Macro Tsimmis

intelligently hedged investment

BUY PowerShares Water Resources (PHO)

Posted by intelledgement on Tue, 02 Jan 07

Most reading this buy recommendation probably have no direct experience with lacking water for daily use. But less than 3% of the water on the planet is fresh water, and about two-thirds of that is frozen at the poles or glaciers. So the supply of fresh water for use by humans and other land animals is quite limited. There are already many countries where a substantial proportion of the population does not have access to convenient supplies of potable water…let alone enough for agriculture, cooking, washing, plumbing, etcetera. This scarcity is projected to grow more serious by 2025, when, barring an unanticipated reversal in demographic trends, most of southern Asia including China and India, most of Africa, and most of South America will face severe imbalances between fresh water supplies and demand. So by no means is all the demand in poor countries which cannot afford to pay for solutions.

Accordingly, the efforts now underway to improve supplies of potable water, the treatment of water, and the technology and services that are directly related to water consumption are presumptively “good” investments in both senses of the word: that is, both likely to create value and generate a superior ROI and likely to result in the advance of civilization…or, at least, reduce the odds of a precipitous decline.

The PowerShares Water Resources ETF—which invests with the intent of matching the Palisades Water Index—has not been around long, but so far has met at least the first of those criteria: in its first year-and-three-weeks of existence (6 Dec 05 to 29 Dec 06), the fund had an ROI of 19.5% as compared with the S&P 500’s ROI of 12.2%.

For more information about the PHO ETF, check out the PowerShares website.

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