Opportunities in the Real Crisis: Water 25 comments
-
Font Size:
-
Print
- TweetThis
We’ve got a water problem.
The amount of water on this planet hasn’t really changed in the last million years. However, today there are over six billion humans drinking and bathing in the stuff. And while the world’s population has doubled in the last 60 years, water consumption has more than tripled over the same time period.
And supplies are starting to get tight.
Less than 2% of the world’s water supplies is fresh. Even less is easily accessible. According to the Financial Times, about a quarter of the world’s population already lives in an area of physical water shortage— a place where water simply doesn’t exist in abundance. An additional billion people live in areas of economic water shortage— areas where water exists but there is not the necessary infrastructure to extract and distribute it.
This issue affects the whole world, not just developing countries.
At Goldman Sach’s “Top Five Risks” conference earlier in June, the investment bank announced that water was the “petroleum for the next century.” According to the presentations at the conference, the US alone needs to invest over $1 trillion in new piping and waste water plants in the next 12 years alone.
Legal skirmishes over water rights are already showing up in the headlines. However, currently they are more about making money than survival.
BusinessWeek recently ran a cover story on billionaire T. Boone Pickens’ efforts to acquire water rights from Texas landowners in order to transport the stuff to Dallas and other thirsty, fast-growing Texas cities. Similar issues are showing up in Egypt where the government has threatened military attack against any country that draws water from the Nile without a contract.
However, the area where water shortages are most acute is China.
China comprises 21% of the world’s population, but controls only 7% its water supply. And its rapidly expanding population is requiring larger and larger food supplies as consumers adopt a more western, protein heavy diet.
It takes 1.5 cubic meters of water to produce 1 kg of corn. In contrast it takes six cubic meters to produce a 1 kg of poultry and 15 cubic meters to produce a 1 kg of beef. And Chinese meat consumption has doubled since 1985.
In simple terms, anyone who can produce safe, drinkable water is at the beginning a multi-decade long bull market in the commodity.
There are a number of ways to play this trend. The largest water company on the planet is GE (GE), though water only accounts for 2% of its revenues. Other market leaders include Veolia (VE), Suez (SZEZY.PK), Ferrovial (GRFRF.PK), Severn Trent (SVTRF.PK), RWE (RWEOY.PK), ITT (ITT), and Pentair (PNR).
Goldman Sachs suggests a basket of smaller plays that could potentially be bought out by the big boys. These include Badger Meter (BMI), Calgon Carbon (CCC), Clarcor (CLC), Pall (PLL), Insituform (INSU), Tetra Tech (TTEK) and others. All of these are worth having a look at.
Related Articles
|
-
The Seeking Alpha 100
See allThe top 100 stock
market authors
selected for publication
Seeking Alpha 100 » -
Fastest Climbers
Authors with the largestSee all
increase in followers
in the last 7 days
Fastest Climbers » -
Top Commenters
Top commenters,See all
as ranked by their peers
Top Commenters » -
Top Instabloggers
The 100 most active
Instabloggers.-
1
TraderMark
-
2
Don Dion
-
3
Cliff Wachtel
-
4
Mike Havrilla
-
5
James Quinn
Top Instabloggers » -
1
-
Top StockTalkers
TopSee all
StockTalkers.
Top StockTalkers »
This article has 25 comments:
so be careful of any company privatizing water supplies. Bolivia showed us what happens when you take something that people consider a right and try to turn it into a commodity.
Better go with water treatment and efficiency technologies.
aside that,
well
invade brazil and takeover amazon river(largest in volume and size), the most abundant in potable water source in the world.
invade, invade, invade, isnt that what uncle bush has specialized into ? lame takeovers.
According to GS, air is the next crisis. CNBC recently reported that there is plenty of air, just not enough air that contains the molecule to safely transport people to China to build more teleporters.
18% of all Chinese workers live outside of the particulariam molecule as well and could not teleport necessary coal to power the teleporter.
