JBL: Going Nuclear By John Bradshaw LayfieldThe market is...

JBL: Going Nuclear

By John Bradshaw Layfield
The market is concerned about inflation. However, there is a difference between now and the 1970s. In the '70s, commodities had a run, but so did wages, stoking inflation in a huge way. Now the commodities are having a terrific run, but with the globalization of the world's labor market, we still have low labor-market prices.
This, in my opinion, will allow commodities to be bullish, without igniting the Fed's inflation alarm. Though I feel inflation has and will creep into the market to a degree, I do not believe we are seeing a repeat of past cycles.
A commodity bull market presents several buying opportunities. You can buy stocks or commodities that are participating, or you can buy stocks in companies that will benefit from rising commodity prices.
One dormant technology that finally shows signs of life in the U.S. is nuclear technology. China has stated that it will build 40 new nuclear power plants, Japan 13 and even Turkey three. France already gets 78% of its electricity from nuclear energy. The U.S. is about to get on board the nuclear train.
In an attempt to encourage nuclear plants, Congress included a risk-insurance provision in its 2005 Energy Policy Act. The provision will cover $500 million in delays for the first two nuclear reactors built, and $250 million for the next four. The federal energy bill also provided billions of dollars in subsidies, tax breaks and incentives.
In 2004, nuclear power represented just 16% of world energy production, despite the fact that nuclear power can produce a kilowatt hour at just 1.82 cents, lower than coal and a third of natural gas, according to the Nuclear Energy Institute's 2004 numbers.
Nuclear power is again a growing technology; this time, though, it is safer and much more efficient.
With coal prices and natural gas prices set to climb, the cost benefit of nuclear will continue to grow, and public sentiment, already at almost 60% in favor, will continue to grow. The U.S. hasn't built a new nuclear reactor since 1973. That will soon change. We are in a terrific commodities bull market.