A Healthy Glow The Rude Awakening
Paris, France
Friday, December 8, 2006 ------------------------- - Million-dollar windfalls for everyone,
- Powering the world of tomorrow - a nuclear decision,
- Caught in a celestial dreamscape in Melbourne, the big red cloud rolls in and much more…
------------------------- Eric Fry, awaiting a million-dollar windfall, reports… "If you had one million dollars, how would you spend it?" an inquiring participant on a Star Wars Forum message board asked his fellow Star Wars enthusiasts. "I would buy a million items from the dollar store," replied "Bobavader". "First, I'd give 1,000 dollars to starving kids" answered "Itchy the Ape." "Then I would buy one of those life-sized Yoda replicas. Then I would pay Tom Green to stop being in movies. After that, I have no idea," "A million dollars huh? Well I know it would have something to do with Natalie Portman," said "Haka Bri." Lastly, "KulDud" responded, "First I'd buy a huge house, then a really expensive car, doesn't matter if it drives good, just if it looks cool. Then I'd blow it all on worthless stuff that I'll never need."
KulDud's response, we would imagine, closely resembles what most "average Americans" would do with a million-dollar windfall. But what about those Americans who already owns a life-sized Yoda replica…or who are already dating Natalie Portman? Or what about those who'd rather save the money than spend it, with the hope of preserving the purchasing power of their million-dollar windfall? To rephrase the question, how would you invest dollars today to make sure that they could purchase the identical goods and services 20 years from now? This question, dear investor, is the essence of the strong dollar/weak dollar debate. Neither side of the debate needs to take up arms or swear an oath of loyalty or wage war with the opposing camp. But both sides need to ask themselves, every once in a while, "How can I safeguard the purchasing power of my savings?" Dollar-based investors who remain in dollars would be doing the "perfectly acceptable" thing…but maybe not the prudent thing. Investors who remain in dollars would elicit little criticism from their neighbors, or from CNBC commentators, or from their spouses…at least not until after the fact. Investors who buy gold, on the other hand, risk inviting ridicule, or pity…or both. Besides, gold can destroy wealth just as easily as it can protect it. Throughout the 1980s and 1990s, gold's value Dropped. Very true. And it's also true that currency values fluctuate up and down over the short-term. So the dollar's value might just as easily rise as fall tomorrow. But over the long-term, currency values seem only to fluctuate down, which is why we like to ponder wealth-preservation alternatives that do not consist of ink on paper. No one knows if gold will provide the best means of diversifying away from U.S. dollars and other paper assets, but it does provide the classic, multi-millennial means. In yesterday's column, Chris Mayer, editor of Capital and Crisis, explained why natural gas, and natural gas stocks, might offer a timely opportunity to exchange dollar bills for something of enduring value. In today's column, Dan Denning and Justice Litle offer a few kind words for uranium. Denning, the unique voice of the Australian Daily Reckoning, argues that the world's voracious appetite for energy, and in particular for "clean energy," will fuel growing demand for nuclear power. Litle, the "big picture" mind behind Outstanding Investments, agrees wholeheartedly with Denning. That's why Litle suggests keeping a close eye on uranium and the companies that pull it out of the ground… Dan Denning, gazing at sunsets in Australia, reports… We walked west into a fiery red sunset in St. Kilda last night, on our way to pick up some yogurt for dinner. On our way back, the moon rose before us in the east, nearly as dark and orange as the sun setting behind us. We turned sideways with one celestial body on each hand and enjoyed the beauty and symmetry for a few quiet seconds, looking at the skyline of Melbourne in front of us, caught between a nuclear source of light and the dead moon reflecting it. Then we took off our poetry hat and put on our thinking beanie and our brain began to boil. The Chinese are going to burn enough coal in the next fifty years to make every Melbourne sunset look like the end of the world. For instance just this week China's Huaneng Group launched the country's first 1,000 megawatt coal-fired power generating unit. A little info-mining tells us that a 500 mega watt coal-fired power plant provides about 3.5 billion kilowatt hours of juice per year. That's enough to power a city of 140,000 people and enough to consume about 1.4 million tons of coal. Sit down for a second, dear reader, and consider the following. China's great migration of rural farmers to urban enclaves means relocating 400 million people into new or existing cities. Those people will live in buildings that need air conditioning and work in factories that use electricity and eat in restaurants that cook with electric appliances and refrigerate with electric freezers. Where will the power come from? If it comes from coal, China will have to build a staggering 2,857 500 mega watt coal-fired plants to meet the demand. This would produce-without cleaner-burning technology-around 