Four years ago, the dreams of a nuclear renaissance seemed close to coming to fruition. President Obama supported it. Congress passed a raft of new subsidies, tax breaks, liability caps, and cost overrun indemnifications, to grease the works. The goal was to bring the private sector back in a non-oil, non-carbon energy source which had seen no new construction in 34 years.
For a while, things were looking good. The Nuclear Regulatory Commission was flooded by 24 new applications for plants to join America?s 104 existing ones, from utilities largely in the southeast. Then a development far more devastating than the most egregious environmentalist lawsuit stopped the movement dead in its tracks. The price of natural gas crashed (UNG).
In 2008, CH4 peaked at $14/MM btu in 2008 in the wake of the last big oil spike to $149. It then utterly collapsed to $1.90, a vaporization of 86%. It was like someone snuffed your pilot light, turned all you gas burners on, and let your house blow up. Much of the industry was decimated, and gas investors got wiped out in droves. It also became one of my favorite short plays. Although gas has since recovered to $4/MM btu, it has completely demolished the economics of new nuclear.
At current prices, analysts now peg operating costs for new gas fired power plants at four cents a kilowatt-hour, compared to ten cents for nuclear. And this turns a blind eye to other problems endemic to nuclear, like expensive waste disposal, environmental litigation, lender nervousness, consumer backlash, humongous capital costs, and a long history of spectacular cost overruns.
It?s not like gas is going away anytime soon. Over the last five years, a new 100-year supply has been discovered in the US. Another 100 years is there, but exploration companies basically quit looking. What?s the point, when you are already drowning in the stuff. It turns out that about half of the land area of the United States is sitting on an exploitable natural gas field.
The finds assure US energy independence within 3-5 years, and will change the economy beyond all recognition. The risk is that gas gets cheaper, yet again, rather than ease nuclear?s competitive predicament. Just to bring nuclear back to even, gas has to roar back to $10/btu
The utilities have read the writing on the wall and are scrambling to lose their plans behind the radiator, post haste. Duke Energy (DUK), the poster child for new nuclear, has said it is calling off plans to build six new behemoths. Dominion Resources (DRU), in Wisconsin, is closing a nuclear plant which still has 20 years remaining on its license because it is simply too expensive to run. NRG Energy (NRG) dumped plans to build two Texas plants after blowing $331 million on preliminary planning and applications.
The new malaise in nuclear has placed a giant black cloud over the sector?s beleaguered ETF?s, including Market Vector Uranium + Nuclear Energy ETF (NLR) and Cameco (CCJ). Not only did these securities get the stuffing knocked out of them in the wake of Japan?s Fukushima tsunami and nuclear disaster, they have also suffered from this year?s general antipathy towards commodities.
I always had my misgivings about the return of big nuclear, the constructions of plants based on 50-year-old designs. There are too many other intelligent ways to do this from an engineering point of view. On the short list are alternative, cooler, non-weaponizeable fuels, like thorium. Small, modular, and even portable designs that mitigate and distribute risk is another idea. We may have to wait a while until better, more competitive nuclear strategies hit the market.
In the meantime, there are too many better fish to fry. Shop elsewhere.
What?s the Market for a Half Built Nuclear Plant?
Global Market Comments
June 6, 2013
Fiat Lux
Featured Trade:
(JULY 8 LONDON STRATEGY LUNCHEON),
(WHERE?S THIS MARKET BOTTOM?),
(SPX), (DXJ), (FXY), ($NIKK),
(THE ONE SAFE PLACE IN REAL ESTATE)
S&P 500 Index (SPX)
WisdomTree Japan Hedged Equity (DXJ)
CurrencyShares Japanese Yen Trust (FXY)
Nikkei Index ($NIKK)
Come join me for lunch for the Mad Hedge Fund Trader?s Global Strategy Update, which I will be conducting in London on Monday, July 8, 2013. A three-course lunch will be followed by a PowerPoint presentation and an extended question and answer period.
I?ll be giving you my up to date view on stocks, bonds, currencies commodities, precious metals, and real estate. And to keep you in suspense, I?ll be throwing a few surprises out there too. Enough charts, tables, graphs, and statistics will be thrown at you to keep your ears ringing for a week. Tickets are available for $249.
I?ll be arriving an hour early and leaving late in case anyone wants to have a one on one discussion, or just sit around and chew the fat about the financial markets.
The lunch will be held at a private club on St. James Street, the details of which will be emailed to you with your purchase confirmation.
I look forward to meeting you, and thank you for supporting my research. To purchase tickets for the luncheons, please go to my online store.
I feel obliged to reveal one corner of this beleaguered market that might actually make sense.
