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Worldwide
hysteria and the fear factor notwithstanding, Casey Research Chairman Doug
Casey still considers nuclear power "by far the safest, cheapest and
cleanest form of mass power generation." Sharing his views in this Energy
Report exclusive on the eve of a sold-out Casey Research Summit in Boca
Raton, Florida, Doug says power generated from wind, sun, the tides and other
alternative sources are "very nice special applications but don't work
economically unless they're subsidized."
The Energy Report: You have traveled the world
extensively, studying the geopolitical forces that shape the economy on a
day-to-day basis. In the past, you’ve been quite enthusiastic about
uranium because of the need for nuclear power. Has the situation in Japan
altered your view?
Doug Casey: No. What's happened in Japan is most unfortunate, but it
hasn't altered my view at all. People are referring to it as a Class 7
Chernobyl disaster. Perhaps 20,000 people, or more, have died because of the
earthquake and subsequent tsunami in Japan. Not one death, so far, has been
attributed to that nuclear power plant.
What happened at that plant was not anticipated, and the reactor shouldn't
have melted down. Still, I have long said that nuclear power is by far the
safest, cheapest and cleanest form of mass power generation. That is
absolutely as true now as it was before the Fukushima disaster.
Around the world, coal is the source of the vast majority of power, and it
kills directly, through air pollution and fly ash, thousands of people per
year and many thousands more per year through coal mine disasters. Most of
the mining deaths in the world—many thousands each year—occur in
coal mines. No one ever talks about that. Nor do people seem to recall that
when a large hydroelectric dam gives way it kills thousands of people. The
debate on nuclear is intellectually dishonest.
TER: But mass psychology includes a nuclear fear factor.
DC: That's true, because the average person is absolutely ignorant of
science. Ask a kid in the city where milk comes from, and he says it comes
from a carton out of Safeway. He doesn't know it comes from cows and what's
involved in raising cattle. It's the same with power. They think it's like
magic. But if you want to turn the lights on, if you want your refrigerators
to run, you've got to generate the power, and you're not going to do it from
wind and solar. Those are very nice applications, but they don't work
economically unless they're subsidized.
I have high hopes that these things will get better in the future, along with
tidal and geothermal power. But now, and for the next generation, only coal
and nuclear make any sense for mass power generation. Of course, if the
government hadn't been involved in nuclear for all these many years, we might
be using thorium—which appears to have many advantages—instead of
uranium. We'd certainly be far more advanced with uranium reactors using
different technologies. The Fukushima plant design was almost 50 years old
and the plant itself was 40 years old; that's the equivalent of driving a
1957 Chevy today for your primary transportation. This is what happens when
you have heavy regulation that makes capital costs so high that you can't put
in new technologies. Is nuclear power potentially dangerous? Of course.
Everything is. But it's a question of alternatives. I'm afraid hysteria has
overwhelmed reason here.
TER: But how can we get over that? Can uranium really increase in
value if the entire world is reassessing nuclear facilities?
DC: Reassessing in favor of what? Sure, they're going to build more
coal plants because India and China and the whole world needs more power. But
aside from coal, what are they going to do?
TER: How about liquefied natural gas (LNG)? Some suggest that LNG will
be a viable alternative in Japan, at least temporarily.
DC: LNG is fine except that it suffers from the NIMBY (not in my back
yard) syndrome too. First, you have to get the gas; there's plenty of gas,
but nobody wants it recovered using current fracking techniques. Then you
have to compress it and deliver it in a highly
compressed form. Nobody wants an LNG tanker around, because if it explodes,
it'll literally blow up a city. That happened in Cleveland in the 1940s.
Hundreds of people died and it took out half a square mile of Cleveland. So
it's not without risk.
A new hysteria is developing since we found shale gas, with absolutely vast
quantities available using new technologies of horizontal drilling and
fracking. But there are dangers of damaging the water table, so everybody
will say, "You can't go for shale gas here because it can potentially
ruin our water"—and maybe they're right, at least in some
instances. Everybody wants power but nobody wants to do what it takes to
generate the power. I don't know how all of this is going to end, but
probably badly because the world is so politicized.
TER: Shifting focus a bit, Doug, earlier this month, in a piece
entitled "Keeping Capital in a Depression," you wrote about
agriculture as a viable option, and your summit agenda includes an "Investing in
Agriculture" presentation by Steve Yuzpe, CFO at Sprott Resource Corp.