10.6 billion tons of carbon dioxide a year. A 500 mega watt coal-burning plant spews nearly 3.7 million tons of carbon dioxide into the air each year. We don't know what a ton of carbon dioxide looks like, or how you would carry it on your back. Neither do we know if it causes the earth's temperature to rise. But we do know that when you burn coal you also produce what are called particulate emissions. These include sulfur and nitrous oxides and other pleasant by-products like lead, mercury, and arsenic. Atmospherically speaking, the jet stream probably prevents Australia from having to bear the brunt of Chinese energy consumption habits, at least directly. But what could Australia do about it if a big orange cloud descended from China? Would the border patrol try and turn it back? Would customs arrest it? Yesterday's report by the Australian House of Representatives on Australia's nuclear future emphasized the economic benefits of expanded uranium mining. It also concludes that nuclear energy is the "only means" for cutting green house gas emissions. The 700-page report, which sits ominously on our desk, is entitled "Australia's Uranium: Greenhouse friendly fuel for an energy hungry world." And here is our main point. The nuclear debate in Australia isn't so much about Australia as it is about China and India. Australia, like every other major Western economy, ought to develop a safe, efficient, and clean nuclear industry for the day when conventional hydro-carbons like oil, coal, and gas, are no longer plentiful and cheap. That day is fast approaching, and is probably already upon us. But the main reason Australia ought to encourage nuclear power use is that if China and India don't go the nuclear route, the world might soon become a dirtier and more dimly lit place. The sunsets might be romantic. But if you can't breathe, you won't be able to enjoy them all that much. It's not as if nuclear technology isn't safely operating in other places all around the world. There are 442 operating nuclear reactors across the globe. Globally, 28 reactors are under construction and 62 are being drawn up. China currently gets 1.6% of its power from nuclear generation. Finland, by comparison, gets 33%. Germany 31%, Hungary 37%, South Korea 45%, and the USA 20%. Can dirty old fossil fuels power the world into a second industrial revolution in Asian without plunging the planet into toxic darkness, or sparking resource wars in the Middle East? Is there enough conventional fuel to "fuel" the growth? If not we must either find a new source of energy, or use the relatively clean energies we already have. Nuclear power stands first in line. Joel's Note: A while back, during a moment of particularly patriotic brainstorming, we asked Dan whether he thought it was possible that Australia could become the "new Middle East." Nothing to do with immigration patterns, we assured him, just that the great southern land has such vast quantities of uranium and coal - the clean and dirty energies of tomorrow - we thought it could be possible. She is also perfectly positioned, geographically speaking, to feed the voracious appetites of both China and India. Dan has been toiling away, reporting from our home country, investigating (among many other things) the energies of tomorrow. His musings appear in the Australian Daily Reckoning, the sister publication of your thought-provoking American version. If you are interested in reading more of Dan's insightful reports we recommend checking out the Aussie DR right here: The Thunder Down Under - The Aussie DR --- The Inside Investment Track ---
Imagine Spending 22% of Your Yearly Salary on One Investment You'd have to be damn confident in that investment, right? And returns would have to be virtually assured, correct? There's only one reason why execs lay out hundreds of thousands of dollars on their own company: they know the stock's about to take off. One CEO just laid out 22% of his salary and his CFO followed suit, betting 31% of hers. $694,324 worth of insider buying can't be wrong. Click here for more… ------------------------------------ A Healthy Glow
By Justice Litle "The proposed reactors will be of an improved and simplified design, pre-approved, more amenable to maintenance and operation than the first-generation reactors designed before 1980… Some studies estimate that more than 1,000 additional [reactors] will be needed in the next half century." - Retired Los Alamos scientists William R. Stratton and Donald F. Peterson Cigar Lake, in Canada's Saskatchewan province, is home to one of the richest uranium ore bodies on the planet. At 232 million pounds of proven and probable reserves, the economic value of the find is nearly $14 billion at today's prices. Cigar Lake production was expected to save the day for hungry nuclear power utilities - 103 of which operate in the United States. The plan was to have 7-8 million pounds of production from Cigar Lake online by 2008, with as much as 18 million pounds a year not long after. Cigar Lake was expected to supply 50% of all new uranium production within five years. Then the walls caved in. Literally. Concrete-reinforced steel doors were in place to hold back the lake, but an underground rockfall caused the doors to give way. Water rushed in at 1,500 cubic meters an hour; in due time, the mine was flooded. The flood is a