ETFs

Three Ways To Play Blue Gold

By Kevin Grewal

As global populations continue to grow, advancements in medical technology continue to prolong life and developing economies add wealth, the global demand for water will likely surge.

 Water is a commodity that is absolutely essential to life and is becoming increasingly scarce.  At current rates, it is expected that demand for potable water will grow 6% annually.  This, in conjunction with natural disasters and the water shortage already seen in many parts of the world, make the commodity extremely attractive.

The demand for water is well known, but what is expected to truly support price movements in the commodity is supply.  Granted, the globe is comprised mainly of water, but of this water, a mere 1% can be used for by populations for agricultural production, industrial uses and human consumption. 

According to recent government data and reports, water infrastructure all over the world, including the United States, is crumbling and will soon need a major overhaul.  To make it even worse, investment in the sector is virtually non-existent and almost every nation is well behind in water system upgrades. 

Additionally, global warming and Mother Nature are taking their toll on blue gold.  Biological scientists have reported that soil moisture levels on earth are declining and will likely lead to a depletion of fresh water tables around the world.

With all things in mind, there will come a point where water shortages will force an influx of investment into the sector on both the domestic and international stage enabling companies who specialize in extraction, treatment and water conveyance to reap the benefits.  

Some ETFs to consider are:

  • PowerShares Water Resources (PHO), which closed at $17.28 on Friday
  • Claymore S&P Global Water (CGW), which closed at $18.76 on Friday
  • PowerShares Global Water (PIO), which closed at  $18.70 on Friday

Although both macro and micro economic factors suggest that an investment in the global water sector is inevitable, it is important to keep in mind the inherent risks involved when investing in equities.  A good to way to protect against these risks is through the use and implementation if an exit strategy which triggers price points which represent abnormal price weaknesses and indicate that further price weaknesses are likely to follow.

According to the latest data at www.SmartStops.net, the price points for the aforementioned ETFs are: PHO at $16.87; CGW at $18.30; PIO at $18.17.  These price points fluctuate on a daily basis and reflect changes in market conditions.  Updated data can be found at www.SmartStops.net.

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