To set the table, water rates in China have been so far below the global average it’s ridiculous. Especially when you consider the severe water problems in China. The graphic below is from The Wall Street Journal (“China Cities Raise Water Price in Bid to Conserve” by Andrew Batson):

The Chinese are water-poor. They are sucking their aquifers dry. It is particularly bad in the north of China. The groundwater under the North China Plains is draining away quickly. By some estimates, China will exhaust this water supply in the next ten years.

You probably know that the city of Venice is sinking a fraction of an inch per year. But that’s nothing compared to what is going on in Beijing. Parts of Beijing are sinking 8 inches a year! According to Andrew Lees (The Right Game), it is the world’s largest cone of depression (an underground hole created by a depleted water table) at over 15,000 square miles. The second largest cone of depression is around Shanghai.

So finally, many cities are raising the price of water. The WSJ points out several places where water prices could rise 25-48%. Shanghai, for instance, raised water rates 25% in June and plans another 22% increase next year.

The second event that caught my eye was the collaboration between China and India to monitor the health of Himalayan glaciers. This area is very important to both countries. They fought a war over it in 1962. So, the fact that they are getting together on the Himalayan glaciers is meaningful.

Here is why it is so important: Seven of the world’s largest rivers, including the Ganges and the Yangtze, are fed by the glaciers of the Himalayas. They supply water to about 40 per cent of the world’s population.

Well, those glaciers are shrinking. The Indian Space Research Organization, using satellite images, has studied the changes in 466 glaciers. It found they had lost more than 20% of their size between 1962 and 2001.

This melting increases the water flow at first, but eventually slows dramatically as the glaciers either melt completely or reform. These observations have given rise to a kind of “Peak Himalaya” where people wonder if we have not seen the maximum water flow from the mountains.

We know the current run rate on demand is already well above what is sustainable given annual rainfall and river flows. That’s why you have those depressions. That explains the depleted aquifers and the rivers that don’t reach the sea. Now throw into that ugly brew a decline in water supply from the Himalayas. The situation is worse than it seems, if that is possible, because much of the existing fresh water in both countries is so polluted it is unfit for human consumption.

As if all of that weren’t bad enough, the demand for water is still rising rapidly in China and India. The water use per capita in China and India are still well below global averages. As these countries industrialize, they’ll consume exponentially more water. It takes water to make just about everything. For example, to make a 1 tonne passenger car takes more than 100,000 gallons of water. Just to make a cotton shirt takes over 1,000 gallons of water. And most of our water goes into making our food.

So, population growth by itself guarantees increased water demand. (Globally, water consumption increases at more than twice the rate of population growth.) These two countries already have big populations and both will get bigger. When you look at demographic trends, China and India alone will add close 600 million people over the next 30 years. That’s two present-day United States.

Fresh water, like oil, is getting a lot harder to find for 40% of the world’s population. It will get worse before it gets better. The days when we think of water as a cheap resource are coming to a close. That’s especially true for China and India.

Bottom line: We need to create more fresh water. You do that by finding new sources either through new supplies (drilling deeper, desalination, etc.) or by using existing supplies more efficiently (irrigation and other efficiency gains).

All of that takes time and energy. Desalination is energy intensive. Drilling deeper for water or going to more distant source requires energy to pump and move the water. Replacing older, less efficient plants and equipment takes time and energy again. (Detect a theme here?)

Countries, companies and people will find ways to make this transition. The companies that can solve these problems will do well.

Regards,

Chris Mayer

Source: The End of Cheap Water?

“In an age of global water scarcity, with governments scrambling to create new water systems or repair deteriorating ones, there is money in water,” he says. And Emmons isn’t the only expert who thinks water is soon to be a very valuable commodity. “Water is going to be more important than oil in the next 20 years,” predicted Dipak Jain, dean of the Kellogg School of Management at Northwestern University, to Bloomberg.

