Water – It is an Excellent Place to be During the Years Ahead

When you think about commodities that are in demand and other hot items currently among traders

, you most likely dont think of water. But you should as alternative wealth creating strategies in water are surfacing. The pipelines that provide our drinking water cover a distance of a million miles a lot more than four times the length of the Interstate Highway System. A great deal of this pipeline is over 100 yrs old, has exceeded its useful life, and in many parts of the country, it is in a state of utter disrepair. The fix will cost no less than $500B over the following 20 years. And, the renewable bio-fuel targets of the US Dpt of Energy cant be met since we dont have the water supply. It will take 2.5 trillion gallons of water to make 1 billion gallons of ethanol this is more water than used by the farmers inside the Central Valley and the population of Southern California combined. You will need energy for making water and water to make energy and we dont have enough water to make the mandated bio-fuel perhaps this is another conspiracy in the making. Therefore, the cost of water in some parts on the planet is rising sometimes very quickly and it is rising right here in the good ole USA particularly in California. Water rates in California have seen a 71% rise in five years and despite these increases, water is still too cheap in Southern California. Water is a resource that has been underpriced for 50 years consumers pay $10 day for power and only $3 a day for water. Water costs more in Manhattan and New York City isnt even a desert. California is usually a good case study where the water crisis is in bloom and here are drivers of some of the issues and challenges ahead. First Supply Limitations. As the water flows down from the Sierra Mountains, it also flows through an estuary before it reaches the states water supply. The estuary was depleted due to excessive pumping which endangered a species of fish native to the river. A couple of years ago, a federal judge put limits on the quantity of water taken out of the Sacramento San Joaquin Bay Delta to protect the fish. The system is now delivering only 40% of the capacity as a result of these judge implied limits. At this point, even several wet years will not get the capacityback to 100%. Second Drought. Current reservoir levels are at all-time lows because California just had its third consecutive dry year. Third Aging Infrastructure. The system is no longer capable of supporting the increased population without considerable investment. To combat these problems, the state has done a number of things, including the price increases stated earlier. Yet because water is still so cheap, the increased water rates have not had much of an effect on water use so far. There is also a $11.1 billion water bond designed to provide funds for storing water. And there is a hunt for new supplies of water. Having picked all the low-hanging fruit, it is clear there isn't a single solution to the water crisis. There will be many ideas conservation, desalination, and more. As an example, some companies are working on ways to capture the rain and snowfall from various mountain drainage and watersheds before it flows to natural dry lakes and eventually evaporates. The rain and snowfall can be stored and eventually brought to major population centers in California via pipeline and pumping stations. On the surface, it will appear that the value is going to be in the water provided for consumption and irrigation of crops grown on farms inside the region. Yet the real value will not be the actual water or resulting farming but in monetizing the water rights. Todays investor portfolio should include companies that hold these water rights; companies that provide pipes, valves, seals, tanks, treatment plants, and pumping station equipment; firms that provide the engineering services to design and build these pipelines and pumping stations; and water utilities that operate and deliver quality water, that will better than most bottled water, to major metropolitan areas of California. Water worries stretch far beyond California and the America West and it will be a good place to be in the years ahead. As goes California, so goes America. I favor a quote from Steve Forbes Forbes says that pursuing additional financial education and the resulting increase in our financial literacy will open our eyes to alternative wealth creating strategies and this will be they key to resolving our financial crisis. As an example of alternative wealth creating strategies consider investments in non dollar-denominated assets perhaps emerging markets perhaps energy assets that are inherently useful like oil rigs, hydropower, or methanol plants perhaps precious metals, water rights, oil, natural gas, potash mines, or gold mines things hard to build, difficult to replace, and costly to substitute definitely not financial stocks, definitely not retail stocks, definitely not commercial property. I trust this article provides a little more insight as to why water rights, pipelines, and water utilities continue to represent alternative wealth creating strategies. I will continue to introduce alternative wealth creating strategies to consider like water rights and others like emerging markets, oil rigs, precious metals and potash mines, in future articles and updatesover the next few weeks at my blog which is at http://aspenIbiz.blogspot.com .

Water It is an Excellent Place to be During the Years Ahead

By: Michael Farrell

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