Every once in a while, the media grabs hold of a topic we’ve long been covering. Surely you’ve caught glimpses of news stories covering peak oil or the need for rare earth metals in the mainstream of late.
These are huge investment themes. Ones we use to make a lot of money for our readers. But for some reason, they aren’t covered by the large networks with any consistency — perhaps because of the large, ugly truths they expose.
This week, one of the big three latched onto another of our investment themes…
A Water Crisis
I can say confidently that I’ve extensively covered the water industry in these pages. I know the problems we face.
So when I sat down to watch 60 Minutes on Sunday after my usual football routine, I was already familiar with the content of their report. In fact, I covered the same topic seven months ago.
60 Minutes focused specifically on California’s issues, though the same problems can be found on every populated continent.
Lesley Stahl introduced the piece like this:
Water is in short supply. You don’t have to go to Africa or the Middle East to see how much the planet is running dry. Just go to California, where, after three years of drought, dozens of towns and cities have imposed mandatory water rationing and a half-million acres in the country’s agricultural breadbasket are lying fallow.
During the interview, Gov. Schwarzenegger definitively says his state is in "crisis" with respect to water supply.
Now, forget the nuances of California’s problem for a second. Push aside the Delta Smelt, the bobbled policies, and the angry farmers.
What we have here — and around the globe — is a problem that requires serious solutions… and trillions of dollars of capital.
To solve his state’s problems, the Governator has floated a multi-billion-dollar plan. Legislation passed last month will put an $11 billion bond on next year’s ballot that would "pay for new dams to increase the state’s ability to store water."
But that only accounts for a quarter of the $40 billion project the governor wants; his full plan includes a new canal that would be larger than the project in Panama.
And the cost, it seems, is worth it… not just because all residents need water to survive, but because the state’s $36 billion per year agriculture industry depends on it, as well.
Huge Scale & Implications
What is often overlooked on the rare occasions that water makes it into the mainstream is the massive scale of these problems.
Yes, California is facing water shortages.
But so are 18 other states, according to the most recent U.S. Drought Monitor published by the University of Nebraska-Lincoln — including Minnesota, Wisconsin, and Michigan, which border the Great Lakes.
What’s a potential $40 billion times 18?
And that’s without considering other areas of the world most notoriously known for dry conditions, like Africa and the Middle East, as Stahl referred to in her opening.
Reports have cited a $40 billion desalination market just in the Middle East by 2025.
Pakistan has officially announced Vision 2025, a $33 billion plan that will develop its water resources.
In Africa, a recent study conducted by 24 countries forecast infrastructure needs in excess of $90 billion over the next decade.
What’s that, another $160 billion right there?
The scale is huge. Only the oil industry compares.
And water is even more vital than oil, which brings me to my last point about the water industry…
Only demand rises. Supply remains the same… and the potential market includes over 6 billion people.
No other market has these dynamics — not oil; not gas; not gold.
Capital is guaranteed to flow to this sector as the squeeze is put on populations and industries in developed countries. The Third World is already in this state, with millions still hauling water in buckets.
It’s why large corporations are slowly digging into the water industry. GE (NYSE: GE), Dow Chemical (NYSE: DOW), Siemens (NYSE: SI), United Technologies (NYSE: UTX)… They all have departments dedicated to water and are actively seeking contracts and projects around the globe.
But it’s the smaller water companies that will really pay off for investors. The environmental engineering firms. The company that makes specialized parts for desalination plants all over the globe.
The companies that will either be bought out by the GEs of the world, or whose revenue will absolutely soar as countries scramble to secure their water supplies.
I’ve already taken numerous profits in the water sector… and the crisis hasn’t even hit a crescendo.
You’ll continue to learn about new ways to profit from it here as it unfolds.
Call it like you see it,
Nick
