Invesco S&P Global Water Index ETF【CGW】株式ニュース

Water: Investing in the World's Most Precious Resource
by: Nick Hodge posted on: August 10, 2008

There is a giant bull market that hardly anyone knows about.

It has people grappling for a scarce resource. It has businesses fighting for rights to it. It has pitted neighbor against neighbor, and state against state.

And it might make you an absolute fortune.

Of course, being such a huge bull market, there are examples of it everywhere—in the headlines and news stories one reads everyday.

Yet nobody seems to put the pieces together; no one has yet connected the dots in a meaningful way for investors.

Take, for example, an article I came across recently in the Los Angeles Times:

Across the countryside of this nation on the heel of the Arabian Peninsula, the pumps and drills roar. Wildcatters bore as much as 1,000 feet into the earth and draw out the valuable liquid. They pump it into tankers and haul it away to sell to the highest bidder.

Any rational person would assume this article was about oil. But it's not.

It's about water. The world's most precious resource.

Water Scarcity
That L.A. Times article was about Yemen, and its current struggle to provide enough water to satisfy both its population and its agricultural business. It's a task that's proving to be harder and harder each day.

The article continued:

As Yemen's exploding population draws out more and more water from the parched land. . . the bone-dry nation's very existence is threatened. The country faces its greatest water crisis, with underground levels dropping dramatically, scientists and government officials say.

Instead of conserving water as it becomes scarcer and more precious, more and more Yemenis are rushing faster and faster to extract it from the earth and capture it from rains for profit, pushing the country toward an ecological nightmare.

Interestingly, this is the same scenario that's currently being played out with oil or, more specifically, peak oil. So it begs the question: Are we about to face peak water?

More and more, the answer is yes. The Yemeni water problem isn't an isolated event. It's one being witnessed by most countries in the world, both developed and undeveloped.

Certainly you've heard about the ongoing droughts in the American Southeast and Southwest, and in Australia, China, Africa, and the rest of the Middle East.

The Growing Water Problem Is A Factor of Many Issues
First of all, water is a finite resource. There is no more water on the earth today than there was hundreds of millions of years ago. There is no less either. We can't make it or destroy it.

And while our planet may be over 70% covered with water, less than 2% of it is freshwater. . . you know, the stuff we need to survive.

Of that tiny 2%, some water is perpetually tied up as atmospheric moisture or as frozen saturated soil (permafrost) that we can never use. Put another way, if all the world's water were in a one-gallon jug, fresh water wouldn't account for even a teaspoon of it!

The second part of the problem is the growing human population.

Water was first formed about 4.5 billion years ago. We've been around for only 60,000 years. But in that time, our population has exploded.

And we've done it rather quickly. It took us all of history to break the 1 billion population barrier at the beginning of the 19th century. Since then, the world's population has grown exponentially to over 6.5 billion. We now add about 75 people every 30 seconds.
And most projections put world population at about 10 billion by 2050. That's unsustainable to say the least, unless we can come up with market-based approaches to lessen water consumption, use water more efficiently, and derive freshwater from saltwater resources via desalination, which is currently a very capital and energy intensive process.

If nothing is done, by 2025 nearly two-thirds of the world's population will be water stressed due to greater demands on freshwater resources by burgeoning human populations...the diminishing quality of existing water resources because of pollution...and the additional requirements of servicing our industrial and agricultural growth.
That's less than 20 years away.

Water Right Now: Shortages and Investing
Ironically, two-thirds of the world's population lives in areas that receive only one-quarter of the world's annual rainfall, while the most water-rich areas of the world, such as the Amazon and Congo River Basins, are sparsely populated.

Right now, about 450 million people in 29 countries are facing severe water shortages.

According to the UN, water and sanitation deficits affect about 50 percent of all people in the developing world and lead to the deaths of 1.8 million children each year.

Much like easily accessible oil, all the readily available water resources are in full use:

All surface and ground freshwater resources in Jordan, Israel, the West Bank, Gaza, Cyprus, Malta and the Arabian Peninsula are fully used.

It's now possible to wade across Lake Chad—which was once one of the largest lakes in the world and thought to be the source of the Nile.

Once the fourth largest lake in the world, the Aral Sea's surface area has shrunk by 60% and its volume by 80%. . . and it's still shrinking.

