Time at last to short-sell-not buy coal?

[Southernguy]

The following link explains how Miami Beach is being flooded by sea water and even state republicans (Bush, Rubio) are keeping silent about it. They are constrained between their national ambitions (Republicans against taxing carbon) and their local communities demands.
Global warming is a hotly debated matter in Itulip (and everywhere). Me thinks evidence is becoming more and more overwhelming as the certainty of the two issues at stake: 1) there is global warming going on 2) it is man made.
The second is the most debatable, as per my opinion the question is that even in the event of uncertainty we should take measures to control carbon emissions. We can surely live happy lives burning far less carbon than we do today.

http://www.nytimes.com/2014/05/08/us...&nlid=32577412

[FrankL]

Re: Time at last to short-sell-not buy coal?

The following link explains how Miami Beach is being flooded by sea water and even state republicans (Bush, Rubio) are keeping silent about it. They are constrained between their national ambitions (Republicans against taxing carbon) and their local communities demands.
Global warming is a hotly debated matter in Itulip (and everywhere). Me thinks evidence is becoming more and more overwhelming as the certainty of the two issues at stake: 1) there is global warming going on 2) it is man made.
The second is the most debatable, as per my opinion the question is that even in the event of uncertainty we should take measures to control carbon emissions. We can surely live happy lives burning far less carbon than we do today.

http://www.nytimes.com/2014/05/08/us...&nlid=32577412

Will an increasing amount of humans on this earth, a large part longing to increase their standards of living, require less energy, because there's a hypothesis that it might affect the climate?

Seems mostly like a western 'problem' to me, as we've already plateaued our standards of living, and can spend money on improving the efficiency of how we use energy. Most emerging economies do not have that luxury and need the cheapest energy sources, as well as the most efficient/$ processes to use up this energy.

Put it another way: will an increase in oil and coal price decrease global consumption? Or rather, change the amount of income spend on energy?

In the end, my argument is that net global energy consumption is unlikely to be very price-dependent, and more dependent on global population growth, economic factors and events such as large scale war.

What we should do rather, is to focus on how to deal with a changing climate; think of long-term effect studies and how to deal with the consequences rather than to keep building at or below sea-level and promote carbon tax schemes that in the end will not address any climate change.

[charliebrown]

Re: Time at last to short-sell-not buy coal?

Being not that smart, I don't see it ...

Here is a graph of sea level change from 1800 to present with an alarming projection
http://www.businessinsider.com.au/th...-charts-2014-5

Do you see a bump after 1940, when fossil fuel use went up like gang busters .... No.
I'm all for saving resources and reducing carbon emissions on a voluntary basis, but do I want to have uncle sam ram this stuff down my
thoat with some one size fits all draconian tax and regulate scheme no. I just opened the paper today, and see that electricity is going up
38% this year. Gas is once again flirting at 4.00 a gal. Oils seems seems sticky in 90 - 100 price range. I think the economics of the situation
will have its own downward pressure on demand. Getting back to my first point, it seem man is not doing it anyways.

Get your boot off of my throat!

[Southernguy]

Re: Time at last to short-sell-not buy coal?

Dear Charlie: from the (I find excellent) link you provide: "
OBSERVATION: Over the past million of years the Earth has shifted between warm “interglacial” periods and cool “glacial” periods. These transitions occurred over long stretches of time and were caused by natural variation in the Earth’s system. The report stressed that what’s happening today is different: The climate is changing in ways that can’t be explained by natural variation alone. The period between 2000 and 2009 was “warmer than any time in at least the last 1300 years and perhaps much longer,” the report said.
This chart decouples the amount of warming caused by human activities from the Earth’s natural hot and cold extremes. The green band shows how the global average temperature would have changed over the last 100 years due to natural variations. The black line shows actual observed increases in global temperatures, which are only possible if you factor in heat-trapping gases released into the atmosphere by humans.

PROJECTION: The amount of climate change over the next few decades depends on the amount of heat-trapping gases that continue to be released into the atmosphere. Reducing levels of emissions now will result in less warming in the future. In order to limit a global temperature increase of 3.6 degrees Fahrenheit compared to pre-industrial levels, we would need to reduce emissions by more than 70% by 2050, the report said.
The map below shows how the average annual temperature is expected to change between 2071 and 2099 compared to the period between 1970 and 1999 under two different scenarios. The left image assumes there are rapid reductions in emissions and the right image shows what will happen if emissions continue to increase.
You can see even in the best case (and least likely) scenario the U.S. will still see 3 to 5 degrees of warming. If we continue “business as usual” it could be a 10 degree jump.

