We're long commodities, coal in particular, because we think China's demand will drain the world's supply. Now, one of the richest families in the world agrees with us...
Hedge-fund manager Nathaniel Rothschild, of the prestigious Rothschild family, is trying to build the largest coal company in the world... He's leading a $3 billion takeover that would merge Bumi, Indonesia's largest coal producer, Berau Coal, another Indonesian coal company, and Vallar, Rothschild's investment vehicle. "Indonesia is a sleeping giant," Rothschild says. "One scratches one's head to think why isn't there a mining champion out there already, and hopefully we are in the process of showcasing one in the years ahead."
What does Rothschild want to do with the coal? Export it to China. To pull off the deal, he's leveraging his contacts in the industry (Ivan Glasenberg, head of the biggest commodity trader, Glencore; Russian aluminum billionaire Oleg Deripaska; and Barrick Gold Chairman Peter Munk) and his personal commodity knowledge (he excelled in commodity trading at hedge fund Atticus Capital). "There's no global coal company today," Rothschild said. "There's not a Barrick Gold [the largest gold miner in the world] in coal. That's where the opportunity is."
In last month's Stansberry's Investment Advisory, Porter discussed China's growing demand for coal. China is now the second-largest consumer of electricity behind the U.S., and 78% of its production is coal-based. China consumes three times more coal than the U.S. – more than 3 billion tons a year. But it only has around half of the U.S.'s coal reserves. In other words, China must import lots of coal. Here's more on the situation from Investment Advisory...
Current market surveys show China will import 150 million tons of coal this year. That's only 5% of China's total coal demand, but it represents 15% of the total U.S. demand. Right now, almost all of this coal comes from Australia, where China takes up about 60% of the export supply of coal.
China's coal imports doubled in the last year... We know total power production in China is scheduled to double over the next eight years. It's building a new coal-fired plant nearly every week. The United States has built only 12 new coal-fired power plants since 1990. Assuming China's coal imports double again (and they will), Chinese demand will exhaust Australia's export capacity. And when China's import demand doubles again after that (to 600 million tons per year), it will exhaust the world's total export supply.
Porter's recommended coal play is already up 12%... And he expects it to rally at least another 30%. The stock is out of its buy range, but Porter's favorite way to play the coming food crisis (another problem rooted in China's growing commodity demand) is still a bargain. To learn more about Stansberry's Investment Advisory, click here...
The European Union tried to calm markets yesterday by announcing another, more stringent round of stress tests for EU banks. But the organization performing the tests doesn't want to publish the results. Hmm... Not that it matters. We all know the banks are dying.
Jean-Claude Trichet, head of the European Central Bank, also said the decision to continue buying government bonds is "ongoing," which is also boosting the euro today.
After European markets closed yesterday, Standard & Poor's said it's considering downgrading Portugal's credit rating, citing "economic pressures and increased risks to the government's creditworthiness." When S&P finally steps in with a downgrade, you know things are beyond repair.
Economists agree Europe's current bailout fund is enough to rescue Spain... But if Italy and Portugal fail, Europe will need more money. And it'll be up to Germany to decide if it wants to continue bailing out its euro-zone pals. As we've said many times, the euro is finished in both scenarios... Either the EU continues printing money to bail out its member nations (thereby devaluing its currency) or the stronger countries – Germany and France – don't agree to another bailout and the euro disintegrates.
New highs: Almaden Minerals (AAU), Esperanza Resources (EPZ.V), Fronteer Gold (FRG), Keyera Facilities Income Trust (KEY-UN.TO), MAG Silver (MVG), Silver Wheaton (SLW), CARBO Ceramics (CRR), iShares Silver Trust (SLV).
In today's mailbag... one lifetime subscriber writes in with kudos... and one's a little angrier. How have we offended you today? Direct your barbs to feedback@stansberryresearch.com.
"I was forwarded one of your emails by a business partner October 13, and being fascinated, I tried a couple of recommendations and subscribed to a couple of letters. Now November 30 I have migrated my entire portfolio which I largely had in GLD and SLV all year to something like 20 of your strategies. It took me about the whole 48 days to read enough to get the transition done. Still for the November month the set of deals grossed 7% in price gains overall.
"For the short term you have over-delivered. I signed on to Private Wealth. Now I have my spreadsheet set up and look forward to seeing the long term over-delivery. I will have a Hall of Fame soon. I have one position up 189% in 30 days. Can you tell me how to get information about Badiali's new Junior Resource publication? I don't see it on the web site." Paid-up subscriber Bill Prince
Goldsmith comment: Glad to hear you're doing so well. As for Badiali's new service, the S&A Junior Resource Trader is currently available to Alliance members. And it will be open to the public around the middle of this month.
"Thanks. As a subscriber, I appreciate your honesty and frankness. I have been stating the same things for a long time. One Question – Where and from whom do I buy Silver?" – Paid-up subscriber Dell Morgan
Goldsmith comment: We recommend you use Asset Strategies International in Rockville, Maryland to buy bullion. You can reach them at 800-831-0007 or by e-mail at rcheckan@assetstrategies.com.
"What kind of an organization is? Maybe my investment in the Alliance program should never have been made. Track records are bogus. Reported fills are bogus – not at all correct. This not the first portfolio where the results are plain flat out wrong & therefore meaningless. The portfolio shows AXAS reported entry price of 3.55 which was the prior days close.
"The price gapped up on the day after the recommendation. It was not available to me as I was going to buy it but the buy up to price was no more than 4.00. The lowest price on the day after the recommendation was 4.02. So how can you report a price that was not available the next day after the recommendation? The portfolio table is bogus. Using 3.55, it is easy to show great results." – Paid-up subscriber Ken Van Gheem
Goldsmith comment: We probably receive one of these complaints a week. Ken, if you're unhappy with your Alliance subscription, we're happy to end our relationship and part as friends. But you should know, we use the previous day's closing price to track every stock recommendation we make (we use a different method for options). And we make that fact clear in our letters.
We choose the previous day's close to show the value of our idea at the time we publish it... Not to reflect where our readers get in. Using previous day's close is also the most consistent way to track recommended prices. If we feel our readers weren't able to buy our recommendation at a comparable price, we'll change it in the track record.
In the particular case you mentioned (AXAS), the stock did gap up. But it fell back to as low as $3.73, where you could have purchased it. However you look at it, you're still in the black.
Regards,
Sean Goldsmith
Baltimore, Maryland
December 1, 2010