Turning Water into Gold

The trick can be done in the Olympics, where winners get the gold. See the pic how it is typically done in my sport - waterpolo. While I know how gold is made from water, other still fantasize of turning the same trick on the Stock Exchange. The Wall Street Journal writes a misleading article on the Water Investments Industry, delicately suggesting in the one hand that it is fantasy, that there is no water industry as such but a construction supplier or municipal contractor business, yet avoiding to say it in so many words in an effort to avoid offending its investing readers. They end by suggesting that the industry may exist somewhere and that on the long long ran it may even be viable, like the 1999 Dickinson Fund.

Water may be the world's most critical commodity. But it has been a tough market for many investors to tap profitably.

I have been saying that for decades.

A flood of investment vehicles have hit the market, seeking to capitalize on the rising global need for clean water. But many of these investments have proved disappointing in the past few months, just as Wall Street has piled into the sector.

The craze for fantasy water stocks has caused that water related stocks are expensive, because investors have been forced to pour into a small set of perceived opportunities.

Many investors in the initial public offering of Mueller Water Products in 2006 expected demand for the company's valves, hydrants and pipes to hold up as long as water systems needed improvements. But since last June, amid a downturn in housing construction, Mueller's stock has plunged by roughly half. Still, it trades at a relatively pricey 32 times last year's earnings. "What you're buying is essentially a supplier to residential construction companies," said Rod Parsley, portfolio manager of the Perella Weinberg Partners Oasis Fund, an approximately $500 million hedge fund focused on water, clean technologies and alternative energy. Mueller also sells to municipalities.

Need I say more? Water stocks were sold as impermeable to recessions. Nonsense.

Water use drops in a recession: 40% of fresh water in the U.S. is consumed in industrial applications. That is why many water utilities have fallen recently on recession fears.