Water is similar to what oil is or once was -- undervalued and taken for granted, and consumers could soon pay a real price for it. Analysts say increased demand for clean water has been driving up the cost, bad news for a world already concerned about rising food prices. Agriculture is the world's top water user, accounting for an estimated 70% of total global consumption. The world's scarcity of clean water is widely known, yet it's still one of the cheapest commodities in the world. Municipal water rates have climbed by an average of 58% in Canada, 50% in South Africa, and 27% in the U.S., according to an Earth Policy Institute report issued last year. In a survey of 14 countries, average municipal water prices ranged from 66 cents per cubic meter in the U.S. up to $2.25 in Demark and Germany, it said. Demand for corn to create ethanol has helped lift corn prices to their highest levels ever. "Demand for corn at ethanol plants is huge, but demand for water for ethanol plants is even bigger," said Kerr, who is also president of Kerr Trading International. Ethanol is very water intensive, said Mayer.So droughts can reduce the global harvest and the water crisis can "naturally feed inflation," said MoneyandMarket.com's Brodrick. "As water prices rise, there is a mighty river of profits, just waiting to be tapped," said Brodrick. As water is becoming a critical resource throughout the world, it is also turning into a commodity that can be traded. A sure sign of it is the slow emergence of water hedge funds. Buying stock in companies that make bottled water is a good option. And there are water exchange-traded funds, such as PowerShares Water Resources Portfolio , which hold a basket of stocks of companies involved in the production, treatment and distribution of water, said Brodrick.   more »

In light of the recent rise in crude oil and other commodity prices and the influx of new investors into commodity futures markets, the Commodity Futures Trading Commission (CFTC) is announcing the formation of an interagency task force to evaluate developments in commodity markets. The CFTC is looking at changing commodity rules to force big funds to disgorge multi thousand contracts positions. We could be looking at a forced liquidation – similar to the silver liquidation that happened in the big metal run up and silver corner by the Hunt brothers. That episode resulted in huge losses for the Hunts – who were forced out at huge losses after they tried to corner the silver market.The entire world is up in arms about the energy and food shortages. It does not matter that the shortages are the real culprits. The fact is, pretty much all the nations are getting ready to force speculators out of these markets.The fact is that, in a world food crisis, this is going to force poor people to pay – tribute – to big investors to eat. The world governments are not going to allow that to happen if they can stop it.   more »

Gartmore head of global emerging markets Chris Palmer is net short Indian stocks and is concerned about government interference in private enterprise and a lack of financing for growing firms, he told Reuters. Palmer, who manages a range of portfolios including the $1 billion (513 million pounds) Gartmore Sicav Emerging Markets fund, said his long-only funds have been cutting back exposure to India, while his hedge funds are net short. Shorting means betting on a lower price for a security in the future. "Public policy in India has deteriorated substantially in the last two years," he told the Reuters Investment Outlook Summit in London. "Policy towards pricing, how private enterprise can price their services and goods, the level of government interference in the general price levels is accelerating," he said.   more »

Is it likely for hedge fund fees to come down? Scott Frush grapples with these and more questions in ‘Hedge Funds Demystified’ (www.tatamcgrawhill.com). He is of the view that the issue is not ‘if’ but ‘when’ hedge fund fees will decline overall. Asset-based fees are most likely to remain largely intact and untouched, but performance-incentive fees will see pressure owing to two primary factors, Frush foresees. The first factor is that with so many new hedge funds being established, managers will reduce their rates from the typical 20 per cent of profits. Second, with many institutional investors increasing their allocations to hedge funds, pressure to reduce rates will increase, he adds. “These institutions will swap capital invested for a reduced rate – a quantity discount of sorts.” Another prediction of the author is that soon hedge fund investors will be able to hold index-based derivatives, now in their infancy. “In addition, hedge fund indices themselves will improve because there is a concerted effort by data providers and hedge fund managers to provide the best data possible to construct acceptable indices.”   more »

Raw cotton prices are witnessing a surge owing to a fall in global production by up to 5-7% this year and greater demand. Till May 2008, more than 95 lakh bales of raw cotton were exported to countries like China, Pakistan, Bangladesh and Taiwan," said Anandbhai Popat, secretary of Saurashtra Ginners Association. According to experts, the main reason for the fall in production is a shift by major cotton producers like the US to more lucrative crops like corn. Besides India and the US, China and South Africa are the other major producers of cotton."US hedge funds are looking at cotton as a lucrative investment. Moreover, rising demand for cotton has led to the price escalation. The price of US cotton for December 2008 future contract has witnessed a steep hike - from 70 cents per lbs to 98 cents per lbs in the last two months, coming down to 82 cents per lbs at present," said Mr Popat.   more »

There is a tremendous hype all over the world about the wonders of investing in timber, rhodium, carbon emissions credits, private equity funds and various ETFs (Exchange Traded Funds) that seek to double the return of wheat, corn, soybeans and the like. Each week, over the last four months, between $5 billion and $10 billion of fresh money has poured into the Goldman Sachs Commodity Index, the Dow Jones-AIG Commodity Index and other Index Funds, which now total over $200 billion. Hedge funds, banks and pension funds have poured capital into oil trading in recent years, betting that demand will outstrip supply. Such bets have become self-fulfilling prophecies, helping to push prices higher. Trading volume in commodity futures and options contracts has soared across the globe, with the number of agricultural contracts gaining 32 per cent from a year earlier, followed by industrial metals and energy products, which increased by 29.7 per cent and 28.6 per cent respectively, according to the Futures Industry Association.With a global slump in economies, speculators have moved from stocks to commodities.   more »