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Weekend Edition

Where Energy Investors Should Turn Now
Saturday, March 19, 2011

Treasury Secretary Timothy Geithner told a congressional panel Tuesday that Japan could handle the cost of reconstruction and wouldn't have to sell Treasurys. That's rubbish. Ranked by total government debt to GDP, Japan is second only to Zimbabwe at 192%. When people talk about the wealthy Japanese, they are speaking of Japanese citizens. The Japanese government is broke. And it's the second-largest owner of Treasurys in the world.
Geithner is a conniving bureaucrat. Barton Biggs, on the other hand, is a 40-year market veteran. He was the head of institutional research at Morgan Stanley before leaving to start his own hedge fund, Traxxis Partners. Barton told the Wall Street Journal, "I'm buying Japan right now." He said the panic selling was "a gross overreaction."
And how will Japan rebuild? "They'll sell Treasurys and rebuild, they can finance it because it's a country of savers," Biggs said.
Steve Sjuggerud is bullish on Japan, too. In Wednesday's DailyWealth, he wrote:
They're even cheaper now... Over two days, Japan's TOPIX (a broad stock market index) fell more than it ever has since its inception in 1949.
People are selling first and asking questions later. Japanese stocks as a whole are trading at just 1.06 times book value. (Compare that to the Dow, which goes for 2.75 times book.)
Small-cap Japanese stocks are trading at just 0.7 times book value – or a 30% discount to book value – and 0.34 times sales. This is off-the-charts cheap.
Those are the statistics of the WisdomTree Japan Small Cap Dividend Fund (DFJ). – Steve Sjuggerud, March 16, DailyWealth
Who wins and who loses from the crisis? Editor in chief Brian Hunt says, let's start with the losers so far.
The U.S. market has sold off, but it's nothing compared to the action in Japanese stocks. Japan's benchmark Nikkei has collapsed in response to the earthquake. Although the market enjoyed a rebound on Tuesday, it fell more than 17% in the trading sessions after the quake to strike a 12-month low.
Contrarians should put this market on the "watch closely" list. After grinding out a bottom, Japan will likely enjoy a big "bad to less bad" rally.
Another big loser in the Japanese crisis is uranium stocks. Mainstream media outlets are competing with one another to see who can run the most fear-inducing headlines. They can't write "meltdown" or "next Chernobyl" fast enough. After all, those shockers are what get the Web traffic. Concerns over Japan's nuclear plants have clobbered all uranium stocks.
The "ExxonMobil of uranium," Cameco, took a swan dive from the $40 level down to near $28. Many of the smaller companies in this space have lost 33%-50%. It's a washout in the nuclear-fuel business.
Just like Japanese stocks, this massive shakeout should lead to a terrific buying opportunity in uranium stocks. Nuclear power provides about 20% of U.S. electricity... And it factors heavily into China's and India's spectacular future energy demand. What's happening in Japan is terrible, but the world isn't going to suddenly shut down this vital energy source. The world is just too strapped for energy resources to turn its back on nuclear. Solar and wind farms are costly boondoggles that can't even hope to supply power in the massive amounts the world requires. Coal is abundant... and it can produce awesome amounts of electricity, but it's dirty.
The clear winner in all of this is natural gas. Natural gas-fired electricity is relatively clean. It's dependable. It can provide huge amounts of "always ready" electricity. Natural gas currently has environmental concerns with the waste water produced by new drilling methods, but it's the "least bad" choice from the perspective of most reasonable people. The hippies don't like natural gas. They'd rather see us produce electricity from the flapping of butterfly wings... or simply return to the Stone Age. 
We're more realistic. That's why Matt Badiali has been recommending some of the world's biggest and cheapest natural gas reserves in his S&A Resource Report. These are world-class stocks with healthy balance sheets. And because their assets are still in the ground, the stocks are super cheap. When natural gas prices pick up, these stocks will soar. To learn more about the Resource Report, click here...
S&A Research

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