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World Water Usage: Why Investors Should Look These Water Investments (CGW, CWT)

July 22nd, 2011

Sean Brodrick:  This summer, I drove through New York and Canada, and then spent some time in Maine. And I had the opportunity to observe two great water resources — Niagara Falls and the state of Maine itself. I’ve learned some statistics on both that might startle you.

And the world, even the United States, is in a pickle when it comes to water resources.

Here are some of the scary statistics on world water use:

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  • 70% of the earth’s surface is covered with water, but 3/10th of 1% of all the world’s water is usable by humans.
  • Water scarcity affects one in three people on every continent, according to the World Health Organization. The situation is getting worse as needs for water rise along with population growth, urbanization and increases in household and industrial uses.
  • At home the average American uses between 100 and 175 gallons of water a day. That is less than 25 years ago, but it does not include the amount of water used to feed and clothe us. But there are a lot more Americans now than there were back then.

Fact is, water is one of the resources the world the world will probably be fighting over in the 21st Century. We Americans don’t think about it much because North America is blessed with a disproportionate amount of the world’s drinkable water.

The Great Lakes — America’s Bathtub!

For example, 20% of the world’s freshwater lies in the Great Lakes, and four of those lakes drain and flow over Niagara Falls.

The Niagara Falls aren’t particularly high — only 188 feet. It’s the tremendous amount of water that flows over them that makes them so spectacular. During peak season, more than 100,000 cubic feet or 3,000 tons of water go over Niagara Falls per second. That’s enough to fill 1 million bathtubs every minute.

My family and I got an up-close look at Niagara Falls this summer. On the Canadian side, we were able to enter tunnels that take you right under the falls. The noise is huge and thundering. We also rode one of the Maid of the Mist tour boats that goes right up to the falls. It was awesome!

The U.S./Canadian relationship concerning Niagara Falls is one of friendly cooperation. It wasn’t always that way. During the three-year war of 1812 between the United States and Great Britain, more than 80% of the land battles took place along the Niagara River. We can only hope that things remain friendly, eh?

The State of Maine — Big Stretches of Drinkable Water

So that was my trip to the largest freshwater resource. As for America’s purest freshwater resource? While there is some argument about this, arguably, the largest purest water region in the United States is in Maine. It has 3,000 miles of rivers, streams and lakes.

Whereas the aquifer around the Great Lakes was filled by melting glaciers thousands of years ago, Maine’s aquifers are constantly replenished by an average 42 inches of rain a year. That’s 24,000,000,000,000 (24 trillion) gallons of water spread over Maine.

About 35% of that rainfall evaporates, 50% runs off into rivers and into the sea, and 15% ends up as groundwater. That’s still 3.5 trillion gallons annually. That water is filtered through forests into Maine’s granite and gneiss bedrock.

At one time, Mainers made a lot of money exporting their water — as ice, in what was called the “frozen water trade.” That was in the days before refrigeration. In fact, it’s said the high prices charged by the Maine ice merchants was one of the incentives behind the development of refrigeration, which became more economically feasible with higher ice prices.

Nowadays, bottled water is big business in Maine. A few years back, a group of Mainers got sick of big companies taking all the water for free, and tried to institute “Maine’s Water Dividend Trust,” that would have added a 20-cent-per-bottle charge onto bottled water drawn from Maine’s aquifers. It didn’t get far, though.

Probably that’s due to lobbyists, but also it’s hard for run-of-the-mill Mainers to get worked up over water. That would be like someone from Saudi Arabia making a fuss over sand. In fact, Maine is called the “Saudi Arabia of Water.”

As Ben Franklin said, you don’t really know the worth of water until the well’s run dry.

Now if you tried to put a charge on Maine’s ice cream — in a state where you can see the cows that gives the milk contentedly eating grass next to the dairy that serves the world’s best ice cream out front — that might be something worth fightin’ about, ayuh.

Some Parts of the United States Are Water-Poor

Not everybody in the United States is as lucky as the folks in the Great Lakes region or people in Maine. Here’s a recent U.S. drought map:

Despite flooding along the Missouri this year, the like of which we haven’t seen in a century — if ever — large parts of the south are suffering under the worst drought we’ve seen since the Dustbowl.

America has stopped building cities in the desert, but that’s due more to the housing market crash rather than any sudden awareness about how precarious our water supply is.

2 Ways to Invest in Water

There are a number of ways to invest in water. Here are two I like:

1) The Guggenheim S&P Global Water Index ETF (NYSE:CGW). This is one that has been a good bet for my Crisis Profit Hunter subscribers. It holds a basket of international water-related companies. And it recently sported a 1.9% dividend yield, too.

2) California Water Services Group (NYSE:CWT) is, as you might guess, a California water utility. It sports a 3.2% dividend yield.

Yours for trading profits,

Written By Sean Brodrick From Money And Markets

Money and Markets (MaM) is published by Weiss Research, Inc. and written by Martin D. Weiss along with Nilus Mattive, Claus Vogt, Ron Rowland, Michael Larson and Bryan Rich. To avoid conflicts of interest, Weiss Research and its staff do not hold positions in companies recommended in MaM, nor do we accept any compensation for such recommendations. The comments, graphs, forecasts, and indices published in MaM are based upon data whose accuracy is deemed reliable but not guaranteed. Performance returns cited are derived from our best estimates but must be considered hypothetical in as much as we do not track the actual prices investors pay or receive. Regular contributors and staff include Andrea Baumwald, John Burke, Marci Campbell, Selene Ceballo, Amber Dakar, Maryellen Murphy, Jennifer Newman-Amos, Adam Shafer, Julie Trudeau, Jill Umiker, Leslie Underwood and Michelle Zausnig.

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