Is water public or private?

• Indy sells its water
• Is water public or private?
• My coworker's favorite beer
• A Chinese clean-water stock

I was interested, and not surprised at all really, that municipalities in the United States have started to sell their water in order to help stem the tide of budget deficits.

From a story in The Wall Street Journal yesterday:

"Indianapolis is selling its water and sewer systems to a public trust to get money for crumbling streets and bridges. San Jose, Calif., fresh from cutting 49 firefighters, might take its water utility private. "Excess" tap water in Sacramento, Calif., is helping supply a Nestlé SA bottling plant."

You might be thinking that water is cheap - and that portioning off the public's water would not yield much cash.

Water might be cheap, but someone in Indianapolis apparently sees some value in owning it there. The City was able to sell off its water and sewer systems for $1.9 billion.

I want to step back and talk about the quandary of all public property. It's something of a contradiction in terms and concepts. Everyone is an owner of public property, but no single person can use public property in the same way that they would use their private property. So, it's not property in the same sense at all.

And yet, with a single bill of sale, the public property of Indianapolis has been turned into private property with the full auspicial privileges of that status.

I'm sure the new charitable trust that owns the Indianapolis water utility is somewhat limited in what it can do - but the fact remains: the city's water is now in private hands.

To listen to some people, you'd think the very notion of privatized water was impossible; people like Emily Wurth, a 'water advocate' quoted in The Wall Street Journal article: "We have fundamental problems with profiting from water, which is a public resource."

So...is it a public resource, or is it private property? Can it be both? If I buy a bottle of water does it still belong to the public? What if I fill my bathtub, or a swimming pool?

As a corollary - I just stumbled upon this article on Lew Rockwell's website about water rights. Apparently, it's illegal to have a rain barrel in Utah to collect rainwater that falls on your property. First, you have to apply for a "water right" to do so. Borrowing a term, it seems like fair use to collect rain that falls on your property.

So, Ms. Wurth's assertion is problematic at the very least. If it's wrong to profit from selling water, why would anyone be in the business of building new and better water purification devices?

Regardless of the public or private classification of water ownership, there's little dispute that clean-water technology is important. I'll make the further argument that public water is decidedly dirtier than private water - and because the public does such a terrible job, PRIVATE water and clean water technology companies are our only savior.

The worst polluted bodies of water in the world belong to the public. I'm speaking of places like the Yellow River in China, the Aral Sea in Kazakhstan and the Cuyahoga River in Ohio.

In the cases of the Yellow River and the Aral Sea, these "public resources" were systematically and purposely polluted, drained, diverted, and otherwise destroyed by the public for the benefit of....you guessed it: the public.

The Cuyahoga River was so polluted that it was classified (along with much of Lake Erie) as being dead - devoid of all marine life both plant and fish. And you might remember the Cuyahoga catching fire several times. There's even a popular beer in Cleveland called "Burning River Pale Ale."

Incidentally, the beer is actually pretty good. My coworker Elizabeth (a Cleveland native) tells me that it's her favorite, and reminds me that the Cuyahoga is much cleaner today, and it's no longer dead.

Back to my point: the public is uniquely well equipped to destroy the public resources it holds so dear. It literally takes the efforts of the entire public to damage rivers, lakes and oceans as effectively as possible.

But think about the privately held lakes, ponds and stretches of river and coastline - they're among the most fastidiously clean, pristine and safeguarded bodies of water you'll ever encounter.

Okay, I've talked before about owning shares of companies in the water treatment sector. It's an especially important business in China, where "the public" still owns almost all resources, not just water.

Until a couple months ago, Ian Wyatt held one such water treatment company in his SmallCap Investor Pro portfolio: Duoyuan Global Water Inc (NYSE: DGW).

Much of world's water - regardless of who owns it, if anybody - requires that we treat it before it becomes potable for human consumption.

Companies like DGW will make drinking water possible - and although the time hasn't yet come when water is truly expensive, that's a good sign for people buying water investments today. We're buying low.

If you have any water investments you'd like me to write about, please drop me a line at editorial@resourceprospector. com.

In the meantime, consider taking a position in DGW, it's in an uptrend about 10% off its 52 week lows. Anti-China sentiment is strong, and their water is terrible.

Have a great weekend,

Kevin McElroy
Editor
Resource Prospector

disclosure: no positions