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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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The True Story on Nuclear Power

The True Story on Nuclear Power

Having once worked for the Atomic Energy Commission at the Nuclear Test Site in Nevada, I do have some insights into the melt down at Fukushima. The media is wallowing in an orgy of misinformation that is approaching epic proportions. This is what happens when you rely on journalism and English majors for your analysis of nuclear physics, and throw in a dollop of fear and emotion for good measure.

For a start, the General Electric (GE) design of the six Fukushima plants succeeded. With the earthquake now upgraded to a 9.0 on the Richter scale, these facilities withstood an earthquake ten times greater than their maximum design specification. Thank goodness for Japanese engineering. The design of these plants, lacking a graphite core, makes a Chernobyl type disaster impossible. Nothing is going to explode; the fuel used is too diluted.

The four foot thick reinforced concrete containment structures for three of the six reactors have blown up after a buildup of hydrogen of gas. After pumping sea water in to cool the reactors, these facilities are toast and will never be used again. It is likely that fuel rods have melted together, as they did at Three Mile Island. All that means is a very expensive, multi billion dollar cleanup for operator Tokyo Electric Power, the largest utility in Japan. Remote robots will have to be used. But that is tough luck for the shareholders in this unlucky company, whose stock has cratered some 60% since the disaster started, not you are or, or China or India.

The initial cooling system failed when the earthquake knocked out the power grid in Northern Japan. Then the backup diesel generators that kicked in where flooded by the tidal wave. The amount of radiation released so far has been insignificant, just some low emitting particles of cesium, iodine, and strontium. Almost all of this will get rained into the ocean and dissipated.

While it is true that some of this will be measurable on roof tops in the US in a few days, keep in mind that these instruments are so sensitive the can capture a single atom. I laugh when I hear of panic buying of iodine tablets by the public, as is going on in the San Francisco Bay area today. You are more likely to suffer from the radon radiation in your basement.

The obvious question to ask is whether this will lead to a huge buying opportunity in the nuclear industry. There is understandably concern about the risks of nuclear power in the US in the wake of the Fukushima melt downs. But the US is not the market for responsible for the growth of nuclear power and its fuel. China and India are. China alone plans to build 100 new reactors over the next ten years to become the world’s largest producer. If anything, they are accelerating their nuclear program, thanks to higher oil prices. Its energy demands are so immense, they have little choice.

Could it be that nuclear phobia has driven these stocks far below their economic value? I think so. Take a look at Cameco (CCJ), the world’s largest listed uranium producer, and the ETF (NLR). The next headline coming out of Japan could be that the fires are out and the threat neutralized, which could send these stocks soaring.

By. Mad Hedge Fund Trader




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Leave a comment
  • Anonymous on March 17 2011 said:
    Absolutely excellent article. Very informative. And yes, the anti-nuclear booster club is out in force, which is OK, but why do intelligent people listen to or fall for their nonsense.
  • Anonymous on March 17 2011 said:
    If you really want to make a case for nuclear power, ask what would be the impact on mother nature if we were to build enough windmills and solar arrays to replace the world's nuclear reactors, not to mention what might be the environmental impact of building enough windmills to substantially reduce the world's coal consumption too. Also, ask not what might be, but what actually are the environmental consequences of China's massive appetite for coal to feed all their coal-burning power plants.
  • Anonymous on March 18 2011 said:
    Alex, maybe you should wait a while before making an excellent comment like the one you made above, because the know-nothings are out in force where the subject of nuclear is concerned.
  • Not so bold on January 17 2012 said:
    Maybe you better wait before the independent investigation of the incident proves that Fukushima did indeed survive the earthquake. There are a number of indicators, such as satellite scanning for radiation releases, that show the possibility that the plant did not get through the earthquake without critical damage.

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