Why Investing in Water?

Dear PGM Capital Blog readers,

In this weekend’s blog edition, we want to discuss with you, the reasons for and how to invest in water.

AMOUNT OF WATER ON EARTH:
Water resources are sources of water that are useful or potentially useful. Water can be used for many purposes like; agriculture, industrial, household, recreational and environmental activities.

The majority of human uses require fresh water.

About Seventy percent of the earth’s surface is covered with water, below image shows the total volume of water on our planet compared with its size.

• Ninety-seven percent of the water on the earth is salt water.
• Two percent of the water on earth is glacier ice at the North and South Poles.
  • This ice is fresh water and could be melted. However, it is too far away from where people live to be usable.
• Less than 1% of all the water on earth is fresh water that we can actually use.
  • We use this small amount of water for drinking, transportation, heating and cooling, industry, and many other purposes.

 WATER FUNCTION IN THE HUMAN BODY:
On average, the body of an adult human being contains sixty percent water, for which most of the water in the human body is contained inside our cells.

A healthy sedentary adult living in a temperate climate should drink 1.5 liters of water per day.

This threshold of drinking water enables to balance water losses and keep one’s body properly hydrated. Water is a major constituent of our bodies and vital organs.

It provides five vital functions in our body :

• Cell life
• Chemical and metabolic reactions
• Transport of nutrients
• Body temperature regulation
• Elimination of waste

PEAK WATER:
Peak water may be the next of the peak natural resources, but it does not come without a huge price. Without freshwater, we will experience peak food at an accelerated rate. Without water, we will not be able to grow food, and thus peak water is peak food.

It is estimated that 70% of worldwide water use is for irrigation, with 15-35% of irrigation withdrawals being unsustainable. 

This is a considerable amount, when compared to that required for drinking, which is between two and five liters.

• For instance, wheat requires 500 liters of water per pound, and a pound of cheese takes about 2300 liters waters. Therefore, a cheese sandwich represents approximately 380 liters of water (and that’s just for a couple of cheese slices).
• On average it takes about 400 liters of water to produce one pound of corn. If that corn is then used as cattle feed, additional water is required for cleaning and processing. Factoring in feed and water, it can take around 1,800 gallons of water to produce a single pound of beef.
• It takes around 2,000 – 3,000 litres of water to produce enough food to satisfy one person’s daily dietary need.
  

In short, the more processed foods, meat and dairy we eat,
the more water we consume.

To produce food for the now over 7 billion people who inhabit the planet today requires the water that would fill a canal ten meters deep, 100 meters wide and 2100 kilometers long.

PGM CAPITAL COMMENTS:
When we compare all the peak problems humanity is facing, Peak water is the most serious one, because we can live without oil, silver, gold etc, but we cannot live without water.

Fresh water is a natural resource that is very renewable. The problem is that we have outpaced the earth’s capacity to produce fresh water. The population of humans has spiked in nearly a vertical line the last 100 years. In 1950, the world population was 2.5 Billion people. In less than 75 years, we have increased our population by nearly 5 Billion people.

The world population is expected to reach 9.34 billion by 2050.

A bigger question is what are we going to do if we run out of fresh water. Nothing, because there is no substitute for water. Even a decrease in water will have a dramatic effect on the daily lives of every human on earth. It is already affecting the poorest of nations, and the poorest of people. In some countries, they must choose between fresh water for humans or freshwater for nature.

A good example of this is how 14 years of drought has brought the level of the water in Leak Mead USA to its lowest level since the Hover Dam was built in the 1930s. Below video shows the details.

The receding shoreline at one of the main reservoirs in the vast Colorado River water system is raising concerns about the future of a network serving a perennially parched region home to 40 million people and 4 million acres of farmland.

The level of the water in “Lake Mead” is expected to drop to 1,080 feet above sea level this year — down almost the width of a football field from a high of 1,225 feet in 1983.

A projected level of 1,075 feet in January 2016 would trigger cuts in water deliveries to Arizona and Nevada.

By 2016, continued drought could trigger cuts in water deliveries to both the states of Nevada and Arizona.

Below table shows the top Ten Countries on the planet with the biggest reserves of renewable water

Source:

Mining and water pollution:
In some developing countries, with poor environmental laws and regulations, two highly toxic substances, can be released freely into the environment as a result of dirty gold mining.

• Cyanide is a rapidly acting and deadly chemical. Exposure to high levels of cyanide harms the brain and heart, and may cause coma and death. Exposure to lower levels may result in breathing difficulties, heart pains, vomiting, blood changes, headaches, and enlargement of the thyroid gland.
• Mercury poisoning is a type of metal poisoning and a medical condition caused by exposure to mercury or its compounds. Toxic effects include damage to the brain, kidneys and lungs. Mercury poisoning can result in several diseases, including acrodynia (pink disease), Hunter-Russell syndrome, and Minamata disease.

Fish and shellfish concentrate mercury in their bodies, often in the form of methylmercury, a highly toxic organic compound of mercury Species of fish that are long-lived and high on the food chain, such as marlin, tuna, shark, swordfish, king mackerel, tilefish, and northern pike contain higher concentrations of mercury than others.

Below chart shows the effect of mining for fishery and the food chain.

Please read PGM Ethical Values:

As a consequence of this due to high concentration of Mercury, Vanadium and Cyanide in the drinking water and food chain, the life expectancy is very low in countries with poor environmental regulation, laws and control.

Due to the above it is estimated that by 2025, fresh water shortages will be more prevalent among poorer countries where resources are limited and population growth is rapid, such as the Middle East, Africa, parts of Asia, South and Central America.

Based on the above we’ve nicknamed water as the “Blue-Gold” and strongly advise our readers to include water, food (Green Gold) and Oil (Black Gold ) in their globally diversified portfolio

We have discovered a great Global Water Exchange Traded Fund, which invests globally in mayor freshwater producing and purification companies, for which the top 10 holdings, which comprise 51.65 percent of all assets are:

Company

% Assets

PENTAIR PLC	7.02 %
GEBERIT AG-REG	6.68 %
UNITED UTILITIES GROUP PLC	6.22 %
AMERICAN WATER WORKS CO INC	5.82 %
DANAHER CORPORATION	5.28 %
SEVERN TRENT PLC	4.99 %
VEOLIA ENVIRONNEMENT	4.66 %
XYLEM INC/NY	3.63 %
ALFA LAVAL AB	3.54 %
SUEZ ENVIRONNEMENT CO	3.50 %

As can be seen from below chart the stock price of the ETF has increased with approx. 145 percent since March of 2009 and its year dividend from USD 0.20 a share in 2009 to USD 0.42 a share in 2013 an increase of 110%. (The company still has to declare its 2014 dividend)

Based on its fundamentals we have a BUY rating on this ETF.

Last but not least, before following any investing advice, always consider your investment horizon and risk tolerance and financial situation and be aware that stock prices don’t move in a straight line and that sharp corrections may happen in the short term.

Until next week.

Yours sincerely,

Eric Panneflek