Uranio y otras timbas

The Death of the Nuclear Power Renaissance How Japan's Nuclear Disaster has Affected Global Sentiment Eric Fry Reporting from Laguna Beach, California... Chris Mayer, editor of Mayer's Special Situations, shared this bit of investment wisdom with his subscribers yesterday: "Charlie Munger, the long-time Vice Chairman of Berkshire Hathaway, says there are three buckets where investment ideas go: 'Yes,' 'No' and 'Too Hard.' I think uranium is too hard." We would not quarrel with that logic; and we certainly would not quarrel with Chris's caution. As an early, and indefatigable, bull on uranium, Chris led his subscribers to some very large gains in the sector. After yesterday's selloff, some of those gains were much smaller than they had been. Nevertheless, Chris told his subscribers to "hit the bid" on two of the uranium plays he had recommended. "I think we should sell our two uranium holdings," Chris wrote. "We'll book a 73% gain on Kalahari Minerals (KAH:lsx) and a 10% gain on Paladin Energy (PDN:tsx; PALAF:pink sheets). The latter is down 23% today. Once, we were up 70% on the name. So this is a disappointment. But Kalahari is a very nice win for a stock we held little more than a year." Uranium is "too hard" indeed. On the other hand, nothing is very easy these days. Following the Nikkei's vertical plunge during the last two days, most stock markets around the globe also posted minus signs. From the highs of March 11 - the day the 9.0 quake struck - to the lows of today, Japan's Nikkei Index plunged more than 20%. The would-be buyers of Japanese stocks apparently decided that widespread devastation and smoldering nuclear power plants are not bullish phenomena. Following the Nikkei's example, the MSCI EAFE Index of international stocks dropped 7% during the last three trading sessions and erased its gains for the year-to-date. Here in the States, stocks are also wobbling. But buying interest seems to await every selloff. On Monday morning, the Dow Jones Industrial Average sliced through 12,000 immediately after the opening bell and fell as much as 140 points. But as the lunchtime hour was drawing to a close - about the time the third martinis were making their way to the lunch tables - investors regained their bravado. No tsunami carnage or atomic plumes were going to get in the way of their "Buy" orders! Nosirree! And no Middle East civil wars were either. After all, Warren Buffet bought Lubrizol. That had to count for something, right? By day's end, the Dow had trimmed its losses to a mere 51 points, while nearly reclaiming the 12,000 mark. In this morning's trading session, the Dow is attempting an encore. After tumbling nearly 300 points at the opening bell, the Dow has shaved its losses to only 150 points (as of this moment). Even so, the NASDAQ Composite Index has slipped into the loss column for the year-to-date, while the Dow and S&P 500 are flirting with a similar fate. Tomorrow is another day, of course. But tomorrow's news stories probably won't look dramatically different from today's. One possible exception may be the news stories circulating about the nuclear power industry. According to today's headlines, the post-quake crisis at several Japanese reactors is a "Three Mile Island event" that will stop the growth of nuclear power dead in its tracks. A gaggle of government officials around the world are saying as much...and we take them at their word, sort of. Obviously, the unfolding nuclear tragedy in Japan is not a non- event...as the harrowing volatility in global stock markets attests. The uranium sector, in particular, is in full meltdown mode: The ISE- CCM Global Uranium Stock Index has plummeted 27% during the last week. The price of uranium itself ("U308") is down a similar amount. Not a good week for the uranium bulls. But just maybe, tomorrow's headlines about the fate of nuclear power will not resemble today's. Just maybe, tomorrow's headlines will be less bearish. Our respected colleague, Chris Mayer, is not optimistic. "The nuclear power renaissance is dead," he says flatly in the column below. Chris makes a compelling argument. And it almost never pays to disagree with the man (which is why we almost never do). But we suspect that nuclear power will live to fight another day...and will do so within an "investable timeframe." As regular readers of The Daily Reckoning may recall, your editor named uranium as his "Trade of the Decade." Two months ago, this call looked brilliant (or lucky). Today, not so much. Two months ago, uranium and uranium stocks were both sitting atop plump 50% gains for the decade- to-date. But those gains have shriveled to single digits. So where to from here? Admittedly, given the crisis in Japan, uranium might not be the "Trade of 2011." But we think uranium investments still have a solid shot at performing well throughout the rest of the decade. In other words, we'll keep dancin' with the one who brung us - not just for sentimental reasons, but for stone-cold economic reasons. Environmental disasters notwithstanding, nuclear power remains an extremely competitive and compelling alternative to fossil-fuel-powered electricity generation. The opponents of nuclear power tend to portray the contrast between nukes and hydrocarbon-generated electricity as a choice between adopting a rabid hyena or a Golden Retriever puppy. But the contrast is not quite that extreme or simplistic. A more accurate metaphor might be choosing between sleeping under a guillotine blade every night or sleeping in an airport smoking lounge. As long as the blade never