Wednesday, June 17, 2009

Securitization Regulation

I am a little disappointed in the news of new regulations for securitization markets. This article from Dow Jones details the plan that the government will require the firms that securitize debt to hold onto 5% of the securities.

The reason why I'm disappointed is that this is not a change in the status quo. The mortgage securitization shops used to hold onto some of their securities because they couldn't sell them. The securities were so worthless they could not find anyone to buy them, so they kept them. After a long enough period of time, these worthless securities built up, and eventually bankrupted these shops. Here are two examples from one of my favorite bankrupt mortgage securitization shops, Novastar:
What I'm noting from these articles is that these companies always held on to some of their securitizations because they could not sell all of them. Requiring these shops to hold onto a small percentage of their securitizations is NOT a change for the better; it is not a change AT ALL!

Friday, June 12, 2009

New Nuclear Fuel

Many analysts have predicted a future shortage of Uranium. Some rumors on the net and in the broadcast media say that known reserves of Uranium will only last 50 years at current usage rates. For this reason, many commodity traders and speculators have been bullish on Uranium in recent years. The spike in new reactor permits would tend to lend credibility to their arguments. Increased demand with limited supply will lead to higher prices.

So, how high can it really go? The beautiful thing about free markets is that they are self-correcting. High prices are the cure for high prices. As the price for Uranium increases, there is a price that is high enough that it is no longer economical to produce electricity. For example, it might be cheaper to produce your power from wind, solar, oil or natural gas, depending on their prices. The situation is a little more complicated than a single supply & demand curve. Now, factor in nuclear fuel pre-processing, safety and nuclear proliferation issues, and nuclear waste concerns, and you’ve found yourself in a big mess.

However, there is a substitute for Uranium. Thorium is a similar element that can also be used to produce nuclear power. It is easier to process into fuel, safer to operate, easier to dispose of, and is much more abundant on Earth than Uranium. The Thorium fuel cycle also does not produce Plutonium 239, which is used to make nuclear bombs. It really is a much better source of nuclear fuel. That is why modern nuclear “Generation IV” reactor designs are built to run on Thorium, NOT Uranium.

I could only find one stock ticker to buy into the Thorium future: THPW. Might make for a good investment. Make sure to read up on the company at