Dallas, TX
February 18, 2010, 08:00 EST		 Dr. Joe Duarte's Market I.Q.


The Internet's Intelligence Digest
Intelligence, Market Timing, And Trading Strategy For Traders and Investors

In Nuclear Reactors Size May Matter
What's Hot Today:
U.S. stock index futures were pointing to a flat opening on Thursday. Overnight markets were again mostly higher. The U.S. Dollar was again showing some strength. There is a huge economic calendar today, so that means that we could see some volatility. Today's Economic Calendar:
  • MBA Purchase Applications 7:00 AM ET

  • Weekly Bill Settlement

  • Producer Price Index 8:30 AM ET

  • Jobless Claims 8:30 AM ET

  • Leading Indicators 10:00 AM ET

  • Philadelphia Fed Survey 10:00 AM ET

  • EIA Natural Gas Report 10:30 AM ET

  • EIA Petroleum Status Report 11:00 AM ET

  • 3-Month Bill Announcement 11:00 AM ET

  • 6-Month Bill Announcement 11:00 AM ET

  • 2-Yr Note Announcement 11:00 AM ET

  • 5-Yr Note Announcement 11:00 AM ET

  • 7-Yr Note Announcement 11:00 AM ET

  • Fed Balance Sheet 4:30 PM ET

  • Money Supply 4:30 PM ET
News For Thought

IMF sale hits gold price. According to The Wall Street Journal: "Spot gold prices fell in early Asian trading after the International Monetary Fund said it will be selling 191.3 metric tons of gold on the open market rather than to central banks."

Turf war ahead over Bank of America. The SEC is taking on New York Attorney General Andrew Cuomo. According to The Wall Street Journal: "In a swipe at New York Attorney General Andrew Cuomo, the Securities and Exchange Commission said in a court filing that the December 2008 firing of Bank of America Corp.'s general counsel had nothing to do with his opinion about ballooning losses at Merrill Lynch & Co. just before the securities firm's takeover by the giant bank. The SEC's court filing sets up a showdown between two securities regulators whose relationship has been fraught with tension for years. U.S. District Court Judge Jed Rakoff has said he plans to issue a ruling by Monday on a proposed $150 million settlement that would end a lawsuit filed against the Charlotte, N.C., bank by the SEC over disclosure of Merrill's losses."

The Journal added: "If the judge sides with the SEC's interpretation, it could hurt Mr. Cuomo's case against Bank of America, former Chief Executive Kenneth D. Lewis and Joseph Price, the bank's head of consumer and small-business banking. Mr. Cuomo accused them Feb. 4 of failing to disclose Merrill's worsening losses."

Seattle bank sues Wall Street firms over mortgages. The Federal Home Loan Bank of Seattle has launched 11 separate lawsuits against Wall Street firms, alleging that it was "misled by underwriters about the quality of $4 billion of securities it purchased as investments at the height of the housing boom," reported The Wall Street Journal. According to the report: "The Seattle bank is seeking to force the firms to repurchase the securities, plus interest. The $4 billion in securities represents the majority of private-label mortgage securities held by the bank, based on the most recent quarterly earnings filings from the Seattle bank. Private-label securities aren't backed by a government-related entity." If the bank wins, it could set some legal precedents with wide ranging repercussions for investors and firms, domestically and internationally. Involved in the suit are Goldman Sachs, and J.P. Morgan, which now owns Bear Stearns. Also involved in Bank of America, which bought Countrywide.

In Nuclear Reactors Size May Matter
Is Nuclear Power The New Frontier?
President Obama may have started a new trend for energy generation as he relit the fuse on nuclear power. But as always happens, when new trends appear, there are many potential contestants for the big prize.

Mr. Obama's highly publicized loan guarantees to build nuclear power plants are all about the large traditional structures. Yet, over the last several years, a smaller set of nuclear generating plants has been in development and smaller plants may be the way to go.

The smaller size plants are the size of a railroad car and cost one tenth of what a big plant runs to build. That's an advantage that in this day and age is hard to beat. According to The Wall Street Journal: "Tennessee Valley Authority, First Energy Corp. and Oglethorpe Power Corp., on Wednesday signed an agreement with McDermott International Inc.'s Babcock & Wilcox subsidiary, committing to get the new reactor approved for commercial use in the U.S."

