Big Opportunity in This Ugly Duckling

Is There a Secret War on Cash? The U.S. government is moving quickly to quietly change over from paper to digital currency. This looming switch could change the way we shop for groceries, pay bills and even tip our bartenders. It could also mean big profits for a handful of investors. Click here to learn more. Profiting From Ugly Duckling Energy By Sean Hyman, Editor of Commodity Trend Alert Dear Sovereign Investor Subscriber, We know that there's a long-term shift going on in the U.S. from dirty coal to cleaner-burning natural gas. If you listen to the news, you'll be forgiven for thinking coal is out of the picture. Natural gas is making big steps, now powering 26% of our electrical plants. But, according to the Energy Information Administration (EIA), we still power 42% of our electrical plants with coal. That's still the biggest slice of the pie. Over the longer term, we may eventually rid ourselves of much of the need for coal-fired plants and use more natural gas, nuclear and renewables. But for now, coal is still a part of our present, and it's going to be a fairly important part of our future for the next five to 10 years. And that means there's still money to be made in this ugly duckling form of energy. Advertisement Why Should You Listen to Bob When it comes to heading offshore, there's no one more experienced and more qualified than former U.S. Congressman Bob Bauman JD. In his most controversial book to date he reveals dozens of strategies that could help you legally reduce your income taxes and property taxes… exempt yourself from numerous government regulations… and protect your personal privacy from spying government bureaucrats and databases. In short, he has made the daunting world of offshore wealth protection and simple. Details here. Europe and Japan: The New Fundamental Catalysts for Higher Coal Prices Even as coal remains an important part of our energy supply in the U.S., demand for it is growing overseas. In fact, Europe is beginning to import coal from the U.S. because its natural gas prices are still expensive (unlike ours here in the U.S.). U.S. exports of coal have risen 24% in the first half of the year, and 13% of that went to Europe. In addition to this, Japan is turning back to coal. The 2010 tsunami and nuclear disaster left them burnt out on nuclear energy. As they try to wean themselves off of anything nuclear, what are they turning to? Coal! In fact, they're drawing up plans right now to implement approval of coal-fired plants starting in 2013. So between Europe's increased use and Japan's renewed interest in coal, it adds up to a lot of new demand. That's going to be the catalyst to drive coal up from its suppressed levels. So let's look at a long-term chart of the Market Vectors Coal ETF (KOL), an ETF that tracks coal companies, to see what this all looks like. (KOL is a great mix of coal companies from around the world.) The Chart Says Coal Companies Are Forming a Bottom See larger image In looking at how KOL has traded over the past five years, we can see that it tanked as the global economy went into a tailspin in 2008. Volume Spikes Reveal Great Buying Opportunities KOL crashed from just above $60 a share down to just under $10 a share. However, notice the huge surge in volume highlighted in red to the left side of the chart. That's where the crowd that was invested in KOL finally gave up and threw in the towel on coal stocks ever coming back. That told us a lot, because the crowds almost always get it wrong and focus on the "darkness" right before the dawn. Sure enough, after that huge volume died down, KOL began to build a base sideways and then began its next ascent from just over $10 a share up to just over $50 a share. Not too shabby for a hated, dirty energy source. Well, I've said all that to say this: We're at that point again. Look to the right of the chart and what do you see? KOL has crashed from $50 down to around $23 or so. After all, the world isn't in quite as bad of shape as it was in 2008, even though it's no bowl of cherries now. So it's only fitting that KOL's price decline hasn't reached 2008's lows. But now look at the spike in volume highlighted on the right side of the chart during KOL's decline. That's when investors threw in the towel once again. And what happened next? KOL broke its red downtrend line. So what does the future hold for KOL now? It could pull back near-term or base sideways for a bit longer. But after that, I believe it will climb back into the $40s, which is where it meets the black long-term downtrend line. You see, KOL can continue to decline overall and still present awesome opportunities because of the wide volatile ranges that it has due to its booms and busts along the way. I believe that KOL's downside is very limited now relative to its upside potential. In fact, even if KOL does half of what I expect it to, it will still end up being a very respectable return. KOL is Fundamentally Solid I also believe KOL is a great buy now because it's fundamentally cheap again. KOL has a P/E of 10 and a dividend yield of 2.15%. That's