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COAL COMEBACK: What Happens When the Sun Doesn’t Shine?

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Despite major investments in renewable energy around the world, coal is making a comeback. Coal is best suited to the energy challenges of today’s post-COVID-19 economic rebound. Coal energy can come online quickly, and doesn’t need the sun to shine, or the wind to blow, in order to produce. The resurgence of coal use may not last long, but its occurrence shows the inflexibility of renewable power sources. Sarah McFarlane and Katherine Blunt write for the WSJ:

Coal use is surging in some of the world’s largest economies as electricity demand rebounds from the pandemic, illustrating the challenges to countries looking to wean themselves off the dirty but reliable fossil fuel.

Coal was in decline for years in many countries, but its use is now picking up in the U.S., China and Europe despite growing pressure from governments, investors and environmentalists to curb carbon emissions. The leading reason for the uptick—which has pushed coal prices to multiyear highs—is rising power demand as economies reopen rapidly from pandemic hibernation.

While analysts and executives say the resurgence of coal is likely to be short-lived, it shows the world’s continued dependence on fossil fuels until renewable-energy capacity grows further and storage technologies improve.

Countries have spent billions adding renewable-power capacity at record rates, but solar and wind projects generate electricity only when the sun is shining or the wind is blowing, and can’t be ramped up when demand rises. Those limitations mean the world is still reliant on fossil fuels, especially when there is a surge in electricity demand. Analysts say this will remain the case until more renewable capacity is added, along with storage such as batteries.

OK, Your Survival Guy timed the market, overweighted a sector, and got emotional—three things you NEVER want to do as an investor. But, hey, I’m Your Survival Guy, not Mr. Perfect, and you can learn a lot from me because I’ve seen a lot.

Back in 2015, when coal was a dirty four-letter word, Your Survival Guy felt it was oversold. The market was crazy, I thought, and so I bought a coal ETF, symbol KOL. Hey, the world needs coal, right? Well, apparently not, as my position was cut down like a Georgia pine, except I never heard “Timber!”

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You see, Your Survival Guy doesn’t live or die by the markets. I don’t tap symbols into my phone like a day trader checking favorite stocks. I just had a gut feeling that Mr. Market was wrong on coal.

So, like the shoe cobbler, I just went about my business and forgot about it. Well, recently I’ve noticed coal is rebounding, so I looked at my monthly statement, but no KOL. What’s the deal?

Turns out, the board of my little KOL ETF decided to close the fund back in December. The fund had gone from $900 million under management to a measly $35 million as investors headed for greener pastures. And so my little stocking full of coal was sold by the board mid-December, and…wait for it…coal prices took off like Santa’s sleigh barreling through the ozone. Some Merry Christmas.

Action Line Number One: Here’s the deal. Even when you’re right about an investment, today you have to worry about boardrooms like never before because of “Corporate Wokeness.” Here we had a fund whose very name “KOL” means it invests in COAL. But, boardrooms are loaded with carbon called HUMANS, emotional beasts who tend to vote with their EGO and not necessarily Your Survival Guy’s blessing. Shocker.

Action Line Number Two: Learn from Your Survival Guy: Will boardrooms running your money have the guts to stick things out when the going gets tough? Imagine sitting with Your Survival Guy on Christmas Eve with not a care in the world. The potbelly stove is stoked with coal, we’re toasting another challenging year, and life is good. Cheers: “To your good fortune.”

P.S. This isn’t the first time this has happened.

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E.J. Smith - Your Survival Guy

E.J. Smith is Founder of YourSurvivalGuy.com, Managing Director at Richard C. Young & Co., Ltd., a Managing Editor of Richardcyoung.com, and Editor-in-Chief of Youngresearch.com. His focus at all times is on preparing clients and readers for “Times Like These.” E.J. graduated from Babson College in Wellesley, Massachusetts, with a B.S. in finance and investments. In 1995, E.J. began his investment career at Fidelity Investments in Boston before joining Richard C. Young & Co., Ltd. in 1998. E.J. has trained at Sig Sauer Academy in Epping, NH. His first drum set was a 5-piece Slingerland with Zildjians. He grew-up worshiping Neil Peart (RIP) of the band Rush, and loves the song Tom Sawyer—the name of his family’s boat, a Grady-White Canyon 306. He grew up in Mattapoisett, MA, an idyllic small town on the water near Cape Cod. He spends time in Newport, RI and Bartlett, NH—both as far away from Wall Street as one could mentally get. The Newport office is on a quiet, tree lined street not far from the harbor and the log cabin in Bartlett, NH, the “Live Free or Die” state, sits on the edge of the White Mountain National Forest. He enjoys spending time in Key West (RIP JB) and Paris. Please get in touch with E.J. at ejsmith@yoursurvivalguy.com To sign up for my free monthly Survive & Thrive letter, click here.
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