That’s thanks in large part to your local water utility. While cities and municipalities run 85% of water utilities, there are scores of for-profit companies left over to turn water into cash.

Utilities have become popular with investors in recent years for two reasons: stable sales and dividends. In most places, electric, gas and water utilities are highly regulated by the government, and they’re often allowed to operate as pseudo-monopolies in their markets. Couple that with the relatively level demand of utility customers and you have a recipe for fairly predictable sales numbers from quarter to quarter.

Utilities are also among the best dividend-paying industries.

But while that’s proved to be a great combination for investors who are looking for slow growth and slow income, growth-hungry small-cap investors have typically eschewed utilities for those very reasons. Until now…

Claim Your Stake in This Water Utility Stock

We’ve recently caught wind of a small-cap water utility based in the U.K. The company provides water and wastewater services to more than 4 million customers in seven countries. The company’s international exposure is what makes it especially interesting for investors looking for high growth – by entering new markets, the company managed to grow its sales 10 times faster than the rest of the industry.

Our unique water utility investment focuses on providing water services to developing countries with quickly expanding water needs. In addition to the U.K., the company has operations in South Africa, Indonesia, China, Chile, Panama and the Philippines. And in the last year alone, it’s managed some impressive milestones.

In China, a country where a quarter of the population doesn’t have access to safe water, the company secured two new projects that will eventually serve a combined 1 million people. It announced record new connections at its local subsidiary in the Philippines. And one of this utility’s biggest new South African customers is the new FIFA soccer stadium currently under construction – the stadium will be home to the World Cup in 2010.

Why This Stock Could Jump 166%

From a value perspective, we’ve got our eye on an impressive stock. Of all the small-cap water utilities currently trading, this company has the lowest P/E ratio. That means that you’re paying less for each dollar of our stock’s income performance than you would for any other company in its class.

The average P/E for profitable water utilities right now is 23. For our small-cap utility to trade at the average, its share price would be $9.70 – a full 166% gain from where it is now.

Part of the reason for that is the low profile the company has taken since it went public. This company’s shares weren’t traded on U.S. markets until the beginning on 2008, just as the stock markets were starting their yearlong descent. As more investors become aware of what this company is capable of, you can expect its share price to make its way back toward the $5-10 range.

To get access to the water utility in question, visit the Penny Stock Fortunes website.

Cheers,
Jonas Elmerraji

Source: The Water Utility Poised to Jump 166%

Obama’s American Recovery and Reinvestment Act sets $126 billion aside for infrastructure projects. The majority of this is for roadwork and water infrastructure.

On top of that, $144 billion more is going to state and local governments. A large amount of that cash will be spent on these failing water systems. After all, we’ve already seen pipes burst throughout the country, and no one wants to be next governor on CNN trying to explain why the state didn’t fix its water pipes.

Right now, there are a handful of dividend producing water infrastructure stocks that are giving investors the chance to profit from this life-sustaining element. Better yet, one class of these companies has a secure government-sponsored monopoly. You can’t ask for a safer stream of income, and I’ve got my eye on one of these stocks specifically.

But to understand the profit potential of these kinds of stocks, you should be caught up to speed on the background story…

Monopolizing the Last 0.3% of the World’s Most Precious Element

Of 6.7 billion people in this world, 1.3 billion don’t have access to safe drinking water. It seems odd considering we have a blue planet. Here’s how it works out…

96% of all water on this planet is found in the ocean – salt water. Another 3.7% can be found in icebergs, glaciers and the atmosphere. That leaves just 0.3%, or 2 million cubic miles, left in groundwater and freshwater lakes and rivers.

Imagine if just a few companies controlled that tiny amount of fresh water. Well, that’s exactly what we have.

You see, municipalities control about 85% of the total market. And you know they won’t allow any competition. The other 15% comes from investor-owned monopolies. Investors call these monopolies water utility companies.

Utilities in general have enormous advantages over regular corporations. Just like monopolies, they are the only provider of a service. There’s very limited or no competition to contend with. That makes them great investments.

