Investing in water
With most water delivery systems badly in need of repair or replacement, companies that supply the solutions figure to profit handsomely - making now a good time for investing in water stocks.
In the United States alone, estimates of water infrastructure needs run as high as $1 trillion.
Many of the pipes that carry water to U.S. residents are more than 60 years old, with some more than 100 years old. Water main breaks and sinkholes from leaking pipes are common in many U.S. cities.
Water infrastructure is in such bad shape that the nation's pipes leak 1.7 trillion gallons every year. The water lost in a single day is enough to supply the entire state of California.
Pressure to spend more money on the nation's water infrastructure is increasing. This week the National Association of Water Companies and U.S. Chamber of Commerce launched a campaign, "Water is Your Business," to draw more attention to the problem.
And the public is already on board.
In a recent survey taken by water infrastructure company Xylem Inc. (NYSE: XYL), 88% of those polled said the government should be investing in water infrastructure, and 65% said they would accept slightly higher monthly water bills to pay for it.
With the need reaching a critical stage and pressure to act building, U.S. government spending to repair water infrastructure is bound to increase very soon and very rapidly, a golden opportunity for water stocks.
But the opportunity extends beyond the United States. The World Water Council says that current annual infrastructure spending of about $80 billion will double just within the next several years.
And rising global demand for water, driven by population growth, adds even more urgency to the problem.
The United Nations estimates that fresh water withdrawals have increased threefold over the past 50 years, as demand rises by 16.9 trillion gallons every year.
"A billion people lack access to clean water," Bank of America Merrill Lynch wrote in a recent research note explaining why it likes water ETFs. "Water is undergoing pressure both on the supply and demand side."
In the years to come, as governments around the world start spending the hundreds of billions of dollars needed to address these problems, money will flood into water stocks.
Investing in Water Stocks: Profit from the New "Water Market"
Investing in water stocks is about to become one of the hottest trends in 2012.
That's because the days of easy access to cheap commodities are drawing rapidly to a close. In the coming years, the prices of commodities are going to skyrocket - thanks to exponential growth.
Exponential growth in the Earth's population - over seven billion people and counting - means that all of the planet's finite resources are going to have to stretch farther to feed and fuel even more people. Everything from oil and gas to corn, wheat, potash, rare earth metals, timber - everything - is going to be harder to come by, and more expensive to procure.
We're also seeing similar growth in the population of the world's middle class, which means a rise in demand for everything a middle class existence entails, including meat (which requires more feed and processing - which means oil - to bring to the table), smartphones, cars, flat screen televisions, and everything else that we in the West enjoy, and even take for granted.
Including clean water.
Population Growth Creates a New "Water Market"In places like China, India, and Latin America, where the burgeoning middle class is set to explode in the coming years, water use is already on the rise.
In the United States each person uses around 150 gallons of water per day, compared with around 20 gallons per day in emerging economies.
But global water usage is surging. What we take for granted in the West is in many cases just becoming the standard in many emerging markets around the world.
In fact, China and India already have the two largest water footprints (a broad measurement that aims to quantify global water use and consumption) of any country on the planet. And they're about to get even bigger as their consumption of commodities - water included - skyrockets.
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Investing in Water Stocks: Three Names to Buy Right Now (SBS), (PNR), (PIO)
You've no doubt heard about the building scarcity of water. It's the reason savvy shareholders have been busy investing in water stocks.
Water may be everywhere but only 3% of it is fresh or suitable for drinking. Two-thirds of that is locked in glaciers and polar icecaps, which means less than 1% of the world's fresh water is available for human use.
That's the water found in lakes, rivers, reservoirs, and underground sources shallow enough to be accessed cheaply. Even still, much of that is polluted or otherwise unsuitable for consumption.
The water that's left is then used in agriculture and industry, and here's the kicker: It is divided between seven billion people... and demand is increasing all the time.
According to the United Nations, in the last century water use has increased at more than twice the rate of population growth.
Water has become so critical that Willem Buiter, chief economist at Citigroup, believes it will soon become "the single most important physical-commodity based asset class, dwarfing oil, copper, agricultural commodities and precious metals."
That may be hard to imagine, considering we can simply turn on the tap and get fresh water for next to nothing.
But it's true. There are myriad of factors-from population growth to climate change-putting a strain on the world's water supply and causing demand to spike.
We'll look at those factors and how investors can benefit from this growing demand by investing in water stocks.
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Investing in Water: How to Profit From the World's Most Precious Commodity
2010 was the year of the commodity. Gold prices soared, copper hit record highs, oil again marched towards $100 a barrel, and many agricultural products doubled in value.
Yet hardly a word was spoken about the world's most precious commodity - water.
Indeed, few people in the developed world think of water as a commodity. After all, they can usually get all they want out of the tap in their kitchen or bathroom. And even fewer think about water's price - unless, of course, they're buying a bottle at their local convenience store, where it typically cost twice as much as gasoline.
But for the rest of the world - and even some areas in the United States and other developed nations - water represents a significant problem because of supply shortages, poor quality, or inadequate distribution and disposal systems. And, thanks to a mushrooming global population, the water problem is rapidly approaching crisis proportions.