Could you tell us a bit about your views on agriculture going forward?
DC: The prices of most grains, especially wheat, corn and soybeans,
have doubled in the last year. You can make a good case that agriculture is a good place to be for the long term. I'm quite involved
in the cattle business in Argentina and I think cattle actually will go much
higher for a lot of fundamental reasons. Agricultural land all over the world
has gone up hugely in the last few years. But that's the problem, because if
you want to make money, you have to buy cheap. Almost no assets are actually
cheap anymore because so many trillions of dollars are floating around. I try
to look at all the markets, everywhere. There are very few bargains.
TER: A recent article you wrote suggested that you're not crazy about
commodity foods such as wheat, soy or corn because they're so subject to
political interference and—as you put it—"they're not as
important as foods for wealthy people, which is the profitable sector in the
market." What do you mean by subject to political interference? And what
are foods for wealthy people?
DC: Two different questions and they're both good. As for political
interference, Argentina is an excellent example because Americans are only a
few years behind the Argentineans in learning how to destroy an economy. In
agriculture, a government can use export
controls—subsidizing some things and taxing others—to manipulate
the market. Wheat, soy, corn and other grains are common targets. These are
commodities for feeding masses of people, grown by the millions of tons. I
find boutique areas of the market much more interesting—and less
regulated.
TER: For example?
DC: Apples, peaches, blueberries, or, for that matter, cattle. The
rich people in the world are getting richer, mostly because of
politically-caused distortions. But the middle classes are growing by tens of
millions of people per year in China. They don't want to just eat bread and
cheap soybean-based foods. Rich people like to eat meat, so it makes sense to
me that it's a better place to be. Plus, ranchers haven't made money raising
cattle for decades—most do it just because they're ranchers, and can't break a bad habit. Cattle herds worldwide have been in
liquidation for a long time. I believe that's going to change, and cattle
prices are going way up.
Another problem mass commodity producers face is that every year farmers can
plant huge new crops, adding volatility to the market. But cattle take years
to mature. So the supply is more predictable, and constrained.
TER: In the world of the Greater Depression that you foresee, to what
extent is the production of foods for wealthy people—the fruits and the
meat—sustainable? Wouldn't these markets also crash?
DC: In a depression the standard of living goes down. That's the
definition of a depression. But it will go down less for rich people than for
poor people. So in relative terms, I think rich people's foods will be
higher-priced. I don't think they're going to go down as much and they're
likely to go up more. Think about caviar. The number of sturgeon will go down
and the number of people who want to eat fish eggs will go up. In fact, if I
could buy long-term contracts on caviar and good eating fish, I'd do it.
Regardless of what happens in the U.S. and Europe, both of which are in a lot
of trouble, the Indians and the Chinese are coming up rapidly in the world.
Scores of millions of people a year in both of those countries are joining
the middle class. After they have money, nobody wants to eat
high-fructose-based corn products. They want to eat rich people's food too.
TER: In terms of the mass commodities, you pointed out that at any
point farmers can simply plant more grain. But aren't there issues in terms
of the amount of arable land available, appropriate water sources and
machinery and so forth that inhibit or limit that ability to just plant more?
If we have this ability to just plant everywhere, why are potash and
fertilizers going up so much? Doesn't that indicate we're trying to get more
out of the same places?
DC: That's absolutely true. There are counterarguments to everything
I've said and I'm well aware of them. For instance, when it comes to these
grains, they're all gigantic monocultures. Whenever you have a gigantic
monoculture that goes for many, many miles in every direction, like in the
grain-growing areas of the world, you're looking at a potential disaster
because a bug—whether it be a microbe or an insect—could
devastate all of it at once. When plantings were much more variegated, you
couldn't have a wholesale disaster wipe out the whole crop.
Another thing to consider is that while the fertilizers increase yields on
the one hand, on the other hand, fertilizers as well as the various biocides
are very destructive of soils. They kill good microbes and earthworms and
things like that. And, of course, in many growing areas they pump water up
from the water table. That's generally a non-renewable resource because it
takes thousands of years to recharge those water tables. That's another
potential disaster.
At some point you could find the grains going through the roof for those
various reasons. But in the meantime, as people plant grains, for instance,
here in Argentina cattle are being kicked off good land because it's being
planted with grains. The cattle have to go on junkier and junkier lands that
are less productive. All of these things are pushing against each other in
the markets. So, having said all that, I prefer the ends of the market that
are generally looked upon as being rich people's foods.
