Water is one of the most important and necessary resources in the world – so why are exchange traded fund (ETF) investors having such a hard time making gains that are more in line with the soaring demand?

First Trust ISE Water (FIW) is down 6.4% year-to-date; PowerShares Global Water (PIO) is down 8.6% year-to-date; PowerShares Water Resources (PHO) is down 10.2% and Claymore S&P Global Water (CGW) is down 9.6%. Other scarce commodities, such as oil and wheat, are at record prices. What gives?

The fact of the matter is, water isn’t like other commodities.

More than one in six people lack access to safe drinking water. The cost of treating and purifying water amounts to hundreds of billions each year. And access to clean water has been hurt by population growth and competition from industry and agriculture, say Carolyn Cui and Ann Davis for the Wall Street Journal.

But it’s not so cut-and-dry. Water is not priced on a global market. It’s heavy, and transporting it costs many more times its value. Depending on who you talk to, we’re in a recession, and water use drops in one. Currently, 40% of fresh water in the United States is consumed in industrial applications.

Over the long run, things look better. The United Nations Population Fund sees global consumption of water doubling every 20 years. The power industry is one of the biggest users. The food industry use another big consumer: hundreds of gallons are used to produce 2.2 pounds of wheat.

Meanwhile, can the water shortage be helped by Segway inventor Dean Kamen’s newest contraption, a water purifying machine?


The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Mr. Lydon serves as an independent trustee of certain mutual funds and ETFs that are managed by Guggenheim Investments; however, any opinions or forecasts expressed herein are solely those of Mr. Lydon and not those of Guggenheim Funds, Guggenheim Investments, Guggenheim Specialized Products, LLC or any of their affiliates. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.