Tuesday, April 1, 2008

Water's Slippery Seduction

From the Wall Street Journal:

Investors Flood Sector
Amid Economic Falloff,
Limited Opportunities

Water may be the world's most critical commodity. But it has been a tough market for many investors to tap profitably lately.

Since last summer, a flood of investment vehicles have hit the market, seeking to capitalize on the rising global need for clean water. But many of these investments have proved disappointing in the past few months, just as Wall Street has piled into the sector. For one, water-oriented stocks -- from big conglomerates like
General Electric Co. to water utilities to equipment suppliers like Mueller Water Products Inc. -- also are exposed to broader economic problems, including the housing slowdown.

The economics of water treatment and delivery itself look compelling. An acute shortage of clean water in many regions has been worsened by population growth and by competition from industry and agriculture.
More than one in six people lack access to safe drinking water, according to the World Water Council. Global spending to treat and purify water, and to improve the often-dilapidated infrastructure that stores and distributes it, amounts to hundreds of billions of dollars a year, and rising.
Investors can't trade water like other commodities, because it isn't priced on a global market. It is heavy and the cost of transporting it is many times its value, so it lends itself to regional markets