By 2050 the population of California will soar from 37 million to 50 million, and that of the US from 300 million to 400 million, according to data released by the US Census Bureau and the CIA fact Book (check out the population pyramid below).
That means enormous demand for the low end of the housing market?apartments in multi-family dwellings. Many of our new citizens will be cash short immigrants. They will be joined by generational demand for limited rental housing by 65 million Gen Xer?s and 85 million Millennials enduring a lower standard of living than their parents and grandparents.
These people aren?t going to be living in cardboard boxes under freeway overpasses. The trend towards apartments also fits neatly with the downsizing needs of 80 million retiring Baby Boomers. So you have three different generations converging on a single sector of the real estate market. Prices here will hold up, and may even rise.
Rents are now rising at more than 5% a year in some of the more popular markets, and vacancies are dropping like a stone. Good luck finding an apartment in Silicon Valley. Fannie and Freddie financing is still abundantly available at the lowest interest rates on record.
Institutions combing the landscape for low volatility cash flows and limited risk are now accounting for up to 30% of the low-end market. In some markets it is now cheaper to buy than to rent, a 50-year reversal, if you can get the credit.
?More a Rectangle Than a Pyramid
Global Market Comments
June 5, 2013
Fiat Lux
Featured Trade:
(JULY 2 NEW YORK STRATEGY LUNCHEON),
(WELCOME TO THE SACK OF ROME),
(TLT), (TBT), (LQD), (MUB), (VNQ), (KMP),
(BREAKFAST WITH FED GOVERNOR BOB McTEER)
iShares Barclays 20+ Year Treas Bond (TLT)
ProShares UltraShort 20+ Year Treasury (TBT)
iShares iBoxx $ Invest Grade Corp Bond (LQD)
iShares S&P National AMT-Free Muni Bd (MUB)
Vanguard REIT Index ETF (VNQ)
Kinder Morgan Energy Partners, L.P. (KMP)
Come join me for lunch for the Mad Hedge Fund Trader?s Global Strategy Seminar, which I will be conducting in New York, NY on Tuesday, July 2, 2013. An excellent three-course lunch will be provided. A PowerPoint presentation will be followed by an extended question and answer period.
I?ll be giving you my up to date view on stocks, bonds, foreign currencies, commodities, precious metals, and real estate. And to keep you in suspense, I?ll be throwing a few surprises out there too. Enough charts, tables, graphs, and statistics will be thrown at you to keep your ears ringing for a week. Tickets are available for $209.
The formal luncheon will run from 12:00 to 2:00 PM. I?ll be arriving an hour early and leaving late in case anyone wants to have a one on one discussion, or just sit around and chew the fat about the financial markets.
The event will be held at a prestigious private club on Central Park South, the details of which will be emailed to you with your purchase confirmation.
I look forward to meeting you, and thank you for supporting my research. To purchase tickets for the luncheons, please go to my online store.
Global Market Comments
June 4, 2013
Fiat Lux
Featured Trade:
(AUGUST 9 ZERMATT STRATEGY SEMINAR),
(BREAKFAST WITH PIMCO?S MOHAMED EL-ERIAN),
(TAKE A RIDE IN THE NEW SHORT JUNK ETF),
(JNK), (SJB), (CORN), (TBT)
SPDR Barclays High Yield Bond (JNK)
ProShares Short High Yield (SJB)
Teucrium Corn (CORN)
ProShares UltraShort 20+ Year Treasury (TBT)
Come join me for the Mad Hedge Fund Trader?s Global Strategy Seminar, which I will be conducting high in the Alps in Zermatt, Switzerland at 2:00 PM on Friday, August 9, 2012. A PowerPoint presentation will be followed by an open discussion on the crucial issues facing investors today. Coffee, tea, and schnapps will be made available, along with light snacks.
You are welcome to attend in your mountain climbing gear, but you will have to leave your boots at the door. Last year, someone came down from the Matterhorn summit straight to the seminar, sunburned and tired, but happy.
I?ll be giving you my up to date view on stocks, bonds, foreign currencies, commodities, precious metals, and real estate. And to keep you in suspense, I?ll be throwing a few surprises out there too. Enough charts, tables, graphs, and statistics will be thrown at you to keep your ears ringing for a week. Tickets are available for $189, down from last year, thanks to the dramatic and welcome, as well as predicted, depreciation of the Swiss franc against the US dollar.
I?ll be arriving early and leaving late in case anyone wants to have a one on one discussion, or just sit around and chew the fat about the financial markets.
The event will be held at a central Zermatt hotel with a great Matterhorn view, operated by one of the village?s oldest families and long time friends of mine. The details will be emailed directly to you with your confirmation.
I look forward to meeting you, and thank you for supporting my research. To purchase tickets for the luncheons, please go to my online store.