a compelling combo. But it's not only cheap relative to its collective earnings right now, it's also cheap compared to its average price-to-book ratio of 0.91. This means that KOL actually trades just a hair under its liquidation price (if you were to simply sell off all of the assets of all the companies comprised within KOL). That means it's priced cheap compared to its assets now, as well. This ETF is also cheap relative to stocks in general. For instance, the S&P 500 trades at an average P/E of 16.50 as of this writing. Yet, KOL trades at a P/E of 10. So you're only paying 10 times the level of earnings for KOL compared to 16 times for an average S&P 500 stock. If we see KOL make it up to the P/E average of the top 500 stocks in America then we'll see it get to a price of $35.48 per share. That would be right at a 50% gain from the price that KOL sits at today. Like I said … if KOL only hits half of what I think it's capable of doing, then it will be a well-above average return, for sure. The charts show that KOL is likely going back into the $40s. Fair fundamental valuations show that it could easily go into the mid-$30s. Right now it's in the low $20s. So buy KOL again now while it's despised by most everyone. Sure, one day, in the long run, coal companies may be out of favor as clean natural gas takes over. But for the next few years, at least, coal is still a major player in the electricity generation space. Have a nice day! Sean Hyman P.S. Finding just the right time to make a move on coal is a matter of spotting the signs. If you know what to look for in the data, the indicators are always there to tell you what play to make next. A chance encounter with a doctor, of all people, led me to develop my "flashpoint indicator." I've used it to lead my Currency Cross Trader subscribers to a series of wins over the past 11 months. To learn more about this unique indicator – and how it can work for you – click here for my special report. Chart of the Day The Truth Behind the Latest Job Numbers Since the September numbers were released last Friday, the headlines have all been trumpeting one thing: Unemployment in the U.S. edged below 8% for the first time in the last four years. Some claim this is a sign of major progress in our economic recovery. Others claim that this isn't enough of an improvement. Both groups are missing the real message within these numbers. While the quantity of jobs has increased, the quality of those jobs definitely hasn't. As I wrote about last week, America is becoming a nation of burger-flippers. People can't find higher-wage, full-time jobs, so they end up shifting into low-wage, part-time positions. The latest numbers reflect this trend. Since September 2007, the number of people working full-time in the U.S. has dropped by almost six million. During the same period, the number of people working part-time for economic reasons has almost doubled, reaching 8.5 million in September. This chart from Zero Hedge shows the severity of the trend: See larger image Yes, the unemployment rate has dropped. But the jobs that are being created are part-time, don't pay as well and are no substitute for the higher-wage jobs that we've lost. This does not bode well for our economy in the long-term. And as long as the economy is struggling, the Fed will stick to its zero interest rate and money-printing policies. That means traditional income sources will also continue to remain useless for the foreseeable future. So even though the headlines may proclaim this latest data as good news, looking past the headlines shows it for what it really is. The job market remains very weak. So the Fed is going to continue crippling traditional income sources. It's up to you to focus on alternative methods of generating the income you need. I am currently putting together a free report on some ways to escape the trap the Fed has set for you and how to continue to generate meaningful income. If you want to make sure you receive it immediately when I release it later this month, click here to get your name added to our priority list. Regards, Evaldo Albuquerque Senior Analyst Related Reading: The Silver Lining to the Fed's Latest Money Printing The Cheapest Play on Gold Today The "Bad News Indicator" Says This Sector is About to Turn Around Is The World's Biggest Ponzi Scheme About to Unravel? RECENT ARTICLES 10/10/2012 South America Holds the World's Best Kept Secret Peru is the fastest growing country in Latin America. Profit from that today by investing. 10/09/2012 Great-Grandpa May Hold Your Key to EU Citizenship With the U.S. in chaos, it's time to start thinking about a plan B. And you might be eligible for a second passport from another country. 10/06/2012 Another Metal Set to Shine China is going through a copper-restocking phase. And this is set to boost copper prices. So follow China and invest in copper now. 10/05/2012 Our Rights and Liberties Under Attack You describe what we have been watching happen for years, mindless government policies attacking the rights and liberties of its citizens. 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