TODAY’S THOUGHTS
"Today's Thoughts" is a nightly email sent to Zenpenny "Fire" level members outlining different thoughts regarding the markets and our positions. At times, I will post a copy of the email to our site for blog readers. Here is tonight's edition:
I think it's important to speak tonight of what is going in the overseas markets right now. The
Nikkei is essentially crashing, posting a loss of 12%, following a loss of 6% during Monday's
trading session.
Dow Futures are currently down 300 points. It's tough to see the Nikkei putting up any fight
given the disastrous circumstances facing Japan.
Our portfolio is well insulated from this type of move down and yours should be too. Our only
short-term trading position is a short position, which I may cover if we gap down excessively
tomorrow morning. The remainder of our positions are long-term investment positions that have
minimal correlation to the general market.
There are many changes that will come out of the destruction that Japan is facing. It is after all,
one of the largest economies in the world. They hold a significant amount of US debt. They are
also a key ally for the United States in Asia. The ramifications of what is happening there and the
changes that take place as a result will be far reaching.
One of the earliest assessments one can make is that nuclear energy will come under massive
scrutiny following this disaster. I cannot see any nation with a semi-conscious population allowing
for a nuclear power plant to be built. Even those that in the process of being built may come under
attack, with plans being changed, leaving them uncompleted.
The alternatives to nuclear energy must be considered. Three common alternatives are coal, solar energy
and natural gas.
- Coal has as much environmental opposition in developed countries as nuclear power. The cost of
coal itself has increased dramatically over the past few years.
- Solar energy is a viable alternative. I believe it will see greater use over the long-term. At one point,
perhaps, becoming a widespread source of power for developed nations. There are already projects
all over the world that are planning for widespread use of solar for future energy consumption. From
- Natural Gas is also a viable alternative as it is the cleanest burning of the fossil fuels. We have an
enormous supply of it here domestically. There are also massive supplies throughout the world, which
may explain why the price has been floating at multi-year lows in the futures market. However, this may
be set to change, as crude oil prices are set to rise and nuclear energy is just beginning its long journey
of being vilified at every turn.
A monthly chart of natural gas futures (click on chart to enlarge):
Natural Gas Futures (monthly)
Coincidentally, we have entered into a natural gas play recently. I am as bullish on this stock as I am on
any in our portfolio, at present. I think we are in the process of seeing a major trough in natural gas prices.
I expect bright to see significantly higher valuations in the years to come.
Solar has already seen valuations skyrocket. It is seen as a hip, "green" alternative. People are jumping
on the bandwagon and perhaps rightfully so. It will be difficult to navigate through the sea of overvaluation
to make a correct assessment of which companies will and won't make it out of the early stages of the
solar revolution.
There is value to be had in natural gas stocks, at present. I'm not the only idiot on a soapbox telling of the
benefits on natural gas. I have idiots like T. Boone Pickens and Steve Cohen joining me, as well.
I've found our play in the sector. It's a tiger that I've got by the tail...and I ain't lettin' go.