TER: Aside from holding precious metals and finding agricultural
niches such as you've described, how does someone with any wealth preserve it
during this tumultuous period you anticipate?
DC: You must be geographically and politically diversified. That's
critical. It's hard to find a politically stable place, but at least you can
find a politically isolated place that's unlikely to be overrun in a war, or
become a police state. The average person lives his whole life in the country
where he was born, and whatever happens in that country happens to him. He's
planted there and stays there, acting like a vegetable, which isn't a very
intelligent approach to survival. So I recommend, first of all, political and
geographical diversification.
TER: When it comes to geographically allocating your capital, you've
founded a development in Argentina called La Estancia de Cafayate, a remote
"lifestyle community" near the Andes—apparently now home to
more than 150 people from a couple of dozen countries. But you know a lot of
other places, too. How do you view Argentina now in comparison to other
countries that are thriving? Thailand's economy is healthy, expanding more
than 7.5% last year. And of course everybody talks about China's economic
growth. Do you consider those politically stable places? Or would you focus
more on South America?
DC: I'm a huge fan of the Orient. I've lived in Thailand, and thought
seriously about going back for the years to come. But as much as I love it,
it's the antithesis of Argentina—not just geographically, but culturally
it's exactly opposite as well. If you're of Caucasian background, it's fine
to live in the Orient, which I've done for years, but you're never going to
really be part of society there, and you probably won't learn the language
either. Tonal languages are tough. All things considered, I'd say South
America is the best place to be. It's experiencing a boom right now because
of agricultural prices.
There are a lot of places you can go in South America—15 countries.
Argentina is just the one that culturally suits me. Of course, the government
has been idiotic almost all the time since Perón, but it bothers you
less than most governments in the world do. As far as Estancia is concerned,
it's without question the best community in the world to live in, at any
price—even 10 times the price. It has far more in the way of amenities
and facilities and climate. And most important, the people buying there are
the kind of people I want to hang around. So it's a good place to be.
TER: Another good place to be, this weekend at any rate, is your summit in Boca Raton. Participants can look forward to
hearing from some remarkable people, with something on the order of 35 of
them on your agenda. What do you expect to be the major takeaway from this
summit?
DC: What we're facing now is something of absolutely historic
importance, the biggest thing that's gone on in the world since the
industrial revolution. Many things will be completely overturned in the years
to come. What's happening now in the Arab world with all of these corrupt
kleptocracies being challenged and overthrown is just beginning. We haven't
heard the end of this in any of these countries—Egypt, Tunisia, Syria,
Algeria. Saudi Arabia will be the big one, of course. Everything's going to
be overturned. And all these stooges that the U.S. government has been
supporting for years could very well lose their heads.
So this is a very big deal that we're facing here in the next 10 years. It's
going to be the most tumultuous decade for hundreds of years, bigger than
what happened in the 1930s and 1940s. Hold on to your hats. You're in for a
wild ride.
Editor's Note: For more of Doug's views, including his take on how
market distortions will force investors to become speculators, check out the
April 29 issue of The
Gold Report.
Doug Casey, chairman of Casey Research, LLC, is the international investor
personified. He's spent substantial time in over 175 different countries so
far in his lifetime, residing in 12 of them. And Doug's the one who literally
wrote the book on crisis investing. In fact, he's done it twice. After
The International Man: The Complete Guidebook to the World's Last Frontiers in
1976, he came out with Crisis Investing: Opportunities and Profits in the
Coming Great Depression in 1979. His sequel to this groundbreaking book,
which anticipated the collapse of the savings-and-loan industry and rewarded
readers who followed his recommendations with spectacular returns, came in
1993, with Crisis Investing for the Rest of the Nineties. In between,
his Strategic Investing: How to Profit from the Coming Inflationary
Depression broke records for the largest advance
ever paid for a financial book. Doug has appeared on NBC News, CNN and
National Public Radio. He's been a guest of David Letterman, Larry King, Merv
Griffin, Charlie Rose, Phil Donahue, Regis Philbin and Maury Povich. He's
been the topic of numerous features in periodicals such as Time, Forbes,
People, US, Barron's and the Washington Post—not to mention
countless articles he's written for his own various websites, publications
and subscribers.
The Energy
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