I Refuse to Invest In Something Like That!

Tweet

• Coal is making a comeback
• What most people don’t know
• How to get rich from coal

Coal is awful. When the black rock burns it pollutes, spewing metric tons of carbon dioxide in the atmosphere every day. Most investors will tell you it’s a dead resource: “we’re moving towards renewables,” they’ll say. Coal is an anachronism; a blight. It’s an atrociously dirty energy source that will soon be relegated to the same place we put lead paint, asbestos insulation, and shoe-store foot x-rays – buried deep down in the ground.

In the news this week alone, there are two stories about coal miners trapped in mines – one coal mine in China, and one in West Virginia. There’s also a story about a coal tanker that ran aground on Australia’s Great Barrier Reef. My point is that coal is largely hated.

Not by me, of course. I like having a warm house during cold winters. I like air conditioning in the summer. I like cheap goods produced so cheaply, in part, thanks to inexpensive and plentiful coal. I also like the idea of buying stock in companies that mine such a cheap, hated commodity.

Coal isn’t going anywhere. In fact, it’s on its way back to the top of the resource pile. We’ll be using more coal than ever in the coming years.

I’ve got the charts and figures to prove it. Coal is going to replace oil as our primary energy source. There’s not really a question of “if”, at this point. Even the question of “when” might already be answered. The transition could possibly be as soon as 2011, conservatively as late as 2016. That's according to Gregor Macdonald, Chief Energy Analyst of Energy World Profits.

There’s not an “international primary energy indicator” that can tell us precisely when we get more of our energy from coal than from oil – but take a look at this chart, it’s the closest thing to such an indicator:

In the February, 2010 issue of Energy World Profits, Gregor put this chart together – along with this quote about how fast world use of coal is growing:

“In recent years, coal use has risen by 4.9% per year, faster than any other fuel. The use of coal is expected to rise by over 60% from 2006 to 2030, with developing countries responsible for 97% of this increase.” - World Coal Institute

Growth in coal use, like the use of most commodities, shows itself most prevalently in China. To date, China already uses more coal than any other nation. The US is #2 – but China is still growing its use of coal, along with every other nation, including the US. Right now, we get close to half of our electricity from coal power plants. There’s nothing that can come close to matching that output in today’s marketplace. And with oil supplies around the world dwindling it's likely that coal's attractiveness as an energy source will only continue to increase.

As oil gets more expensive, coal prices have stayed cheap just because it’s so plentiful. It doesn’t take an energy analyst to see how the trend will eventually play out. But it doesn't hurt that Gregor has been able to compile the data to illustrate the argument. The price of coal will continue to crawl precipitously upward.

I don’t think most people are aware of coal's attributes and how it will play an ever more vital role supplying the world's energy. I think right now most people pretty much despise coal.

To test this theory, yesterday I sent some of the above statistics and facts about coal use to my younger, environmentally conscious sister, and told her that maybe she should buy stock in a few promising coal companies.

To quote myself:

“Long story short: China uses a lot of coal, as does the US.  Other nations are using more and more coal. Furthermore, we are running out of cheap oil, but we still have a whole lot of cheap coal. So you should buy shares in coal companies today, while they're cheap. Hold them forever and you'll make money."

Her response: “I refuse to invest in something like that.”

The emphasis is mine, since it was an email discussion, but I can imagine her face screwing up at the thought of giving her money to evil, greedy coal companies that pollute and destroy our delicate earth.

This immediate knee-jerk distaste for coal, I think, is something that many investors share with my sister. Sure, they’ll heat their homes with coal. They’ll buy goods from China made possible by coal. They’ll even leave their lights on when they on vacation thanks to cheap electricity from cheap coal – but they shudder to think about investing in coal companies.

I believe this type of sentiment makes for a once-in-a-lifetime investment opportunity. What’s more hated than coal? Sentiment can only reverse. When sentiment catches up with the reality – that we’ll be using more and more coal every year for the next 20+ years at least – early coal investors will make a true bundle.

So there’s only one question you have to ask yourself: are you an early investor, or, like my sister, do you “refuse to invest in something like that?”

I for one want my money to be in front of huge trends exactly like this one. Coal use is going to grow regardless of whether I invest in it or not. I know that today’s plants are generally much cleaner, and more efficient than old plants – so if anything, my tiny contribution only makes it easier for companies to build new plants. President Obama is behind clean coal technology. Major manufacturers are designing scrubbers to clean smokestacks and decrease toxins before they are released into the atmosphere. And the economies of many states like Pennsylvania have a huge economic interest in the future of clean coal as a major part of our energy mix.

If you don’t like coal, that’s fine. Sit this one out. But I think it could be one of the best commodity/energy investments of the next 20 years – so I encourage you to consider it further.

To help you make an informed decision, we have a Special Report all about energy investing, including coal. Click here to start a risk-free 90-day trial and read this Special Report at your leisure.

We have also recently added a stellar coal company to our Energy World Profits portfolio.

Right now, this company is up over 100% for the year.  But I still think it's a bargain in the coal industry. The company has also tapped into China’s growth. This stock could be an easy double in the coming months. It could be the best way to buy a double-upside in coal prices AND growth in China. Click here to get the full story.

Good investing,

Kevin McElroy
Editor
Resource Prospector