Investing In Water

A Profit Watch White Paper Report
By: Chris Mayer
First Published: August 2006

Investing in Water: There's a Clean Water Shortage

There is no shortage of water on this big orb of ours, but there is an acute shortage of CLEAN water... and the human toll is alarming.

Half of ALL hospital beds in the world are occupied by someone suffering from a water-related illness. In the developing nations, 80% of all diseases stem from consumption of and exposure to, unsafe water.

Contaminated water is deadlier than any other evil on earth; deadlier than AIDS; deadlier than cancer; deadlier than contagious diseases; deadlier even than World Wars. During the Second World War, one soldier died every 8 seconds. Today, one human being dies every 6 seconds from drinking contaminated water.

The scale of this ongoing international tragedy boggles the mind.

More than a third of the earth’s population lacks access to effective sanitation, which is why more than a billion people contract water-related diseases every year... and why contaminated water kills more than 6,000 children every day.

The UN estimates that in less than 25 years, if present water consumption trends continue, 5 billion people will be living in areas where it will be impossible — or nearly impossible — to meet basic water needs for sanitation, cooking and drinking. But present trends simply cannot continue. The human toll is already horrifying, and the economic toll is rising rapidly.

Although 70% of the world’s surface is covered by water, only 2.5% of it is potable, and most of that is trapped in the polar ice caps. According to the World Health Organization, less than 1% of the world’s freshwater, or 0.007% of all the water on Earth, is readily available for human consumption. Pollution and water-supply abuse are rapidly reducing these precious supplies.

The problem is; there’s no substitute for fresh water.

Investing in Water: It's More Precious Than Oil

“Water is the most basic and necessary commodity,” observes Summit Global Management, “and it is the only element in the world that has no substitute at any price. One can substitute wheat for oats, coal for natural gas, corn oil for soybean oil and hydro- electricity for fossil-fuel generated power, but... water has no substitute regardless of price, the only element in the world of which this is true: This most fundaments of facts is another key to the inexorable and intractable demand for water that will not abate with time.”

Without question, therefore, clean water is the earth’s most precious resource. But this essential truth has not prevented decades of water mismanagement. Throughout the world, clean water is underappreciated and woefully abused... except by the billions of people who struggle to find it each day... or die trying. Only 20% of the world’s population currently enjoys the benefits of running water. The other 80% have to find it whenever and wherever they can. In some parts of the world, people spend as much as six hours a day fetching water.

For most of the world, clean drinking water is a far more precious commodity than oil.

Investing In Water: Opportunities in China

There are few industrial countries in the world feeling that scarcity more acutely than China. Its water needs are more critical than its much ballyhooed power needs. I did not fully appreciate this until I visited China myself and talked to Chinese business people. Even Chinese officials — prone to covering up or understating the extent of problems — sound alarmist when it comes to water.

One official recently said China’s problem is "more serious and urgent than [in] any other country in the world." China’s rapid industrialization has outpaced its water infrastructure, which is on the verge of collapse. As Minister of Water Resources Wang Shucheng noted, "The price of China’s economic boom is being paid in water." Two-thirds of China’s 600 largest cities don’t have enough water; half of these cities have polluted groundwater.

India is no better off than China. The southern city of Chennai (once known as Madras) is a typical example. Technology companies are setting up shop there and money is flowing in from abroad. But this rapid growth hides an unresolved problem below the prosperous surface. As the Financial Times reports:

“Anyone who stands at the edge of Marina Beach and watches the stinking, black and lifeless water of the Cooum River befoul the blue-green sea at the river mouth can hardly fail to notice that Chennai has a problem with its water.”

Only a third of the city’s waste is treated. The rest flows into the rivers to the sea. Chennai is typical of Indian cities, and of cities in other emerging markets.

Finding a way to play the water crisis in China, India and around the world is going to be a key theme for investors in the years ahead. Find the stocks servicing the water crisis, and you could be on to a winner.

Chris Mayer
For Profit Watch

‘Blue Gold’: Making Money From Water - 20/11/2006

By Simon Munton Water shortages could lead to compulsory household metering for the ‘Blue Gold.’ We look at who is most likely to profit from this – meter manufacturers, producers of water-saving devices, and even water butts.

Platinum: The Next Big Commodity Play? - 22/11/2006

By Frank Hemsley Could platinum be the next big commodity play? There has been much speculation about the launch of a platinum-based exchange traded fund (ETF) amongst investors. They flocked to both gold and silver ETFs when they launched, so Platinum may be the same.

Investing In Water: A Far More Precious Commodity Than Oil

Investing in Water: There's a Clean Water Shortage

Investing in Water: It's More Precious Than Oil

Investing In Water: Opportunities in China