One issue I've written about during the past few years is the lack of water of potable water globally, including in the U.S. Southwest, and access to fresh water in general, a situation that's been getting worse.
The issue doesn't seem to concern investors or politicians. The United Nations issued a report on the subject last week ("World Water Development Report 2015 -- Water For a Sustainable World"). It concluded that changes in government policies would resolve the issue. That lack of cognitive dissonance among the authors of the report is similar to the lack of understanding by politicians and investors about the water situation in the Southwest.
Although evidence continues to mount that the region is experiencing a water shortage and that supply may not be replenished naturally, awareness is still lacking. One possible consequence: In California, the accelerating rate of ground water depletion will trigger an earthquake along the San Andreas Fault.
For the past few years, as the drought that began in 2011 wore on, I've been expecting that awareness of the seriousness of the situation would resonate with voters, politicians and investors. I thought there would be a call for an increase in investment in water infrastructure. That hasn't happened.
Since I last wrote about the issue from an investment potential standpoint in September, the equities I listed have performed erratically even as the issue has become more pressing.
During the past six months, France's Veolia Environnement (VEOEY) has increased 7%, Israel Chemicals (ICL) has sold its water-treatment business to Japan's Kurita Water Industries (KTWIF), American States Water (AWR) is up 35%, California Water Service Group (CWT) is up 12%, American Water Works (AWK) is up 13%, Consolidated Water (CWCO) is down 19%, Lockheed Martin (LMT) is up 15%, and General Electric (GE) is down 1%.
The water exchange-traded funds that have a broader exposure to more individual companies do have performed even more poorly. PowerShares Water Resources ETF (PHO) is up 2%, Guggenheim S&P Global Water ETF (CGW) is up 3%, PowerShares Global Water ETF (PIO) is up 2%, and First Trust ISE Water ETF (FIW) has been flat.
The performance during the past five years has also been dismal in comparison with the broader markets, as both the S&P 500 and Dow Jones Industrial Average have outperformed the water ETFs.
Earlier this month, in an op-ed in the Los Angeles Times, Jay Famiglietti, a water scientist at the NASA Jet Propulsion Laboratory/Caltech and professor of Earth system science at University of California, Irvine, wrote: "California has no contingency plan for a persistent drought like this one (let alone a 20-plus-year mega-drought), except, apparently, staying in emergency mode and praying for rain."
For the past five years, residents and politicians in the Southwest, as well as investors, have believed that the drought would end, water supplies would be replenished, and no substantive action or investment would be necessary.
That belief seems finally to be giving way to a recognition that the current drought may not end soon and that action and investment are necessary and are already late.
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