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Latest Comments10 Comments
Everything They Tell You About Solar Is Wrong - Travis Bradford
Four Best Global Deals on Uranium
This is the same uranium story that is always trotted out. The least this author could do would be to recommend Uranium One (UUU.TO) and Denison Mines (DNN), two pure plays that have taken it on the chin lately. Uranium doesn't even more the needle for BHP and Rio Tinto.
If India is your best example of uranium shortages, this is truly a weak thesis. India has a whopping four (4!) nuclear reactors - and these are not even full gigawatt reactors like we operate in the US.
The uranium miners all expect to be ramping UP production - significantly - over the next few years.
I will agree with this author on one point - there could be a shortage if the Russians cut off exports of HEU. Given the recent conflict, this is not out of the question. Although Europe and Obama seem inclined to appease and ignore Russian aggression - probably in part because they know Putin has them by the marbles. So I agree with the long term (and we mean looooong term) argument for nuclear.
This is not a near term (1-3 years) argument for uranium stocks, however.
Four Best Global Deals on Uranium
This is the same uranium story that is always trotted out. The least this author could do would be to recommend Uranium One (UUU.TO) and Denison Mines (DNN), two pure plays that have taken it on the chin lately. Uranium doesn't even more the needle for BHP and Rio Tinto.
If India is your best example of uranium shortages, this is truly a weak thesis. India has a whopping four (4!) nuclear reactors - and these are not even full gigawatt reactors like we operate in the US.
The uranium miners all expect to be ramping UP production - significantly - over the next few years.
I will agree with this author on one point - there could be a shortage if the Russians cut off exports of HEU. Given the recent conflict, this is not out of the question. Although Europe and Obama seem inclined to appease and ignore Russian aggression - probably in part because they know Putin has them by the marbles. So I agree with the long term (and we mean looooong term) argument for nuclear.
This is not a near term (1-3 years) argument for uranium stocks, however.
Crude Oil Seeks Iranian Black Swan
Of course, we can count on the North Koreans not to sell uranium to terrorist states, right?
Let's not re-write history guys. We all know there were no WMD in Iraq. But we also know that Iraq had the ability to produce chemical weapons in a matter of months. We also know that Saddam trained and sheltered any number of terrorists, and contrary to the revisionism the Left keeps feeding us, Iraq had high-level contacts with international terrorists including Al Qaeda. Or did the bipartisan 9/11 commission fabricate that as well?
So go ahead and run in circles for a few more years telling us Iran won't make a nuclear weapon. Just be sure you apologize and every Iran-appeasing liberal resigns from government when Iran does test (or use) a nuclear weapon.
Crude Oil Seeks Iranian Black Swan
Of course, we can count on the North Koreans not to sell uranium to terrorist states, right?
Let's not re-write history guys. We all know there were no WMD in Iraq. But we also know that Iraq had the ability to produce chemical weapons in a matter of months. We also know that Saddam trained and sheltered any number of terrorists, and contrary to the revisionism the Left keeps feeding us, Iraq had high-level contacts with international terrorists including Al Qaeda. Or did the bipartisan 9/11 commission fabricate that as well?
So go ahead and run in circles for a few more years telling us Iran won't make a nuclear weapon. Just be sure you apologize and every Iran-appeasing liberal resigns from government when Iran does test (or use) a nuclear weapon.
Electric Cars for 2010: Shift from Foreign Oil to Riding on Local Renewable Energy
How will the growth of electric cars affect neodymium prices? And will neo supply limit electric car growth, or can substitutes be developed?
Investing in a Resource-Constrained World (Part II)
There are several water hoarding plays, such as PICO, which is buying land in Nevada and Arizona I believe. Boenning Scattergood publishes excellent research on the water sector, and some of it is freely available. They had a recent good call on Ameron.
I agree with Rogers, however, that when a crisis hits, you'll be lucky if they just hang you. And from both a moral and environmental perspective, this is in NO way a 'socially conscious' investment. On the contrary, free water rights for landowners is resulting in overuse of groundwater around the country and the world. Go look at the situation in Atlanta right now. There has been an ongoing fight between Georgia and Florida over river flows and groundwater for decades. It affected the oyster harvesters in Florida for a while, but now Atlanta is paying the price - you can't fill up your swimming pool there this summer due to water shortages.
One commenter mentioned water ETFs - these are a fools game, created purely for marketing purposes, with no coherent holdings. Many of them hold hoarding plays like PICO, as well as GE and Siemens, which are big in water but water is a small percentage of their business.
Basinwater (BWTR) is a black hole of bad governance and a money-losing product -- although it addresses an interesting market, which is the removal mercury and other contaminants from groundwater. Increased government regulations of such toxins will expand the market here for better capitalized competitors.
The opportunities abroad will be significant. Epure does water treatment in China -- worth taking a look at.
Peak Oil and Some Alternative Energy Investments
I take exception to your argument for buying a Prius in the near-term. The marginal fuel savings are not significant enough to reduce our oil dependence, and most motorists will have to drive a lot to realize savings in a meaningful time period. Ironically, it is the people who drive the most, consuming the most oil and polluting the most, who will save the most by buying a hybrid.
I would agree that the development of the electric drive train and ultimately an all-electric or duel-fuel car would enable us to take advantage of a diversified energy supply over the next few decades. I look at the market for hybrids at this stage as merely a field test for engineers to improve the performance of electric car technology for future generations.
As we build out an electricity infrastructure diversified away from fossil fuels to solar, and possibly wind and nuclear, we will truly be able to get our vehicles off of fossil fuels. The reality today of course is that the grid is powered by natural gas, coal or nuclear -- so that's what you're running your plug-in hybrid on.
