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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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Peabody Energy (BTU) Takes a Hatchet to the Natural Gas Industry

After my year in the White House Press Corps, I vowed never to return, and took a really long shower, hoping to scrub every last spec of prejudice, self interest, and institutionalized corruption off of my battered carcass. But sometimes I see some maneuvering that is so unprincipled, crooked, and against the national interest that I am unable to restrain my fingers from the keyboard. For shorthand, let’s call them lies.

I’m talking about the absolutely merciless hatchet job the coal producers are inflicting on the natural gas industry. Coal today accounts for 50% of America’s 3.7 trillion kilowatts in annual power production. That’s a lot of vested interest. Chesapeake Energy’s (CHK) Aubrey McClendon says correctly that if we just shut down aging conventional power plants that are over 35 years old, and replace them with modern gas fired plants, the US would achieve one third of its ambitious 2020 carbon reduction goals. The share of relatively clean burning natural gas of the national power load would pop up from the current 23% to 50%. Even the Sierra Club’s Carl Pope says this is the fastest and cheapest way to make a serious dent in greenhouse gas emissions.

So what do we get? The press has recently been flooded with exaggerated or untrue reports of widespread well poisonings and forest destruction caused by the fracting processes that was used to recently discover a new 100 year supply of ultra cheap CH4. While the coal industry has had 200 years to build a formidable lobby in Washington, the gas industry is a neophyte, their only public champions being McClendon and T. Boone Pickens.

But memories in Washington are long, and Obama & Co. recall all too clearly that this was the pair that financed the Swift Boat Veterans for Truth that torpedoed Democrat John Kerry’s 2004 presidential campaign. What goes around, comes around.

Whose hands are dripping with blood here? Peabody Energy (BTU),  which ripped 200 million short tons of the black stuff out of the ground in 2008, followed by Rio Tinto (RTP) at 140 million tons, and Arch Coal (ARCH) with 134 million tons, poured millions of dollars into Washington to lavishly finance lobbyists. Their mission is to render toothless Cap & Trade legislation, block subsidies for natural gas which both parties seem to agree on, dilute environmental legislation, and promote the myth that the whole global warming thing is nothing more than a leftist hoax, thus keeping hands off King Coal.

Senators and congressmen from the top three coal producing states have been the eager facilitators: Wyoming at 467 million short tons in 2008 (Thanks Dick Cheney!), West Virginia at 157 million tons, and Pennsylvania at 65 million tons. That dinosaur of a union, the United Mine Workers, is another guilty party. You might even blame Warren Buffet’s Burlington Northern (BNR), which earns 70% of its revenues from shipping coal across the country for export to China. This is the wellspring for the money that is financing all those conservative initiatives, energy related, or not.

This will be unhappy news for the 23,000 the American Lung Association expects coal emissions to kill this year. How many will clean burning natural gas bump off? None. Can’t the coal industry be happy selling everything they rip out of the ground to China? If you are lacking an ounce  of conscience and are willing to turn a blind eye to where your trading profits come from, then use the current sell off in all hard assets to pick up (BTU), (RTP), and (ACI). China’s demand for our coal remains insatiable, and domestic demand isn’t about to go up in smoke overnight either. You can always donate your profits to the Sierra Club. After all, I recommended Russia, why not King Coal.

There! I’ve had my say. Now I’m going to go have another long shower.

By. Mad Hedge Fund Trader




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Leave a comment
  • Anonymous on August 24 2010 said:
    I don't believe that gas can replace coal, because I don't believe that there is a 100 year supply of "ultra cheap" CH4. And I certainly don't intend to accept the expertise of gentlemen who sponsored the 'Swift Boat Veterans for Truth'. Oh no!

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