Water - It Is a Good Place to Be in the Years Ahead, by Mike Farrell with aspenIbiz

When you think about commodities that are in demand and other hot items right now among traders, you probably don’t think of water. But you should as alternative wealth creating strategies in water are surfacing.

The pipelines that provide our drinking water cover a distance of a million miles … more than four times the length of the Interstate Highway System. Much of this pipeline is over 100 yrs old, has exceeded its useful life, and in many parts of the country, it is in a state of utter disrepair.

The fix will cost at least $500B over the next 20 years.

And, the renewable bio-fuel targets of the US Dpt of Energy can’t be met because we don’t have the water supply. It will take 2.5 trillion gallons of water to make 1 billion gallons of ethanol … this is more water than used by the farmers in the Central Valley and the population of Southern California combined. It takes energy to make water and water to make energy and we don’t have enough water to make the mandated biofuel … perhaps this is another conspiracy in the making.

As a result, the price of water in some parts of the world is rising … sometimes very quickly and it is rising right here in the good ole USA … especially in California.

Water rates in California have experienced a 71% increase in five years and despite these increases, water is still too cheap in Southern California.

Water is a resource that has been underpriced for 50 years … consumers pay $10 day for power and only $3 a day for water. Water costs more in Manhattan and New York City isn’t even a desert.

California is a good case study where the water crisis is in bloom and here are drivers of some of the issues and challenges ahead.

First – Supply Limitations. As the water flows down from the Sierra Mountains, it also flows through an estuary before it reaches the state’s water supply. The estuary was depleted due to excessive pumping which endangered a species of fish native to the river. A few years ago, a federal judge put limits on the amount of water taken out of the Sacramento – San Joaquin Bay Delta to protect the fish. The system is now delivering only 40% of the capacity as a result of these judge implied limits. At this point, even several wet years will not get the capacity back to 100%.

Second – Drought. Current reservoir levels are at all-time lows because California just had its third consecutive dry year.

Third – Aging Infrastructure. The system is no longer capable of supporting the increased population without significant investment.

To combat these problems, the state has done a number of things, including the price increases mentioned above. Yet because water is still so cheap, the increased water rates have not had much of an effect on water use so far. There is also an $11.1 billion water bond that will provide funds for storing water. And there is a search for new supplies of water.

Having picked all the low-hanging fruit, it is clear there is no single solution to the water crisis. There will be many ideas – conservation, desalination, and more.

For example, some companies are working on ways to capture the rain and snowfall from various mountain drainage and watersheds before it flows to natural dry lakes and eventually evaporates. The rain and snowfall will be stored and eventually delivered to major population centers in California via pipeline and pumping stations.

On the surface, it will appear that the value will be in the water provided for consumption and irrigation of crops grown on farms in the region. Yet the real value will not be the actual water or resulting farming but in monetizing the water rights.

Today’s investor portfolio should include companies that hold these water rights; companies that provide pipes, valves, seals, tanks, treatment plants, and pumping station equipment; firms that provide the engineering services to design and build these pipelines and pumping stations; and water utilities that operate and deliver quality water, that will better than most bottled water, to major metropolitan areas of California.

Water worries extend far beyond California and the America West … and it will be a good place to be in the years ahead. As goes California, so goes America.

I favor a quote from Steve Forbes … Forbes says that pursuing additional financial education and the resulting increase in our financial literacy will open our eyes to alternative wealth creating strategies and this will be they key to resolving our financial crisis.

As an example of alternative wealth creating strategies … consider investments in non dollar-denominated assets … perhaps emerging markets … perhaps energy assets that are inherently useful like oil rigs, hydropower, or methanol plants … perhaps water rights, precious metals, oil, natural gas, potash mines, or gold mines … things hard to build, difficult to replace, and costly to substitute … definitely not financial stocks, definitely not retail stocks, definitely not commercial property.

I trust this article provides a little more insight as to why water rights, pipelines, and water utilities continue to represent alternative wealth creating strategies.

I will continue to introduce alternative wealth creating strategies to consider like water rights and other like emerging markets, oil rigs, precious metals and potash mines, in future articles and updates here at my blog over the next few weeks.

You can find out more about Financial Education, Alternative Wealth Creating Strategies, Internet Marketing opportunities, Home-Based Businesses, and the global economy by reading updates that will be posted here at my blog over the next few weeks and by following me on Twitter.

As a former engineer with General Dynamics and management consultant at Deloitte … I am on a mission to empower individuals by increasing their financial literacy, improve their ability for personal sustainability, and contribute to the program that has a goal of creating 100 Millionaires by 2012.

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When not traveling for business or pleasure, Farrell operates his own internet marketing company and consulting firm from his home in the mountains of Colorado.

In closing, if you are a reluctant entrepreneur, a business owner, employed in an 8-5 job, or recently retired, yet still wanting to be plugged-in to the next wave of economic prosperity, you can join him in pursuing the lifestyle you want to live by following the aspenIbiz link provided above.