The reason we love utilities so much is because in the income world, they are about the closest you can get to guaranteed dividends. Unless these companies are fiscally irresponsible, we are assured of steady income from a competition-free business.

Why Water is the Best Utility Investment

However, water utilities have an extra attribute other kinds of utilities do not. Natural gas can be transported through trucks and pipelines. So if one area is experiencing an extra-cold winter, it can get gas from other places. The same applies to electricity. It can flow through the grid from one area to another to stop blackouts before they happen. You just can’t do that with water.

If one area is suffering from a drought, it’s nearly impossible to bring enough water from elsewhere to make a difference. Transporting water is difficult. It costs way too much. Plus, the infrastructure is simply not in place. That’s why water utility companies can stake out a territory and monopolize the area.

We also love water utilities because they provide an absolute necessity. If you are really sick of high energy bills, you can put solar panels on your roof. If you don’t like your natural gas company, you can find another heating source. There’s no substitute for water. Unless you are willing to ship in an astronomical amount of bottled water or drill a well, you are pretty reliant on the water company.

How much do you really even pay for water? It’s hardly anything at all. There’s very little chance you’d ever think to radically change your water supplier. The cost of drilling a well far exceeds any local municipality’s or utility’s fee. So you are stuck with one provider.

Demand certainly isn’t falling, either. There’s no recession or even depression that can cause someone to say, “I can do without water this month.” In fact, the amount of people this world needs to supply with water is only growing. To really spur a growth play, we need to look for areas that are growing the fastest.

A Liquid Investment

With scarcity, recession-resistance, and a bulletproof dividend stream, water utilities are a fantastic investment that can diversify your small-cap portfolio and add big gains to your bottom line.

Sincerely,
Jim Nelson

Source: Retire Rich with This Legal Monopoly

Here he shows us covered call strategy investing and how it works.

This from Karim:

Just what is the best way to profit in a stock market like this?

Our mission here is not only to show you the sectors, industries, and stocks that are set up to fare well, and the trends you can play to your advantage, but to also show you how to profit from them in more advanced, sophisticated ways than ordinary investors.

And when I say “advanced” and “sophisticated,” I don’t mean “complex to understand” and “difficult to execute.” Far from it.

In recent columns, we’ve talked about investing in water, gold investments, the real estate market, and much more (check out our Smart Profits Report archives if you’ve missed anything).

The bottom line is that amid all the bailout and stimulus talk… the volatility… the fear… the constant doom and gloom… we continue to stress that there are ways to negotiate brutal bear markets – ways that can still bring in strong profits.

Covered call investing is one of them…

Covered Calls: The Perfect “Cover” For An Imperfect Market

We realize that times are tough. No doubt about that. But we’re not sitting around complaining about it. Our focus, as always, is purely on showing any investor how to take profits from any market.

And we’ve demonstrated that in recent weeks, due in no small part to our covered call strategy.

Now, before I go any further… I understand that options strategies can sometimes spook investors. They seem complicated, especially since most people are used to just buying and selling stocks.

But our job is to educate you… helping you become a smarter investor, able to take bigger profits…

2 Key Elements That Will Help You Beat Wall Street…

In some ways, Wall Street is like the world’s biggest casino.

The devious types who make their living there don’t want you to know about the tips and techniques that can help you win.

They’re perfectly happy for you to remain in the dark, unwilling to teach you about hedging your bets. They just want you to make them and grab your money.

Now, in some cases, I’ll be the first person to admit that hedging your bets is a flat-out bad idea. However, this is not one of those cases. And I’ll tell you why…

This type of market, complete with its daily volatility and blow-ups, requires that you expand your investing acumen. And this is where we come in, giving you the two key elements you need…

1. The necessary know-how.
2. The specific trades to take end-game profits.

Covered Call Buyers vs. Covered Call Sellers… Who Wins?

