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Coal Investing for 2015

The Return of Coal!

Written by Jeff Siegel
Posted December 24, 2014

For Christmas, I hope you get coal.

And I mean that as a gesture of goodwill.

Because if you get coal for Christmas, you can always try to sell it to Robert Murray.

Robert Murray is the CEO of Murray Energy. And even against the backdrop of a disintegrating market in the U.S., Murray knows coal is still a very valuable commodity that's not going to disappear from the global energy economy.

In fact, he's aggressively gobbling up other coal producers that have been unable to compete in a very hostile market.

Whether you want to blame Obama and his “war on coal” or the fact that coal simply can't compete against dirt-cheap natural gas, there's no denying that the U.S. is rapidly replacing coal with natural gas and renewable energy.

But honey badger Murray don't give a damn.

Heading into 2015

I'm not here today to praise Murray. Nor am I here to bury him.

Truth is, the guy does come off as kind of an asshole.

Robert Murray is pretty well known for bullying his employees and trivializing environmental and labor risks. I could also do without him referring to every single person who disagrees with him as a “radical.”

But the truth is, I actually think Murray's pretty savvy when it comes to strengthening his position in the coal industry while so many others are running for the hills.

In the U.S. alone, coal is a $30 billion-a-year industry. And those with the capital and risk tolerance to play the long game are going to come out ahead. 

Don't lose sight of the fact that internationally, coal use continues to grow, too.

Here to Stay

The most recent International Energy Agency (IEA) report shows that no form of energy has grown faster than coal since 1973. This growth is expected to continue through 2019 as well — by about 2% annually.

IEA head Maria van der Hoeven followed up on these results by simply telling reporters:

Coal is here to stay for decades to come. Some people don't like this. But it's the truth.

I suppose I'm one of those “people.”

I don't like it because I do believe that the continued use of coal results in a heavy environmental burden for the planet. But that doesn't change the fact that coal use across the globe is not giving way to the rapid growth of alternative energy.

And as far as a new wealth of natural gas? Well, that's pretty much monopolized by North America. We have been blessed with an abundance of this resource... or cursed, depending upon who you ask.

In any event, as we head into 2015, don't be so quick to dismiss coal.

While most Americans will continue to get less and less of their power from coal, internationally, demand is still quite strong. Even as exports to China are starting to peter out a bit, India will soon surpass the U.S. as the world's second-largest consumer of coal. Japan isn't far off either, already importing about 200 million tons a year.

Of course, I'm not saying to run out and buy a bunch of coal stocks. To be honest, I'm still not convinced we've hit a bottom yet. But I do think we're getting close. I suspect we'll have better visibility sometime in the second half of 2015.

Until then, I'll be watching from the sidelines.

Enjoy your holidays!

Jeff Siegel Signature

Jeff Siegel

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