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Mad Hedge Fund Trader

Mad Hedge Fund Trader

John Thomas, The Mad Hedge Fund Trader is one of today's most successful Hedge Fund Managers and a 40 year veteran of the financial markets.…

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Nuclear Energy Makes a Comeback

Better drag your leisure suits, bell bottoms, and Bee Gee’s records out the attic. The seventies are about to enjoy a rebirth.

The nuclear industry, which has been comatose since the accident at Three Mile Island in 1979, is gearing up for one of the greatest comebacks of all time. There is absolutely no way we can deal with our impending energy crunch without a huge expansion of our nuclear capacity, which sits at a lowly 20% of our total power generation. France has already achieved 85%, followed by Sweden at 60% and Belgium at 54%, and the last time I checked, none of these Europeans were glowing in the dark. The BP disaster only brings the day of reckoning closer.

Unless you’re an underpaid nuclear engineer toiling away in total obscurity at some university, you are probably unaware how far the technology has moved ahead in the last 30 years. Generations I and II produced the aging “joint use” behemoths we now see on coasts and rivers, which generated both electricity and fuel for atomic weapons, but could potentially melt down if someone forgot to flip a switch. Think Chernobyl. Generation III has spent decades trapped on the drawing board.

There are over 100 Generation IV designs, and many are certain to get built. The most popular is known as a “pebble reactor,” which relies on a new form of fuel embedded in graphite tennis balls cooled with helium that is just hot enough to generate electricity, but too weak to allow a disaster. Also known as a Very High Temperature Reactor (VHTR), these plants enable a 50% increase in thermal efficiencies. The built-in safety of the design let’s you eliminate many redundant backup systems, cutting costs. No surprise that the only operating prototype is in China. Low grade waste can be stored on site, not shipped to Nevada or France. Other feasible designs include using thorium fuels, fast neutron reactors, and liquid lead, sodium, or salt cooling variants. Plants are also about to get a lot smaller too.

Speeding the resurrection of this once dead industry is some cheerleading from none other than the same demonizing, apocalyptic environmentalists that shut the industry down thirty years ago (remember Jane Fonda in The China Syndrome?) That is helping shorten the permitting process from 15 years to four by confining new construction to existing facilities instead of green fields. 

Nuclear power generates no carbon dioxide, an important consideration if we’re all about to suffocate on the stuff. Each new nuclear plant will take one or two of our 400 coal fired plants offline. Do you think they noticed that there has not been one nuclear death in the US since the sixties, while tens of thousands died globally in coal mining disasters or from the black lung that follows?  And I’m not even counting millions of respiratory illnesses brought on by ubiquitous air pollution. That’s why at least 30 new reactors are expected to start construction in the US over the next five years, and over 100 in China.

I stampeded readers into the great equity plays in this sector a year ago, which have done spectacularly well since. The Market Vectors Nuclear Energy ETF (NLR) is the easiest way in, and has popped by 29%.

This ETF’s largest component and the world’s largest uranium producer, Cameco (CCJ) was sucked into the commodities and hard asset boom, and rocketed by an eye popping 42%. As with all of my other commodity recommendations, don’t chase here, but wait for the inevitable 20%-30% pull back that will come in 2011. So for now, just put this on your “watch list”.

 And while you’re at it, you might start practicing those moves for your “hustle” once again.

By. Mad Hedge Fund Trader




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