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A Tailwind for One of Energy's Biggest Uptrends

By Matt Badiali, editor, S&A Junior Resource Trader
Wednesday, March 30, 2011

There's nothing like radiation over Massachusetts to dampen that "feel good" green spirit around nuclear energy.
 
I just got off the phone with a good friend in Boston. She bought several gallons of bottled water, thanks to a local news story about high levels of radiation in the recent rainstorm. We grew up together just up the road from Three Mile Island, the site of the country's worst nuclear accident.
 
The radiation in Boston was far below anything that can hurt people. It came from a short-lived isotope of iodine, likely released from Japan's damaged nuclear power plant. But it reaffirmed people's (until recently dormant) fears of radiation.
 
While cutting carbon dioxide emissions – a big selling point for nuclear energy – is important in a feel-good, earth-friendly way, it can't stand up to the fear radiation inspires.
 
Of course, this is bad news for nuclear power and uranium... recently one of my favorite resource sectors. But it's great for coal. Take a look...
 
 
The chart shows the Dow Jones U.S. Coal Index, a collection of U.S. coal producers, nearing a new high. Investors are looking around for the fuels that will likely take the place of uranium to supply the electric power needs of the world.
 
You see, Japan's woes stopped a burgeoning nuclear renaissance in Europe dead in its tracks. Even China's government said it would review the safety of its massive nuclear expansion projects. Something must supply the electricity expected from these projects... if not nuclear power, what?
 
One answer, as my colleague Brian Hunt has pointed out, is natural gas. But it's not the only one. Despite its "dirty" reputation, the market is also voting for coal.
 
Coal consumption in Japan alone is expected to rise by more than 500,000 tons per month, about 5%, once reconstruction starts. According to the Financial Times, coal prices in Rotterdam – a key port in Europe – are up 11% since the earthquake.
 
The world's newfound fear of nuclear power will give a tailwind to coal's uptrend for years to come. Get long coal.
 
Good investing,
 
Matt Badiali




Further Reading:

Now that the Fukushima disaster has made nuclear power an awful thought for most folks, longtime natural gas bull Brian Hunt sees even more potential in the commodity.
 
And while uranium is getting crushed now, Matt says this could become the single best buying opportunity in uranium stocks. "When the dust clears, we'll still need energy," he says. "And we'll still need uranium." Get the full story here: What to Do with Uranium Stocks Now.

In The Daily Crux
Market Notes
Natural gas liquid producer Rosetta Resources breaks out to fresh all-time high.
 
Treasury bond fund TLT falls to two-week low.
 
Advantage Oil & Gas is already up 31% in 2011.
 
Bank of America drops to three-month low.
Market Watch
Symbol Price
Change
52-Wk
S&P 500 1319.44 +0.7% +12.5%
Oil (USO) 41.83 +1.0% +4.7%
Gold (GLD) 138.21 -0.2% +27.1%
Silver (SLV) 36.17 -0.1% +112.3%
U.S. Dollar 76.19 +0.1% -6.3%
Euro 1.41 +0.1% +4.7%
Volatility (^VIX) 18.16 -6.6% +3.2%
Gold Stocks (^HUI) 557.43 +0.2% +37.2%
10-Year Yield 3.49 +1.2% -9.6%

World ETFs
Symbol Price
Change
52-Wk
USA (SPY) 131.86 +0.7% +14.6%
Canada (EWC) 33.07 +0.6% +20.1%
Russia (TRF) 23.72 -1.3% +16.6%
India (IFN) 32.44 +1.4% +13.7%
Israel (ISL) 17.30 +0.8% +7.7%
Japan (EWJ) 10.29 -0.2% -1.4%
Singapore (EWS) 13.45 +0.5% +18.2%
Taiwan (EWT) 14.69 +0.5% +19.1%
S. Korea (EWY) 62.78 +1.3% +26.7%
S. Africa (EZA) 70.90 +1.9% +22.0%
China (FXI) 43.72 +0.9% +6.7%
Lat.America (ILF) 52.32 +0.8% +12.3%

Sector ETFs
Symbol Price
Change
52-Wk
Oil Service (OIH) 166.00 +2.3% +40.8%
Big Pharma (PPH) 65.54 +0.4% +3.1%
Internet (HHH) 71.22 +2.0% +16.9%
Semis (PSI) 17.39 +1.1% +25.9%
Utilities (XLU) 31.59 +1.0% +10.6%
Defense (PPA) 20.18 +0.6% +7.9%
Nanotech (PXN) 9.55 -1.3% -6.4%
Alt. Energy (PBW) 10.67 +2.0% +7.1%
Water (PHO) 20.03 +1.1% +14.6%
Insurance (PIC) 16.63 +0.0% +10.6%
Biotech (PBE) 21.24 +1.2% +8.3%
Retail (PMR) 20.05 +0.8% +14.0%
Software (PSJ) 26.92 +0.8% +22.5%
Big Tech (QQQQ) 57.08 +1.0% +19.3%
Construction (PKB) 14.18 +0.9% +18.7%
Media (PBS) 15.04 +0.6% +16.3%
Consumer Svcs (IYC) 70.07 +0.9% +15.7%
Financials (IYF) 58.67 +0.2% +3.5%
Health Care (IYH) 68.52 +0.7% +4.8%
Industrials (IYJ) 70.35 +0.7% +22.3%
Basic Mat (IYM) 80.77 +1.2% +28.2%
Real Estate (IYR) 58.28 +0.5% +20.1%
Transportation (IYT) 95.13 +0.6% +21.9%
Telecom (IYZ) 23.50 +0.7% +21.3%

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