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Friday, December 17, 2010

Gold or Coal for your Christmas, Retirefund Stocking?

Christmas CoalImage by Jenn and Tony Bot via FlickrThis Christmas, should you put more gold in your Christmas stocking, or will a lump of coal actually increase your retirefund.

Well, if the choice is between the Euro and gold, I say gold, hands down!!  If the choice is between the U.S. dollar and gold, I still say gold. However, there is a growing chorus singing the praises of dirty old coal, as a solid, short term (6-12 month) investment for your retirefund, possibly, even better than gold.

China burns more coal than any other country on earth now. It is also building 200 more coal fired power plants. As Chinas economy charges ahead, its leaders are loath to put the brakes on any economic expansion and economic expansion requires power. More than 90% of Chinas power is produced by coal.

Yes, pollution is a serious threat. In many large cities in China, including the capital of Beijing, it is sometimes dangerous to breath in the city air. Particulates (produced from burning coal and other fossil fuels) are sometimes so thick, they surpass the limit of what is considered safe, by as much as 25-30 times. (as a side note, it is interesting that the green lobby does not jump all over this like they do to the western worlds coal and oil burning). However, the air quality in China does not seem to be slowing down the economic expansion in any way.  It seems China is in a race to build as many coal plants as possible before they have to negotiate with the rest of the world on pollution trends and the global warming issues.

We can debate the pros and cons of such reckless policies in many ways, however, from an investors point of view, this is an opportunity.  So how do we capitalize on such opportunities

Well, if you are Canadian, like me, there are a few good  mid tier companies ramping up coal production and could be takeover targets in the not to distant future. American producers are salivating over possible west coast ports shipments to Asia and therefore the railroads who will ship such bulk may be a good bet.

However, I always like going to the source of the money and right now, Australia is, by way of geography and geology, in the drivers seat to supply Chinas insatiable appitite for coal, (both coking coal for steel production and coal for burning).

Do some homework, pick your stocks carefully, and your lump of Christmas coal could be very sweet indeed in 2011.

Heres to your Retirefund.


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