- Labour continues to flip-flop on net zero
- Investors should focus on what actually works
- Traditional energy firms trade at an attractive discount
We’re on quite a roll here.
Not only has our readership increased in recent months. It appears to include ministers of His Majesty’s Government and the Governor of the Bank of England.
No, they’re not coming after us for being critical of some of their policies.
Rather, they appear to be taking our constructive criticism to heart and acting accordingly…
Let’s start with net zero policies and plans.
Labour’s EV U-turn
Late last year, under tremendous pressure from the car industry, including the threat of plant closures and thousands of lost jobs, Business Minister Jonathan Reynolds announced that the government wouldn’t ban the sale of new petrol and diesel vehicles from 2030.
At the time, we wrote that this was likely the first of a series of such policy flip-flops:
Could it be that the EV backtrack is only the first in a series? What might be next? The big, controversial proposed Norfolk solar farm? (Norfolk is known for sun, right?) How about the huge offshore wind farm planned for the Dogger Bank, way out in the North Sea? (And with way out maintenance costs too.)
Imagine the economy remains weak. Inflation rises again due in part to the big pay rises handed out to public sector workers at the last budget. Trump introduces tariffs on the UK and other countries. A global trade war breaks out.
All of the above are possible, likely even, next year. None of them are going to make the government any more popular. Nor are they going to contribute to raising government revenue. Borrowing, already rising faster than forecast, will just keep on doing so.
The government is going to become increasingly desperate to implement policies that not only appeal to the public but that might even support growth, bring down inflation and increase government revenue.
Sure enough, the EV U-turn appears to have been the start of a trend…
Pave baby, pave!
Overseas travel has long been in the sights of net zero zealots.
Of course, they claim it’s a necessity for government officials and celebrity businesses executives to fly private jets to Davos or COP environmental conferences.
Meanwhile, a budget family holiday somewhere abroad is a luxury that should be discouraged with ever-higher taxes.
Yet apparently this bias against affordable overseas travel for the masses won’t prevent Heathrow expansion. Chancellor Rachel Reeves has decided that greater Heathrow capacity is essential to her supposedly pro-growth agenda.
In a speech last week, she claimed that a third runway would “make Britain the world’s best-connected place to do business”.
Will that third runway be open for business travel only? Of course not, but it will ease congestion for business travel, she says, making the UK a more attractive place to invest.
At least she has her priorities straight: get Britain working!
But let’s not give anyone the impression that we also want hard-working Britons to spend their earnings on environmentally-unfriendly overseas holidays far away from their cozy, 15-minute cities.
So as long as it’s about business, investment and growth, overseas travel is just fine. Damn the CO2 emissions! Full throttle ahead! Pave baby, pave!
Fissile baby, fissile!
In another exciting development, the prime minister has gone nuclear. He has announced that he will ease planning restrictions for new nuclear power plants. These would include those utilising next-generation, small modular reactor (SMR) technology.
Of course, he didn’t specifically point out that wind and solar projects have overpromised and underdelivered in recent years. Not to mention the huge, ongoing taxpayer subsidies.
Getting back to nuclear. Here at Fortune & Freedom we’ve sung the praises of SMR technology for some time. It’s far superior to wind and solar as an alternative to traditional, carbon-emitting power generation.
So, we’re all for it. But will the government deliver?
British NIMBYism affects many industries. Nuclear power generation is one of them. Few would wish to have a nuke plant in their backyard.
Well, tough. As the BBC explains, the prime minister wants to get the countryside positively “fissiling”:
Liberalising the rules around nuclear power stations in England and Wales is the latest case study in trying to turn that around.
The idea is these so-called small modular reactors could be sited in a far wider range of places than current or past nuclear power stations.
For instance, all but one of them were located on the coast, because of the volume of water required nearby for cooling.
The new generation of power stations would still need water but much less of it: A nearby river or lake would suffice.
Ministers are also going to make it easier for them to get planning consent too.
That means it is less likely those arguing against such a plant being built down the road from them would be able to stop it.
Call me sceptical, but I’m not sure many folks living in the countryside will welcome a nuclear power plant next door. No more than they would a massive windmill or solar farm large enough to generate a comparable amount of power.
Invest in what actually works
Perhaps I’m wrong and the country will soon begin work on dozens of SMRs. The technology is indeed impressive. It has powered our submarines for decades. Why not have it power cities and towns too?
Perhaps the third runway at Heathrow won’t just go the same way as HS2. Maybe they’ll complete it rather than abandon it halfway through, providing Heathrow with Europe’s largest long-stay airport car park.
Perhaps the government will continue to allow us to drive the type of car we prefer indefinitely. Perhaps the government will allow us to continue using gas boilers or other appliances that actually work and that we can afford.
Perhaps, perhaps.
There are few things in life that are certain other than death, taxes and government incompetence.
When it comes to investing, there is no surer way to make money than to invest in what works, rather than what the government hopes will work.
