Dear Reader:

Last week I told you about a few solar stocks that I saw were trading sideways and primed for a pop. Sure enough, three of those stocks have gained double digits since then, in just the span of a few days!

• China's LDK Solar (NYSE:LDK) is up by more than 10% since Monday, Feb. 11.
• Solarfun Holdings (NASDAQ:SOLF) shot up by nearly 13% since last Thursday.
• And from market close on Friday, Feb. 8 to early trading Wednesday, Feb 13, Yingli Green Energy (NYSE:YGE) gained just above 27%!

Sure, the broader market has been up a little in that time, gaining a couple of percentage points, but as oil pushes up and short-sellers get squeezed into buying, these solar plays are destroying the Dow!

Today let's turn our attention to the other end of the world. You see, though the Federal Reserve is trying to flush our recession down with cash, the water swirls the other way in Australia... and it's creating an energy play you can't afford to miss.

Why It's Time To Bank on Australian Energy

Australia is in the throes of an incredible 16-year economic expansion. More money means more inflation, and like most of the world's central banks, the Reserve Bank of Australia is worried sick about the value of the country's currency and price stability for nervous consumers.

Inflation is now approaching 3.75%, far above the 2-3% range targeted by most governments, including Australia's leaders in Canberra. New Australian Prime Minister Kevin Rudd has even called inflation, "Public Enemy #1."

So the Reserve Bank of Australia (RBA) just raised its benchmark lending rate to 7%, an 11-year high and a major drag on investor sentiment. This comes despite the fact that Australia's All Ordinaries index just logged its biggest one-month decline since the Wall Street crash of 1987!

Consumer sentiment is also at the lowest point in over a year, and there is speculation that if shoppers and stock market investors don't start feeling better about the economy, a rate cut may be coming up in early 2009.

But bear in mind... Australia is the world's #4 coal producer and #1 exporter. Oz has become top of the export heap largely because of its proximity to the Asian Tiger economies, especially China and India, with their energy consumption growing even faster than their breakneck GDP expansion.

Australia is also one of the top liquefied natural gas (LNG) producers, ranking #5 worldwide according to the U.S. Department of Energy. Australia's LNG production could surge in the coming years as new deepwater technology exploits major offshore natgas reserves.

This energy production scenario gives us a huge upside to investing in Australia, even when the locals are down in the dumps.

New Energy, New Economy

Kevin Rudd's first act as leader of his country was to sign onto the Kyoto Protocol, the landmark emissions-reduction charter that former PM John Howard rejected along Bush administration logic that developing countries must be held to a higher standard.

Rudd, himself fluent in Mandarin after years of service as a Beijing diplomat, understands Australia's strategic position just across the sea from "Chindia."

He also recognizes this crucial point: Australia is still far too dependent on fossil fuel for its power needs, and new sources are required for coal and LNG exports to be maximized. Ultimately, upping exports and reducing domestic use will take advantage of surging worldwide commodity prices.

So Rudd and the Australian government are stimulating Australia's latent energy sources underground - geothermal, or "hot rock" energy. Over A$50 million has been pledged to kickstart the industry, while clean coal possibilities are also being explored.

While Coal Is Still King, Renewables Will Be the New Royalty

Mark my words: the energy commodity bull market is set to continue, with coal leading the way as China builds more than 500 coal-fired power plants in the coming years!

As I reported in sister publication Wealth Daily last week, a secret government document from the Treasury to the new PM, called the "Red Book," outlines a need for a massive overhaul of the country's energy portfolio.

The Red Book says clearly that for energy production revenue to be maximized, and for Kyoto targets to be met, "the energy profile of the economy will have to be fundamentally changed."

To us international energy investors, that sets off bull market sirens. We here at Energy and Capital are monitoring the geopolitical ins and outs of Australia's energy story, and we'll bring you the hottest plays as they develop.

Regards,

Sam Hopkins

"Energy stocks... The only way a human is going to make any money."

-- Matt Simmons, Peak Oil's first and most vocal proponent,
and founder of the country's last pure play energy investment banking firm.

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Australia is one of the last frontiers left that has elephant type oil reserves onshore.
A lot of these have aboriginal claims and so it is slow moving.
There are very few oil rigs in the country that can develop the reserves on hand. For the right companies, this is an overwhelming opportunity.

Five Stars. He backed up his recommendations by reason, including political probabilities.