Natural Resource Boom

Blue Gold — one of the world’s most
precious natural resources
by Larry Edelson, Editor
Real Wealth Report

Wall Street gurus usually chase after what’s right under
their noses, scouting out the latest IPO … the sexiest tech
or biotech stocks … in short, what they think most investors
will readily buy into.

Rarely do they search out real companies with real value, especially
in the natural resource sector.

That’s why most stock brokers … most analysts … most
newsletter editors have missed the beginning phases of the boom
in natural resources, gold, oil, agricultural commodities, and
more.

And that’s why they’re missing out on an opportunity
that’s staring them in the face and could yet prove to be
one of the most profitable trends of the next few years.

I’m talking about water … pure, fresh water … what
I call “blue gold” — one of the most precious
natural resources of all.

Each and every minute of every day, over ONE BILLION people don’t
have access to clean, fresh, potable drinking water.

More than a third of the world’s population — about
two billion people — live in countries where consumption
of drinking water exceeds available supplies. In Asia …

* China’s available water supplies are estimated to support
650 million people, only half of its 1.2 billion population. Of
China’s 617 cities, 300 face serious water shortages.

* Thailand and Malaysia: Rivers carry 30 to 100 times more pathogens,
heavy metals, and industrial poisons than the government supposedly
allows. Water-related diseases are rampant.

* India receives 90% of its annual rainfall during the summer
monsoons, from June to September. The rest of the year is basically
bone-dry, with hardly a drop of rain. It’s estimated that
India and other countries with similar climates, such as Pakistan,
can actually use no more than 20% of their annual freshwater resources.

In Karachi, Pakistan, poorly-maintained sewage treatment plants
with clogged pipes can barely manage to operate at 15% of their
design capacity. Most of the sewage leaks out into the soil and
contaminates the city’s drinking water wells, causing sickness
and death.

In the Middle East — Jordan, Israel, and Saudi Arabia all
suffer chronic water shortages, and are forced to import as much
as 91% of their fresh water needs from other countries.

In parts of Iran, the fresh water table or aquifer has plunged
an astonishing eight meters, creating a swelling flow of “water
refugees” as whole villages are abandoned because the wells
have run dry.

Dams in Turkey and irrigation in Syria have reduced Iraq’s
water supply from the Tigris and Euphrates rivers by one third.
The problem has been aggravated by poor infrastructure and insurgent
terrorism. In Basra, the poorest people drink green,
putrid water from stagnant irrigation canals used by the city’s
two million people for washing.

In Africa, 20 million people in six countries depend on drinking
water from Lake Chad, an aquifer that has shrunk 95 percent in
the past 38 years. According to the African Development Bank,
nearly two-thirds of Africans who live in rural areas lack an
adequate water supply.

In Mexico, 90% of the land is high and dry, and the per capita
water supplies are 3,470 cubic meters, less than half of the world
average. Parts of Mexico City is sinking at the rate of nine centimeters
per year because so much water is being sucked out from under
it.

In Lima, Peru, three million people are having their water supplies
cut off for 12 hours every night from 5 p.m. to 5 a.m., because
of water rationing. High altitude reservoirs in the Andes, where
Lima’s water comes from, have shrunk over 43% below normal.

Water Crises Not Limited to Emerging Nations

In Europe, over 90% of the rivers have high nitrate concentrations,
as much as 200 times more than in unpolluted rivers. Over half
of Europe’s lakes are clogged with life-choking algae from
agricultural and municipal drainage. Three-fourths of Poland’s
river water is too polluted even for industrial use.

And right here at home — in the United States — groundwater
is being used up at a rate 25% faster than it is being replenished.

A decade-long drought has parched the western United States,
threatening drinking water supplies for major cities and irrigation
for food production. U.S. Geological Survey scientists say that
the Western U.S. could be experiencing its worst drought in 500
years.

The 1,400 mile long Colorado River, which provides drinking water
for Las Vegas, Phoenix, and Los Angeles, is at its lowest flow
on record.

Meanwhile, 173,000 miles of fresh waterways throughout the continental
U.S. are polluted.