costly setback for Cameco (CCJ: NYSE), 50% joint owner of the Cigar Lake mine, and a major headache for uranium buyers in general. Kevin Bambrough of Sprott Asset Management believes American utilities will be particularly squeezed. "The delays… will create a sense of urgency for the next few years," Bambrough said. "It's almost the equivalent of the oil industry losing Saudi Arabia." Uranium prices are surveyed and quoted on a weekly basis by various industry watchers. The recent move from $56 to $60 a pound was "the largest weekly increase on record," according to Eric Webb of Ux Consulting. Long-term forecasts of $75 and even $100 a pound now appear justified; uranium would have to trade above $111 a pound to break its inflation-adjusted highs from 1978. This is more than just subterranean cave-in blues: The uranium spot price hasn't seen a down month since 2001. For years now, uranium producers have met just 60% of total annual demand - the other 40% coming from government stockpiles and decommissioned nuclear warheads. This can go on for only so long. The tightness of supply comes at a time of atomic resurgence. Three large-scale factors have turned the tide in favor of nuclear energy: geopolitics, global warming and developing world growth. First, geopolitics: The unpleasant consequences of fossil fuel addiction splash across the headlines every week. Mahmoud Ahmadinejad predicts the collapse of Israel, the U.K. and the United States… Hugo Chavez vows to defeat "the most powerful empire on Earth"… Vladimir Putin waves off brutal assassinations while cranking up the Cold War rhetoric… and so on. All this and more is fueled by an unquenchable thirst for oil and gas. Nuclear power may not offer a direct path to energy independence - we can't put uranium rods in our gas tanks, as Peter Tertzakian observes - but it is a big step in the right direction. (And if hybrid car sales continue to skyrocket, drivers could conceivably "plug in" at night, when traditional electricity demand is low.) Second, global warming: The debate rages on; many still agree with Sen. James Inhofe (R-Okla.), who called global warming the "greatest hoax ever perpetrated on the American people." Yet political ideologies aside, mounting evidence is getting harder to ignore. While China, North America and Australia are endowed with huge deposits of thermal coal, the consequences of accelerated coal use could be dire. (Air pollution factors in too; filters in Lake Tahoe, your editor's beloved backyard, are already clogging up with Chinese gunk.) Whether the public accepts global warming or not, Western governments surely do. The United States was arguably the last holdout, and with Sen. Barbara Boxer (D-Calif.) succeeding Inhofe as chair of the Environment and Public Works Committee, that domino has clearly fallen. Politics aside, this is another feather in uranium's cap: Regime change in Washington, combined with the urgent need to "do something" about global warming, works in favor of nuclear energy. The Democrats would no doubt like to rely more on greener solutions, like solar and wind, but those industries are still too small to pack a meaningful wallop. The green technologies of tomorrow hold great promise, but they have not yet demonstrated an ability to perform at scale. Nuclear power has already demonstrated its safety and scalability, with next-gen technology like pebble bed reactors offering improved maintenance and safety to boot. The final factor driving a nuclear renaissance is developing world growth. The historical correlation between energy use and economic growth is high; when rapid industrialization kicks in for a developing world country, the energy consumption path goes parabolic. Asia knows that relying on fossil fuels to drive the next stage is a mug's game, for geopolitical, environmental and financial reasons. Besides, there will already be enough headaches as we try to fill up all those cars (hybrid diesels anyone?) and enough pollution to deal with aside from new power plants. Fossil fuel use is going to rise dramatically no matter what; nuclear power will help take an edge off that pain. So where will the uranium to fuel a nuclear resurgence come from? With government stockpiles covering 40% of present demand, the question looms large. For one, Cameco is confident that Cigar Lake will eventually be up and running. The costs will be high, but that uranium is too valuable not to be accessed - and Cameco should recoup its recovery costs and more in the long run. An important future source could be Australia, home to 38% of the world's low-cost uranium reserves. Surprisingly, for a country so rich in the stuff, Australia does not operate a single nuclear power plant - yet. The "lucky country" still relies on coal for 80% of electricity needs. Yet a government report recommends adding nuclear to Australia's energy mix to lower greenhouse gas emissions, and Prime Minister John Howard recently called the rise of nuclear power in Australia "inevitable." A commissioned study argues Australia could quadruple its export profits by enriching and fabricating uranium at home, rather than shipping it abroad unprocessed. Local environmentalists may protest against expanded uranium trade, but friendly pressure from the United States could win out…especially when combined with lucrative economic incentive. 
