Monday, May 21, 2012
   
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The Next Big Commodity Trend

Making money in the market often comes down just to sticking with the big trends -- the rise of gold being a prime example.

But there's another big commodity uptrend that isn't getting nearly as much attention...

It's the big uptrend in the price of coal.

As I'll show you today, despite all the bad press coal gets, it's in a major uptrend... and I expect it will be for at least the next decade...

Coal today is largely a story about electricity use... And the world consumes staggering amounts of power.  Electricity is a fundamental fact of modern life.  It powers virtually everything we do -- from heating the stoves that cook our dinner and lighting up the TVs we watch, to powering the massive factories that build cars and refine natural resources.

And as countries like China and India modernize their economies, the volume of electricity they devour is mind-boggling.

In the U.S. alone, we use almost 4 trillion kilowatt-hours of electricity every year, an amount the U.S. Energy Information Administration says is growing about 1% a year

Now, consider China. Power consumption there grew from 1.2 trillion kilowatt-hours in 2000 to about 4.5 trillion kilowatt-hours this year.  That's a 275% increase in 11 years.  India's consumption has grown from 375 billion kilowatt-hours in 2000 to more than 600 billion kilowatt-hours today.  And 80% of that electricity is created by coal.

Environmentalists would like to change coal's vital role.  Burning coal for power generation creates more pollutants than other fuels, like uranium and natural gas.

But relatively poor economies like India and China are more concerned with the cheapest, most plentiful sources of power right now.  They'll worry about cleanliness later.  As long as coal is cheap and plentiful, it will serve as a cornerstone of the world's power industry.

In addition to China & India's coal consumption, Japan's tsunami tragedy is a tailwind for prices.  Japan and many other nations will be forced to burn coal if they want use less nuclear power.

But as I hinted at the beginning of this essay, the big thing to keep in mind here is the BIG TREND.

Below is the trend in coal prices since 2002.  When you slice out the crazy credit crisis action 2008, coal sports a solid uptrend that has lasted for years.

 

When I consider the bright economic future of massive countries like China and India (which collectively hold nearly 10 times the population of the U.S.), the world's recent aversion toward nuclear power, and the black stuff's big uptrend, I end up with just one piece of advice:

Get long coal, and stay that way for a long time.

 

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