Friday May 18, 2012
A alert TMP reader asks about coal. Indeed ACI PCX JRCC are all below book value.
The President has said that under his administration one an build a coal fired generating plant but one would go bankrupt. I take him at his word. He failed to pass Cap and Trade, after setting up lucrative deals for his buddies like Franklin Raines in trading carbon indulgences, and now has the EPA doing the same thing.
I reported this morning that RUSH Enterprises believes we will go from diesel to natural gas for commercial trucks.
I goggled generating plants switch to natural gas' I suggest you do the same. Here is a typical article
Switch Away from Coal has Begun at Iowa Power Plants
This is of course now playing well with coal mining unions. A convicted felon from Texas garnered 40% of the vote against Obama.
My conclusion is that if Obama remains President and does not have to stand for re-election, he will in fact shut down all coal fired facilities, then he will be beyond the reach of the coal mining vote.
If Romney is elected he will need to fire most of the EPA and send in a new team with new instructions. Will he do that, who knows? Or will he compromise and require coal plants to be as clean as if they burned natural gas? That will pit the nat gas producers against the coal producers. I am no authority on the two but either way we may be witnessing a seismic shift in energy sources.
KOL is an ETF of coal companies. Of the top ten holdings however, three are obviously in China, BUMI and ADRO are in Indonesia, JOY global actually manufactures coal mining equipment, So a majority of the holdings are either outside the US or not actually coal miners. This is an indication of where the managers of KOL think the growth in coal Will be-outside the US.
Uranium is another out of favor sector. But frankly URA was a dud in my opinion during the last rally.
We may be on the cusp of a seismic shift in power sources. Here are some notable previous shifts. Those with investments in the prior energy source lost all their investment.
Rome
The original power source was human via slave labor. Wealthy Romans owned many slaves for this purpose. Two things, both cheaper, brought an end to slave power. First, water power from the mountains via aqueducts was quite cheap once they were built. Second, the Romans were terribly slow to replace very expensive, and heavy, human oar power in ships with wind power. Remember the Galley scene in Ben Hur? The boat had one sail but dozens of slaves, both heavy and expensive to maintain.
Medieval England
Remember Robin Hood? The rich he was robbing was the Royalty and their holdings in Sherwood Forrest. Specifically, wood was the main source of heat. Finally the British realized that extensive bogs of peat or soft coal could be used for heating. The value or Royal holdings and Royal power promptly dropped. Recall the Magna Carta appeared about this time. it all fits, the people could make demands and they were no longer in debt to the King for power. The King compromised. And frankly I doubt Robin did much for the poor, more likely the men were made merrier.
Whaling Ships
Moby Dick is the classic novel. But two things doomed whaling from 1848 on. It had become more and more expensive as the ships had to stay out longer and longer to harvest whale oil.They were thinning the world's whale population. Then a retired railroad conductor Edwin Drake found oil some 70 feet below Titusville, PA. A new alternate fuel could then be cheaply found and produced.
About the same time the discovery of gold in California cause a mass exodus of whaling sailors from the Boston whaling fleets to Sutters Mill in CA. The only ones that got rich were the suppliers to the would be miners such as Levi Strauss. His method of attaching pockets with copper rivets kept the pants from ripping when filled with ore or heavy hammers.
Horseless Carriage
And thanks to Henry Ford and Karl Benz working separately on the same project, the internal combustion engine freed horses from horrible labor and mistreatment. This was a shift in power source rather than energy source.
Current Day
The USA was consuming some 20% of world energy though it had less than 5% of world population.And so for several decades it was held hostage by the concentration of oil deposits in the unstable middle east. And then one day, much as Drake displaced whale oil with his find, fracking found extensive natural gas in places like South Texas, North Dakota, and even, gasp, New York State. New York of course promptly forbade any further exploration, or effectively did so with new regulations.
I suspect crude oil prices will take off with stock prices. But this rally is bolstered more by the Israel Iran potential conflict than any shortage of crude oil. As for coal, I will pass. There are just too many uncertainties.
PWE and PGH continue to fall, I did purchase a bit of PBT yesterday. It is earning more than its dividend.
We also noted with the bullish percentage chart this morning that there is potential for further drop in stock prices. The DOW looks to close down 90 points or so with 15 minutes to go. Gold and natural gas both up for the day.
Let's wait till Monday and see what happens. We could still have a 400 point down Dow day to wash out all the remaining sell stops before a reversal. Recall that was the end point October 3-4.
One of the oh so great ironies of our time is that we sent nuclear powered aircraft carriers to rescue the carbon producing state of Kuwait, go figure. The tsunami in Japan along with environmental restricutions seem to have doomed this source of power for the time being. All hail natural gas.
dennislelam@gmail.com
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