Four Chief Reasons Why There Is So Little Drinkable Water

Naturally, nothing in the investing world is certain or guaranteed.
As in any investment, you have to be willing to risk taking a
loss in order to go after the big gains possible. But with all
that’s happening in the water market, I think the risk to
reward profile is one of the best out there…

Reason #1: Demand way outpaces supply.
According to the U.S. Census Bureau’s World Population Clock,
the human race is 6.4 billion strong at latest count … and the
count is rising at the rate of 80 million new thirsty mouths each
year.

Nearly two billion people have been added to the planet just
since 1970, but the per capita supply of fresh water is one-third
lower today than it was then.

Reason #2: Salty Oceans. Most of the
world’s water is in oceans. Salty. Undrinkable. Corrosive.
Saltwater makes up 97.5% of the water on earth.

Of the remaining 2.5% of water supply that is fresh, about three-fourths
of it is unavailable to most humans, locked away in ice caps and
glaciers in the frigid polar regions. Other fresh water reserves
are buried deep under the Earth’s surface in rock formations,
the trickle-down reservoirs built over centuries.

That leaves only about 1% of the world’s entire water supply
readily accessible in freshwater lakes, rivers, and in the soil
at depths shallow enough to reach affordably.

Reason #3: Irrigation. Almost 70% of
the available fresh water gets used for irrigation in agriculture.
But only 35% to 50% of the water used in irrigation actually helps
grow crops. The rest leaks, evaporates, or runs off into surface
waterways (carrying a toxic load of agricultural pollutants).

Reason #4: Pollution and Mismanagement.
Of the one-percent freshwater supply, an increasing share is fouled
by pollution — from agricultural runoff mainly, but also
from industrial and municipal waste — rendering it unsuitable
to drink.

Many people don’t have much of a choice and pay the price
in high disease rates. Each year, some 12 million people will
die from diseases related to water shortages, contaminated water,
and lack of adequate sanitation.

Bleak as it is, the water crisis isn’t hopeless

Public and private sector groups are actively studying the global
water crisis to create solutions that will help head off a global
disaster.

New technologies and techniques for better water supply management
and improved conservation on the demand side could potentially
avert a worldwide disaster. As a long term investment, water holds
huge profit potential. The clamor for solutions (and the companies
that provide them) could propel overnight the relative unknowns
of the water industry to legendary investment status.

And the dawn is not far away. The water crisis is nearing critical
mass. In the next few years, I expect it to become headline news
as the urgency spreads around the globe.

When it hits, you can depend on the politicians to take up the
cause with gusto and a loud voice, jostling for prime position
in the media to proclaim their efforts to guarantee a clean drink
of water for every voter. That alone should keep water in the
news almost daily for months, even years.

Thirsty citizens will demand action from their governments, and
governments will scramble to find solutions. Companies that provide
those solutions will be rewarded with fat government contracts.

New York City is already spending $1 billion to conserve and
protect upstate water catchment areas. That’s where the
Big Apple gets their drinking water.

All businesses in the U.K. can claim 100% credit for capital
allowances spent on plants and machinery that reduce water use
and improve water quality. The tax credit should act as a powerful
stimulus for companies that supply meters and monitoring equipment,
flow controllers, leakage detection, and efficient toilets and
water taps.

A water industry conference this spring revealed that, in the
U.S. alone, the water industry will grow by 7% per year to $150
billion. The Environmental Protection Agency estimates that we
need to spend at least $138 billion by 2016 just to meet the requirements
of the Safe Drinking Water Act. Private sources say the EPA’s
figures are grossly underestimated.

Another enticing trend for water investment is that more and
more cities are choosing to privatize their water supply systems,
leading to contracts for vendor companies good for as long as
20 years. That’s two decades of guaranteed revenue.

The investment demand for companies involved in water management
and conservation and development of water technologies should
skyrocket, sending share values to the moon faster than you can
say “I’m thirsty.”

Investor excitement will soar for companies involved in:

• Water purification
• Water supply and distribution
• Wetlands management
• Coastal engineering
• Erosion and sediment control
• Groundwater hydrology
• Storm water control and treatment
• Sewage and wastewater treatment