How to Buy the World's Cheapest Commodity

What is the cheapest commodity?  I've talked about natural gas, and how extraordinarily cheap it is.  In the April 5^th issue of the Resource Prospector, I said that buying natural gas at current prices is like "buying gasoline for 48 cents a gallon."

I've talked about coal too – and why I think it's still undervalued.  We're going to be using more and more coal every year, and so are China, India and Europe.  We can't escape this trend no matter how much we'd like to. 

And I've mentioned that while I'm still super-bullish on gold, I think silver can rise much higher, much faster in the near term. 

I've made the case for these commodities and others in past issues of the Resource Prospector, and I still think these trends are extremely strong. 

But there's one commodity I haven't talked about, indeed, that no one is talking about – and it's still as cheap as it's ever been. 

And more importantly, it will never go out of style.  Scientists call it "the universal solvent" for its unique ability to dissolve both acids and bases.  It's also used by oilmen to help pump the last barrels of oil out of a well.  Natural gas producers use it to fracture reserves to release additional gas.  

It's a vital component of every electricity turbine, every nuclear power plant, every hydraulic dam.  It's used to make clothing; it's vital for food production and essential to life throughout the planet. 

It's the world's most popular beverage.

You know it as water.  And you've probably been told all these facts before, that 97% of it is saltwater, and therefore undrinkable.  You might even have heard that much of the remaining 3% is locked up in glaciers and ice caps on the north and south poles.  

You probably also know that water, even the somewhat rare, safe-for-drinking variety is extremely cheap.  According to the American Water Works Association, tap-water costs the average American less than a penny a gallon.

What you might not know is that you can easily invest in water.  There are places in the world, most notably China, where the population is growing so fast that they have to throw billions of dollars at this resource just to ensure the bare minimum of their water needs will be met in the next 10 years.  

That's why the companies that treat water to make it safe to drink, and safe to dispose of, are compelling investments.  In fact, depending upon your perspective, the case for water could even be stronger than the case for oil, gold, coal or any other commodity.  While I could get by for a while without oil, I haven't got a shot without water.  I'd gladly trade my bottom dollar for a gallon of water if I was dying of thirst.  

But it's not just drinking water that's in demand.  Water demand is growing for use in agriculture, industry, cooking, energy production – the list goes on and on.  And we use a lot of it.  While you may only drink half a gallon a day, you used around 25 gallons during your last shower. And it takes 1,857 gallons to produce a pound of beef.

Regardless of your feelings on global climate change, pollution, or any of the apocalyptic scenarios promoted by the zaniest of environmentalists- you have to ask yourself:

Will there be more drinking water tomorrow, or less? 

I don't put too much stock in the idea that the world will end tomorrow because of manmade pollution, but I do think that a growing population coupled with even moderate amounts of groundwater pollution simply means that more people in more places will have less access to clean drinking water.

The problem (and implicit benefit) is that most people, myself included, really just can't get too excited about investing in water.  I took a 20 minute shower this morning, and I'm thinking about washing my car this weekend.  Water is so plentiful where I live in Vermont that many people do nothing but complain about the water on their property.  We're just coming off of mud-season, a time when the snow and ice in the mountains melts, and many non-paved surfaces are somewhat submerged in mud.

So it's tough to get amped up about investing in something so common.  But we should invest in water for all of the reasons I've laid out in this issue.  And while I have your attention, I hope that you take the opportunity to just do it. 

How?

Right now there's a water company in the SmallCap Investor Pro portfolio that specializes in wastewater treatment in China.  It is a small company, but there's some recent good news that makes for a more exciting entry point for this stock.  Yesterday the Wall Street firm Piper Jaffray just initiated coverage on the company.  Typically, when a firm like Piper Jaffray initiates coverage, it's a good sign for the stock.  It brings more attention to the company, and can have a domino effect as more and more investors and institutions buy up shares.  Click here to get more information on this water company and how to become a subscriber to SmallCap Investor Pro.   

Good investing,

Kevin McElroy

Editor

Resource Prospector

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