrote:
> Waterworld: any public companies inre "drip system".
>
> That you know of, I able to buy Aussie publically traded firms.
Planet can only support so many humans...so fresh water and food
will only get more expensive..fertile soil is another issue.
Soon we will be recycling waste water, very expensive desalinization,
pumping water from Canada to California. Heavily populated Southern areas
like Atlanta, South Florida, Phoenix, So Cal...major problems looming..
to many people for the natural water supply.
Question for me is: what is the proper way to invest...not sure I've heard
a slam dunk answer on the posts...not interested in Australia investments.
PS..posters are correct in saying bottled water is not the play in a depression
scenario...that is a luxury item.
Recently I made an investment in farm property in Eastern Oregon. This land requires irrigation in order to produce. The particular acreage has 1888 senior water rights for 150 million gallons per year.
I expect that at some point the water rights will be considerably more valuable than the land itself.
Is this true? Will there be a movement towards places where water is easier to access? Does anyone believe this and see a way to play it?
Here are a couple more:
"One has to create the itch to sell the scratch."
Lastly the following is a fill in the blank:
"A _____ is born every minute."
Water will be a great play one day but it's based on speculation at this point.
Does anyone know some big water filtration/infrastruct... companies in China exclusively?
But if people thirsty, what do you think people will be capable of?
If you think you can deny people's access to water based on "water rights" printed on some pieces of paper, think again.
The problem right now is not enough fresh water, but there is more than enough salt water. So if fresh water really gets tight, where would people look for solutions?
12/21/12-End of one 26k year zodiac revolution and start of another....Age of Aquarius. And the end of the Mayan calender to boot.
On Feb 01 02:26 PM MoneyMine wrote:
> Suez is one of the biggest water infrastructure companies in the
> world, if not the biggest. I own VE, as well as PICO, which are extremely
> attractively valued right now, and seem to have bottomed beginning
> the upswing.
>
> Is water the new oil? If not now, it will likely be so in the very
> near future due to rapidly increasing climate change. I don't buy
> the "Global Warming" arguements, which are supported by a lot of
> pseudo-science and failed political figures like Al Gore, with his
> inconvenient circumstance of explaining it a big conferences in the
> middle of ice storms. It seems like just a good excuse for a Global
> Cap-and-Trade Tax on carbon-based energy production and consumption,
> where Obama can play Robinhood, in his superhero role of saving the
> planet, taking from developed nations like the good ol' USA, to give
> to underdeveloped nations like Kenya in Kyoto styled per-capita pollution
> credit purchases.
>
> The real science is supports the fact that climate change is cyclical
> in nature. Although highly controversial, I have researched and believe
> that the current climate change that is ramping up quickly and affecting
> the entire planet is likely being affected by Planet X, or Nibiru
> as it was called by the ancient Sumerians, who also called it "Planet
> of the Crossing". Nibiru, massive brown dwarf star that has a retrograde
> 33 degree orbit around the Sun, which is being tracked by NASA and
> the secret SPT (South Pole Telescope in Antarctica).
>
> Also called Nemesis, Nibiru is accelerating as it nears the center
> of our solar system in its 3600 year eliptical orbit, and estimated
> to be closest to us in the year 2012. Incidentally or coincidentally,
> NASA has recently released warnings of Solar Super Storms that can
> wipe out all kinds of infrastructure, including the electrical grid
> and potable water delievery, as we approach the year 2012, when they
> conclude we will reach the Solar Maxim No mention by NASA however
> about our Sun's twin Nemesis rapidly approaching with an ETA of 2012.
> All of this can be Googled. Fox News has an article on NASA's recent
> warning. NASA specifically warns of possible imminent POTABLE WATER
> PROBLEMS... here's a link that still works at the time of this posting:
> www.foxnews.com/story/...
>
> Jeremiah in the Bible called it "The Destroyer" in his prophecy,
> which he claims will scorch the earth and cause all kinds of natural
> disasters, similar to some of the things Jesus himself warned of
> in Matthew 24. Governments know, and are preparing for it, but only
> leak information to their citizens slowly to prevent widespread panic.
> Jesus told his believers not to fear, but to look up as our redemption
> is drawing nearer.
>
> Will water soon be the new oil? Although oil is the lifeblood of
> all modern industrialized economies, geopolitical wars are being
> fought over the control of the flow of the $pOIL... Water is more
> essential to daily life!!
>
> A human being can live about 30 days without food & about 3 days
> without water... It's important to have an uninterrupted dependable
> supply of all of them, or plenty of storage. I believe that Atmospheric
> Water Generators will soon come into high demand, as they can make
> the purest water from thin air anywhere... but they need power to
> run. That can be supplied with solar panels if the electrical grid
> fails, particularly if we really have powerful solar storms coming...
> There are a lot of solar panel companies that make them. I like Open
> Energy Roofing Shingles and own the stock (seekingalpha.com/symbo...),
> which has surged recently.
>
> I strongly believe that commodities are extremely cheap right now,
> as well as the stocks associated with them. The coming Commodity
> Boom will make the so called "Commodity Bubble" of last summer look
> like a second long baby burp, as the surge overcorrected to the downside
> because of all the forced margin selling and hedge fund redemption
> selloffs. Demand for essential commodities will continue and grow,
> whereas companies that produce them have shut down operations or
> gone out of business. The currenty global financial crisis and flood
> of trillions of dollars in liquidity injections will soon create
> massive inflation, and possibly even the demise of the dollar as
> global investors run away from the perceived "safety" of a swell
> in paper debt instruments towards truly historic safe-havens of gold
> & silver, which have broken through key resistance levels with
> major momentum at the end of January 2009.
