{"id":28699,"date":"2012-04-02T11:20:58","date_gmt":"2012-04-02T15:20:58","guid":{"rendered":"http:\/\/countingpips.com\/forex-news\/2012\/04\/three-easy-ways-to-invest-in-water\/"},"modified":"2012-04-02T11:20:58","modified_gmt":"2012-04-02T15:20:58","slug":"three-easy-ways-to-invest-in-water","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex-news\/2012\/04\/02\/three-easy-ways-to-invest-in-water\/","title":{"rendered":"Three Easy Ways to Invest in Water"},"content":{"rendered":"

Article by Investment U<\/a> <\/p>\n

\"Three<\/p>\n

You can be a contrarian. Or you can be a victim. If you prefer the former, here are a few simple ways to invest in water.<\/p>\n<\/div>\n

\u201cYou can be a contrarian. Or you can be a victim.\u201d
\n<\/em>\u2013 Rick Rule<\/p>\n

As Executive Editor of Investment U<\/em>, I\u2019m dedicated to providing you with the most sound investment philosophies and unique contrarian investment ideas on a daily basis.<\/p>\n

And as our Chief Investment Strategist Alexander Green wrote earlier this year, our newsletter\u2019s aim is to provide you with \u201cthe best investment you can make in four minutes each day.\u201d<\/p>\n

In that light, I made some time to sit down with legendary resource expert Rick Rule<\/a> at our 14th<\/sup> Annual Investment U<\/em> Conference two weeks ago. Rick is the Chairman and CEO of Global Resource Investments LTD \u2013 part of the Sprott Group of Companies.<\/p>\n

Rick is known to be a fierce contrarian. So of course I was curious \u2013 as I\u2019m sure many of you are \u2013 what he sees as the most contrarian investment right now.<\/p>\n

His answer may surprise you\u2026<\/p>\n

\u201cThe most obvious contrarian investment that I see isn\u2019t one that people are pessimistic on, it\u2019s one that people ignore totally,\u201d Rule said. \u201cIt requires patience, but that commodity \u2013 the most underpriced commodity that I see in the spectrum \u2013 is water.\u201d<\/p>\n

And Rick isn\u2019t the only one who sees water as an intriguing opportunity right now. Our own emerging markets expert Carl Delfeld<\/a> recently told Oxford Club<\/em> members:<\/p>\n

\n

\u201cDuring the last century, oil was at the heart of the global economy. Nearly every development in the financial news was somehow linked to its price and availability. But in the twenty-first century, I believe the price and supply of water will dominate the headlines.\u201d<\/em><\/p>\n<\/blockquote>\n

Carl also cites a World Bank estimate that global water demand<\/a> will actually double <\/em>every 20 years.<\/p>\n

\"Global<\/p>\n

Who else is making a big bet on water? None other than T. Boone Pickens<\/a>\u2026<\/p>\n

As Carl alluded to in his recent article in The Oxford Club\u2019s<\/em> Communiqu\u00e9<\/em>, Pickens \u2013 through a company he controls called Mesa Water L.P. \u2013 is the largest individual water owner in America.<\/p>\n

So what\u2019s so impressive about water?<\/p>\n

Politics, Politics, Politics\u2026<\/strong><\/h2>\n

In his article, Carl mentions that governments heavily subsidize water prices and like to keep tight control over water supplies.<\/p>\n

Hmm\u2026 Governments meddling in free markets? Who would have thunk it?<\/p>\n

Rick, who\u2019s based out of California, is especially knowledgeable about the situation in his own state.<\/p>\n

\n

\u201c[Water is] delivered politically, which means the market doesn\u2019t work. Which means ultimately the supply won\u2019t work because it\u2019s mismatched with demand. In California, we use water for such \u2018intelligent\u2019 things as growing rice in the desert and producing subsidized alfalfa.<\/em><\/p>\n

\u201c[Meanwhile] the highest and best use in the state of California is flushing toilets and brushing teeth. And yet we supply water to some farmers in California for prices in the range of $55-$60 an acre foot and we charge urban users $1600 per acre foot. But the delta between $50\/acre foot and $1500\/acre foot is a very, very, very interesting arbitrage \u2013 which is effectively political.<\/em><\/p>\n

\u201cPeople who have watched the movie \u2018Chinatown\u2019 understand something about the genesis of this politics. The takeover by the city of Los Angeles \u2013 fair and square by the way, purchasing it in the market \u2013 of the water in the Ojai Valley, united the agricultural community against urban users in the 1890s and 1900s. At that point in time, the state\u2019s economy was predominantly agricultural and the political power base in the state was rural rather than urban.\u201d<\/em><\/p>\n<\/blockquote>\n

The result, according to Rick, is 85% of the state\u2019s water resources being used to create 3% of the state\u2019s GDP. An interesting market anomaly indeed\u2026<\/p>\n

But considering most investors don\u2019t have the financial resources or the logistical ability to invest in actual water rights, how can average investors cash in on this arbitrage?<\/p>\n

How to Invest in Water
\n<\/strong><\/h2>\n
\n

\u201cThe simplest way to invest in water is to invest in water,\u201d Rule said. \u201cThe most leveraged ways might involve the technologies. But that involves being right or not being right about selecting among the best technologies. What I prefer to do is either own water rights or own companies that own water rights. I prefer for my own investing portfolio to treat water itself as a resource.\u201d<\/p>\n<\/blockquote>\n

Rick also provides a few guidelines of what potential water investors<\/a> should be looking for:<\/p>\n