Using options does not mean gambling. If you’re relatively new to the options world, that’s the first fallacy you need to put aside. Options actually work very logically. With every buyer, there’s a seller.

The Buyers: 9 times out of 10 – especially with short-term options trading – buyers lose out. And with good reason: It’s like trying to predict where a stock will go in a couple of weeks or months – something that nobody is entirely capable of doing.

The Sellers: Options sellers, on the other hand, usually make money because they’re basically betting on this lack of supreme knowledge. Huh… how does that work? Simple…

While they acknowledge that they can’t predict where an index or stock will go with pinpoint accuracy, they at least want to try by making a well-informed, educated estimate. And they want to get paid for trying and waiting around. In particular, with deep-in-the-money covered call selling or put-selling, they want to own the underlying shares, but at a price that they specify.

I’ll give you an example…

Using Covered Calls To Invest In Gold

As we’ve written about here before, we liked gold investments when no one else did. So we put our money where our mouth was and bought shares in Goldcorp (NYSE: GG), a major gold producer.

But we were also aware that gold prices would likely remain volatile for a time, keeping shares from reaching our targets right away.

So what to do?

Easy. We bought the shares and sold call options against our position. This not only reduced our cost, but also gave us a quasi-dividend and increased our chances of a win.

In the end, our shares didn’t get called away from us at options expiration. But that was fine with us. We got another opportunity to lower our cost and increase our potential for a win by selling more calls.

We did the same with a recent trade in the Xcelerated Profits Report – and I’ll be doing it again very shortly. In this market, it’s how you play the game that counts. It’s all about risk management.

The Covered Call Investment Strategy – A Gateway To Safer Profits

In case you don’t know, we have the resources for you to learn about the covered call investment strategy (and several others, for that matter) in more detail on our Smart Profits Report website.

Scan our archives. It’s all free and essential reading if you’re serious about investing. We provide step-by-step instructions on how to execute various trades, as well as the rationale behind them.

And if you find something you really like, why not take your investing to the next level?

Source: Kiss Goodbye To “Ordinary” Investing: Why Smart Investors Use Covered Calls

This from Penny Sleuth:

Two days before Christmas, a 66-inch water main burst on River Road, not far from where I live, during morning rush hour. Water spewed out at a rate of 150,000 gallons per minute, turning River Road into an actual river for a time. People at the scene described the burst as a bomb going off. The road itself took significant damage.

The force of the water – going at 12-15 miles per hour – pushed cars around like so much debris. Firefighters had to rescue people from their cars as freezing cold water swirled around them. They had to use a helicopter to pull some out of the more sticky situations.

This was a big deal where I live. My kids came home early as the county closed schools over concerns about water supply. It hit home, too, because I’ve been writing about the dangers of this exact thing for at least two years. So I have cause to revisit one of my favorite investment themes – water. When water pipes get old, they break.

The pipe that broke was 44 years old. The Washington Suburban Sanitary Commission, the local water utility, has nearly 5,500 miles of pipeline. Of these, 1,380 miles of water mains are more than 50 years old.

Another 2,000 miles are between 30-50 years old. Many of these pipes are near the end of their engineered life spans. The WSSC replaces 27 miles of pipe per year. At that pace, the WSSC will replace a pipe, on average, no sooner than once every 200 years.

It’s a simple matter of math to see that’s untenable. This was the third major water main break in the last six months. In June, one break led to the widest disruption of service in more than 20 years. Restaurants closed and residents were under a boil-water advisory. From Jan. 1 through November of 2008, the WSSC repaired 1,357 breaks and leaks – or about four per day.

The previous general manager at the WSSC, a former Navy engineer, raised the alarms in February 2008. “In my view, the public will no longer be able to trust the system that delivers water to residents,” he said. Unfortunately, this is a problem that is widespread in our country. Water pipes are aging and need replacement.

