Old King Coal Will Rise Again [Arch Coal Inc, Peabody Energy Corporation, Alpha Natural Resources, Inc.]

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July 1, 2014 1:10pm NYSE:UNG

handful-of-coalAccording to BP plc(LON:BP), the fastest-growing fuel in the world is coal. Yes, despite the White House’s war on coal, last year it had the biggest share of demand worldwide since 1970. From China to Germany, coal’s use is expanding, not contracting. Consumers are choosing cheap fuel over


reducing greenhouse gases. It is that simple.

Developing nations drove most of the increase in demand, which was 3% last year. Natural gas saw only a 1.4% increase in demand and that is down from the historical average of 2.6% growth.

And coal’s share of worldwide energy use hit 30.1% last year. Oil is only 32.9%.

Coal is 67% of China’s energy demand, and that is the lowest on record for the country.

As we all know, coal is the dirtiest fossil fuel, but it is not going anywhere, and that means the beating coal stocks and bonds have taken here at home is a gift in disguise.

Take your pick, from the most secure, Peabody Energy Corporation(NYSE:BTU); to the riskiest, Walter Energy, Inc.(NYSE:WLT); to the middle of the road, Alpha Natural Resources, Inc.(NYSE:ANR) or Arch Coal Inc(NYSE:ACI). This may be one of the best buying opportunities since February 2008.

The White House’s war on coal has driven prices way down. But the world’s increased demand for it has made this unloved fossil fuel a hot commodity. Excuse the pun.

Just don’t go hog wild with this one. These are still considered speculative plays, and the road back will be filled with bumps and bruises… but they will be back. It is just a matter of time.

Natural Gas Is Set to Move Up

Gas stockpiles are at 11-year lows and that is just before the peak demand summer season when cooling pushes electric demand through the roof.

Cold weather nationwide is to blame for the shortfall, and most analysts do not think the stores can be beefed up enough in time for the increased electrical demand in the summer or the winter heating season.

July delivery prices were up 4.3% this month alone. And as gas approaches $4.70 per million BTUs, power plants shift to coal. Many have made the shift already.

But as summer demand ramps up, power plants will have to burn both coal and natural gas. So expect demand for gas to continue to increase as stockpiles stay well below average. And that means higher prices.

And we haven’t even begun to think about heating demand this coming winter in a market with the lowest amount of gas in storage since 2005.

Play it anyway you like, big or small gas companies, but UNG may be the simplest.

That’s United States Natural Gas Fund, LP(NYSEARCA:UNG). It is just off its bottom of about $20, down from $120. The glut of gas here at home really took a bite out of its pricing.

But as we enter the high cooling power demand period, late June to late August, and the winter heating period, November through late March, with the lowest stockpile of gas in a long time, expect to see significant price action.

The “Slap in the Face” Award: From Obama to America

And yes, thanks for sticking around for the “Slap in the Face” Award.

This week is one of those cheek smackers that really sizzles Oxford Club Members. So, get ready!

You all remember the story about conservative groups being targeted by the IRS office in Cincinnati about their tax exempt status.

Old news, right?

Well, it seems Congress isn’t finished looking at it and has requested more than 60,000 emails sent between the IRS, the White House and the DOJ. They are hoping to prove what all of us already know: that this was not run by a bunch of low-level pencil pushers in a field office but from the highest levels of the government: the Department of Justice and the executive offices.

Well, it seems the IRS can’t find 40,000 of the emails requested – those that were sent from the fall guys in Cincinnati to the White House and the DOJ. They can get all the other emails requested except the ones to and from Eric Holder’s and Obama’s offices.

According to the IRS, a server crashed and they are all gone.

Nixon was impeached for erasing eight minutes of tapes. What do you think will happen to whoever dumped all the evidence of Holder’s or Obama’s involvement in this outrage?

Nothing! In fact, the press for the most part isn’t even covering it.

The fact that the emails have been erased or dumped is outrageous enough, but that the press is giving Obama a pass on this is a disgrace, a national disgrace.

How does that slap in the face feel?

by Steve McDonald, Bond Strategist

Investment U provides cutting-edge research and strategic financial recommendations for all levels of investors through its morning publication Investment U Daily and its related publications.


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