Investment Themes for 2010, Part 5 — Oil & Water

Oil and Water: they’re two elements that, chemically speaking, do not mix. Yet, both do mix nicely as one investment theme I’m watching in 2010. Let’s take a look at each separately here, as they both represent potential opportunities for profits down the road.

In the case of oil, we know it’s the lifeblood of an industrial society. We also know that most of it is locked up in countries that are either hostile to the U.S. or in regions with very unstable political milieus. The volatile environment for oil is a veritable powder keg just waiting to explode with even a hint of real geopolitical turmoil.

I easily can see some kind of conflict taking place in the Middle East, particularly in Iran, that could cause huge problems — and a huge spike — in the price and availability of crude oil. If this happens, it could put a serious damper on world equity markets and the nascent global economic recovery. It also likely would mean big gains in oil and/or related energy ETFs.

As for water, well, that commodity is, in many regions of the developing world, literally running dry. We may not realize it here in the U.S., but our water infrastructure also is in need of a serious facelift. My friend Tom Lydon of ETFTrends.com recently wrote something that summed up the water situation quite well. “Water has become the most valuable resource of the 21st century. Its value touches down upon all socioeconomic aspects of civilization and is used in nearly every industry.”

I couldn’t agree more with Tom on the importance of water, and anything that important can be both a barometer of investment activity around the globe, as well as an opportunity to profit from ETFs that track the best water industry companies around.

With oil being the lifeblood of industrial society, and with available freshwater being essential to nearly every land-dwelling animal on earth, particularly humans, both oil and water represent potential investment opportunities in 2010 — opportunities that we’ll continue to explore here in the Alert.