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Blue Gold, Again

Written by Brian Hicks
Posted April 18, 2005

Dear Wealth Daily Reader:

It makes you wonder. What's the market seeing on the horizon that has it in such a bad mood?

And why is everything under the sun selling off, while the most essential elements of life - water - is skyrocketing in value?

Of course here at Wealth Daily, we think we know all the answers. And if we don't, we won't let you think differently.

Bottom line, we like things that are easy to understand. (You may have noticed that we don't talk about Ray Kurzweil anymore. Browsing his website was like trying to understand what makes Michael Jackson tick.)

We're simple men. Water is simple to understand. It's essential to human life. If I were to include Maslow's Hierarchy of Needs in today's WD, water would form the base of the pyramid, along with food, air, sleep and sex.

As I was telling a prospective employee today, who wants to write for WD, water was important 2000 years ago. It's important today. It'll be just as important 2000 years from now.

Last Friday, I showed you a chart of the Dow Jones Water Index. It's trading near record highs. If you need to see again, here it is: DJ Water Utilities Index

In short, water is hot.

And so is my #1 water stock, a tiny $220 million company that converts undrinkable seawater into potable, life-saving water.

Well, that stock made another all-time record high today.

My guess is that the stock is going higher and higher. It's a stock you definitely want to own for the long- term.

Like all stocks, it'll correct. But on balance, the stock is headed to a $1 billion market cap. Yeah, I know, I'm a bit conservative, considering that Google currently trades at a market cap of $51 billion.

But even that dramatic discrepancy pales in comparison to what hit the wires over the weekend.

You may have given it a thought or two in the past of what you would do if the world ran out of water. It may have prompted you to turn off the faucet while you were brushing your teeth, or to turn off the sprinkler for the grass for a couple days.

But, imagine if you lived somewhere outside the United States, in say Egypt, whose population of more than 68 million receives essentially no rainfall.

All agriculture in Egypt is irrigated by seasonal floods from the Nile River, and from water stored behind the Aswan High Dam. Any interference with water flow by Sudan or Ethiopia could starve Egypt.

Or, how about China, which has about 22% of the world's population, but only 7% of all freshwater runoff?

China's freshwater supplies are estimated to be capable of sustaining 650 million people, roughly half the population.

About 2.5 billion people worldwide lack water sanitation services, and 5 million die from waterborne diseases each year, according to Global Green USA, the American arm of Green Cross.

Nearly 1.2 billion people do not have clean water to drink.

Yes, the majority of the world's people face a real water crisis on a daily basis.

It's gotten so bad that former Russian president Mikhail Gorbachev is pressing world leaders to adopt a treaty guaranteeing clean water and sanitation for their people.

He described the task as more daunting than ending the nuclear arms race during the Cold War.

Yeah, that's pretty accurate.

Dwindling water supplies and political resistance have hampered efforts to bring fresh water to poor people around the world, the former Soviet leader said Friday in an interview with The Associated Press.

"We were able to solve the nuclear arms race because of ... political will," he said before an awards banquet held by his American environmental group, Global Green USA. "Today we don't see that political will. But I think it will emerge that leaders will have to address this problem."

Gorbachev will call for a first-ever international water treaty during an April 21 keynote address to the U.N. Commission on Sustainable Development.

He envisions a binding agreement that makes access to water and basic sanitation a human right, holds nations responsible for providing it, and governs how freshwater resources are managed and shared.

*****

However, like all valuable resources, we're not confident that nations "owning" water will see it as a basic human right. They'll see it as a bargaining chip, and blue gold.

Until tomorrow,

The Phantom Trader
Wealth Daily
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