The Yangtze, Ganges, and Colorado, don't flow to the sea for much of the year because of upstream withdrawals.

In some places, the Ogallala—which supports America's breadbasket—is declining at the rate of five feet per year. Optimistic predictions say that the Ogallala will be depleted by 2020.
Perhaps an image of the current drought conditions here in the U.S. can give more tangible insight as to just how severe the problem currently is:

I could go on and on about the doom side of the water story. There is more than enough solid information and analysis to convince any sane person that there is real problem going on.

What's more interesting for investors, though, is that there's a boatload of money to be made from investing in the companies that are providing solutions to water scarcity issue.

Take, for example, the current state of the water infrastructure here in the U.S.

The nation has 800,000 miles of water pipes and 500,000 miles of sewer pipes. Generally, these pipes are supposed to last fifty years. The most comprehensive research to date suggests that the average age of water infrastructure pipes in the US is 43 years.

Just this single piece of data implies that nearly the entire water pipeline system in the US will soon have to be replaced.

To overcome these obstacles, an investment upwards of $1 trillion will need to be made in the next twenty years. That breaks down to over a 150% annual increase over current spending amounts of $60 billion annually.
Water Company Stocks
Essentially, this is a massive wealth building opportunity. By staking your claim early in the water utilities, pipe and valve manufacturers, and desalination companies that will be providing lifeblood to billions of people, one has the chance to rake in hefty profits.

Just this week Mueller Water Products (NYSE: MWA), which makes water infrastructure and flow control equipment , announced its third quarter results. The result was net income of $20.3 million, much better than the $1.3 million loss in the third quarter of 2007.

Net sales from their U.S. Pipe segment surged 9.4% higher than the same quarter in 2007—a prime illustration of the infrastructure work currently underway.

Since the announcement of the results, Mueller's stock has gained as much as 25%. And there's probably more to come.

But Mueller certainly isn't an isolated incident. I expect this trend to continue for year. This is just the beginning.

Just look at Flowserve Corp. (NYSE: FLS), which develops, manufactures, and sells precision-engineered flow control equipment. That stock has been on an absolute tear over the past twelve months:

Indeed, there is much more to come from this sector.

Water, The Next Oil
By Thomas Rooney

Good morning! I'm Tom Rooney, and it's a real pleasure to here today. What I'm going to try to do here is help you understand why some people refer to water as the next oil. If you have any inclination to invest in favor of or against water, I think that probably the most important thing you need to understand is WHY it has become such an interesting commodity.

My background is as a civil engineer with a finance degree. I spent five years running one of the few pure-play water investments publicly traded. I was also the CEO of a company by the name of Insituform Technologies, traded on the NASDAQ. I'm a turn around guy, so I came in to turn that company around. I left that company a year ago. Interesting enough, by virtue of running a global company that is investing so heavily in water, I did travel the world meeting with presidents, kings, governors, mayors and bureaucrats on many, many levels on almost every continent.

Since leaving Insituform a year ago, I now actually serve on the board of directors of a Chinese water company based in Beijing with aspirations of going public on the NYSE somewhat near term.

I also sit on the International Center for Democratic Transition. I was asked to do so by individuals in the US State department simply because, as you think about Maslow's hierarchy of needs, food and water would be the first priority for meeting the needs of a population.

When you're thinking of a fledging democracy, for example, you may think about Russia and breadlines. If you think about Russia and why it has backtracked to a great degree in terms of its move towards a pure and better democracy, you would think about breadlines. There is very great concern around the world about fledging democracy and even some stable democracies as it relates to water. So that would tell you a lot, the fact that I sit on the board with some very interesting people from around the world dealing with the linkages between democracy and the stability of democracies and water. And finally I also sit on the board of a charity that is in the business of providing clean water for third world and impoverished countries. All of this gives me a very interesting perspective on water.

Some people refer to water as the next oil. So what I'll talk about is the sky rocketing demand for water, water supplies as they currently exist, failing distribution systems, political concerns surrounding water and other compounding factors. I also will be speaking about this afternoon in two break out sessions on the future of water, where I will speak to some degree about the companies that are in the business and segmentation of water.

So, why has water moved from effectively plentiful and cheap to something that people would compare to oil?