On an investment topic: Electric & hybrids cars require lightweight magnets for the electric motors. The motors require NEODYMIUM, which today come primarily from China (over 95% of it!).
The ramp-up in hybrid cars will increase demand for neodymium - and manufacturers are already concerned about diversifying their supply beyond China. There are no companies currently producing neodymium (and other rare earth elements) other than possibly Chevron.
LYNAS Corp (LYC.AX / LYSCF) expects production by YE2009. Several other exploration stage ventures claim neodymium reserves, although I do not buy these due to systematic over-valuation by speculators.
Another irony is that neodymium and rare earth production yields radioactive thorium, which is why both California and China have regulated and limited such mining and processing in the past. This risk of China cutting off supply -- either strategically or for health and environmental reasons -- is a huge risk to the supply of Nd for electric cars.
Desjardins: Uranium Prices Should Stabilize at $60
This article is the antithesis to the near-term nuclear & uranium bulls, continually arguing that there is a "uranium shortage" and expecting a "uranium buying panic".
I pointed out months ago in a similar commentary that even with delays in uranium mining capacity coming online, the expected increase in output is a significant proportion of current production. When pressed on the issue of a shortage, the uranium bulls will fall back with the caveat "mining" shortage -- and this is technically true given that a large portion of US uranium supply is met with Russian HEU. But there is no uranium shortage today.
Nor is there likely to be in the next 5 years. 5 years is the relevant timeframe for two reasons:
1. The Russian HEU agreement officially expires in 2013.
2. Any new plants being constructed from here on out in Asia would not come online before 5 years. (Although the Japanese have done some faster than that, its unrealistic to expect this in the near term.)
As with all energy planning, there is a need to meet near term demand, but an imperative to build supply that can only deliver over a much longer term.
Contrary to the nuclear bull arguments, Gen III and IV reactors are not "proven" to be failsafe, or ever safer. A lot of technological development is in process.
The only near term catalysts would be events extraneous to the core nuclear business:
1. Extreme resource nationalism by the Russians, withholding promised HEU supply to the US.
2. Strategic buying by Chinese and other SWFs to lock up uranium supply.
3. A massive oil shock.
We cannot discount the possibility of any of these. But in any event, the likely outcome of any of these would be more reliance on natural gas (and even coal), while we continue to build out solar and nuclear infrastructure.
Buying Into the Global Infrastructure Build
For example, the "water" sector has received a lot of hype recently - to the extent that many ETFs have been developed to capitalize on it. Unfortunately, investors and ETF marketers have not been disciplined about what "water" actually means. Moreover, in the rush to jump on the bandwagon, we've seen a lot of press about the inevitability of a water spending boom - but little discussion of where the funds will come from in a time of reduced tax revenues and national/global recession.
I prefer to maintain the integrity of a macro-trend analysis by identifying companies that I don't believe will be able to capitalize on the trend. For example, in water infrastructure, many have argued that the utility companies will be able to raise water rates to pay for needed upgrades. Let's think about that. These companies are certainly monopolies - but when we see the wrath that even cable television operators get for raising rates, why do we think water utilities will be able to do so successfully? I would argue you can't go wrong betting that people will put off repairs until tomorrow that should be done today, especially in a recession.
Conversely, Insituform (INSU) provides an almost-literal "band aid" solution for broken water infrastructure, with a technology that allows them to repair water mains & pipes internally, without costly digging. There is some hair on this stock for other non-fundamental reasons (governance, hedge fund involvement, etc) but I believe the primary thesis plays well during a recession.
Cable television and fiber optic / broadband internet is also an infrastructure play, but this sector highlights a similar issue as water utilities: Be careful when the companies that may benefit from end-user demand are also the ones that must spend massive amounts of capital. More than likely, there is another supplier one step removed from the utility (or cable company) that stands to benefit from that infrastructure spending being passed through - from higher cable bills to the cable operator to the equipment provider. Cisco (CSCO) would be one example. Moreover, its the company dealing directly with the consumer that takes the *political* heat for the rate increase! Avoid rock-and-hard-place situations.
Your recommendation of the tower companies (AMT, CCI) plays nicely to this thesis, given that it is the wireless companies (Verizon, AT&T) who have to spend money on the infrastructure.
Within cable, I would point out that Mediacom Communications (MCCC) operates in areas where the large phone companies are *not* building out competitive fiber networks. So unlike Comcast and Time Warner Cable, who will face intense competition, Mediacom (MCCC) is actually improving its market position (particularly with competitive DSL offerings raising their prices in light of recent FCC decisions).
Within energy infrastructure, there are many issues to address. One I would highlight is solar power. We periodically read about the idea of a "Manhattan Project" to promote various clean energy technologies. Although I don't agree that the Manhattan Project is the right analogy to use, the idea that a certain Big Bang catalyst is necessary is gaining credibility.
One gold ring for solar companies would be a concerted government effort to develop large-scale solar projects in the Southwest. These projects are beginning on a small scale. And clearly, with every advance in solar cell efficiency and cost reduction, the price tag for a multi-gigawatt "Marshall Plan" (I prefer this analogy) is improved.
Solar continues to benefit from rapid but incremental growth. If a Federal government program to develop truly utility-scale solar is launched, the PV manufacturers are positioned for a home run. Silicon makers may benefit, but may be left out if a thin-film or non-silicon technology is capable of yielding the efficiency necessary to make large-scale buildout economic. Longer term, however, the entire industry would benefit as manufacturing plants would expand and economies of scale would lower costs across the board.
There are many risks to juggle here: technology improvement, Federal energy policy, local & state land restrictions, and oil prices, to name a few.
From water to television to solar, a macro infrastructure boom will still result in losers as well as winners.