A Clearer Outlook
Scientists have a much greater understanding of climate change than they did a decade ago and since the last National Climate Assessment was released in 2009. Back in 2000, for example, sea level was projected to rise by around 10 to 17 inches, Tom Carl, the director of the National Oceanic and Atmospheric Administration’s National Climatic Data center, said at a press conference on Tuesday. Those estimates have now been updated to 1 to 4 feet by the end of the century. Sea ice is now expected to disappear by mid-century as opposed to the end of the century and more heavy precipitation events are expected. Other important advances in climate knowledge are highlighted in the chart below."

However, my position here is not to go through the normative economic point of view. Just to ask a question about the relevance of coal stocks as a good investment.
I would like to center the discussion, therefore, not in the benefits or damages of a carbon tax but on the possibilities such a measure shall be put to work in the USA.
Bear in mind the extraordinary power this country has, it's intrinsic economic relevance and therefore the investment implications of such a policy change. I bought coal stocks and are currently bearing paper losses. Should I liquidate them?
That's the question I (and probably some other itulipers) am asking myself.

Being not that smart, I don't see it ...

Here is a graph of sea level change from 1800 to present with an alarming projection
http://www.businessinsider.com.au/th...-charts-2014-5

Do you see a bump after 1940, when fossil fuel use went up like gang busters .... No.
I'm all for saving resources and reducing carbon emissions on a voluntary basis, but do I want to have uncle sam ram this stuff down my
thoat with some one size fits all draconian tax and regulate scheme no. I just opened the paper today, and see that electricity is going up
38% this year. Gas is once again flirting at 4.00 a gal. Oils seems seems sticky in 90 - 100 price range. I think the economics of the situation
will have its own downward pressure on demand. Getting back to my first point, it seem man is not doing it anyways.

Get your boot off of my throat!

[RebbePete]

Re: Time at last to short-sell-not buy coal?

However, my position here is not to go through the normative economic point of view. Just to ask a question about the relevance of coal stocks as a good investment.
I would like to center the discussion, therefore, not in the benefits or damages of a carbon tax but on the possibilities such a measure shall be put to work in the USA.
Bear in mind the extraordinary power this country has, it's intrinsic economic relevance and therefore the investment implications of such a policy change. I bought coal stocks and are currently bearing paper losses. Should I liquidate them?
That's the question I (and probably some other itulipers) am asking myself.

Here are my two cents.

• For coal to become more popular, natural gas needs to become less economical than coal, which implies that the natural gas boom in this country needs to run its course, and the output of wells start to decline. We may have a few more years before that happens. Looking at UNG, the price of natural gas is showing a rising trend, but it's very slight so far.
• Overall demand for energy needs to remain the same or rise in order for all energy investments to do well. Conservation in this country is making its mark, and, if we do have a recession in the next few years, that will depress demand further for all sorts of energy sources, including coal.
• A carbon tax of some sort would also hit natural gas. If it disproportionately hits coal, then all it does is change the price point where coal begins to become cheaper to use than gas.

FWIW, I got out of most of my energy-related investments lately, since the direction is too hard to call in the short term. In the long term, I believe that the price of energy will go up, and natural gas will become more expensive than coal.

- Pete

[BK]

Re: Time at last to short-sell-not buy coal?

Can someone explain to me how the harsh winters we have been experiencing and later spring is result of global warming?

Anyone remember the human caused global cooling of the 1970s which at the time was explained because of the use of aerosol cans. see http://en.wikipedia.org/wiki/Global_cooling#Aerosols

[lektrode]

Re: Time at last to short-sell-not buy coal?

Can someone explain to me how the harsh winters we have been experiencing and later spring is result of global warming?