First I'll speak to skyrocketing demands. Most people first and foremost say, "Okay, that has to be because the population is outstripping the water supply." This is a good starting point, and that's very true if you think about places like Nevada, Southern California, even, Florida, Georgia, Texas, and Phoenix Arizona. You see a great number of people crowding into an arid location that really can't sustain it. If you think about the global population expansion, you would think about what the population was one hundred years ago versus today and that the water supply has not changed.

But really the most pronounced drivers are China, India and Eastern Europe. These places have experienced what we have called an economic awakening. We certainly know that. That's why mineral prices and oil prices are up as much as they are. But what happened when you have an economic awakening with population mass in the order of 2.6 billion people is that their buying pattern change. They tend to want to eat richer food, that is to say that they have moved from dried grain to wet grains, like rice and then from rice and chicken and then from chicken to beef. And if you looked at the water consumption per calorie from a dried grain to beef its on the order of a thousand to one.

So if I consumed dried grain in my local area I wouldn't have much of an impact on water, but if I'm wealthy enough to desire beef for my consumption, my water impact, my water footprint as an individual can go up to as much as 1000 to 1. When you then start to think about places like Beijing and China, which used to be bicycle cities that are now automobiles cities, and you think about the electrical consumption, you see a tremendous consumption pattern or footprint for water for each individual that goes way up.

What we have seen is water consumption per capita is skyrocketing...and there's a long way to go for developing countries. The US, for example, uses 158 gallons per person per day. Most developing countries use only around 13. So what we have is a massive population that is suddenly becoming dramatic users of water in unprecedented days. By the way, if I take a look at the united states, us water demand has moved per person 6 folds in the last 50 years. So our population grows, our water consumption moves up even more steeply.

So where does the water come from? Well, water supplies are limited. Now I say that, and we've all seen the picture of the earth vastly covered by water. The problem is that 97.5% of the volume of the water on the earth is salt water, not consumable for human beings. Then when we look at that other 2.5% we see where the fresh water is. Interestingly enough, almost 80% of it is frozen in the polar ice caps and in glaciers. But polar ice caps and glacier, generally speaking, are not where the population is. So, its in the wrong place and its frozen. I guess the good news is that the glaciers do melt and create rivers such as the Ganges and the Colorado and others and ultimately do supply human beings. But you can't actually tap a glacier very easily and I'm not sure if you would want to from the standpoint that it takes millennia to create glaciers.

What's left then? Most people when they think about fresh water and access to fresh water think about water from the Ganges River, from the Mississippi River and from Lake Michigan and places like that. The fact of the matter is that only about 1% of all fresh water in the world is on the surface. Twenty percent is underground. So our focal point has been off as to terms of where to access the water.

This is critically important as we think about the future of water and investing in water. Water supplies are diminishing rapidly. In China you see the Yangtze and Yellow River are down dramatically and effectively don't run continuously year round any more. In the US the Rio Grand doesn't make it to the end. The Colorado is being fought over and the Chattanooga that supplies Georgia and Florida is at a point of serious legal contention between the states of Florida, Mississippi and Georgia. The situation is so dire that the governor of Georgia, quite literally, holds prayer sessions praying simply for rain. I think when you see a major political person literally praying for rain, well, that would suggest to you that we have gotten to a certain dire situation. I guess next up would be water dances and everything else.

The fact of the matter is, that's only 1% of the rivers and lakes. The other 20% [see chart] would be aquifers and the water tables. So how do they look? In parts of Tuscan and Phoenix the water tables down as much as 500 feet. Houston is down 400 feet. There are areas in the Chicago land area that are down as much as 900 feet. The Ogallala aquifer, one of the largest aquifers in the world, which basically runs from Nebraska down to Texas, is dropping at 2 feet per year. Thirty percent of the agriculture in the US is dependent of the Ogallala aquifer. I'll talk about that later because T. Boone Pickens and others are actually gearing up to sell water out of the Ogallala by transporting it over long distances. By the way, an aquifer typically takes as much as about 1000 years to recharge. So .1% of an aquifer will typically recharge in a year, so if you deplete the Ogallala as an example, you would have to go through exuberant means to try to mechanically recharge it.

To be continued...

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