You probably saw innumerable stories as to how the World Health Organization was warning first that this might be an epidemic, and then, that it was indeed a pandemic.

But most all of those deaths were overseas. And we’ve all read dire headlines like this before: “Ebola Hot Zone Breakout… Vietnamese Bird Flu Flies Around World… SARS in Singapore… Invulnerable strains of Staphylococcus on Gym Mats… Incurable TB on Airplanes…”

In the end, nothing ever seems to come from it all, except a lot of expensive grants, decades-long studies, and indecipherable papers claiming to statistically prove that next time around we are screwed.

The “Next Time” Is Now

It’s so easy to get numb to it. Unfortunately, I have to tell you that the “next time” really is here. And while I can’t tell you if this is genuinely a plague, I can assure you that we are looking at something of considerably greater impact than a mere bad cold.

Right now, it’s summer in England. The average daytime high is 80°. Most summers, pallid Londoners worry more about sunburn than influenza, which usually sequesters itself to the cold soggy days of winter.

But not this summer. This time, it’s different….

Spreading Like a Plague

In this year of the Swine Flu Pandemic, the rate of illness in London has quadrupled. Proven H1N1 cases have hit 1,794. But those are simply the incidents that have been forensically established.

The Royal College of General Practitioners has just reported that the incidence of “flu-like symptoms” (the euphemism for “it’s swine flu, but we can’t prove it because we have run out of test kits) has now risen to 80 of out of every 1,000 citizens in the city.

To give you a sense of scale, of just how fast this disease is spreading, last week, the figure was 20 out of every 1,000. Heck, last winter during the peak of the regular flu season it was only 60 cases out of 1,000.

When the Bankers Get Worried About the Flu…

H1N1 is spreading like, well, like a forest fire, really. And this is still just the beginning. The World Bank now reports (that’s right: the World Bank is getting involved now – an important clue we will come back to) that it expects transmission to accelerate over the next few weeks as the flu season commences in South America. And as the Bank calculates global impact, it is now factoring in a doubling of influenza mortality rates.

In its Pandemic assessment, the WHO reported that H1N1 has penetrated over 100 countries. But what you probably really want to know is what’s going on right here at home (for those of you in the States).

Here in the U.S., official H1N1 cases have surpassed the 1 million mark, with 127 official deaths. These are once again forensically proven cases – the actual figure may be substantially higher. The median age of those fatalities is 37.

And once again, this is all taking place during influenza’s weakest moment, when ambient temperatures and humidity make it difficult for airborne droplets of the virus to persist. Come winter’s dry, cold air, the rate of transmission is expected to increase tenfold.

How You Can Prepare…

This is not some tale out of history or the plot from some overheated medical novel. These facts are not conjecture or supposition.

This is happening, right here, right now. And there is little or nothing we can do to stop it.

On a personal level, you can tend any nagging health issues now, so as to be in good health prior to infection. Seventy-five percent of recorded fatalities have occurred when the victim has some underlying condition like obesity, pregnancy, asthma, diabetes or immune system problems.

You can do your best to avoid contact with obviously sick people. And to be blunt, you can stay home if and when you get sick, so the rest of us stand a better chance of getting through all this.

… And How You Can Profit.

On an investing level, I draw you back to the World Bank’s concerns. The Bank has just approved “fast-track” status of $500 million to help countries finance emergency operations to prevent and control outbreaks. This is on top of an existing $500 million credit line set up in January 2006 to minimize the threat posed to people by the highly pathogenic avian influenza virus H5N1.

And here in the States, the CDC is planning a massive immunization campaign that could include as many as 600 million doses of the H1N1 vaccine. There are five manufacturers of flu vaccine currently serving the U.S. market. Of the bunch, only GlaxoSmithKline (GSK:NYSE) also produces the post-infection anti-viral treatment Relenza.

GSK shares have already risen some 28% since last March. Come this winter, I anticipate that GSK will rise from its current price of $34.88 to just below $50. Select call options could be expected to rise as much as 236% over the same period.

And, as I have mentioned more than once over the past few months, that will pay for a lot of chicken soup and Tylenol.

Source: The Hot Zone Is Here

What do you think is the most important commodity in your life? Yes, oil is important, but not as important as staying alive – after all, you can survive only about a week without water, right? Just look around. How much water do you personally use in a day? And think about how much water you don’t even realize you use. Water is something we take for granted, and it’s a growing crisis that’s beginning to hit traders’ radar screens.

Reports from the World Health Organization show an epidemic problem: A staggering 2.6 billion people – 40 percent of the world’s population – do not have even the most basic sanitation, and more than 1 billion people still drink unsafe water. This can cause a range of diseases and even death. The world is just one natural disaster from a lack of clean water. One example of the devastating impact of nonpotable water was the tsunami in Asia. Many thousands of deaths could have been prevented had there been fresh water supplies.

