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If You Like the Big Trend in Gold, You Need to See This One, TooBy
Friday, July 8, 2011
In yesterday's essay, Steve showed how profitable it is to own gold when the trend is up.
To most people, that sounds too simple to work... But as Steve highlighted, making money in the market often comes down just to sticking with the big trends.
That's why it's important to know about another big commodity uptrend...
It's the big uptrend in the price of coal.
As I'll show you today, despite all the bad press coal gets, it's in a major uptrend... and I expect it will be for at least the next decade...
Coal today is largely a story about electricity use... And the world consumes staggering amounts of power. Electricity is a fundamental fact of modern life. It powers virtually everything we do – from heating the stoves that cook our dinner and lighting up the TVs we watch, to powering the massive factories that build cars and refine natural resources.
And as countries like China and India (aka "Chindia") modernize their economies, the volume of electricity they devour is mind-boggling.
In the U.S. alone, we use almost 4 trillion kilowatt-hours of electricity every year, an amount the U.S. Energy Information Administration (EIA) says is growing about 1% a year.
Now, consider China. Power consumption there grew from 1.2 trillion kilowatt-hours in 2000 to about 4.5 trillion kilowatt-hours this year. That's a 275% increase in 11 years. India's consumption has grown from 375 billion kilowatt-hours in 2000 to more than 600 billion kilowatt-hours today. And 80% of that electricity is created by coal.
This table below, using numbers from the International Energy Agency, shows how "Chindia's" coal consumption is growing:
Environmentalists would like to change coal's vital role. Burning coal for power generation creates more pollutants than other fuels, like uranium and natural gas. But relatively poor economies like India and China are more concerned with the cheapest, most plentiful sources of power right now. They'll worry about cleanliness later. As long as coal is cheap and plentiful, it will serve as a cornerstone of the world's power industry.
This next charts shows the U.S. Energy Information Agency agrees with me. You'll note how coal is expected to play a huge role in power generation for decades:
.bmp) In addition to Chindia's coal consumption, Japan's tsunami tragedy is a tailwind for prices. Japan and many other nations will be forced to burn coal if they want use less nuclear power (which is a big topic I'll cover another time).
But as I hinted at the beginning of this essay, the big thing to keep in mind here is the BIG TREND. Below is the trend in coal prices since 2002. When you slice out the crazy credit crisis action 2008, coal sports a solid uptrend that has lasted for years.
.gif) When I consider the bright economic future of massive countries like China and India (which collectively hold nearly 10 times the population of the U.S.), the world's recent aversion toward nuclear power, and the black stuff's big uptrend, I end up issuing my readers one piece of advice:
Get long coal, and stay that way for a long time.
Good investing,
Matt Badiali
Further Reading:
"Investing in what's unloved and unpopular is the sure way to make money in the markets," Brian Hunt told DailyWealth readers earlier this year. Check out a must-see chart comparing coal versus solar and wind stocks here: Dirty Energy Versus Clean Energy: It's Not Even Close.
Market NotesA MARKET BELLWETHER RETURNS TO DOMINANCE Of all the bullish price action we've seen in the past week weeks, few developments are a positive as what we're seeing lately in shares of Apple (NASDAQ: AAPL).
Few businesses have changed the world like Apple has in the past decade. Its iPods, iPhones, and iPads are sold all over the world to loyal buyers. It's become the world's most valuable brand and one of the most popular stocks in the world to own. Its CEO, Steve Jobs, is a rock star.
All of these attributes make Apple one of the "generals" of the stock market... a bellwether stock we can monitor to gauge the market's overall health. In early June, Apple shares reached six-month lows (along with other high-growth stocks like Cummins and Baidu), which was a bad "reading" of the market's health. But in the past few weeks, Apple has surged higher to close within spitting distance of its 52-week high. It's an impressive turnaround for Apple and for the market as a whole.
Seeing this new bullish action from Apple and other growth stocks, we'll note that sure, there are things out there worth worrying about, but they all take a backseat to the market's general trend. And right now, this trend is being bolstered by leadership from generals like Apple.
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