Market Overview

Are You Ready for Water to Become a Globally Traded Commodity?

I couldn't help but notice a new ad on Yahoo! Mail from Fidelity Investments that boldly asks, "Are you ready for water to become a globally traded commodity?" Given the world's economic climate, geopolitical issues, and the planet's track record with oil, I personally would say, "No, I am not ready for water to become a globally traded commodity." I don't want to even imagine living in a society where grocery stores advertise the price per gallon of water on big signs by the side of the road that you can see from the highway. Nevertheless, there are factors that suggest that water will be the world's most sought-after commodity in a handful of decades.

The video accompanying the Fidelity Investments ad is as thought-provoking as it is ominous. The video discusses the respective costs in water to make items like a slice of bread, a cup of coffee, and a hamburger. From the video: "With global population expected to increase by 30 percent by 2050 and more developing nations transitioning to higher standards of living, regional water shortages and peak water issues will become more widespread." The issue of water becomes more complicated in considering the accessibility and availability of drinking water in the years to come. From the video: "Global consumption of water is expected to increase by 40 percent over the next 20 years. And according to some estimates, more than half of the world's population could be living under conditions of water stress by 2025." Thus, the video suggests that water stress could intensify geopolitical affairs and "border disputes" related to the water supply.

Even worse, "as water constraints rise, so will food costs." The video portends that as everyone needs water and as the quantity of water on the planet is fixed, the world will need to rely on desalinization efforts, water reuse, and conservation in the future. From the video: "Water...becoming a more costly and regionally more scarce resource will have massive economic, ecological, and geopolitical implications. Think about it." After watching the video, to be honest, I am not too certain as to whether Fidelity Investments wants us to make use of their investing services or run and hide in a doomsday bunker.

Whereas water will likely be an issue in the coming decades and whereas water may become a globally traded commodity one day, I'm not sure if it was the intent of Fidelity Investments or not, but after watching the video, I couldn't help but feel a Kafkaesque chill in the air...enough to cloud even the mind of a bullish investor. It's as if one would ask, "If water scarcity is going to lead to the next world war in a future global dystopia, what is the point in investing in anything?" Seriously, after watching that video, I'm kind of wondering, "So are you saying that we should we be investing in water purification and desalinization technology and conservation, or are you saying that we should be investing in space colonization efforts?"

In any event, I asked in an article late January, "Oil is currently the centerpiece commodity of world trading, but with the fears of a possible water crisis, might water be the world's next oil?" In terms of possible trading and investment ideas, I previously mentioned PowerShares Water Resource ETF (NYSE: PHO) and American Water Works Co., Inc. (NYSE: AWK). In terms of ETFs, other possible trading opportunities include the PowerShares Global Water Portfolio (NYSE: PIO), Guggenheim S&P Global Water Index (NYSE: CGW) and First Trust ISE Water Index Fund (NYSE: FIW).

As for water stocks, traders can take a look at Aqua America Inc. (NYSE: WTR), the York Water Company (NASDAQ: YORW), California Water Service Group (NYSE: CWT), American States Water Company (NYSE: AWR), and SJW Corp. (NYSE: SJW). Water could prove to be quite a lucrative commodity in terms of trading and investing in the not-so-distant future. That being said, the downsides of scarce water should not be overlooked. One has to wonder what human civilization would look like on a planet where half of the global population (numbered in the billions) is living in a state of water stress. Such prospects seem to raise questions regarding the viability of humanity going forward -- and in light of pollution and environmental issues, perhaps questions of the legitimacy of humanity as well. With hope, developments in technology and an emerging Zeitgeist of humanistic economic maturity will work to ensure that there is enough drinkable water for the planet's population.

ACTION ITEMS:

Bullish:
Traders who believe that believe that water will become a globally traded commodity in the near future might want to consider the following trades:

  • Go long on the ETFs and water stocks mentioned above.
  • Traders could also check out possible real estate investments related to key geographical locations for water.

Bearish:
Traders who believe that the global economy will utterly collapse bringing about the fall of human civilization before water even gets a chance to become a globally traded commodity may consider alternate positions:

  • You could short the above, or you could always store up bottles of water in the basement. Technically, one might still consider that an investment in water.

Neither Benzinga nor its staff recommend that you buy, sell, or hold any security. We do not offer investment advice, personalized or otherwise. Benzinga recommends that you conduct your own due diligence and consult a certified financial professional for personalized advice about your financial situation.

Posted-In: Long Ideas Specialty ETFs Commodities Psychology Economics Markets Trading Ideas Reviews Best of Benzinga

 

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