What a way to start the Year of the Rat.

It should come as no surprise that weather occurrences are running amok, or that the global economy is a disaster. The Year of the Rat is upon us, threatening international tensions, natural and air disasters, and a turbulent stock market, says this report. Yep, the Year of the Rat has been ushered in.

Coincidence or not, famous disasters fill the Year of the Rat history, including the Asian tsunami in 2004 and even the 1912 Titanic incident. In 1996, another Year of the Rat, 20 planes crashed, according to the report.

Better yet, “Kenny Lau, head of the small-cap sector at Credit Suisse, said the last three Rat years had all seen very strong stock market growth in Hong Kong. It grew 232 percent in 1972, 30 percent in 1984 and 18 percent in 1996. But he said high inflation -- he predicted 5.1 percent in Hong Kong and 6.5 percent in the Chinese mainland -- would provide a threat to economic growth and turbulent times were ahead.”

What will happen this time around? Who knows? But if economic tensions and strange weather occurrences remain, nothing’s out of the question.

Do I buy into the theory of the Year of the Rat? Not really. It’s interesting stuff, though.

Take a look at China, where, according to Sam Hopkins, “It was the worst winter in half a century in the Middle Kingdom, throwing China into a coal energy crisis and giving us several ways to play China's power problems.”

Why Coal Prices Could Double

Coal, whose surging price has outpaced crude oil and natural gas, could double this year.

When heavy rains and flooding cripple two million metric tons of thermal coal production at an Ensham mine in Queensland, Australia, coal prices go nuts. But when crippling China snowstorms, floods in Queensland, Australia, stronger Asia demand, slower Indonesian growth, power crisis in South Africa wreak havoc, will it be any shock if coal prices double this year?

All the while, coal demand continues to spike as global electricity use grows, and isn’t expected to slow. Thermal coal prices in Newcastle, Australia, for example, soared 73% in 2007, beating the crude oil run. This year, coal futures have already jumped 42% to about $80 a ton.

Supply pressures alone already forced Citigroup, for instance, to forecast $100 thermal coal prices for 2008-2009, from the current price of $55 / ton, while the price of coking coal could rocket to $200 / ton from $95. Other developments that may boost coal prices, include higher exchange rates, says Forbes. “Production costs have been rising 14% per year, and further cost inflation is expected, if at a slower rate.”

Plus, consider this. According to MarketWatch.com, “China will sharply increase coal imports in the coming months to build its reserves. Coal demand from China, the world's largest coal consumer, will be very strong in February and March’” seeing, for one, that it banned coal exports until March 2008.

Better still for the coal stock bulls, the export market into Asia and Europe is extremely strong. Supply can’t keep up with demand.

Investing in Coal Stocks: How to Profit from Soaring Coal Prices

Yes, there’s a drawback to coal. Coal is dirty and toxic. As consumption rises, we’ll see negative sentiment, the legal issues, you name it. But is won’t slow down demand. It’s like cigarettes. There’s huge demand, and people know it’s bad for their health. Yadda… Yadda… Yadda… But it hasn’t slowed demand.

The coal stock Arch Coal (ACI), for one, has been in a strong uptrend after posting net income of $81.3 million, or 56 cents per share from $79.5 million, or 55 cents a year earlier, dwarfing analyst predictions for 47 cents. Revenue was up to $644.4 million from $618.4 million, bettering $641 million forecasts.

And most of it’s because of stronger coal prices.

But if you want broader exposure to coal, there’s another coal investment... the Market Vectors Coal ETF (KOL), which provides exposure to a tight supply and demand market. That doesn’t mean it’s not volatile, though. The fund’s big weighting is in the U.S. followed by China, and Indonesia with major holdings in China Coal Energy, CONSOL Energy, Bumi Resources, Peabody Energy, and China’s Shenhua Energy.

Again, we expect to see volatility in the ETF. Be cautious if you buy.

With a real possibility that coal could be the new gold… black gold, take a look at the following coal stocks: KOL, ACI, and Teck Cominco (TCK), which now has a $50 price target.

Welcome to the Coal Bull Market,

Ian L. Cooper
http://www.energyandcapital.com

P.S. Since mentioning Cree Inc. (CREE:NASDAQ) on December 21, 2007, the stock has run from a $22.59 low to more than $31. We bought the underlying stock in Pure Energy Stock Trader, as well as the June 2008 25 calls (CQRFE), which have gained 226%.

I’m also the editor for Small Cap Trading Pit, where I just took 62% and 43% gains on Millennium in an average of eight days, a 3-day $3.36 gain on half of NutriSystem, and a six-day $4.11 gain on the second half. Get more information on Small Cap Trading Pit here.