Why Chinese Power Plants Need Rabbit Food
By Tom Dyson
November 14, 2007
When I met Jim Rogers in London in 2005, I asked him about investing in water. He told me water is the most valuable commodity on earth. "In the future, they will wage wars over water," he said.
However, Rogers cautioned me, as a speculator, you don't want to own the water itself. When the crisis comes, the government will steal it from you... if you're lucky.
If you're unlucky, the town will lynch you as a greedy speculator. Much better, he said, is to figure out how to transport it, clean it, or filter it. They'll give you a Nobel Prize and all the money you want.
I just spent four days in British Columbia learning about the forestry products industry. This is a complex industry, and I spoke to many different people with many different opinions. But everyone agrees on one thing:
British Columbia will suffer a gargantuan forest fire in the very near future.
As a speculator, you might consider stocking up on firefighter equipment and water-bearing helicopters to profit from this situation. Not a good idea. When the inferno hits, people will probably call you dirt bag, tie you to a burning tree, and take your assets.
I have a better suggestion: It's a way to fix the problem. You probably won't win the Nobel Prize from this idea, but it will make you rich. Here's how you do it:
You may have heard about the Mountain Pine Beetle. This little pest is smaller than a grain of rice, yet it has killed more than 50% of the mature pine trees in British Columbia. The way its population is mushrooming, 80% of the pine trees in BC will be dead in five years.
This is an unmitigated disaster. BC is the world's forest capital. We're talking about 20 million acres of infested pine forest here. That's double the size of West Virginia. My forest guide told me the beetle kills 10 trees for every tree the loggers chop down.
I saw the effects with my own eyes last weekend. "Beetle-kill" trees turn red. I stood at the top of a hill in a logging region of BC and looked down over the forest. It was like someone had spilled rusty red dye on a huge green blanket... and this wasn't even one of the bad areas.
These beetle-kill trees are useless to the logging companies. They won't waste their harvest allowance on dead trees, so they just leave them there. The beetle-kill trees dry out and become perfect fuel for forest fires.
As my guide put it, beetle-kill trees are "like billions of matches pointing at the sky." Making the problem worse, if they don't log the forest, they can't clean out the brush on the forest floor, either. This brush is highly flammable.
All it takes is one lightning bolt and we'll have a fire 50 times the size of the California wildfire. The fire will wipe whole Canadian towns off the map.
So how do we make money from this situation? Answer: We make wood pellets.
Pellets are a form of bio fuel. They're made from sawdust and waste wood. You dry and compress it into these little pellets that look like rabbit food. Power stations in Sweden use them to generate electricity as they don't produce greenhouse gases. Or you can mix them with coal and reduce the CO2 emissions from your power plant by 50%. The Chinese government wants to start buying wood pellets to burn in its coal plants.
In cold countries, people use pellets on a retail level. You can buy a ton of them for $200 and heat your house for the whole winter. Even though the pellet furnace costs $4,000, you make your money back in just a couple of years with the money you save on heating oil or gas. In Austria, wood pellets fire two-thirds of all new home heating systems.
At the moment, this industry is tiny, but it's growing fast, especially in Europe. The Europeans are gobbling up wood pellets. With heating oil prices shooting up, it's becoming a serious alternative in Canadian and U.S. homes, too.
Beetle-kill wood is the perfect raw material for making pellets. It's already dry and doesn't need any serious processing. By turning beetle-kill into wood pellets, you also reduce the forest fire risk. It's the perfect solution.
Strong demand, low production costs, and a solution to forest fire risk...
If you're an entrepreneur looking for new business opportunities, you should learn more about wood pellets. You could be a hero... and make a fortune at the same time.
Good investing,
Tom
Editor's note: Tom Dyson is a regular contributor to DailyWealth, a free investment newsletter focused on the world's best contrarian opportunities. We write with a simple belief in mind: You don't have to take big risks to make big money with your investments.
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THE BIGGEST BLOW YET TO CHINESE STOCKS
Everywhere we look, Chinese stocks are sinking...
Yesterday, we discussed the near-50% plunge in shares of China Southern Airlines since September. Stock-touter China Finance Online lost 23% of its market cap on Monday... and shares of China's largest insurance company, China Life, have shed 20% in the past month.
But the largest blow to the China mania has come via Asia's largest oil company, PetroChina. For a brief period this month, PetroChina became the world's largest public company, doubling True Wealth readers' money in the process. This week, however, the dramatic decline in Chinese assets triggered Steve's profit-taking stop loss in PetroChina.
Take a look at today's chart of PetroChina's decline. The chart of nearly every Chinese equity looks the same. This technical damage is along the lines of a sprinter rounding the corner only to be smacked in the head with a 2x4. At the very best, it will take the stocks a long time to recover from the blow. At the very worst, it could turn into a Chinese stock rout.
- Brian Hunt |
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BHP Billiton Ltd.'s offer for Rio Tinto Group, potentially the largest mining acquisition, is spurring rival Chinese companies to step up global takeovers to secure raw materials.
China Shenhua Energy Co. and Yunnan Copper Industry Co., the Asian nation's largest coal and third-largest copper producers, are planning acquisitions in Australia, Mongolia and elsewhere, executives said.
"BHP's bid to buy Rio will help change the Chinese mentality, and accelerate their pace to go outside and open up," said Helen Lau, a Shanghai-based analyst with Daiwa Securities Group Inc. "But mining assets are all very expensive now given metal prices are at their peak."
"The Chinese need to get equity in supply," Mark Pervan, a commodity strategist at Australia & New Zealand Banking Group Ltd., said by phone from Melbourne. "They have been a buyer to date, and now they need to be an owner." |
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The "Big Five" oil companies are putting more money into stock buybacks and dividends than new exploration and development despite a fourfold increase in cash flow since the 1990s, according to a study by Rice University's Baker Institute for Public Policy.
Exxon Mobil Corp., Royal Dutch Shell, BP, Chevron Corp. and ConocoPhillips collectively spent 56 percent of their cash flow on share repurchases and dividends in the last year, moves that are good for investors in the short term, according to Amy Myers Jaffe, a co-author of the study that was released Monday.
But those moves put the companies' long-term oil reserves at risk and have led to lower reserve replacement rates. |
– Houston Chronicle |
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