Water pushed through hydroelectric dams is one of the world’s most efficient and harmless forms of electricity generation. Water is also vital in sanitation, manufacturing, drinking, and more. The water industry is very complex. The list of related companies is long, from water suppliers and bottlers to technology and equipment firms.

Think there’s no real way to play water supply and demand? Think again. The explosion of the world’s population and the dwindling supply of fresh water on the planet are sounding alarm bells for the greatest commodity play of all time. Make no mistake:Water is an increasingly vital commodity. And that hasn’t gone unnoticed by worldwide capital markets.

Very few people know about the Dow Jones U.S. Water Index. This index lists only 23 companies, mainly utilities, but rest assured that there are many, many others. Surprisingly, many experts contend that the way to play water isn’t just through U.S. utilities. Worldwide, the utilities are considered overvalued to some extent.

Even though the utilities are expensive in the United States, one country that offers even better opportunity due to pent-up but exploding demand is China. China’s population of 1.3 billion is more than one-sixth of the world’s total. The sheer numbers are staggering.
And while not everyone there drives a car, everyone does drink water.

Here’s a list of water crisis facts, provided by Summit Global Management:

- The World Health Organization says that 60,000 children die each day from lack of water and/or dirty water, by far the largest health problem in the world.

- Only 20 percent of the world’s population currently enjoys the benefits of running water.

- Every year, according to the World Bank, the amount of global water polluted equals the amount of water consumed: Fresh water is disappearing at an alarming rate, especially when compared to the rising world population.

- Since the turn of the last century (1900), the U.S. population increased 200 percent, while per capita water usage shot up 500 to 800 percent, depending on the region.

- It takes 1,000 tons of water to produce 1 ton of grain; agriculture consumes 75 percent of the world’s fresh water. The World Water Council says we will be 17 percent short of necessary water to feed the global population by 2020.

- Users of the most water in California, in decreasing order, are alfalfa growers, cattle ranchers, cotton farmers, rice farmers, and the city of Los Angeles.

- In the United States there are 58,000 water utilities, 90 percent of which serve less than 4,000 homes and have operating budgets of less than $2 million.

- About 500,000 tons of pollutants pour into U.S. rivers and lakes each day.

- California accounts for 20 percent of all irrigation and 10 percent of all fresh water use in the entire United States.

Opportunities exist in the United States, if you pick the right players. The U.S. water infrastructure, much like the oil refinery situation, is falling apart. The Environmental Protection Agency (EPA) and others estimate that up to $1 trillion will have to be spent to upgrade U.S. water infrastructure over the next few years. That work will fall into the hands of only a few key players in the water market, and the rewards for the shareholders of those that are chosen could be substantial.

It’s unclear as I write this which players will be on top in the next decade; some may not even exist yet, but will be born out of necessity. As I mentioned earlier, the best thing to do is to keep an eye on China, as their need for water will be the most immediate. Take, for example, the grain situation in China in summer 2006. Severe drought afflicted China’s poor western region and underscored how vulnerable the country’s critical ecology was despite its growing wealth, raising concerns among some big commodities traders that China might need to import massive amounts of grain.

A report by the United Nations Food and Agriculture Organization warned in 2006 that some parts of key provinces lost half of their winter wheat crops. Some areas experienced massive food shortages that were on the verge of epidemic.

The cause was lack of water supplies – an ongoing and growing problem in China. In some villages and cities the major water sources have reportedly dried up by more than 70 percent, according to the UN agency’s global information and early warning service. China was the fourth-largest destination for U.S. farm products in 2006, overtaking the European Union, with purchases of $6.8 billion, according to the U.S. Department of Agriculture.

It seems ironic that millions of Chinese are potentially facing food and water shortages, even as the nation’s economy is growing by leaps and bounds. That growth clearly comes at a price worldwide, not just in China.

Speaking of prices, we continue to pay an ever-higher one for our energy. The boom in mining, drilling, foresting, and other resources sectors has a downside, too – a negative effect on our environment. From greenhouse gases and strip-mining to deforestation and drilling in Alaska, the commodities boom is not without casualties.

Energy and mining are on the top of the list when it comes to harming the environment. Just ask anyone who lived in Alaska when the Exxon Valdez disaster occurred. The ecological implications were daunting. Drillers and the oil majors are spending more and more to protect the environment, partly for public relations and partly because they have to. However, measures are being taken in some sectors to stop the destruction – and this is also providing an opportunity for investors.

Various companies that do cleanup and reclamation are set to do well as an ecology-conscious world demands that we be good stewards of the environment at the very same time we are searching for resources. Investing in these companies is a way to further expand a winning portfolio.

The commodities markets are always in flux, and it’s important to keep up with new markets and new opportunities. Always study the markets you want to enter – take an interest in them. One of the most important things in this business is to be interested in what you are trading. Otherwise, trading becomes a chore. Be passionate about the market you choose to follow, but never let emotions cloud your judgment.

Regards,

Kevin Kerr
for The Daily Reckoning

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