Yesterday I asked you to identify the next economic bubble or artificial shortage that is likely to form. You did better than I expected. The winning suggestion: WATER.

In order to have a good artificial shortage you need several things to be true:

  1. The commodity must be essential.
  2. There is a plausible "natural" explanation for the shortage.
  3. Only large companies have the resources to increase supply.
  4. The government is involved in some way.
  5. The media hasn't yet obsessed about it, but could.
  6. Inventions to solve the problem are noticeably absent.
  7. There are futures contracts for it.

Water has it all, except for the existence of futures contracts, as far as I can tell. Once you see a market for water futures forming, bend over. That's when the manipulation will begin. Crooks prefer manipulating financial markets over building reservoirs.

The plausible explanation for the worldwide shortage is that the population is growing faster than the supply of clean water. Add global warming to the mix and you have plausible explanations for worldwide droughts. That's the cover story. It's true enough to mask the artificial shortages that will be caused by the speculators and hedge funds.

So how can you invest and make money in water now, before the bubble tops?

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Jan 20, 2009
I didn't read all the comments, so probably someone said this already. I live in Argentina and although here water is cheap and it's not rationed, a few years ago we started to see how big foreign companies or holdings or whatever they are (mostly from the US and some European countries) started to buy big extensions of land. Or to get contracts until the year 2100 or things like that with our government to exploit the resources of those lands, the resources being, of course, water. So if you are looking for future contracts, look outside US borders and you will find plenty.
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Jan 18, 2009
Water rationing already happens in a lot of Australia; rationing, increased water supply prices and desalination plants are all part of the plans to ensure water supply, while at the same time people are growing rice and cotton in the desert - morons.

As for being screwed over and so on about water, the Aussie film Mad Max from about 1980 and starring Mel Gibson was all about water shortage leading to marauding gangs pursuing the precious resource; so the idea is not really very new, but still an interesting line of thought.
Jan 16, 2009
So... then we WANT the ice caps to melt, right?

A nice side benefit is a lot of douchebags will get covered up with water. Pleasanton is pretty high sea-level-wise, right?
Jan 16, 2009
Water. No doubt, desalination will be used. I know our buddies, just kidding, in the middle east use desalination plants.
Jan 16, 2009
you're behind the curve - watch "Flow" the movie (http://flowthefilm.com) - highly recommended.

water is an "artificial shortage"?? um... err.???

i'd take a closer look at the index fund you invested in. may be honest enough companies, but if it's any of the european water cartels, i'd stay well clear.

ps. if you drink bottled water you're a douche.
Jan 16, 2009
Saw a related article today about our possibly using bail out money to pay dairy farmers to retire some cows - to artificially decrease the milk supply; for the purpose of propping up milk prices. The last time this was tried, the "retired" cows were butchered and the price for beef got hammered. And the milk prices were only briefly effected as the farmers got more production out of their remaining cows - and the extra supply forced the milk prices right back down.
Jan 16, 2009
Scott, as an economics major you certainly must see the tragedy of the commons at work here.

The argument goes, water is too vital to put a price on, so governments MUST be the sole supplier. (And we all know how efficient and fair governments are.)

So you are absoluty right that there will be a water shortage, there will be rationing, and there will be rent seeking, where the connected will profit at the expense of the masses.

See David Zetland's comments at Aguanomics for interesting discussions on the potential for water markets. As a libertarian leaning person, I think you will find David's views interesting.
+1 Rank Up Rank Down
Jan 16, 2009
I'm gonna put Lake Michigan up for sale on eBay. I know there will be some takers.
Jan 16, 2009
Maybe dehydrating and storing water will help?
Jan 15, 2009
Whether the issue is water, land, or sky it still all boils down to energy. The kid on the block with the most energy wins. Water has to be found, pumped, processed and moved to the market. Water does not run downhill, it runs to money and votes. The Middle Eastern Cartels are already launching a multibillion dollar investment in renewable energy as they know oil is a finite recourse. They openly state they still want to export energy to the world when they have less oil. Talk about bending over, they still will be boinking us well into the twenty-first century if we do not get off our collective butts in this country and try to beat them at their own game. Hope we can do it.
Jan 15, 2009
I live in South East Queensland, Australia and all of the things you described above have occurred here over the last few years. We had failed to invest in water infrastructure for 20 years and then had a drought for 7 years and our dams were down to 10% however the main reason for the dams being so low was the huge population growth we have had without an increase in dams etc.
Anyway as usual the government went into panic mode at the last minute and we have just been gouged by the infrastructure companies building desalination plants and the recycled water grid in record time. Although who can blame them - if you have the opportunity to bid uncompetitively on a massive job that has to happen wouldn't you put in a massive price and see if the government is stupid enough to accept it?
Anyway luckily it has been raining a lot in the last 6 months so the dams are back to 50% (which is where they were designed to be as the biggest one was built for flood mitigation not as a reservoir) which means the pressure is off the government and they have gone back to competitive tendering for the remaining dams that need to be built.
Anyway all I can say is beware of low government investment in water - our crisis means we have spent $8 billion dollars on a desalination plant that is faulty and a recycled water pipeline that the government is now not going to turn on because we have an election coming up and people are freaking out about drinking recycled water.
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Jan 15, 2009
Inc. Magazine had a story about future water shortages. <a href="http://www.inc.com/magazine/20081101/blue-is-the-new-green.html">Blue is the new Green</a> is the name of the article. When I read that article, I kept visualizing scenes from The Road Warrior. You know, the moist robot known as Mel Gibson portraying the character Mad Max.
Jan 15, 2009
Up here in Canada, where we have the world's largest supply of fresh water and we consume more per capita than anywhere else in the world, it's been in the news for a while now. Mostly the smart news though that doesn't get a lot of attention and spends a lot of time talking to boring people who actually know what's going on.