The New York Times reports that Washington is concerned about the migrating pidgeon flock that makes it's home in NYC skyscapers and Senator CheatAlot claims "that the potential impact on markets and the environment must be carefully studied."
Republican President Ron Paul has visited the teleporter facility and claimed that this was the wave of the future for transportation but the Los Angeles Times claimed that the economy could not provide for the build-out of the technology citing estimates it would take 10 M years and would soak the productive business environment of California of necessary capatilization.
:)
However, if you look at the names the author mentions, they are not in that business. It does not hurt them for a government to steal a water source; whoever controls the water will still need systems to purify and deliver it. Mr. Summers's thesis is clear, even if he does not say it explicitly: water is a commodity, but it cannot be valued like one because of the difficulty in asserting ownership rights to it, its unlimited availability, and the thoroughness with which nature recycles it. Instead, one must make money in the continuous business of treating and delivering water. In many ways, this is much better than, say, mining copper: once a pound of copper is out of the ground and in pure form, the miners have made all the money they will ever make on that pound. It will now sit in a building somewhere for 100 years as a wire or pipe. But once a litre of water has been treated and delivered, it goes right through its consumer and back into the water purifier's intake.
The analogy with other commodities is not the oil companies, drillers, or miners, but rather the companies that recycle scrap metal and those who make the fuel filters used by the cranes in the scrap yards. To simplify it a bit further, the razor is free, these guys make the blades, and everyone has to shave every day starting the day he or she is born. I much prefer water plays servicing treatment and distribution infrastructure and manufacturing components and consumables over treatment plant owner/operators (those can be easily seized). And, unusually for me, I prefer US and Canadian companies in this space because people desperate for water will do pretty much anything. These countries have relatively plentiful and uncontested water resources, so private entities making water-essential equipment are not unusually likely to be nationalised, and the US military should be strong enough to make it cheaper for foreign governments to buy these products than to send soldiers here to steal them. That's about the best water investors can ask for when it comes to geopolitical risk.
You, too, i.
Same thing with air which will soon have a value. Those who use it (pollute it ) must pay.
Capitalism is failing because it can not recognize the ecologic truth.
He also said, "I've seen a heap of trouble in my life and most of it never came to pass."
I think he was right with the first statement-water is life, and there are so many more lives now on the planet to support-and so much more pollution rendering lots of the once-usable water toxic. I would say water purification equipment will be more and more in demand.
Much as I would like to believe access to water is a 'right', it is a limited resource and therefore will be treated as any other commodity. And that could easily mean 'water wars' .
Jason
On Aug 09 07:24 AM Serge Birbrair wrote:
> iThinkBig, thanks, I fell off the chair laughing and woke up! <br/>:)
Jason
On Aug 12 06:08 PM jakedeez wrote:
> The problem with treating water itself as a commodity is that water
> is a local commodity, it is very expensive to transport water...
On Aug 11 11:45 AM surfgrrl wrote:
> as Mark Twain said- "Whiskey is for drinking. Water is for fighting
> over."
>
> He also said, "I've seen a heap of trouble in my life and most of
> it never came to pass."
>
> I think he was right with the first statement-water is life, and
> there are so many more lives now on the planet to support-and so
> much more pollution rendering lots of the once-usable water toxic.
> I would say water purification equipment will be more and more in
> demand.
>
> Much as I would like to believe access to water is a 'right', it
> is a limited resource and therefore will be treated as any other
> commodity. And that could easily mean 'water wars' .
>
On Aug 09 02:32 AM jayminho wrote:
> there are several (ok, not several, but a couple of..) desalinization
> researches around the world
>
> aside that,
>
> well
> invade brazil and takeover amazon river(largest in volume and size),
> the most abundant in potable water source in the world.
>
> invade, invade, invade, isnt that what uncle bush has specialized
> into ? lame takeovers.