E HH Why Water Is One Of 2016’s Best Sectors

I bet you didn’t know that water infrastructure plays have been one of the top performing stock sectors in 2016.

In fact, shares of this little known industry are up more than 25% since the February market bottom.

If you think that energy is scarce, it will pale in comparison to the next water crisis. So investment in fresh water infrastructure is going to be a great recurring long-term investment theme.

One theory about the endless wars in the Middle East since 1918 is that they have really been over water rights.

Although Earth is often referred to as the water planet, only 2.5% is fresh, and three quarters of that is locked up in ice at the North and South poles. Global warming is freeing up some of this, but not fast enough.

In places like China, with a quarter of the world's population, up to 90% of the fresh water is already polluted, some irretrievably so, with heavy metals.

About 18% of the world population lacks access to potable water, and demand is expected to rise by 40% in the next 20 years.

Aquifers in the US, which took nature millennia to create, are approaching exhaustion.

It has become so extreme in California, that subsidence has destroyed hundreds of buildings. The Golden States Central Valley is now about 10 feet lower than it was during the 19th century.

While membrane osmosis technologies exist to convert seawater into fresh, they use ten times more energy than current treatment processes, a real problem if you don't have any, and will easily double the end cost of water to consumers.

While it may take 16 pounds of grain to produce a pound of beef, it takes a staggering 2,416 gallons of water to do the same. Beef exports are really a way of shipping water abroad in concentrated form.

The UN says that $11 billion a year is needed for water infrastructure investment, and $15 billion of the 2008 US stimulus package was similarly spent.

It says a lot, that when I went to the University of California at Berkeley School of Engineering to research this piece, most of the experts in the field had already been retained by major hedge funds and were not allowed to talk!

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Trinity Sinclair 4 years ago Member's comment

This is extremely insightful and an excellent investment idea that I never considered.