falls, that's a much better - and healthier - place to sleep. That's the nuclear industry's critical challenge: preventing that blade from falling, no matter what. The newest nuclear technologies purport to achieve exactly that. Meanwhile, the world's coal-fired power plants are continuously converting the earth's atmosphere into a smoking lounge. This reality will not change, which is one very big reason why the demise of nuclear power may have been greatly exaggerated. Nuclear power has played - and continues to play - an essential role in worldwide power generation. More to the point of this discussion, nuclear power's role is growing most rapidly in the economies of the world that are growing most rapidly. The Fukushima disaster won't change that trend. To be sure, the world's newfound anxieties about nuclear power are probably not nothing; but they may not be very much of anything. For starters, many of the "concerned" individuals who are voicing anti-nuke viewpoints are individuals who happen to have an additional agenda or two in their hip pockets. Many of these individuals are either members of an opposition party in their particular country or are members of some group that has long opposed nuclear power. In the midst of the crisis, no one wishes to oppose these dissident voices. But once the crisis passes, the dissident voices may have to yell a little louder if they wish to be heard...and these voices might have to yell really, really loudly if the price of crude oil surges toward $150 or $200 a barrel. Secondly, many of the folks who are issuing the harshest anti-nuke remarks reside in countries like Germany and the US that were already hostile to nuclear power. The map below, courtesy of the World Nuclear Association, identifies the locations of nuclear power plants that are currently under construction. Of these, 42% reside in China; 16% in Russia and 11% in India. The G-7 countries, combined, account for only 3% of all nuclear plants currently under construction! So if you are an investor in uranium, do you really care that Germany might not renew some nuclear power licenses or that Switzerland will find a new way to stall construction of three new nuclear plants? Even in the Developed World, the news for the nuclear industry is not all bad. At the very same moment that the Swiss and the Germans were pandering to their publics, the French, Spanish and Italians were promising full-speed ahead on their nuclear power programs. "France will continue to rely on nuclear power," Bloomberg News reports. "Spain, which is extending the life of existing plants, said Fukushima won't hold back its nuclear policy. Italy's environment minister said the earthquake won't make the country reconsider to build new plants." "We can't switch to renewables overnight," says French Environment Minister Nathalie Kosciusko-Morizet said. "For the foreseeable future, we will need nuclear." So will the rest of the world. Net-net, the long-term prognosis for nuclear power may not be as grim as the near-term headlines suggest. The Daily Reckoning Presents Japan's "Three Mile Island" Chris Mayer Japan's nuclear disaster is tragic on many levels. My focus here, though, will be on what it means for uranium investments and the world's energy markets. The main worry is that the situation in Japan chills the industry in the same way Three Mile Island did in 1979. Will political pressures quash the nuclear renaissance? It's too early to know for sure how this will play out, but we can make some guesses. First, some context... Japan's disaster affected at least six nuclear reactors. In total, 11 reactors in Japan have had emergency shutdowns and will be offline for months. The focus right now is on the nuclear reactors at a 40-year-old power plant that are experiencing partial meltdowns. These reactors are at the Fukushima Daiichi power plant, run by Tokyo Electric Power Co. (TEPCO). There are six reactors in total on this site, ranging from 35 to 40 years old. The number 1 reactor is the second oldest in Japan and is 40 years old. It's not certain how much radiation is escaping from the plant, but clearly, the news is going from bad to worse. The shutdown of these reactors removes about one quarter of Japan's total nuclear generating capacity and 4% of its total electrical generating capacity. For TEPCO, the Fukushima site is about half of its nuclear capacity and about one-third of its total capacity. To replace its lost nuclear power, TEPCO will likely make up the difference by importing more liquefied natural gas (LNG) and oil. This could create something of a shock in the energy markets, though it is hard to say. Yes, Japan has to replace lost energy sources. But it will have less demand as factories close and as economic activity grinds to a halt in some regions. As it is, Japan is the world's third-largest oil importer and second-largest LNG importer. In addition to LNG and oil, Japan will likely tap the coal markets to help make up the gap. Then, too, there are political wild cards. If Japan orders its existing reactor fleet to shut down temporarily, the impact on global energy markets will be that much larger. The political wild cards are the most worrisome thing for uranium investors - and not only in Japan. It didn't take long before a US politician - in this case, Rep. Ed Markey (D-MA.) - warned of "another Chernobyl" and predicted "the same thing could happen here." He called for an immediate suspension of licensing procedures for the new AP1000 reactors that have been crawling their way through the regulatory process