Anyone remember the human caused global cooling of the 1970s which at the time was explained because of the use of aerosol cans. see http://en.wikipedia.org/wiki/Global_cooling#Aerosols

well maybe taking all the CFC's out of the equation (at least in the 'developed' world, while the others can still spray it anytime/amount they want to, apparently - since ya can still get R12 in mexico, i'm told) - is causing 'global warming' ?

only half joking - as the refrigeration industry has been going thru hoops/backflips etc trying to deal with all the mandate$ for consumer appliances (sealed systems)- while the main problem was the fact that it was prev used as spray can propellents and foam rubber blowing agents etc - by the RAILROAD CAR full - (and to a somewhat lesser extent, car/truck a/c systems) from what i've read, anyway (feel free to debunk)

but i dont see 'warming' or sea level rise as the problem - considering the planet has been warming since the end of the last ice age - which generally has been a GOOD thing (at least for those who DONT enjoy winter/snow ;) -

its fossil fuels combustion and the chemical effects on the oceans that is going to cause starvation, if not kill us.

i also met a guy this winter with 50years of observations in snow country/the rockies - he sez we're 'in about year4 of a 5year cycle' (of low snow fall/pack) - and some of the weather types think an el nino is forming - so not sure why the focus and political hysteria is all about 'warming' or 'change' or whatevah they'll be calling it next year...

and i'm not sure we/the planet will ever be able to 'use less energy' - maybe not waste so much - but use less?

IMHO - had The US gone with its 'energy ace in the hole' starting in the '70s - NONE of this would be happening
along with endless war over oil, with ENDLESS TRILLIONS IN BUDGET DEFICITS TO PAY FOR IT

[BK]

Re: Time at last to short-sell-not buy coal?

Cold weather has been a major head-ache for the Federal Reserve's economic forecasting in the first quarter of 2014. Cold weather and snow was cited as the cause of the ultra low GDP number for the first quarter.

Perhaps one the next set of tools for the Federal Reserve will be an orchestrated Global warming initiative that gives large banks financial incentives for burning fossil fuels. The goal of the Federal Reserve Global warming initiative would be to raise the temperature of the earth and eliminate snow storms (there by eliminating the negative GDP impacts of snow storms). The added benefit would be from the economic activity that will be require to secure the shoreline, prevent floods, and moving homes further inland. Think of the millions of people who could be employed as a result of global warming and never again have GDP numbers distorted by snow fall.

[lektrode]

Re: Time at last to short-sell-not buy coal?

...Perhaps one the next set of tools for the Federal Reserve will be an orchestrated Global warming initiative that gives large banks financial incentives for burning fossil fuels. The goal of the Federal Reserve Global warming initiative would be to raise the temperature of the earth and eliminate snow storms.....

heheheh.... methinks that scenario is looking more plausible by the day, eh BK ?

;)

[ST]

Re: Time at last to short-sell-not buy coal?

Coal still warrants caution, IMO. If you hear a giant sucking sound, it's coming from here ("the first to" are the key words):

http://www.nytimes.com/2014/05/07/ed...s&emc=rss&_r=0

[thriftyandboringinohio]

Re: Time at last to short-sell-not buy coal?

Can someone explain to me how the harsh winters we have been experiencing and later spring is result of global warming?

Anyone remember the human caused global cooling of the 1970s which at the time was explained because of the use of aerosol cans. see http://en.wikipedia.org/wiki/Global_cooling#Aerosols

I'm old enough to remember the issue, BK. The article you posted uses "aerosol" in a different sense.
To an atmospheric scientist, "aerosol" usually means a tiny particle suspended in the atmosphere, like dry dust, or volcanic ash, or ice crystals.
They reflect sunlight back into space and cool the earth.

What you and I remember is the controversy over "aerosol cans". Different use of "aerosol"
More specifically, back then we were using chlorofluorocarbons (CFCs) as propellants in most consumer spray cans.
The new worry back then was depleting the earth's ozone layer, which protects life from UV radiation. There was much talk back then about the ozone hole.
In the 1970s CFCs were banned, except for a few small critical uses.

CFCs were otherwise great chemicals. Non-toxic, non-flammable, long lasting, cheap.... but they persist a long time in the upper atmosphere, destroying huge amounts of ozone.
They became popular as the pressurizing propellant in spray cans, and the wonderful cheap and effective R-12 refrigerant was a CFC.
Turns out CFCs are also strong greenhouse gasses, but they are not an issue for that because they are not much used these days.

Global warming and ozone depletion are two separate issues easy to conflate.

As an aside, CFC's were invented by the US chemist Thomas Midgley Jr. of Columbus Ohio, whose other big hit invention was the gasoline additive tetra ethyl lead (ethyl gas, leaded gas).
Those two inventions were so important the American Chemical Society gave him their highest awards, and he was one of the most celebrated chemists in the world.
He died before he learned how much inadvertent damage his inventions caused -damaging the ozone layer, and increasing the level of lead in people's bodies world wide.