Global Market Comments
June 3, 2013
Fiat Lux
Featured Trade:
(HARRY S. DENT, JR. ON HEDGE FUND RADIO),
(SPY), (IWM), (UUP), (GLD), (SLV), (USO), (XLE), (TLT)
(A RELIGIOUS EXPERIENCE)
SPDR S&P 500 (SPY)
iShares Russell 2000 Index (IWM)
PowerShares DB US Dollar Index Bullish (UUP)
SPDR Gold Shares (GLD)
iShares Silver Trust (SLV)
United States Oil (USO)
Energy Select Sector SPDR (XLE)
iShares Barclays 20+ Year Treas Bond (TLT)
Your stock portfolio will get decimated by a stock market crash that could take the Dow average down 60% to 6,000 or lower. There will be no place to hide, as gold, silver, oil, real estate will see declines of similar magnitude.
Given the fresh dose of uncertainty besieging the markets these days, I thought I'd touch base with my pal, co-conspiring Eagle Scout, and fellow traveler, Harry S. Dent, Jr. I was inviting a bomb thrower to tea.
I listen to Harry, not because he is an iconoclast, one of the few original thinkers out there, and sometimes, a complete wild man, although these are all admirable qualities to be found in a global strategist. I listen to him because in the past, he has been as right as rain.
So when an opportunity arose to bag him for Hedge Fund Radio, I jumped. It would give my listeners an opportunity to sort through the tealeaves, work through alternative scenarios for the future of disparate asset classes, and test competing investment theories. What I got was nothing less than a Vulcan mind meld.
Harry argues passionately that we are witnessing the end of the third great bubble in debt, hot on the heels of earlier forays into madness in technology stocks and real estate. Add public and private debt from all sources, and it totals $130 trillion, the greatest accumulation of IOU?s in history. The Federal Reserve is now manipulating all markets, and the exercise is certain to end in tears. The only way out from this will be to suffer an economic and financial crisis worse than we have seen to date.
A key part of Harry?s work revolves around generational spending patterns. Americans see spending peak when they reach the ages of 46-50, and bleed off from there. He blends this perspective in with historical data on demographics and some traditional Eliot Wave Analysis to produce one of the most refined long-term views in the marketplace.
Harry runs an independent research boutique, which has accurately predicted many of the major moves in financial markets during the past 25 years.
His unique blend of demographic research, identification of global consumer spending patterns, and long-term cycle analysis, really makes Harry one of a kind. Foreign governments, major hedge funds, financial advisors, and individuals are all just wild about Harry. They have found his advice indispensible when navigating the sticky shoals of international finance.
Growth of the national debt (TLT) continues to be a major headache. Since the Great Depression, public spending has grown steadily, from supporting small town 'Mayberry' to the equivalent of a New York City. While much of the early deficit explosion resulted from WWII and Vietnam, all of the recent growth has come from entitlements, like Medicare and Social Security. Government estimates of $46 trillion in unfunded liabilities are wildly inaccurate, with $70 trillion closer to reality.
Harry's advice to investors is to use any strength in coming months to unload stocks (SPY) (IWM). He would sell all remaining holdings in gold (GLD) and silver (SLV). He also wants to dump oil (USO) and other energy plays (XLE). And he believes we are about to enter a prolonged period of dollar strength. His favorite vehicle for the greenback is the ETF (UUP), which offers investors a long position against a basket of foreign currencies.
Harry is a native of South Carolina, who like Federal Reserve governor Ben Bernanke, went off to Harvard where he got his MBA. His career then took him to the top-notch private equity firm, Bain & Co., where he reported to recent presidential candidate, Mitt Romney.
After years of consulting with Fortune 100 companies, he found gaping holes in their understanding of the global economy. That spurred him to take off and create his own research boutique to address these grievous shortfalls in understanding.
To learn more about Harry S. Dent, Jr. please go to his website at http://www.harrydent.com/.
In addition to Harry?s many talents, he is also a prolific writer. His most recent tome is The Great Crash Ahead (click here to purchase from Amazon). You can guess the topic. He has also published The Great Boom Ahead (1993) (click here to purchase from amazon),? The Roaring 2000?s (1999) (click here to purchase from Amazon),? and The Great Depression Ahead (2008) (click here to purchase from Amazon). Note that the timing on all of these volumes is prescient.
Purchasing a download of the entire interview for $4.95 is very simple. Just go to the HEDGE FUND RADIO menu tab and click on the pull down menu for RADIO SHOW (click here for the link at http://madhedgefundradio.com/radio-show/). Click on the green BUY NOW button and complete the order form. A blue link will appear telling you to ?click here to proceed?. Then click on the small blue box with the question mark inside to download. Hit the PLAY arrow to listen. You can pause, fast forward, or rewind at any time.