for seven years. Of course, the US is not the focus of the uranium story. The US hasn't built a new nuclear plant since 1979, after the Three Mile Island disaster. Even so, old reactors supply 20% of US electricity. In Europe, too, opponents of nuclear power jumped on the issue. Germany's Chancellor Angela Merkel called for an immediate safety inspection of the country's 17 nuclear plants. And opponents called for Germany to abandon plans to extend the lives of 10 European reactors. They also wanted Germany to close its oldest plants. European regulators are supposed to meet early this week in Brussels. Still, two-thirds of the 324 proposed new reactors will come from outside Europe or the US. The uranium story is mainly an Asian story. China, Vietnam and Thailand have over 100 nuclear plants on the drawing boards. What they do will mean a lot as far as the nuclear renaissance is concerned. Already, Thailand's prime minister said that Japan's incident would "impact the decision of whether to build nuclear plants in Thailand." China, however, reaffirmed its commitments. But Asian power plants had not advanced smoothly, even before this whole disaster happened. About a year ago, Indonesia postponed its first nuclear plant after protests from villagers. So this is where we are. One of the great risks anyone investing in uranium takes on - the risk that another catastrophe sets the industry back - has finally unsheathed its sword. How much will facts matter in the debate about nuclear power? The fact is that all energy sources have risks, as The Wall Street Journal editorial column points out today. There are rig explosions, tanker spills and mining accidents. Still, nuclear has the most devastating consequences of error. William Tucker outlines more facts in a column entitled, "Japan Does Not Face Another Chernobyl." He points out, "You can't have a 'runaway reactor,' nor can a reactor explode like a nuclear bomb. A commercial reactor is to a bomb what Vaseline is to napalm. Although both are made from petroleum jelly, only one of them has potentially explosive material." He follows with some technical explanations about how new reactors do not share the design flaws of older reactors. His conclusion: "What the Japanese earthquake has proved is that even the oldest containment structures can withstand the impact of one of the largest earthquakes in recorded history. The problem has been with the electrical pumps required to operate the cooling system. It would be tragic if the result of the Japanese accident were to prevent development of Generation III reactors, which eliminate this design flaw." Still, I wonder how much facts will matter in this case. How much did logic and reason dictate what happened after the BP Horizon oil spill? The US government banned all drilling for a time. It didn't matter how safe your rig was. And a de facto moratorium still exists, with new drilling permits incredibly difficult to come by. Why would it be different with nuclear power? I don't expect sudden enlightenment on the part of the public or politicians. I expect they will do what is easy and what plays well on TV. The easy thing to do is to quash development of new reactors, one way or another. As I say, it's too early to know for sure how this will play out. Your guess is probably as good as mine. My guess is this: The nuclear renaissance is dead. I think we should sell our two uranium holdings. We'll book a 73% gain on Kalahari Minerals (London:KAH) and a 10% gain on Paladin Energy (Toronto:PDN). The latter is down 23% today. Once, we were up 70% on the name. So this is a disappointment. But Kalahari is a very nice win for a stock we held little more than a year. At the moment, I'm undecided on Cameco (NYSE:CCJ), which I recommended early last year to the subscribers of Capital & Crisis. It's the biggest and best-capitalized company in the uranium sector. We'll still need uranium to feed existing reactors. And not all planned reactors will die on the drawing boards. If you hold anything in uranium, this would be the one to hold. I may be completely wrong about how the uranium story plays out. Maybe people look past Japan and continue to merrily build nuclear plants around the world. Somehow, I don't think that will happen. In any case, it seems prudent to book some gains and move on to easier ideas. As Charlie Munger likes to say, there are three buckets where investment ideas go: "Yes," "No" and "Too Hard." I think uranium is too hard. Regards, Chris Mayer, for The Daily Reckoning Bill Bonner Who Will Buy the Bonds Japan Needs to Sell? Bill Bonner Reckoning from Baltimore, Maryland... The world seemed to hold its breath yesterday. People watched videos of the tsunami...of the earthquake...of the nuclear reactors. Japan's nuclear reactors were on the verge of a meltdown. Here at The Daily Reckoning, we predicted a meltdown in Japan - but not that kind of meltdown! In January, seers and forecasters turned in their predictions for the year ahead. Now, we are in March, and we have already run into two major events that no one predicted. First, the Arab world exploded. Now, the blow-ups are happening in the least-explosive part of the world, Japan. Japanese stocks sold off yesterday. If they were a bargain when we recommended them a couple weeks ago, they are an even bigger bargain today. US stocks didn't do much of anything. Perhaps some kind of turning point has been reached. Japan has been suffering from a manmade disaster for the last 20 years. It is a long, slow, painful form of national economic suicide. Now it is time to