Another misadventure of his inventiveness killed him.
He had become disabled, and made up a system of ropes and pulleys to get out of bed.
One morning he got tangled up in it, and strangled to death.
A famous writer said of Midgley "he had an instinct for the regrettable that was almost uncanny."
I learned that story years ago and it sticks in my mind -hard work, brilliance and good intentions all gone wrong.

[charliebrown]

Re: Time at last to short-sell-not buy coal?

My last gas bill shows a big uptick in nat gas prices. .68 USD / therm 2014, vs. .42 last year. So much for "floating on a sea of gas"

I don't have the time or the intellegence to analyze individual coal producing companies. I have a small position of KOL purchased at what I thought was a good
price of $22. I have been writing OTM calls and have reduced my cost to $20. Current price is 18.nn. It has gone as low as 17.nn. I have noticed that
the price of KOL is highly correlated with emerging market stocks such as FXI, and EMG. Several of the companies held by KOL are Chinese.

I have plans to write further OTM calls on this position, to push the cost down further. So far, it seems a hard landing in China, and KOL is going to get
killed. Maybe if I can push the cost down to 18.00, I might be content to hold for a while, collect the 1.5% dividend and wait. For those techies out there
200 day trend line has flattened, the first time that has happened since 2011.

BTW, a handy chart is this one published by the illinois commerce commission. It lists the cost per therm for nat gas by 3 chicago area utility companies. As part of the agreement for gas utility de-regulation nicor agreeded to sell the gas at cost "whatever that means".
It appears the lowest price for gas according to this was May of 2012 at $.22 per therm. I know nicor gas charges do not include delivery.
https://www.icc.illinois.gov/ags/pgarates.aspx

[thriftyandboringinohio]

Re: Time at last to short-sell-not buy coal?

Coal still warrants caution, IMO. If you hear a giant sucking sound, it's coming from here ("the first to" are the key words):

http://www.nytimes.com/2014/05/07/ed...s&emc=rss&_r=0

I would never bet against your advice on either mining or energy, steveaustin2006.

Still, don't we depend on a certain amount of coal, both worldwide and in the US for both steel and electrical generation?
It would seem that coal mines and their stocks will eventually find a bottom, no matter how many big universities and pension funds divest.
Depletion rates in the shale gas fields seem to make this even more true.

[ST]

Re: Time at last to short-sell-not buy coal?

I would never bet against your advice on either mining or energy, steveaustin2006.

Still, don't we depend on a certain amount of coal, both worldwide and in the US for both steel and electrical generation?
It would seem that coal mines and their stocks will eventually find a bottom, no matter how many big universities and pension funds divest.
Depletion rates in the shale gas fields seem to make this even more true.

Hello thrifty, thank you and I am in full agreement with you. It's just a question of timing, I would tend to lean towards waiting if we're on the cusp of a new normal for P/NAV ratios for those particular resource companies, IF we truly are about to witness permanent divestitures. Plenty of work to do in the meantime anyways to figure out which companies could withstand even further hits to equity without triggering covenants etc... there's always a basket via KOL, also as an option.

Uranium here, on the other hand, is looking very interesting to me for the long run although management from the largest player makes good points about further weakness to come. I'm very tempted to start dollar cost averaging monthly or quarterly into U.TO (Uranium Participation Corp.) which does a good job of tracking the price of uranium.

[rtchoke]

Re: Time at last to short-sell-not buy coal?

I would never bet against your advice on either mining or energy, steveaustin2006.

Still, don't we depend on a certain amount of coal, both worldwide and in the US for both steel and electrical generation?
It would seem that coal mines and their stocks will eventually find a bottom, no matter how many big universities and pension funds divest.
Depletion rates in the shale gas fields seem to make this even more true.

“Under its models the EPA predicts that coal will still account for around 30% of American electricity production in 2030 (it is around 39% today),” The Economist explains. “Such forecasting is a tricky business, given the number of moving parts and the economic, technological and regulatory uncertainties.”

Right. Like the fact that emissions are already falling thanks to a major uptick in the use of natural gas from our booming shale operations. That, and a potential 9% reduction in the use of coal over the next 16 years won’t exactly decimate the coal industry…

So maybe all of this “war on coal” business is just talk.

“If Obama wants to dethrone the coal industry so badly, why on earth is the Energy Department rushing to approve natural gas export permits?” our own Matt Insley chimes in. “Seems like in a world where you want to transition from coal, it’s silly to take actions that could increase the price of the substitute fuel, in this case natural gas. Weird.”

http://dailyreckoning.com/obamas-war...t-lip-service/