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Wednesday, July 11, 2012

Are Coal Stocks Lit Up?

The Bucyrus Erie 3850-B Power Shovel named &qu...
The Bucyrus Erie 3850-B Power Shovel named "Big Brother" went to work next door to Paradise Fossil Plant for Peabody Coal Company's Sinclair Surface Mine in 1962. When it started work it was received with grand fanfare and was the Largest Shovel in The World with a bucket size of 115 cubic yards. After it finished work in the mid 1980's, it was buried in a pit on the mine's property. It remains there still today. (Photo credit: Wikipedia)
Even though coal usage is falling in the United States and stagnant globally, coal stocks are soaring in recent market action.  Peabody Energy (NYSE: BTU), the world’s largest private sector coal company in the country, is up 17.33% for the last week and 10.44% for the last month of trading.  Year to date, Peabody Energy is off by 20.67%.  James River (NASDAQ: JRCC), a small cap coal producer with a short float of 34.62%, has soared by 34.94% for the last week and 55.13% for the last month.  For 2012,  James River has fallen by 47.54%.  Market Vectors Coal (NYSEMKT: KOL), the exchange traded fund for coal, is down 19.63% since January 1 but up 10.11% for the last week and 9.23% for the past month.
Due to lingering economic weakness in the United States, hopes for more quantitative easing to stimulate growth are firing up energy stocks, particularly coal.  The weak jobs report for June was just more proof that the economic recovery in the United States is anemic, at best.  Quantitative Easing 2, from November 2010 to June 2011, sent the share prices of energy company equities higher due to speculative effects.  Quantitative Easing 2 consisted of the Federal Reserve inflating its asset sheet to acquire about $700 billion in US Treasuries to underwrite the budget deficit for the United States Government.... Continue to read.
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