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On September 22, 2011, Karen Roche and JT Long of The Energy Report
interviewed renowned speculator and financial author Doug Casey on his views
about uranium. Read here why Doug thinks despite the recent bad press,
“yellowcake” has a bright future.
The
Western world's skittishness, skepticism and staunch opposition when in comes to nuclear energy won't stand in the way of its
production elsewhere in the world. It will be full steam ahead in China,
India and other developing nations, says Casey Research Chairman Doug Casey,
and the Western world is tiny in comparison. In fact, "I'd say uranium
is a great place to be for at least the next generation," he tells us in
this Energy Report exclusive.
With ever-advancing technology enabling economic recovery in places where it
previously wasn't possible, he's also optimistic about natural gas and oil.
The Energy Report: Next month, at the sold-out Casey Research/Sprott Inc. "When Money Dies" summit in Phoenix, you're on tap
for a presentation entitled "The Greater Depression Is Now." Your
colleague, Marin Katusa, is on the roster too,
talking about "Making Money in Energy." Marin recently
told us there's a buying opportunity for uranium companies. Given
Fukushima's repercussions in terms of the nuclear energy industry, are you
bullish on uranium?
Doug Casey:
Absolutely. It's unquestionably the safest, cheapest and cleanest form of
mass power generation. That's not to say that there aren't problems, as the
Fukushima incident made clear. As much of a disaster as that was—a
combination of earthquake, tsunami and radiation leakage—so far it's
just been a big industrial disaster. I daresay that if government hadn't been
so involved in nuclear power these last 50 or 60 years, the technology would
have been much further along. Nuclear power would be much safer, cheaper and
cleaner than it is today. We might, for instance, be using thorium, which
appears to be better than uranium in many ways. We would almost certainly
have much smaller, cheaper, and robust reactors.
So, yes, I'm a huge uranium bull. If you want mass power, you need nuclear
power. And today that means uranium. I'd say uranium is a great place to be
for at least the next generation.
TER: But
considering the fact that governments remain involved and people are even
more squeamish about nuclear power post-Fukushima, won't we see a stall in
nuclear power and development?
DC:
That's possible. But, the hysteria is mainly going to affect the Western
world. China and India recognize they have no alternative to nuclear power.
As you know, the growth is in China, India and other emerging economies; it's
where the most of the world's people live. The Western world is small by
comparison, and getting smaller. These other places will continue full steam
ahead with nuclear.
TER:
Porter Stansberry, whom you know well, recently
told us to expect the U.S. to become a net exporter of natural gas in the
not-too-distant future. Do you see that as well?
DC: Quite
likely. Let's talk about peak oil first, though. I think that the Hubbert peak theory is accurate, and for good geological
reasons—but understand that peak oil doesn't mean we're running out of
oil. Rather, it means that we're running out of easily available, cheap light
sweet oil. And we are.
However, technology is always improving, enabling economic recovery of oil
and natural gas in places where it previously wasn't possible. Horizontal
drilling and the fracking process have opened up
gigantic reserves of gas, scores of trillion of cubic feet in some basins in
the U.S. So, yes the U.S. could become a huge exporter of natural gas. It's
entirely possible. It could happen in other regions of the world as well, but
probably not with gas at its current prices.
The gas is available, but because it's very
underpriced relative to other forms of energy, it probably won't be produced
until the price doubles or even triples from where it is now. That would
bring it more into historical alignment with oil prices, which I expect will
themselves go higher as well.
TER: How
is it that the oil prices have remained relatively high and gas is still so
low? Given the differential of the two price points, why aren't we seeing a
conversion from oil-dependent cars, for instance, to natural gas?
DC: Oil
has much a greater density of energy than natural gas, and a much more
convenient energy-based fuel, so of course we've all gravitated toward it.
It's not really feasible for aircraft, for instance, to be able to run on
natural gas, so they'll continue to use oil-based derivatives. In addition,
gas is much harder to transport than oil. So it's tended to be a local
market, whereas oil is international.
But since most all the easy, cheap oil's been found—mostly in the 60s
and 70s—and those old oilfields are going into decline, gas is probably
the next thing. Gas has some advantages as well. For one thing, it burns
cleaner. Remember that these fuels, these petrochemicals, basically contain
just hydrogen, oxygen and carbon. As technology advances, we should be able
to manipulate these very simple and well-understood molecules and put them into
a form we want. We'll be able to do it ourselves in various ways as
nanotechnology, for instance, develops further in the future. Then maybe we
won't have to rely on nature doing it for us over billions of years.
TER:
Despite criticism of the effects of government involvement—stifling
nuclear energy advancement over the years, as you mentioned earlier, or
printing money to paper over enormous amounts of debt, as you've pointed out
in other interviews—you've indicated that improving technology is a
countervailing trend that actually will increase the standard of living.