As it stands today, when it comes to energy, that means oil, gas and nuclear.
I’m not saying that, someday, wind and solar won’t deliver on at least some of their promises and wean themselves off taxpayer subsidies. Perhaps they will. But as investors we should discount such investments as higher risk.
Yet it’s the traditional energy firms that trade at a discount. Traditional energy’s market capitalisation today is smaller relative to the broader market than at any time in the post WWII-era.
If you’re looking for value, you need look no further.
John Butler
Investment Director, Fortune & Freedom
PS As mentioned above, it appears the Bank of England has also been reading Fortune & Freedom of late. I’ll be writing about that tomorrow.
PPS My colleague James Allen is working on detailed analysis for the future of Britain’s energy solution. You’ll hear more about that next week.
For now, James has something more urgent to share with you – three energy stocks he believes could make a fast move in the next 120 days. Make sure to check that out here.
The 79 Times
Bill Bonner, writing from Baltimore, Maryland
Number 79 on the periodic table is remarkably heartless. The poor? Let them get jobs. The homeless? Let them sleep in hollow logs. Body bags in Gaza? That’s their problem.
Gold is indifferent to the sufferings of others. It is as callous as a torturer… as clueless as a Democrat. Does a man want you to refer to him as ‘they?’ Does an Afghani force his wife to wear a full-length cover… head to toe?
And why shouldn’t the Trump Team want to find a better place for Palestinians… or give preference to White South African refugees… even after eliminating the refugee program?
Eh… gold shrugs.
Are you getting richer? Poorer? Are stocks going up? Is Nvidia a ‘buy?’ Is it time to cash out your 401k?
Don’t bother asking gold. It doesn’t know… and it doesn’t care.
And yet… sometimes, gold glitters. Monday morning, for example. Markets Insider:
Gold hits record high after Trump threatens steel and aluminum tariffs
Commodity prices climbed and related currencies softened against the dollar on Monday after President Donald Trump said he would impose 25% tariffs on all steel and aluminum entering the US.
But that sparkle is not just an overnight thing.
Since January 2000, the Dow (a general measure of US stocks) is up 290%.
Oil has gone up too… from $29 a barrel to $71.
And bonds? They’ve just suffered their worst sell-off in history. The Wall Street Journal:
A Bond Selloff Is Rocking the World.
But gold has shined… from $282 an ounce in 2000, it now trades at nearly $2,900 – a gain of 900%, more than 3 times what you could get from stocks.
CBS News:
The remarkable, record-breaking price surge that gold experienced in 2024 continued this week as the price of the precious metal surged to $2,871.74 per ounce. That’s up from the $2,700 mark gold surpassed last October and, overall, is up just under 40% from where it started in January 2024 when the metal was priced at $2,063.73 for the same amount. It’s possible, if not likely, that gold could soon surpass the $3,000 price point should certain economic conditions become more pronounced.
Would you have been better off in Nvidia… or Tesla… or Bitcoin? But those are individual investments; you might have gotten lucky… or not. Take Facebook, for example. The stock was trading at $23 when Barron’s thought it was too expensive. ‘Stay away from the stock,’ it counseled its readers. Today, Facebook (now Meta) trades at $717. Who knew? Trying to pick the hot stocks is a losing proposition. There are few winners… and lots of losers.
It’s asset allocation, not stock selection, that makes the most difference for most investors. Being in the right place at the right time is what really matters. And among leading 21st century places – stocks, bonds, gold, commodities – nothing beat gold.
Which is a very odd thing. After all, not only does gold lack sympathy, empathy, and other kinds of pathy… it is also unproductive… and almost completely useless… except… as money.
What a strange thing… How could an otherwise useless thing, with no pretensions to activity of any kind, beat a corporation, with all its smart people, patents, marketing machinery… innovations and capital – a sophisticated complex, dynamic organization, intentionally set up to increase wealth?
Our take on it is this: there is progress…and backsliding. There is virtue… and sin, beauty and ugliness. There is profit… and loss. There is life… and death.
There is a time for everything under heaven. A time to sow and a time to reap. A time to hold ‘em… a time to fold ‘em… a time to walk away, and a time to buy gold.
In the autumn of 1999, US stocks had never been more expensive. It was time to get up from the table… time to walk away from equities… and put our wealth back into real money, gold.
We weren’t trying to fructify it. We weren’t looking for capital gains or for dividends. We didn’t want a good return on our money; we just wanted a return OF our money.
That’s what real money is supposed to do. Not go up. Not go down. Just not go away.
Most of the time, there should be better places for your investment money. But now? Is burying your talents in the ground the best you can do?
An important insight from our Law of Conservation of Value (about which more, tomorrow): Prices go up… and down. No kidding.
Gold has outpaced stocks for a quarter of a century. Isn’t it time for it to go down?
More to come.
Regards,
Bill Bonner
Contributing Editor, Fortune & Freedom
For more from Bill Bonner, visit www.bonnerprivateresearch.com