The Great Water Build Out

Globally, too, the demand for new water infrastructure is also strong. There is, for example, a huge urbanization movement happening on this planet of ours. Think about this: The average population of the world’s top 100 cities in 1900 was 700,000. Today, the average city has 6 million people living in it. In just the last 30 years, the world’s urban population went from 1.6 billion to 3.3 billion. This puts huge stresses on water systems.

Industrialization also eats up a lot of water. It takes large amounts of water to make food – some 630 gallons of water to make a hamburger. Even basic consumer goods take a lot of water to make – it takes 2,900 gallons of water to make a pair of jeans.

Semiconductor plants are huge consumers of water. Power generators also use water for cooling. Manufacturers use it for cutting, cleaning and more.

We ask a lot of water. The water services industry alone is a $385 billion business – and growing. “There is a boom in the construction of new assets,” says Antoine Frerot, CEO of Veolia Water. “The assets are also more complex and more technical than before.” Water-related equipment is another $64 billion industry. That too is a growing field.

Energy and water are also linked in ways people don’t appreciate. It takes a lot of water to make energy.

As the easy oil is gone and we go deeper into the earth, our water needs rise. “Enhanced oil recovery,” reports the FT , “is particularly water intensive.” Alternative energy is no better off. Biofuels, obviously, consume water, but so do solar and wind power. It’s just not as obvious. (There are enormous amounts of water used in making the equipment.)

But this is only half of the greater water crisis. The other half is an issue of supply. I don’t have space to get into that aspect of it again here. But suffice it to say that in the American West, China, India and many other parts of the world, getting water where people live is an ongoing problem. According to the U.N., there are over 1 billion people without access to clean water. This has appalling health effects.

“Water has never been more under threat in modern history,” reports the FT without exaggeration. A new special report in the salmon-colored pages of the Financial Times is entirely about water. I give the paper credit for reporting on this topic more than any other mainstream outlet I follow.

Thinking thematically, energy, infrastructure and agriculture all look attractive to me as long-term investment themes. And water issues touch each of these in numerous ways.

Over the holidays, I swapped e-mails with my friend Tom Rooney. He is a former CEO of a water pipe company and a highly sought-after consultant on water issues, especially now. “Water and water infrastructure are getting hotter by the day,” he reports.

“It’s not going away.” I agree, it’s not going away – whether we have a global depression or not. For investors, water is, indeed, blue gold.

Source: Investing in Water: Mining for Blue Gold

Environmental damage costs China more than $200 billion a year, or roughly 10 percent of its GDP. The country recently pledged to spend up to $125 billion on a massive cleanup, including the construction of over 10,000 wastewater treatment plants.

This makes Singapore’s water treatment companies well worth a look, according International Strategist editor Tom Dyson in DailyWealth.

The Singapore water industry is my favorite way to profit from China’s drive to clean up its water. Singapore’s water companies all derive the bulk of their revenues and profits from China.

Take Hyflux (SIN:600) for example.

Hyflux is the biggest name in the Singapore water industry. It makes water treatment systems that turn sewage and seawater into drinking water. Hyflux has built Asia’s largest desalination plant. It has won billions of dollars worth of contracts to build wastewater treatment systems in China, Southeast Asia, the Middle East, and Africa. And it makes consumer products like home water filters.

Hyflux derives 81% of its revenues from China.

Hyflux stock recently got a boost after Hyflux Water Trust Management (SIN:D7TU) – a recent Hyflux spin-off – posted better-than-expected 2Q results due to lower expenses.

Last Wednesday, Hyflux stock surged to a high of S$2.54 with over one million shares changing hands.

Moreover, Credit Suisse recently upgraded Hyflux, which currently trades at S$2.62, to “outperform” and raised its target price to S$3.60.

Apart from Hyflux, Tom says there are half a dozen other Singapore water companies worth a look. Most of them are fairly cheap due to the fall of Asian stock markets this year. 