pick up the pace. This from Bloomberg: The Bank of Japan poured a record amount of cash into the financial system and doubled the size of its asset-purchase program to shield the economy from the effects of the nation's strongest earthquake on record. The central bank pumped 15 trillion yen ($183 billion) into money markets to assure financial stability amid a plunge in stocks and surge in credit risk. Governor Masaaki Shirakawa and his board also increased their facility that buys assets from government bonds to exchange- traded funds to 10 trillion yen. "We are providing as much funds as needed to dispel anxiety in financial markets," Kazushige Kamiyama, an official in charge of the central bank's money market operations, said before the policy announcement. "We will continue to add ample funds to stabilize financial markets." It used to be that central banks were charged with maintaining the integrity of the people's money. Then, mission creep set in. Maintaining full employment was added to the job description. And then, Ben Bernanke took it upon himself to boost stock prices. Higher stock prices would encourage people to spend and invest, he thought. And now, the Bank of Japan takes another step. It is playing a leading role in earthquake remediation - like the Red Cross or the National Guard. The Bank of Japan is going all out. Not only is it putting emergency funds into the economy, it's also stepping up its own QE program. What else can it do? It was already doing all it could. The BOJ has been "zero bound" for the last 15 years - meaning, it has been lending money as cheaply as it possibly could. If monetary policy were a pair of pants it would be around Japan's ankles. And fiscal policy? The country already has $20 of debt for every dollar of tax receipts. What's left? Thirty dollars, surely - or bankruptcy! There's unconventional stimulus too. That's right...the old printing press...is getting a good workout. Onward! And more thoughts... The Japanese camel has a remarkably strong back. He's held up to more than two decades of counter-cyclical stimulus programs...and central government debt that now measures 200% of GDP. The poor long-suffering beast has seen everything. The Japanese trusted the government with their retirement money. The government spent the money. And yet, bond buyers seem none the wiser. They still lend to the Japanese government at less than 2% yield. And now the old-timers are beginning to dis-save. That is, after saving so much for their retirements, now they are retired. And now they are drawing down their savings. This puts the Japanese government is in a real fix. Net savings in Japan are now negative. So, who will buy the bonds Japan needs to sell in order to rebuild its economy? Who will buy the bonds Japan needs to sell in order to rebuild its infrastructure? Who will buy the bonds Japan needs to sell in order to fund its government? Who will buy the bonds Japan needs to sell in order to pay back the people who bought bonds last year...and the year before...and all the way back to 1990? The answer is likely to be: no one. Instead, Japan will be forced into more QE, forced to print money to make up for the money she can no longer borrow. This will have a couple knock-on effects. First, the Japanese famously helped Europe and America finance their deficits and bailouts. Recently, Japan funded a major part of Europe's bond sales - helping to hold down rates. Also, the last time we looked, Japan had the largest stash of US bonds in the world. Under pressure to bring money back to the home island, you can expect Japan to be doing some selling - which might be the final straw. Second, the Japanese are making such an obvious mess of their finances that they are bound to attract attention. Investors might notice that the Japanese aren't the only ones. As we've pointed out several times, the developed economies all now count on low interest rates, huge deficits, and printing press money. Even with these massive in-puts of cash and credit grease, the economy still barely creaks forward. Without the extra grease, they will probably slip backward. *** The ides of March are upon us already. Little blue flowers are pushing their way up through the cold earth. There are buds on lilac bushes. Cherry trees are already in bloom... Another winter seems to be history already. Where did it go? They seem to go by so fast now...and now we've already put our clocks forward. Here it is, 5PM... It is bright and sunny outside. We're worried about the way time seems to be speeding up. As near as we can tell, we're in good health...but we can only expect to live a decade or two more. What a pity it would be if they went by too fast. We're on the downhill slope now. Picking up speed as we go down. Every year that goes by will find us with less hair...less muscle...maybe even less able to think clearly and remember where we left the car keys. Next year, is nothing to look forward to in other words, not compared to this year. The odd thing is that we tend to think about things that will happen in the future...and we're impatient. We tell ourselves to "slow down...smell the flowers...enjoy the here and now." But the here and now never seems as good as tomorrow. We're looking forward to finishing the fences...to having the orchard cleaned up...to fixing up the loft apartment in the barn. But why? What will we do next? What's the point? We are racing ahead...but only so that time can rush forward to meet us. Regards, Bill Bonner for The Daily Reckoning

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