I bet you didn't know that water infrastructure plays have been one of the top performing stock sectors in 2016.
In fact, shares of this little known industry are up more than 25% since the February market bottom.
If you think that energy is scarce, it will pale in comparison to the next water crisis. So investment in fresh water infrastructure is going to be a great recurring long-term investment theme.
One theory about the endless wars in the Middle East since 1918 is that they have really been over water rights.
Although Earth is often referred to as the water planet, only 2.5% is fresh, and three quarters of that is locked up in ice at the North and South poles. Global warming is freeing up some of this, but not fast enough.
In places like China, with a quarter of the world's population, up to 90% of the fresh water is already polluted, some irretrievably so, with heavy metals.
About 18% of the world population lacks access to potable water, and demand is expected to rise by 40% in the next 20 years.
Aquifers in the US, which took nature millennia to create, are approaching exhaustion.
It has become so extreme in California, that subsidence has destroyed hundreds of buildings. The Golden States Central Valley is now about 10 feet lower than it was during the 19th century.
While membrane osmosis technologies exist to convert seawater into fresh, they use ten times more energy than current treatment processes, a real problem if you don't have any, and will easily double the end cost of water to consumers.
While it may take 16 pounds of grain to produce a pound of beef, it takes a staggering 2,416 gallons of water to do the same. Beef exports are really a way of shipping water abroad in concentrated form.
The UN says that $11 billion a year is needed for water infrastructure investment, and $15 billion of the 2008 US stimulus package was similarly spent.
It says a lot, that when I went to the University of California at Berkeley School of Engineering to research this piece, most of the experts in the field had already been retained by major hedge funds and were not allowed to talk!
At the top of the shopping list to participate here should be the Claymore S&P Global Water Index ETF (NYSEARCA:CGW). You can get it for a bargain now, as it has just fallen by more than 10% since the stock market meltdown began.
You can also visit the PowerShares Water Resource Portfolio (NASDAQ:PHO), the First Trust ISE Water Index Fund (NYSEARCA:FIW), or the individual stocks Veolia Environment (VE), Tetra-Tech (NASDAQ:TTEK), and Pentair (NYSE:PNR).
Who has the world's greatest per capita water resources? Siberia, which could become a major exporter of H2O to China in the decades to come.
There is a potential happy ending to this story. If solar energy cost improvements continue their Moore's law like descent, energy will effectively become free by the 2030's.
If you think this is pie-in-the-sky stuff, know this. On peak days alternatives are now accounting for 56% of California power grid, largely through solar.
That will dramatically drop the cost of desalination. Indeed, major efforts along these lines are already underway by utilities in the Middle East.
San Diego's Poseidon project only recently came on line, and is producing 50 million gallons of fresh water a day. The goal is for the Carlsbad facility to obtain 8% of the county's water from the ocean by 2020.
And the last time I checked, we had plenty of seawater.
The US is Still the Saudi Arabia of Fresh Water
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.