The main reason we care is because we know that when you run out, there will be a lot of thirsty people with a lot of guns knocking on our door.

(I think my point is that there is some truth to it, and I hope it goes the way of Y2K as you described; big enough problem lots of smart people = problem fixed without too many people dying)
Jan 15, 2009
So, what you mean to say is, how do we be the screwer and not the screwee?
Jan 15, 2009
It already happened where I live. Water is carefully rationed and very expensive. The reason given is the same as you mentioned. Whether it is artificial or not, I don't see why this trend won't continue to expand throughout the country.
+2 Rank Up Rank Down
Jan 15, 2009
I do not agree with the criteria suggested to create a bubble. For example, bubbles are not formed by commodities, and there does not need to be a shortage (The Internet bubble). Large companies have better access to capital, but if demand is not there, no bubble will occur (The tulip bubble). Criteria 5 & 6 are backwards. The idea is to get everyone on board - and quick! - which therefore hyperinflates the particular sector/industry. You can't do that if you're squirreling your bubble away in a garage. Bubbles need media exposure, and lots of it /prior/ to it developing.

If you're interested in learning about economic bubbles, may I suggest this article:


Here is an excerpt:

"We have learned that the industry in any given bubble must support hundreds or thousands of separate firms financed by not billions but trillions of dollars in new securities that Wall Street will create and sell. Like housing in the late 1990s, this sector of the economy must already be formed and growing even as the previous bubble deflates. For those investing in that sector, legislation guaranteeing favorable tax treatment, along with other protections and advantages for investors, should already be in place or under review. Finally, the industry must be popular, its name on the lips of government policymakers and journalists. It should be familiar to those who watch television news or read newspapers."

The article goes on to make a convincing argument for Alternative Energy as the next bubble.
Jan 15, 2009
Private wells can and will be outlawed. It will be illegal to take ANY water from any running stream. Collection systems will be outlawed. For all you who will depend on solar stills for your water supply, I hope I live upwind. Best bet is to begin contributing (heavily) to the biggest crook in politics you can. In short, if you are a working stiff, you’re as hemmed in as a rabbit at the yearly Bunny Bop.
Jan 15, 2009
If you really think that water will sufer from a shortage then I would suggest investing in desalination. The earth has roughly 70% of it's surface covered in water, most of it is too salty to be drinkable but if we can create an efficient desalination process our water worries would be over.
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Jan 15, 2009
Forget that. If the government was willing to fabricate a weapons of mass destruction story to get at mid-east oil, I damn well expect them to come up with something awsome to secure our clean water supply.
I believe our neighbor/neighbour to the North conveniently happens to have the world's largest fresh water supply. We just need a good cover story to use at the UN. Some possibilities.

-According to a Dialy Show episode I saw recently, the Queen of England still has real power in Canada. Well we've bled for our freedom too many times to let the monarchy builda new empire, unchecked, just across our border.
-We need to secure the North West Passage for all teh world's people, not just for polar bears.
-Quebec's got the bomb.
+2 Rank Up Rank Down
Jan 15, 2009
I live in the REAL Northern California, home to 2 multi-national -corporate-owned water bottling facilities...and where a 3rd one has been trying to gain a foothold for 2 years. Yup, they take water out of the ground, bottle it, and ya'all pay 1-3 dollars a bottle to drink it...and, here, we hear about 'the drought' all of the time. Experts routinely predict it will take a decade of heavy rains to replenish our water supply.

As we speak, legislation is moving through to require rural homeowners to ante up as much as 45K and a yearly fee, too, to ensure their septic systems don't pollute groundwater. Which sounds good, but 25 feet of sand purifies water at a fraction of the cost...

Government conspiracy? Hmmm
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