Source: How You Can Profit From China’s Water Cleanup

Deutsche Bank (NYSE:DB) has told clients to get out of commodities. The bank says China is slowing, oil will return to its “marginal cost of production” – somewhere between US$60 and $80 – and gold will settle around $650.

Dan Denning in The Daily Reckoning Australia says you have to take what analysts tell you with a fistful of salt. Most of the time they’re just morons who are making it up as they go along. The case for resource has yet to be disproven…

Remember, the world’s population has doubled since 1960, from three billion to well over six billion. The first two great periods of industrialization in Europe and North America brought more resources on-stream, and thus, lower prices for tangible goods.

There was a lot of coal in Newcastle and West Virginia, and a lot of farmland in Kansas. But now, the latest period of industrialization begins with more people than ever chasing scarce resources. China is not Kansas.

It could be that demand for resources will fall (as it appears to be doing simultaneously all over the planet). It could also be that in some sectors, supply will finally catch up (this appears to be what’s happened with base metals). But what’s really changed in the last month is that investors are simply demanding fewer resource shares. That’s it. It’s important to distinguish investment demand from real demand.

The trendy investors who want to own the latest “It” sector will be back. Let them go trawl for beaten down financials and retail stocks. If you missed out on the first phase of the boom, this will be your next best chance to get into long-term positions at much lower prices. Those prices may not go anywhere for a year, mind you. But at least it won’t be so crowded in the aisles while you browse through firms, projects, and management.

What we have in the commodity and credit markets now is what the geopolitical crowd calls a kind of “durable disorder.” Things can remain disorganized a lot longer than a neat freak would prefer. Replacing one global currency regime with another isn’t easy, is it? Yet we still believe that’s what you’re witnessing and living through: a grand changing of the economic guard.

Source: Deutsche Bank Tells Clients to Get Out of Commodities

Fresh water supplies are drying up in the US, says Chris, even as a growing population and increased biofuel production create more demand. And water is still too cheap, given it’s demand.

This could soon change. As shortages become more frequent, the price of water resources will go up. This makes the industry a promising investment play. More from Chris…

About 7,050 feet above sea level, high in the snowy Sierra Nevada Mountains, lies a little frozen meadow called Gin Flat. It got its name from a speak-easy that closed long ago. Nestled amid a forest of pine and cedar, a little scientific outpost measures snowfall — and has done so since the 1930s.

This is important work, because the melting snow from the Sierra Nevada provides water for millions of Californians. The size of the snowpack at Gin Flat gives us clues to how much water will flow from the mountains. With the data gathered at Gin Flat, scientists can divine the future of California’s water supply.

The latest reading this year is that the snowpack is only 67 percent of normal. So California looks like it will have more water troubles this year. “I have not seen a more serious water situation in my career,” opined one official. “And I’ve been doing this 30 years.” Some scientists think that we’re overstating the water content at Gin Flat by 20 percent or more. If so, we have even less water than we think.

Across the globe, scientists look to the world’s mountains and watch carefully. The areas most at risk of lack of fresh water include parts of the Middle East, southern Africa, the United States, South America and the Mediterranean.

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In this piece, we return to a familiar theme: the unfolding water crisis. The spur that drives me to revisit it once again is the thoughtful annual report of a publicly traded water company that has purchased water rights in the western United States. In the shareholder letter, the company’s CEO wrote: “Arguably, the most critical issue facing the Western United States is the availability of water to support continued population growth.”

Water scarcity in the West is not new, the CEO admits. At least since the time of Mark Twain, people have been fighting over it. (“Whiskey is for drinking and water is for fighting over,” goes the old saying often attributed to Twain.) But what’s new this time is the sheer amount of water needed to support the fastest and largest population growth in the union. In Arizona and Nevada (and Colorado and Idaho), population grows at a pace double the national average. Yet water is scarcest in these places.