The general idea is to use these smaller plants to replace aging coal powered electrical plants. Each one of these smaller units generates about one tenth of the power that a traditional nuclear plant does, but they are easier to build, and cost less. And that's important as investors are starting to worry that the sudden interest in building nuclear power plants will lead to rising prices for plants and that at some point problems will start to emerge. Among the problems expected is that utility companies will bet too much of their capital on nuclear power and eventually generate significant financial losses.

According to The Journal: "Already, the high cost of large reactors is generating friction among partners. CPS Energy and NRG Energy Inc. sued each other recently when CPS, a city-owned utility in San Antonio got cold feet about investing in a new nuclear plant that could push up power costs for its customers. On Wednesday, the two agreed to a settlement in which CPS will reduce its stake in the project to 7.6% from 50% in exchange for a $90 million payment from NRG and dropping its lawsuit." The lawsuit was settled on Wednesday and "NRG will pay CPS $1 billion to reduce its ownership interest in the project so it can proceed."

The major advantages to the small reactors are that they can be built at a central plant and then transported, that they will cost less, and that they can be water cooled or air cooled. The latter is important because that means that the reactor wouldn't have to be located near large bodies of water. Also important is the fact that these can be modular. A utility can buy one or two and then add others as its needs arise. Finally, the reactors can store their waste on their own premises for the sixty year life of the reactor, at least putting off the decision of waste disposal for decades.

Conclusion

It's going to take some time to get this sorted out. None of these smaller reactors are likely to go on line before 2018. But there is some precedent for small nuclear reactors, especially on nuclear submarines and other ships.

The take home message is that nuclear power is back on the drawing board and in a big way. For investors it's hard to figure out which companies will benefit as many of the firms that build reactors or components are divisions of larger conglomerates.

They key may be to just monitor the story and see what happens. Still, with the fanfare coming out of the White House, nuclear power seems to be getting a new lease on life.

Know when to sell and how to make money when the market falls. Get a detailed trading plan in your pocket. Read Dr. Duarte's All NEW Books "Market Timing For Dummies." and "Trading Futures For Dummies." The Trading Manuals for All Seasons. Also Available As Kindle Books.

 

Market Moves - Stock Of The Day
Southern Company (NYSE: SO) Gets Nuclear Bounce
Southern Company (NYSE: SO) got an $8 billion federal loan guarantee leading to a small bounce in the stock.



Chart Courtesy of StockCharts.com




Shares of The Southern Company didn't quite go nuclear on Wednesday. But the stock seems to have bottomed and is worth watching.

Think of this stock as a bellwether for investor attitudes toward nuclear power plants and their future. And the reaction has been muted, for obvious reasons. It takes a long time and a lot of money to build a nuclear plant.

Also risk is high, both from the potential damage that can be caused by rare malfunctions, but also because government backing is crucial since investor interest is tepid.

The rise of the potential for small reactors as an alternative to the traditional large reactors is an interesting development. But more than anything this is a slow moving trend.

Yet, it looks as if Southern Company has made a bottom of sorts and is worth watching. The other aspect of utility stocks is that they are interest rate sensitive and function on borrowed capital. Their lack of a rally recently suggests that investors may also be worried about higher interest rates in the not too distant future.
 

 


Other Subscriber Reports are located on the website (log in required). These
reports are updated on a weekly basis (or as conditions require) and are not emailed:

S&P Timing  /  Bond Timing /  Dollar Timing /  Energy Timing
Gold Timing /  Tech Timing /  Biotech Timing

© Copyright 1996-2010, Market Timing Strategies, Inc., All Rights Reserved.
  • Market IQ reports may not be redistributed without permission.
  • Joe-Duarte.com is independently operated and solely funded by subscriber fees. This web site and the content provided is meant for educational purposes only and is not a solicitation to buy or sell any securities or investments. All sources of information are believed to be accurate, or as otherwise stated. Dr. Duarte and the publishers, partners, and staff of Joe-Duarte.com have no financial interest in any of the sources used. For independent investment advice consult your financial advisor. The analysis and conclusions reached on Joe-Duarte.com are the sole property of Dr. Joe Duarte.