>
> Stock up NOW!! Be independently prepared, just in case, especially
> with the stockpiles of essentials for daily living, or the means
> to obtain essential commodities through alternative methods, at your
> home or local community level. Pray to see through all the official
> propaganda...
>
> Best Wishes & Happy Investing!!
There are already local water shortages now, and resolving them is hardly a lucrative business now. I can't see what would change that in the future.
Overall, even with the shortages—especially with the shortages, actually—we'll see frantic lobbying by those that don't have it, since they'd rather not pay market prices if they can get it through lobbying (rent-seeking, even if it isn't in truth economically efficient).
And in other countries, I don't see India or whatnot suddenly rolling over to market systems for water either. They already have shortages. And you can never ignore the political aspects. These developing countries are unhappy that western corporations (Coca-cola, etc.) are coming in for bottled water, and just water for their drinks. If anything, the "market," piecemeal as it is now, can be expected to disappear with tightening nationalistic priorities from various nations.
Finally, I don't see these water plays working out. Water becoming scarce does not necessitate building new giant pipelines and whatnot. It is conservation and production (desalinization) first. There are very few places that truly have huge excess reserves of water—the resource distribution is completely different from oil, and that is the critical factor that will keep it from being oil.
Those who are actually interested in water scarcity plays should look to the Northwest, where water is in abundance. If you believe that water will increase in value over time-- think British Columbia, Washington State, Oregon. These states/provinces use their abundant water to generate cheap power and irrigate, and their abundance stands in stark contrast to the giant to the South, California.
(Nephilim? Seems to me that I've seen a name similar to this somewhere else, like maybe a race of giants from Norse Mythology, ice giants? Or maybe Germanic Paganism? Ragnarok?)
A Chinese company mentioned in Barron's and portrayed occasionally on Bloomberg is Hyflux. Penny stock, Pink sheets, water desalinization, purification.
I own it but only down about 40% since I bought it. It has started to expand.
China is on a gigantic water project unheard of in the world, with implication for the world:
stockology.blogspot.co...
On Jan 31 11:05 PM Larry Bellehumeur wrote:
> PHO looks interesting, as it seems to cover many areas of the Water
> spectrum (iTron, its biggest holding, is a Water Metering company,
> while it has positions in Danaher for the Technology side, and Veolia
> for the Infrastructure side). Thanks for pointing it out....
>
>
Along those lines- agricultural use dwarfs municipal use. Nothing is more absurd during a drought than restaurants holding back on the glass of water unless it's requested. The amount of water sent down one irrigated row of crops would fill every water glass served in Phoenix for a year. Maybe growing cotton in the desert isn't such a good idea?
Let's live according to our surroundings, grow crops where the rain falls, and quit pretending we have the planet all for our own.
Then, either a main pipeline or several smaller ones can be built running west or south from those reservoirs. The water can then be piped to the Southern and Western drought states into their water/irrigation distribution systems that desperately need the water for their crops or even for drinking.
Most state governments are continually whining about balancing their state budgets. Now, here's a chance for them to all get together and cooperate in an endeavor that will make them as much money as Big Oil makes. I also don't doubt that the same water running though those pipes can also be harnessed to create green energy as it flows through the pipes.
Or, they can just continue letting these floodwaters cause untold billions of damages year after year and let the water continue to run into the Gulf of Mexico to turn into salt water.
Based on how the politicians and government leaders are currently running our country into the ground I doubt that they have the brains to make this happen. Besides, who would want to create a whole new industry, create thousands of new jobs and make billions upon billions of new dollars flow into the economy? I'm sure Canada will outsmart our stupid politicians and do it first. Then we'll be beholden to them for a foreign water supply.
The only way I see a visionary project like this ever happening is to throw out ALL the incumbents from government office first and start with fresh idea makers. Do you agree?
We cannot let water go to exchanges, it is too vital a commodity. You can't let something (which has no subsitute) that we need to live lend itself to speculators. It could be catastrophic.
Stick with other opportunities like the funds unless you have the capital to buy a spring or two.
Community Home complexes around Vegas had to stop building when they found they could not get enough water for them. Water tables across state lines became an issue. State Courts are still deciding the lawsuits.
There was even some litigation involving the Colorado River. State disputes over usage... not sure what the status is.
Last summer, the State of Georgia had a big drought problem that affected the cities as well as the farmers. Rivers and lakes were dry.
Water is an issue in the US, it just isn't a national issue.
Hadn't heard of it, looks like a triple bottom in Oct/Nov. 2008; hasn't looked back since.
Would like to see it move up to $28 before stalling a bit, maybe retracing 30% of the 100% move down to $24.
Diamond formations are darn hard to come by. This has the potential to be one.
Thank you for bringing it to my attention.
I thought it funny that I own both WTR and CWT and they are up during this market mess. When I say up, I mean up or down less than 10% during this time. Both pay a dividend which I reinvest into more shares. Not a word about them in this article.
On Feb 03 03:26 PM Marky61 wrote:
> Man, am I glad I live in Canada. More fresh water AND oil than we
> know what to do with. Now you know why we Canadians live in the best
> country in the world. Say, neighbor, what are you doing with that
> gun?!