For all that’s demanded of it, water is too cheap. The CEO continues: “Market prices [for water] have started to appreciate dramatically in recognition of the actual economic cost of developing new supplies.” Despite constant threats of shortages, there is a reluctance to allow the price of water to rise. Lastly, the company’s CEO chides the public’s irrational view of water as something that ought to be a “free” public resource, not subject to market forces.”

“Paradoxically, this same public is willing to pay exceptionally high prices for bottled water,” he writes, “rather than drink inexpensive tap water, in part due to the often mistaken belief that bottled water is safer to drink.” This water scarcity issue does not only affect America’s dry Western half. It’s a global issue affecting many other parts of the globe. In a water-constrained world, conserving water becomes top priority. Treating existing water supplies when new supplies are not available becomes especially important.

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As an investment idea, the water theme is not going away anytime soon. Many trends in energy and agriculture make the water situation only worse. Take a recent Tampa, Fla., development. Officials got a shock when the state’s first ethanol facility put in its request for water — 400,000 gallons per day! That instantly made it one of the top 10 consumers of water in Tampa, yet there are plans to double its capacity. All the while, Florida’s rivers and lakes are at or near record lows.

It’s madness, of course. But at least you can make it work for your portfolio by putting some money in the water resources arena. Maybe one day, people will quote the readings at Gin Flat — and its counterparts across the globe — as they do the Dow Jones industrial average.

Source: Gin Flat: The Next Dow Jones Industrial Average?

We’ve been hearing about Baby Boomers for the last 50 years. The US has just beaten their baby boom peak of 1957 by 15,000.

My big concern when I read these figures was water.

Water is becoming a major issue… and it’s all connected to the rapid rise we are seeing in world population. Unfortunately, it’s going to get much worse.

Parts of the US are already in a water crisis… and this is just the beginning.

The government has said it expects 36 States will be suffering from some form of water shortage by 2012.

Florida doesn’t have enough water for its expected population boom. The Great Lakes continue to shrink. New York’s reservoirs have dropped to record lows. California is trying to get a $9.3bn water bond off the ground to shore up its water infrastructure.

Across America, the picture is clear – the nation’s freshwater supplies can’t quench its thirst. But the problem is not only confined to America. Australia has been suffering from a drought for decades. Asia also faces a looming crisis. It has 60% of the world’s population but only 30% of its fresh water.

The water crisis will be devastating… experts are already calling it the greatest threat to our civilisation.

As the population rises, so does demand for water. If we continue using water at the rate we do today, by 2035 we will be using up all available fresh water on the planet.

I’ve been studying this problem for some time… and I’ve discovered that our greatest ever threat to civilisation is also our biggest profit opportunity.

I’ve discovered three ways that are set to benefit from this coming crisis. You can read all about them right now in my free report entitled Population Explosion: How our greatest threat became our biggest opportunity.

In the next ten years, water looks set to become more valuable than oil or gold. It really is the most undervalued commodity in the world today.

I will send you an email tomorrow morning talking some more about this issue. On Monday, our emerging markets guru Manraaj Singh will be writing to you in Ben’s absence, followed by Fleet Street Research’s stock expert Theo Casey on Tuesday.

Our small cap Sleuth Tom Bulford has also found another great stock to keep your eye on. It’s the un-trendy loan sector, but this company is managed so well just 1% of loan repayments are in arrears today, compared with the industry average of 3%. Click here to read Tom’s full analysis on this company.

Asian markets look set for a rebound: and we’re positioned to profit By Manraaj Singh

China became the world’s worst performing stock market on Wednesday. That’s actually quite incredible when you remember that this is the fastest-growing major economy in the world.

The CSI 300 Index has fallen by 49% since the start of this year. But China’s economy is still growing at over 10% per year. And corporate profits are still rising.

Right now, there are a lot of companies on this market that offer good value.

Manraaj believes that Asia’s falling markets have opened up some incredible profit opportunities.

You can read Manraaj’s article in full here.