Another country keen on nuclear power is Russia. Home to an estimated 15% of world uranium reserves, Russia could yet go from exporter to importer in the coming years. The official plan is to dramatically expand nuclear power's share of the Russian energy mix, to 25% by 2020. Russian uranium production will have to grow approximately 433%, from 3,000 tons a year to 16,000 tons, if domestic supply is to do the job. On the positive side, existing government stockpiles of uranium can act as a buffer against volatile demand. Construction costs make up the lion's share of investment for a new plant, with ongoing fuel and maintenance costs relatively small in comparison; the hitch is that a steady supply of fuel - the uranium itself - should be locked up in advance, preferably via ironclad contracts. This puts a lot of power in the hands of financiers, who like to see a reasonably steady production stream before committing funds. The financiers are thus relieved to know that governments are on their side, with a willingness to act as swing supplier in the event of temporary shortages. The U.S. government in particular is doing all it can to get the nuclear resurgence jump-started, including making generous offers of "regulatory insurance" to utilities who get the ball rolling. All in all, the pieces are in place. The global nuclear power boom is underway. Uranium producers could have some very good years ahead Joel's Note: It's one thing to debate the validity and viability of future energy sources. Sure, it's fun to develop theories and wage guesses on who will be consuming what and at what cost…it's always interesting reading predictions about future emerging technologies and inferring which will boom and which will bust. But what is the end result of it all? The real value comes when one learns to distill all this information down into one or two actionable ideas…something you can invest in. It is this very technique, this top-down macro approach to investing that has earned Justice Litle's Outstanding Investments the title of Hulbert's #1 investment newsletter of the last five years. If you enjoy these macro discussions but would like to take the information to the bank, check out Outstanding Investments right here. This first report is free: America's New Energy Saviors --- Investing In Energy --- From the newsletter Ranked No.1 by Hulbert Financial Digest: UNCOVERED: 11 of America's New Energy Saviors Buy into these new non-oil outperformers Right Now, and you could see triple-digit returns - in as little as 6 months! --------------------------- From beneath the lights of the Champs Elysees, Joel Bowman reports… "Do you know that in France you can get a beer at McDonald's?" observed a casually cool John Travolta in the cult classic Pulp Fiction. "And I'm not talkin' about no little cup either…I mean a real glass of beer." Last eve your penny-poor junior editor decided to take a meal, and beverage, at the cheapest restaurant on one of the most expansive stretches in Paris - the Champs Elysees. Retracing Napoleon's footsteps, we meandered by the Arc de Triumph and down the 5th Avenue of Paris. Christmas lights are draped over the tree's bare winter branches, illuminating the faces of awestruck tourists and nonchalant locals alike. Buskers provide entertainment with accordions and guitars and couples walk arm in arm with scarves around their necks and love in their eyes. The city is awash with a palpable romance. Not far from the decidedly pricier addresses occupied by the likes of Louise Vuitton and Peurgeot, we find a quiet seat at McDonald's and order Les Big Mac, avec frites, and a Kronenberg 1664. Our American dollars continue to dwindle and, standing under the glowing spider web of lights along this historic pathway out of Paris, we wonder how long it will be before we have to take to the streets with our own guitar and song. 
Next week we will attempt to stretch our greenbacks a little further by journeying to Thailand. The Thai baht is equal to approximately 0.028 U.S. dollars - certainly better than the Euro, which buys over $1.3 of the floundering U.S. currency. We'll be back with our final word from the city of love and lights tomorrow in your weekend edition. Until then, enjoy your Friday and remember to always keep it Rude. Au Revoir, jOEL ----- Demise of the Dollar ----- Demise of the Dollar …and why it's great for your investments by Addison Wiggin The Demise of the Dollar examines the reasons for the dollar's slide - including the nation's historic trade deficit, the euro, government spending habits, globalization, and other international factors - and offers an up-close look at the Federal Reserve's attempts to "manage" the dollar's value. Addison Wiggin spent over a week in the #1 slot on Amazon's bestseller list - knocking Harry Potter to number two. He then showed up on Barnes and Noble's bestseller list and debuted on The Wall Street Journal's Business bestseller list at #8! The logical next step was for the book to get on the New York Times bestseller list…which it did, sitting strongly at #5! To purchase your copy, see… The Demise of the Dollar | 
