You need it. I need it. Every single person in the world needs it. It's without doubt the most precious commodity on the face of the planet. There is nothing more important to basic human survival.
But the world is struggling to cope with a very serious shortage - one that is approaching 'crisis' level. Even in America's own backyard.
I'm talking about water - a massive $460 billion global market.
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Whether it's washing your hands, taking a shower, or pouring a glass of water, we take clean, fresh water for granted and use it without thinking.
But here's the problem: 97.5% of the world's water is seawater, unfit for human consumption. That leaves just 2.5% of fresh water resources for the world's 6.5 billion people. Moreover, just 0.1% of all water is actually available to use. Most of it is locked up in glaciers, groundwater, and soil.
By 2025, the world population is expected to rise to 9 billion. But the global demand for fresh water exceeds supply by 17% already, according to the Population Institute, with World Bank figures showing that water demand is doubling every 21 years.
And don't bet on suddenly discovering any more water either. There's no way. We have a fixed, finite amount.
Water investments: moneymaking opportunities
For the water industry, it's simple economics: More people = more demand = less supply. So it's no wonder natural resource prices are exploding - a trend that means investors have some massive moneymaking opportunities.
In fact, Fortune magazine says: 'Water promises to be to the 21st century what oil was to the 20th century: the precious commodity that determines the wealth of nations.' Even Vanity Fair has hopped on the bandwagon, running a major water article in this month's issue.
So let's take a look...
Water investments: surging in popularity
Water investments are surging in popularity. On Wednesday, MFS Aqua Managers in Australia launched the MFS Water Fund, whose portfolio includes water utility companies and water technology firms, as well as companies that run the water infrastructure and water rights.
Here in the U.S., you can invest in several water-based ETFs - such as the PowerShares Water Resources Portfolio (AMEX: PHO). Had you invested back in July 2006, you'd be up 24% by now.
But while those investments can produce some decent profits, you have to zone in more specifically if you want the real investment gems. And the most compelling and lucrative idea right now is lying deep in the desert of the American Southwest.
Water investments: go southwest
As you know, this region is home to some of the most arid desert in the world. Nevada is the driest American state. And compounding the issue is the fact that Nevada and Arizona are two of the fastest-growing states in America. The facts tell the story:
Since 1990, the population of Nevada has surged over 107%. That's greater than the retirees who migrated to Florida. Nevada has been the fastest-growing U.S. state for 19 straight years.
Over the next 20 years, Nevada's growth rate projected at an astounding 74%. Las Vegas will triple in population by the middle of the 21st century.On top of that...
In 1922, the Colorado River divided 17.5 million acre-feet of river water among six southwestern states. Today, it averages only 11.7 million acre-feet per year... for an ever-increasing population.
Every drop of the Colorado River is now used 17 times, herded through 49 dams and dozens of pipelines and canals, until drying up from excess use before ever reaching the Gulf of Mexico, its original destination.
Water tables in Phoenix have dropped 400 feet in the last 50 years.
CNN says: 'The drought gripping the West could be the biggest in 500 years, with effects in the Colorado River basin considerably worse than during the Dust Bowl years.'
In Mesquite, Nevada, officials say that at current growth rates, the city will run out of water in three to five years.
Simply put, there isn't enough water for everyone. The U.S. government reports that a majority of states will face water shortages over the next decade - not including droughts - and says the water infrastructure problem is potentially the #1 internal problem that America faces today.
And fresh off an 11-year drought, states like Arizona, Nevada and California are now fiercely fighting for water and water rights. And according to NPR, you can obtain a permit to drill an unregulated well in Arizona for a mere $160... and then do whatever you like with the water. Savvy businesses are gobbling up those permits - and triggering a huge legal scrap...
How to profit from the water wars
Canadian land developer Wind River Resources (trading on the Toronto Stock Exchange) is one of those companies. Trouble is... it plans on shipping the water straight out of Arizona to those thirsty folks in Mesquite, Nevada, who are willing to pay big bucks for the water.
While that's great news for Wind River - and other similar companies - Arizona isn't too thrilled with the idea. It has pressing water-shortage concerns, too. And situations like this are sparking an almighty tug-of-war in court over water rights.
Canada could also be involved in another trilateral scrap next week when government officials from America, Canada and Mexico hold the two-day North American Future 2025 Project in Calgary. Up for debate: How the continent should tackle its increasing water shortages and whether they can devise 'creative' solutions to combat 'profound changes' in the water industry in the U.S. and Mexico.
This might include large-scale water exports from Canada, which possesses plentiful fresh water supplies. But Federal Environment Minister John Baird has already stated that, 'Canada has no intention of entering into negotiations regarding the issue of bulk water exports' and is 'committed to protecting water in its natural state.'
Bottom line: The water industry could be the greatest investment of the 21st century. And positioning yourself in companies that are fighting to solve the problems could be one of the greatest investments you could make.
Right now, the companies in pole position to make significant returns are the ones that own water rights - with the profits filtering to savvy investors.
By Karim Rahemtulla, Investment Director, Mt. Vernon Research for the Smart Options Report
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