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  • Opportunities in the Real Crisis: Water
    Those of you commenting about expropriation are very likely correct; I would not buy a water utility as they tend to own what they own and serve local markets that are not directly influenced by prices elsewhere. If they have water perceived as being needed elsewhere on the same continent, it will be taken from them by force. If not, their opportunity for profit would be limited anyway.

    However, if you look at the names the author mentions, they are not in that business. It does not hurt them for a government to steal a water source; whoever controls the water will still need systems to purify and deliver it. Mr. Summers's thesis is clear, even if he does not say it explicitly: water is a commodity, but it cannot be valued like one because of the difficulty in asserting ownership rights to it, its unlimited availability, and the thoroughness with which nature recycles it. Instead, one must make money in the continuous business of treating and delivering water. In many ways, this is much better than, say, mining copper: once a pound of copper is out of the ground and in pure form, the miners have made all the money they will ever make on that pound. It will now sit in a building somewhere for 100 years as a wire or pipe. But once a litre of water has been treated and delivered, it goes right through its consumer and back into the water purifier's intake.

    The analogy with other commodities is not the oil companies, drillers, or miners, but rather the companies that recycle scrap metal and those who make the fuel filters used by the cranes in the scrap yards. To simplify it a bit further, the razor is free, these guys make the blades, and everyone has to shave every day starting the day he or she is born. I much prefer water plays servicing treatment and distribution infrastructure and manufacturing components and consumables over treatment plant owner/operators (those can be easily seized). And, unusually for me, I prefer US and Canadian companies in this space because people desperate for water will do pretty much anything. These countries have relatively plentiful and uncontested water resources, so private entities making water-essential equipment are not unusually likely to be nationalised, and the US military should be strong enough to make it cheaper for foreign governments to buy these products than to send soldiers here to steal them. That's about the best water investors can ask for when it comes to geopolitical risk.
    Aug 09 10:50 am |Rating: 0 0 |Link to Comment |View article

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