DC:
Exactly. There are more scientists and engineers alive today than have lived
in all previous history put together; that's a huge cause for optimism.
Technology is very likely to solve many, many problems—as long as the
scientists and the free market are allowed to develop these things, and as
long as there's capital available to manufacture the tools they need to do
so.
TER: What
are you hoping attendees come away with from next month's summit?
DC:
People come to these conferences is to get ideas about intelligent places to
put their capital. Today those places are harder to find than has ever been
the case before in my lifetime. With the dollar's imminent demise, staying in
cash is also very dangerous. There are very few bargains to be found in the
world of investment today. Stocks today are quite overpriced by almost any
parameter. Bonds will implode; that's especially serious because they're a
much bigger market than shares. Property prices are still headed down. So
people are looking for answers, and I think we have some.
Beyond answers along those lines, we also host these summits to discuss some
investment principles so that our attendees don't have to rely on us for
answers. They'll be equipped to deal with these things on their own.
TER: What
are some things that investors can do to protect themselves?
DC: It's
very hard to be an investor in today's world, because an investor is someone
who allocates capital in a way to create new wealth. Inflation, taxation and
regulation make investing very problematic—and all three are becoming
much more severe. That said, it's late in the day
but not too late to buy gold, silver and some other commodities. Productive
assets of several types are good to own. Of course, the easiest way to buy
most productive assets is through the shares of publicly traded companies,
but since the stock market is overvalued in my opinion, that's not the best
option right now.
In addition to trying to build personal holdings of gold, and to a lesser
degree silver, I think people should learn to be speculators. That's not to
be confused with gamblers, who rely on random chance. Speculators position
themselves to take advantage of politically caused distortions in the
marketplace, and we'll be seeing lots of those. In a true free market
society, you'd see very few speculators because there'd be very few such
distortions. But compounding regulations, taxes and currency inflations are
likely to keep markets very volatile. Good speculators will position
themselves to both capitalize on inflating bubbles, and identify bubbles that
already have been blown to their maximum and are about to pop.
Increasing government involvement in the economy is going to literally force
people to become speculators.
TER: What
bubbles might speculators look to exploit?
DC: As I
mentioned earlier, most forms of real estate in the U.S. are problematic
because the U.S. bubble hasn't completely deflated yet, and real estate
bubbles are just starting to deflate in places such as Australia and Canada.
Probably the world's biggest real estate bubble is in China. It's relatively
hard to short real estate, of course. But shorting banks there might work
well. . .
Bonds are another story. I'd say bonds are the short sale of the century.
They're going to be destroyed. Bonds pose a triple threat to capital:
- Interest
rates are artificially low, and as interest rates rise—which they
must—bonds will fall.
- The
currencies that bonds are denominated in, let's say dollars, will
depreciate radically.
- The credit
risk presented by many issuers—certainly including
governments—very high.
On
the long side, mining stocks are very cheap relative to the price of gold
right now. There's an excellent chance of a bubble being ignited in gold
mining stocks, especially the small ones; in fact, I'd put my finger on that
as likely being the easiest way to make a killing—although there's
plenty of risk.
TER: How
about technology? Do you see a bubble forming there?
DC: You
have a point, but I'm not sure you can talk about technology stocks as a
whole; technology is too variegated, too vast a field. I must say, however,
that I've always been a huge fan of nanotech—that is an area that will
change the nature of life itself. The market will see that, and so it's a
definite candidate for a mania. With gold stocks, however, you can jump into
a discrete universe.
TER: Any
others?
DC: Just
talking about the things that seem most obvious to me, like gold. . .well, oil isn't cheap, but a lot of oil stocks
are. Natural gas, as we said, impresses me as being cheap relative to other
commodities. A favorite of mine is cattle—the downside is de minimus and
the upside is huge.
TER:
Well, Doug, thank you so much for your time and this preview of your October
event. I imagine you look forward to it for many reasons, including the fact
that it's sometimes nice to be with other intelligent people who want to
broaden their horizons.
DC: It
is. It's nice to spend time with others who see things the way you do, and
with whom you have some philosophical principles in common. The people who
come to our conferences share what I believe to be a sound view of the world.
They're not statists; they're not collectivists; they're not misguided,
ignorant or wrong-headed. They're an enjoyable company.
Learn from Doug Casey, Rick Rule, Rich
Dad advisor Mike Maloney, investment pros John Hathaway and
Richard L. Hanley, and many more, what you should expect to happen next in the
ongoing economic crisis and how to survive it with your wealth intact. Listen
to more than 20 hours of audio recordings of the recent Casey/Sprott Summit When
Money Dies, on CD or MP3… including specific stock
recommendations by the summit’s all-star cast. More
details.
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Doug Casey
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