Regards,

Garry White
Editor
Smart Commodities UK

Source: The New American Baby Boom

Not a Drop to Drink

About 7,050 feet above sea level, high in the snowy Sierra Nevada Mountains, lies a little frozen meadow called Gin Flat. It got its name from a speak-easy that closed long ago. Nestled amid a forest of pine and cedar, a little scientific outpost measures snowfall — and has done so since the 1930s.

This is important work, because the melting snow from the Sierra Nevada provides water for millions of Californians. The size of the snowpack at Gin Flat gives us clues to how much water will flow from the mountains. With the data gathered at Gin Flat, scientists can divine the future of California’s water supply.

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The latest reading this year is that the snowpack is only 67 percent of normal. So California looks like it will have more water troubles this year. “I have not seen a more serious water situation in my career,” opined one official. “And I’ve been doing this 30 years.” Some scientists think that we’re overstating the water content at Gin Flat by 20 percent or more. If so, we have even less water than we think.

Across the globe, scientists look to the world’s mountains and watch carefully. The snow is melting earlier this year. That means water will flow less freely this summer, when people need it most. The areas most at risk of lack of fresh water include parts of the Middle East, southern Africa, the United States, South America and the Mediterranean.

In this piece, we return to a familiar theme: the unfolding water crisis. The spur that drives me to revisit it once again is the thoughtful annual report of a publicly traded water company that has purchased water rights in the western United States. In the shareholder letter, the company’s CEO wrote: “Arguably, the most critical issue facing the Western United States is the availability of water to support continued population growth.”

Water scarcity in the West is not new, the CEO admits. At least since the time of Mark Twain, people have been fighting over it. (“Whiskey is for drinking and water is for fighting over,” goes the old saying often attributed to Twain.) But what’s new this time is the sheer amount of water needed to support the fastest and largest population growth in the union. In Arizona and Nevada (and Colorado and Idaho), population grows at a pace double the national average. Yet water is scarcest in these places.

For all that’s demanded of it, water is too cheap. The CEO continues: “Market prices [for water] have started to appreciate dramatically in recognition of the actual economic cost of developing new supplies.” Despite constant threats of shortages, there is a reluctance to allow the price of water to rise. Lastly, the company’s CEO chides the public’s irrational view of water as something that ought to be a “free” public resource, not subject to market forces.”

“Paradoxically, this same public is willing to pay exceptionally high prices for bottled water,” he writes, “rather than drink inexpensive tap water, in part due to the often mistaken belief that bottled water is safer to drink.” This water scarcity issue does not only affect America’s dry Western half. It’s a global issue affecting many other parts of the globe. In a water-constrained world, conserving water becomes top priority. Treating existing water supplies when new supplies are not available becomes especially important.

On that idea, I’ve held Nalco Holding (NYSE: NLC) in my Mayer’s Special Situations letter since summer 2006. It’s up 46 percent for us, but I believe bigger gains lie ahead. Nalco is the world’s largest water-treatment company. Nalco is all about helping companies treat and conserve water in their manufacturing processes. A trio of insiders bought the stock in February and March for prices at $19-22 per share. It’s a steady business that generates plenty of cash flow and trades for 15 times next year’s estimate of earnings. Nalco is one of the few water stocks sitting a good 20 percent or more off its high.

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As an investment idea, the water theme is not going away anytime soon. Many trends in energy and agriculture make the water situation only worse. Take a recent Tampa, Fla., development. Officials got a shock when the state’s first ethanol facility put in its request for water — 400,000 gallons per day! That instantly made it one of the top 10 consumers of water in Tampa, yet there are plans to double its capacity. All the while, Florida’s rivers and lakes are at or near record lows.

It’s madness, of course. But at least you can make it work for your portfolio by putting some money in the water resources arena. Maybe one day, people will quote the readings at Gin Flat — and its counterparts across the globe — as they do the Dow Jones industrial average.

Regards,
Chris Mayer

Source: Investing in Water